ATO Interpretative Decision

ATO ID 2004/552 (Withdrawn)

Income Tax

Company tax losses: same business test - not practicable to show continuity of ownership test satisfied for any period
FOI status: may be released

This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 5 March 2010

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Where a loss company cannot show that it satisfies the continuity of ownership test (COT) for any period from the start of the loss year, does the loss company have a test time for the purpose of applying the same business test (SBT), in order to deduct a tax loss?

Decision

Yes. Pursuant to Item 2 of subsection 165-13(2) of the Income Tax Assessment Act 1997 (ITAA 1997), a loss company's test time for the purpose of applying the SBT is the start of the loss year, where it is not practicable for the loss company to show that it satisfies the COT for any period from the start of the loss year.

Facts

Loss company incurred a tax loss in the 1999-2000 income year (the loss year).

Loss company was in being throughout the loss year.

The majority shareholder in Loss company is Company X which is not a resident in terms of subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Under the laws of the jurisdiction in which it is registered, Company X may disclose the names of its shareholders but it is not legally obliged to do so. Company X has refused to disclose that information in the present case.

For the 2003-04 income year Loss company's total assessable income exceeds its total deductions (except tax losses). Loss company seeks to deduct the tax loss that it incurred in the 1999-2000 income year.

Division 166 of the ITAA 1997 does not apply to Loss company.

Reasons for Decision

Section 165-13 of the ITAA 1997 provides that in order to deduct a tax loss, a company must satisfy the SBT if it fails to meet the COT or it is not practicable for it to show that it meets the COT.

Further, pursuant to Item 2 of subsection 165-13(2) of the ITAA 1997, if it is not practicable for a company to show that it has satisfied the COT for any period from the start of the loss year, and the company was in being throughout the loss year, the test time for the purpose of applying the SBT is the start of the loss year.

As Company X has refused to disclose the names of its shareholders, it is not practicable for Loss company to show that it has satisfied the COT for any period from the start of the loss year.

Accordingly, Loss company's test time for the purpose of applying the SBT is the start of the loss year as Loss company was in being at all times during the loss year.

Date of decision: 29 June 2004

Year of income: Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   section 165-13
   subsection 165-13(2)
   Division 166

Income Tax Assessment Act 1936
subsection 6(1)

Keywords
Continuity of ownership test
Prior year losses
Same business test
Tax loss

Business Line: Losses and Capital Gains Tax Centre of Expertise

Date of publication: 9 July 2004

ISSN: 1445-2782

history

	Date:	Version:
	29 June 2004	Original statement
You are here →	5 March 2010	Archived

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