Edited version of private advice

Authorisation Number: 1052038741332

Date of advice: 29 September 2022

Ruling

Subject: Tax losses - same business test

Question

Does Company A satisfy the business continuity test under section 165-210 of the Income Tax Assessment Act 1997 (ITAA 1997), such that it can deduct tax losses incurred in income years prior to and including the year ended 30 June 2015 for the relevant income year to the extent that its total assessable income exceeds its total deductions (except tax losses) for that year?

Answer

Yes.

This ruling applies for the following period:

Year ended XX

The scheme commences on:

XX

Relevant facts and circumstances

1.     Company A carried on a business as a wholesale distributor of products in a particular industry until it failed the Continuity of Ownership Test.

2.     Company A failed the Continuity of Ownership Test on the relevant date.

3.     Company A continued to carry on its business as a wholesale distributor of products in a particular industry after it failed the Continuity of Ownership Test.

4.     At different times after Company A failed the Continuity of Ownership Test, Company A acquired Business 1, Business 2 and Business 3 to increase its market share, create operational synergies and optimise costs.

5.     Business 1, Business 2 and Business 3 each carry on a business as wholesale distributors of products in the particular industry.

6.     During the Business Continuity Test Period and as a result of the acquisition of Business 1, Business 2 and Business 3, Company A undertakes some activities which are not identical to those it undertook before it failed the Continuity of Ownership Test.

7.     The non-identical activities include certain product conversion activities and sale of certain products.

8.     Company A has carried forward losses.

9.     Company A is the head of an income tax consolidated group.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 165-13

Income Tax Assessment Act 1997 section 165-210

Reasons for decision

The Business Continuity Test

Section 36-25 of the ITAA 1997 sets out special rules for deducting tax losses. Item 2 in table 2 of section 36-25 of the ITAA 1997 refers to the relevant tests in Subdivision 165-A of the ITAA 1997.

Section 165-10 of the ITAA 1997 provides that a company cannot deduct a tax loss unless either it meets the conditions in section 165-12 of the ITAA 1997 (the Continuity of Ownership Test) or section 165-13 of the ITAA 1997 (the Business Continuity Test).

Company A failed the Continuity of Ownership Test on the relevant date. Therefore, Company A cannot deduct tax losses incurred in the income years prior to and including the year ended 30 June 2015 unless it satisfies the Business Continuity Test.

A company can satisfy the Business Continuity Test by satisfying one of two 'limbs' being:

•         carrying on the same business under the test in section 165-210 of the ITAA 1997 (SBT) or

•         carrying on a similar business under the test in section 165-211 of the ITAA 1997 (SiBT).

The SiBT in section 165-211 of the ITAA 1997 does not apply for present purposes as it is only available for losses made in income years starting on or after 1 July 2015. This Ruling only applies to losses incurred in income years up to and including the year ended 30 June 2015. As such, the SiBT will not be considered further, and this Ruling will only consider the SBT.

Section 165-210 of the ITAA 1997 states:

The business continuity test--carrying on the same business

(1) A company satisfies the business continuity test if throughout the * business continuity test period it carries on the same * business as it carried on immediately before the * test time.

(2) However, the company does not satisfy the * business continuity test under this section if, at any time during the * business continuity test period, it * derives assessable income from:

(a) a * business of a kind that it did not carry on before the * test time; or

(b) a transaction of a kind that it had not entered into in the course of its business operations before the * test time.

(3) The company also does not satisfy the * business continuity test under this section if, before the * test time, it:

(a) started to carry on a * business it had not previously carried on; or

(b) in the course of its business operations, entered into a transaction of a kind that it had not previously entered into;

and did so for the purpose, or for purposes including the purpose, of being taken to have carried on throughout the * business continuity test period the same business as it carried on immediately before the test time.

Business Continuity Test Period and the Test Time

To apply the Business Continuity Test (including the SBT), the Business Continuity Test Period and the Test Time need to be established. Section 165-13 of the ITAA 1997 defines the Business Continuity Test Period and the Test Time.

Subsection 165-13(2) of the ITAA 1997 states that the Business Continuity Test Period for a company is the income year in which the company wishes to deduct tax losses of earlier income years. For present purposes, the Business Continuity Test Period is the relevant income year.

The Test Time is determined by the table provided by subsection 165-13(2) of the ITAA 1997. Item 1 of the table states that, where practicable, the test time is the latest time that the company can show that it has satisfied the Continuity of Ownership test in subsections 165-12(2), (3) and (4) of the ITAA 1997 (regarding the company maintaining the same owners). The latest time that Company A is able to show that subsections 165-12(2), (3) and (4) of the ITAA 1997 were able to be met was at the relevant date.

The SBT

To satisfy the SBT in section 165-210 of the ITAA 1997, the Taxpayer must be able to satisfy the following sub-tests:

• The Same Business Test(a positive test) - the company must carry on the same business during the Business Continuity Test Period that it carried on immediately before the Test Time (subsection 165-210(1) of the ITAA 1997)
• The New Business Test (a negative test) - the company must not derive assessable income from carrying on a business of a kind that it did not carry on before the Test Time (paragraph 165-210(2)(a) of the ITAA 1997)
• The New Transactions Test (a negative test) - the company must not derive assessable income, in the course of its business operations, from a transaction of a kind that it had not entered into before the Test Time (paragraph 165-210(2)(b) of the ITAA 1997), and
• The Anti-Avoidance Test - the company did not commence certain business activities before the Test Time for the purpose of satisfying the SBT (subsection 165-210(3) of the ITAA 1997).

The first three of the above sub-tests form a descending hierarchy that first tests the business of the company as an entirety (its 'overall business'), then the component undertakings or enterprises, if any, of that business and, finally, the individual transactions by which the business is carried on.

The Commissioner's views concerning the application of the SBT and each of the sub-tests are set out in Taxation Ruling TR 1999/9 Income tax: the operation of sections 165-13 and 165-210, paragraph 165-35(b), section 165-126 and section 165-132 (TR 1999/9).

Application of the SBT to consolidated and MEC groups

TR 1999/9 provides, at paragraph 57 and 58 that the business of a company is identified, for the purpose of applying the same business test, by reference to the business activities carried on by that company and not by reference to the business activities carried on by a commonly owned or controlled group of companies to which that company belongs.

However, Taxation Ruling TR 2007/2 Income tax: application of the same business test to consolidated and MEC groups - principally, the interaction between section 165-210 and section 701-1 of the Income Tax Assessment Act 1997 (TR 2007/2) sets out the Commissioner's views on how the SBT applies in the context of determining whether deductions are available to the head company of a consolidated group in respect of prior year tax losses and other matters.

Paragraph 12 of TR 2007/2 states:

12. If in respect of a particular year of income the head company of a consolidated group has failed a relevant continuity of ownership test, then the same business test in section 165-210 will be relevant when calculating taxable income to determine the income tax liability of the head company. The single entity rule therefore will apply in this context (refer to section 701-1 and TR 2004/11).

Paragraph 14 and 15 of TR 2007/2 further state:

14. Under the single entity rule of subsection 701-1(1), subsidiary members of a consolidated group are taken for the purposes of the same business test (section 165-210) (among other purposes), to be parts of the head company. In this context, the principles set out in TR 1999/9 in respect of the application of the same business test to a single company apply equally to the head company of a consolidated group.

15. When determining the one overall business carried on by the head company of a consolidated group for the purposes of subsection 165-210(1) it is necessary to have regard to the activities of the subsidiary members of the group. Applying the principles of TR 1999/9, one overall business of the head company is to be identified by examining all of the activities, enterprises or undertakings carried on:

•         at the appropriate test time by all those entities that were members of the consolidated group at that time; and

•         by all entities during that part of the same business test period when they were members of the consolidated group.

In line with TR 2007/2, the principles contained in TR 1999/9 apply to Company A as the head company of the income tax consolidated group and Company A is considered to be carrying on one overall business that consists of all the businesses carried on by its subsidiary members.

The Same Business Test - subsection 165-210(1)

The positive test in subsection 165-210(1) of the ITAA 1997 requires a comparison of the business carried out throughout the Business Continuity Test Period, with the business carried on immediately before the Test Time.

TR 1999/9 provides extensive commentary on how the Commissioner will apply the Same Business Test, including (but not limited to) the following relevant principles:

• To satisfy the Same Business Test, the company must be able to show that, during the Business Continuity Test Period, it carried on at all times the same business as the business that the company carried on at the Test Time (paragraph 30 of TR 1999/9).
• Gibbs J in Avondale Motors (Parts) Pty Ltd v. FC of T (1971) 124 CLR 97; 45 ALJR 280; 2 ATR 312; 71 ATC 4101 held that the 'same business' means an 'identical business' rather than a business of the same or similar kind (paragraph 31 of TR 1999/9).
• Whether a company is carrying on the same business or a new business is a question of fact (paragraph 33 of TR 1999/9).
• When identifying the business carried on by the company immediately before the Test Time, it is relevant to consider all of the activities of the company, though those activities must be considered as a whole, so as to consider the overall business of the company at that time (paragraph 34-37 of TR 1999/9).
• An identical business does not mean that the business of the taxpayer during the Business Continuity Test Period must be identical in every respect to the business carried out immediately before the Test Time. A business may be the same, even though there have been some changes in the way in which it is carried on, provided the identity of the business is not changed (paragraph 38 of TR 1999/9).
• Mere expansion or contraction of the taxpayer's business may not result in a change in the identity of the business carried on by the taxpayer. However, expansion or reduction in business activities is likely to result in a change in the identity of the taxpayer if carried out to a sufficient extreme or results in sudden and drastic change. A mere expansion of business activities is distinct from the evolution of a business (paragraph 39-43 of TR 1999/9).
• If a company acquires and merges with its original business another undertaking or enterprise, even if the amalgamated businesses are of a similar kind, the company fails the Same Business Test when, considered as a whole, the business of the company in the year of recoupment cannot fairly be regarded as the same, albeit expanded, business carried on at the change-over. Similarly, the acquisition of an undertaking that alters the nature of the overall business causes a company to fail the same business test (paragraph 44-45 of TR 1999/9).
• There are various relevant factors to take into account in determining whether the same business test is satisfied by a taxpayer. A single factor or matter might be so important that it determines the issue but, usually, it is a combination of factors, appropriately weighted, that decides whether the same business is carried on. A factor that in isolation has little weight, may in combination with other factors have great weight and, conversely, something that is significant when it appears with other changes, may have no importance when it appears alone (at paragraph 59 of TR 1999/9).
• It is not only changes that must be weighed: one must have due regard to what remains the same. In determining whether the same business test is satisfied, significant weight is given to changes after the change-over in the income producing product or service of the taxpayer, how it is produced, acquired or provided and/or changes in the market for that product or service. But even these are a question of fact and degree often to be decided in the context where some expansion or contraction would be expected (at paragraph 59 of TR 1999/9).
• An expansion or contraction of the taxpayer's business activities may not, in itself, result in a change in the identity of the business carried on by the taxpayer. However, the expansion or contraction of activities may result in a change in the identity or character of the business, taking into account the nature and extent of the expansion or contraction. In particular, the organic growth of a business through the adoption of new compatible operations in the ordinary way and, similarly, the discarding of old operations in that way, may not cause a taxpayer to fail the same business test, but a sudden and dramatic change brought about by the loss or acquisition of business operations on a considerable scale is likely to do so (at paragraph 60(d) of TR 1999/9).
• The commencement or acquisition, by merger or otherwise, of new undertakings (including going concerns and similar or complementary undertakings) may cause a company to fail the same business test, e.g., if the result is to alter the character of the overall business (at paragraph 60(f) of TR 1999/9).
• Other factors relevant factors include the name of the taxpayer, the location of the business, the existence of a period or periods of dormancy, and the circumstances accounting for the inactivity and in which activity is resumed (at paragraph 60(g) of TR 1999/9).

TR 1999/9 provides at paragraph 61, a list of matters that would be relevant to consider in a manufacturing context for example, noting that the list is not a checklist and is not exhaustive. These matters broadly include:

• changes in the nature of the product manufactured or activities undertaken by the taxpayer and changes in the way in which the business is carried out (subparagraph 61(a)-(c) of TR 1999/9)
• changes in the customer base and mix of customers (subparagraph 61(d)-(e) of TR 1999/9)
• changes in turnover or gross assets attributable to the sale of product to particular customer bases(subparagraph 61(f) of TR 1999/9)
• changes in the method of selling products and services (subparagraph 61(g) of TR 1999/9)
• changes in the taxpayer's capital and working capital (subparagraph 61(h) of TR 1999/9)
• changes in goodwill (subparagraph 61(i) of TR 1999/9)
• changes in the location where the taxpayer carries on business and where customers are located (subparagraph 61(j) of TR 1999/9)
• changes in the trade names, trademarks, patents, royalty arrangements or other intellectual property rights of the taxpayer (subparagraph 61(k) of TR 1999/9)
• changes in the number of persons employed by the taxpayer or who are contracted by the taxpayer(subparagraph 61(l) of TR 1999/9)
• changes in the directors and/or management of the taxpayer (subparagraph 61(m) of TR 1999/9)

Application of the Same Business Test - subsection 165-210(1)

The Commissioner has compared the business of Company A immediately before the Test Time to the business of Company A during the Business Continuity Test Period, which comprises of Company A at the Test Time as well as the integrated business of Business 1, Business 2 and Business 3.

The business of Company A has remained largely unchanged, or only experienced minor changes such as:

• Company A has retained its overall character as a wholesale distributor in the particular industry.
• Company A's customer base and mix of customers has remained stable.
• The proportion of Company A's turnover attributable to the particular market segments has changed slightly and can likely be attributed to the integrated business of Business 1, Business 2 and Business 3.
• The method in which Company A sells its products has not changed.

• There have been no significant changes in Company A's capital and working capital.
• Company A's goodwill has remained largely unchanged.
• There have been no significant changes in the location where Company A carries out its business or where its customers are located.
• There have been no significant changes in the trade names, trademarks, patents, royalty arrangements or other intellectual property rights held by Company A.
• Employee counts have remained stable and there have been no changes in Company A's directors or management.

The main material changes in Company A's business at the Test Time as compared to the time during the Business Continuity Test Period involve the nature of the product manufactured or activities undertaken and changes in the way in which the business is carried out, which can be summarised as follows:

• During the Business Continuity Test Period, Company A conducted more product conversion activities than it did at the Test Time due to the acquisitions the relevant business.
• During the Business Continuity Test Period, Company A sold a more diverse range of products.

On the above two elements which have not remained identical, the Commissioner satisfied that:

•         The acquisitions of Business 1, Business 2 and Business 3 have expanded Company A's already existing business activities.

•         The changes which resulted from the acquisitions represent an expansion of Company A's business which has not occurred to a sufficient degree to change the identity of Company A. The changes are consistent with the character of Company A's business which existed at the Test Time.

•         The acquisitions of Business 1, Business 2 and Business 3 and the integration of their operations to Company A's existing operations has resulted in the organic growth of a business through the adoption of new compatible operations in the ordinary way. The changes have not been sudden or dramatic to any extent which causes concern.

•         Company A is fundamentally the same business that it was at the Test Time.

The Commissioner is satisfied that even though there has been a small degree of change in the ways in which Company A's business is carried out from the Test Time to during the Business Continuity Test Period, the identity of Company A's business has not changed, and Company A is carrying on the same business.

As such, Company A satisfies the Same Business Test in subsection 165-210(1) of the ITAA 1997.

The New Business Test and the New Transactions test

Paragraph 64 of TR 1999/9 provides that the new business test requires that the taxpayer company did not, at any time during the period of recoupment, derive income from a business of a kind it did not carry on before the change-over.

Paragraph 65 of TR 1999/9 provides that the new transactions test requires that the taxpayer company did not, at any time during the period of recoupment, derive income from a transaction of a kind it had not entered into in the course of its business operations before the change-over.

Paragraph 66 and 67 of TR 1999/9 provide commentary regarding the legislative intention of the New Business Test and the New Transactions Test:

66. Whether the new business test or the new transactions test is satisfied by a company in a particular case is a question of fact. The legislative intention underlying these provisions is to prevent the injection of income into the loss company while permitting, within limits consistent with the prevention of tax avoidance, the development and expansion of the overall business carried on immediately before the change-over. Such an injection of income might occur by means of activities that form part of the business and would not cause the business to cease to be the same; this might occur, for example, through a new undertaking or enterprise that had not been carried on before the change-over, or through entering into a transaction, in the course of the business operations of the business, which was not one that would have been expected to be entered into in the natural flow of the taxpayer's business prior to the change.

67. The new business test and the new transactions test do not depend for their operation on the existence of a purpose of tax avoidance and may, therefore, operate in some cases to prevent a company obtaining a deduction for a prior year loss where there is no purpose of tax avoidance. However, the new business test and the new transactions test allow a business to expand and develop, provided the activities by which it produces its income remain of the same kind. The limits to expansion and development provided by these tests express the balance decided by Parliament between the prevention of tax avoidance and the facilitation of takeovers and mergers carried out for sound commercial reasons and that are unassociated with tax avoidance.

The New Business Test - paragraph 165-210(2)(a)

Paragraph 14 of TR 1999/9 states:

... In the new business test there is a reference to 'business of a kind' that the company did not carry on before the change-over. In the new business test the word 'business' has a different meaning from the word 'business' in the same business test; it refers to each kind of enterprise or undertaking comprised in the overall business carried on by the company at the change-over and during the period of recoupment. The new business test puts a limit on the type of expansion the company may undertake if it is to retain the benefit of accumulated losses; for the taxpayer may not engage in an undertaking or enterprise of a kind in which it did not engage before the change-over and still benefit from accumulated losses.

Paragraph 68 of TR 1999/9 explains that the term 'business' in the New Business Test is a reference to each of the different kinds or types of activities comprised in the one business that is referred to in the Same Business Test and is carried on by the taxpayer at the Test Time. Therefore, each particular undertaking or enterprise carried on by the taxpayer during the Business Continuity Test Period is tested under the New Business Test.

Paragraph 69 of TR 1999/9 provides that the question of if a new undertaking has commenced is a question of fact.

Paragraph 70 of TR 1999/9 states that the New Business Test is intended to limit the expansion available under the Same Business Test. That is, the taxpayer cannot add to its operations, an undertaking or enterprise, of a kind it had not carried on before the Test Time.

Paragraphs 72 and 74 of TR 1999/9 state:

72. Generally speaking, the new business test permits a company to expand or develop during the period of recoupment within the same fields of endeavour as it was engaged in before the change-over, provided the effect of expansion or development is not such as to cause it to fail the same business test. Cases where such failure occurs tend to be where the injection of income is occurring or could occur and, thus, not appropriate cases for the protection of sections 165-13 and 165-210 or equivalent provisions...

74. As stated above, whether a new business, in the sense of a particular undertaking or enterprise, is of a different kind from the old undertakings or enterprises of a company, is a question of fact. In characterising an undertaking or enterprise, regard must be had to the undertaking or enterprise as a whole. A new undertaking or enterprise may be of a different kind from an old one, even though some or all of the transactions that it comprises or by which it is carried on, occurred in the old undertaking or enterprise because, in a different context, those transactions, considered with the other business operations of the taxpayer, may be such as to lend a different character to the undertaking or enterprise considered as whole.

Application of the New Business Test - paragraph 165-210(2)(a)

The two elements of Company A's business during the Business Continuity Test Period which could cause Company A to fail the New Business Test are:

• The expanded product conversion activities
• The additional products supplied

In applying the New Business Test, the Commissioner needs to consider whether the New Business Test should be applied such that the expanded activities of Company A during the Business Continuity Test Period constitute the commencement of a new undertaking that Company A did not carrying on before the Test Time and as such cause Company A to fail the SBT. Whether these activities constitute a 'new business' is a question of fact.

As per paragraphs 72 and 74 of TR 1999/9, the New Business Test generally permits a company to expand or develop during the Business Continuity Test Period within the same fields of endeavour as it was engaged in at the Test Time.

At the Test Time, Company A undertook product conversion activities. The expanded product conversion activities are therefore not dissimilar to the existing product conversion activities undertaken by Company A at the Test Time. As such, these activities are considered to be within the same field of endeavour that Company A was engaged in before the Test Time.

Second, Company A now sells additional products. At the Test Time, Company A already sold products similar in nature. The addition of these new products is an expansion of Company A's business which is within the same field of endeavour that Company A was engaged in before the Test Time.

The legislative intent underlying the New Business Test is to prevent the injection of income into a loss company while permitting, within limits, the development and expansion of the overall business carried on by the taxpayer at the Test Time. The additional activities being undertaken by Company A during the Business Continuity Test Period are of the same kind as those Company A undertook at the Test Time and are a natural expansion of Company A's business and not a means of injecting income into a loss company.

As such, the Commissioner is satisfied that Company A is not undertaking any new business that it was not undertaking before the Test Time and Company A therefore satisfies the New Business Test in paragraph 165-210(2)(a) of the ITAA 1997.

The New Transactions Test - paragraph 165-210(2)(b)

Paragraph 82 of TR 1999/9 states:

81. Interpretation of the new transactions test is not without its difficulties. However, a purposive approach would regard it as applying to all transactions entered into the course of the company's business operations and not merely those that are 'isolated' or 'independent'. But transactions that could have been entered into in the course of business operations before the change-over consistently with its ordinary course, are usually transactions of the same kind as those that actually had been entered into.

Paragraph 86 of TR 1999/9 further explains:

86. The content of the word 'kind' in the new transactions test (and the new business test), when applied in a particular case, is to be derived from the course of the taxpayer's business operations before the change-over. A transaction that is entered into during the period of recoupment, which could have been entered into in the course of business operations before the change-over, and which is neither extraordinary nor unnatural in the context of the business carried on by the company at the change-over, is generally a transaction of the same kind as transactions actually entered into by the company before the change-over. Conversely, a transaction that is entered into during the period of recoupment, and which is outside the course of the business operations carried on before the change-over, or which is extraordinary or unnatural when judged by the course of the business operations before the change-over, or which otherwise could not have been entered into in the course of the taxpayer's business operations before the change-over, is a transaction of a different kind from the transactions actually entered into by the taxpayer before the change-over.

Application of the New Transactions Test - paragraph 165-210(2)(b)

The acquisition of Business 1, Business 2 and Business 3 were intended to increase Company A's market share in its existing market sectors, create operational synergies and optimise costs. The acquisitions are not considered extraordinary or unnatural given the nature of each of the acquisitions and the underlying businesses acquired. The acquisitions are a natural expansion of Company A's existing business operations which were carried out at the Test Time.

Further, Company A will continue to derive revenue from the same type of transactions in the course of its business operations that it did at the Test Time as it continues to:

• sell products as a wholesale distributor
• sell to same kinds of customers in the same locations and the same kinds of market segments
• sell the same kinds of products
• sell in the same methods

There is nothing to suggest that Company A has transacted in any way which is outside the course of its business operations carried on before the Test Time. Further, there is no suggestion of any transaction occurring during the Business Continuity Test Period which is extraordinary nor unnatural in the context of the business carried on by Company A at the Test Time.

As with the New Business Test, the legislative intent underlying the New Transactions Test is to prevent the injection of income into a loss company while permitting, within limits, the development and expansion of the overall business carried on by the taxpayer at the Test Time. The transactions undertaken by Company A during the Business Continuity Test Period are of the same kind as those Company A undertook at the Test Time and are a natural expansion of Company A's business and not a means of injecting income into a loss company.

As such, Company A will satisfy the New Transactions Test in paragraph 165-210(2)(b) of the ITAA 1997.

The Anti-avoidance Test - subsection 165-210(3)

Paragraph 91 of TR 1999/9 states the following regarding the Anti-avoidance Test:

91. Subsection 165-210(3) is a provision designed to prevent a taxpayer company satisfying the 80E test, the 50D test, the 63C test, or the 80F test, respectively, where the company commenced to carry on new businesses or entered into a new kind of transaction prior to the change-over, in anticipation of obtaining a deduction for a prior year loss, a current year loss or a bad debt respectively. Those provisions are referred to as the 'anti-avoidance test'.

92. The anti-avoidance test is failed by a taxpayer where:

(a) before the change-over, the taxpayer commenced to carry on a business it had not previously carried on, or entered into, in the course of its business operations, a transaction of a kind it had not previously entered into; and

(b) the taxpayer commenced to carry on the business or entered into the transaction for the purpose (or for purposes that included the purpose) of satisfying the requirements of the 80E test, the 50D test, the 63C test, or the 80F test (as the case may be) in relation to a prior year tax loss, a current year loss, or a bad debt deduction or swap loss respectively ('specified purpose').

Application of the Anti-Avoidance Test - subsection 165-210(3)

Immediately before the Test time, Company A had not commenced carrying on any business or entered into any transactions it had not previously carried on or entered into.

There is no other issue present in the facts and circumstances of this case which would suggest that Company A would fail the Anti-Avoidance Test.

In applying the above to the present case, it is clear that Company A did not commence any businesses or enter into any transactions of a kind that had not been previously carried on for the purpose of satisfying the Business Continuity Test under section 165-210 of the ITAA 1997 and as such, the Anti-Avoidance Test has no application.

Conclusion on the SBT

Company A has satisfied the requirements of:

• The Same Business Test (subsection 165-210(1) of the ITAA 1997)
• The New Business Test (paragraph 165-210(2)(a) of the ITAA 1997)
• The New Transactions Test (paragraph 165-210(2)(b) of the ITAA 1997), and
• The Anti-Avoidance Test (subsection 165-210(3) of the ITAA 1997).

As such, Company A has satisfied all requirements of the SBT in section 165-210 of the ITAA 1997 and therefore satisfies the Business Continuity Test as provided by section 165-13 of the ITAA 1997.

As the Business Continuity Test has been satisfied, Company A can deduct tax losses incurred in income years prior to and including the year ended 30 June 2015 for the relevant income year to the extent that its total assessable income exceeds its total deductions (except tax losses) for that year.