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Edited version of private advice
Authorisation Number: 1052054164944
Date of advice: 6 December 2022
Ruling
Subject: Carry forward losses - business continuity test
Question
Does the company currently satisfy the business continuity test under sections 165-210 and 165-211 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes, the company intends to resume the business activity it previous carried on from 1 July 20XX. The company has not commenced any business or entered into any transactions of a kind that had not been previously carried on for the purpose of satisfying the business continuity test. Consequently, the Commissioner accepts that the company will satisfy the business continuity test requirements under sections 165-210 and 165-211 of the ITAA 1997.
This private ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The company was incorporated in 20XX.
From 20XX to 20XX the company's sole business activity was the conduct of a primary production enterprise.
The company has never owned farming realty and instead it was engaged in a lease to occupy farming realty.
From 20XX to the present point in time the company froze the primary production operations. The reason for the immobilisation of the activity was primarily due to drought and Covid.
Related entities operate two other primary production operations. The pressure of the drought forced the group to consolidate their activities for a period to cut costs and stay viable.
A decision was made to pause the company's operations to deliver the best result for the group in regards to the overall sustainability of operations.
The company sold a vehicle but retained ownership of some other minor equipment.
The company maintained a relationship with a relevant industry body.
The company has maintained a relevant licence which permits the company to engage in the business operations. This was purposely done as it was always intended that the company would recommence.
From 20XX to the present point in time the company on-leased the farm lease obligation to another entity.
The company currently has income tax losses which were incurred from the primary production enterprise relating to the 20XX financial year and prior.
On 1 January 20XX the company proposes to change the shareholding whereby one of the existing shareholders will acquire 100% of all issued shares in the company.
The existing shareholder currently owns 25% of the ordinary shares and 0% of the A class shares.
After the proposed change in shareholding the company will re-commence the primary production operations. The is planned to occur on 1 July 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 165-13
Income Tax Assessment Act 1997 section 165-210
Income Tax Assessment Act 1997 section 165-211