Taxation Ruling

IT 97

Meaning of 'same business': section 80E

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FOI status:

Preamble

Section 80E was enacted in 1965 to ensure that the 1964 amendments to the loss provisions, which were designed to prevent trafficking in loss companies, will not interfere with bona fide attempts to take over, and rehabilitate, ailing businesses. Generally speaking, the effect of section 80E is to allow losses incurred by a company to be carried forward, notwithstanding a change of ownership, if the company continues to carry on the same business as it did immediately before the change.

Ruling

It has come under notice that borderline cases can arise where, after a company has completely ceased unprofitable operations, another organization in the same line of business acquires its shares and conducts its own business operations through the corporate shell of the old company. The Commissioner's attitude to such cases is that the reference to 'the same business' must be construed strictly. It is not enough, for example, that a tax-loss company recommences making the same kind of goods as it made before the change of ownership. If its former business was completely terminated, this is a new business rather than a continuation of the old. It may be 'the same kind of business' but it is not 'the same business'.

Commissioner of Taxation
27 March 1969

References

ATO references:
NO J70/35/1 P4 F156

Date original memo issued:
27.03.69

Subject References:
same business test

Legislative References:
ITAA 80E