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The new company loss recoupment rules.

Publication date: 30 Sep 05 | Source: CCH TAX WEEK

Issue: No 36 22 September 2005

Pages: pp. 1-6


The company loss recoupment rules of our income tax law will be significantly altered if the recently introduced Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005 is enacted.

That said, the Bill does not alter the basic construct of the existing rules. A company will still need to satisfy the continuity ownership test (COT), initially, if it is to deduct a previously incurred tax loss, net capital loss or bad debt. Failing that, the company will only be able to deduct those amounts if the same business test (SBT) is able to be applied and satisfied.

What will change, however, is that:

  • the COT will be made easier to satisfy for sufficiently large companies, and
  • the SBT will no longer be available to companies for income years in which they have a "total income" of more than $1000m

In addition, the Bill will make a number of more technical changes.The authors consider one of the more significant of those concerning the implication of the High Court's decision in FC of T v Linter Textiles Australia Ltd (in liq) 2003 ATC 4458

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Author profile

Hayden Scott FTI
Hayden, FTI, is a Partner at PwC in their Tax & Legal practice. He has over twenty years of experience in the tax environments of the Big 4, top-tier law firms, and Government (both Treasury and ATO). Hayden extensively advises clients in the financial services and infrastructure industries, as well as extensively advising outside those industries on finance tax matters. Additionally, Hayden is a contributor to the broader tax policy and reform conversation, having been a member of the (now defunct) National Tax Liaison Group Finance and Investment Subcommittee, and, more recently, an expert panellist on the Board of Taxation’s review of the debt-equity rules. - Current at 17 March 2016
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