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The Government will remove the $100 million cap on the same business test (SBT), with effect from 1 July 2005.

Currently, a company is able to carry forward a tax loss to offset future assessable income, subject to meeting the continuity of ownership test (COT), or if the COT is not satisfied, the SBT applies. Companies with income in excess of $100 million do not have access to the SBT.

The Government will also improve and clarify the loss recoupment rules by:
- ensuring that companies do not fail the COT because they have multiple classes of shares on issue, with effect from 1 July 2002;
- defining the meaning of ‘voting power’ in the context of the COT as the power to vote on a poll for the election of a director to a company, with effect from 1 July 2007; and
- ensuring that the ‘entry history’ rule in the consolidation regime — which, for certain purposes, applies the pre consolidation history of a subsidiary member of a consolidated group to the head entity — is disregarded in applying the SBT, with effect from 1 July 2002.

The removal of the SBT cap will assist large closely held companies that do not benefit from the relaxation of the COT. The other amendments to the loss recoupment rules will reduce uncertainty and ensure that the outcomes under the rules are consistent with policy intent.

For a copy of the Minister for Revenue's press release, No 2007/48, 8 May 2007, go here

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