Among the first batch of tax legislation the government dealt with in the new year was Treasury Laws Amendment (2017 Enterprises Incentives No.1) Billlegislation that contained changes to the “same business” test.

It sees the “same business test” supplemented with a more flexible “similar business test” to work out whether a company’s income tax losses and net capital losses from prior income years can be carried forward and used as a tax deduction in the current income year. The rationale for the change is that the same business test is considered too restrictive – stifling innovation in the economy.

In the most part, this stemmed from the test being interpreted very narrowly. Courts and the ATO generally held that “same” did not mean “similar”. The inability to utilise losses where a company has entered into new types of transactions or business activities can inhibit a company’s ability to grow. This in turn discouraged companies that had made losses from seeking new investors or exploring new profit-making activities because they may have lost access to these valuable past year losses. Readmore