8 May 2007

Company Loss Recoupment Rules

The Government has announced that it will remove the $100 million cap on the same business test (SBT).

This will allow all companies to access the SBT to determine whether a loss can be deducted against future income.

This measure will apply to losses incurred on or after 1 July 2005. This commencement date avoids creating additional compliance burdens on affected taxpayers.

The Government will also make three changes to improve the operation of the company loss recoupment rules and to remove uncertainty.

The first change will ensure that companies do not fail the continuity of ownership test (COT) because of having multiple classes of shares on issue, or because of having special arrangements in place to make distributions of dividends and capital returns.

This change has effect from 1 July 2002, coinciding with the measure relaxing the COT tracing rules and introduction of the consolidation regime.

The second change will clarify the meaning of ‘voting power’ in the context of the COT, with effect from 1 July 2007. Voting power will include the power to vote on a poll for the election of a director to a company.

The third change will ensure that the entry history rule in the consolidation regime is disregarded in applying the SBT.

This change has effect from 1 July 2002, coinciding with introduction of the consolidation regime.

The Government will legislate these changes as soon as practicable following consultation with stakeholders.