New “similar business test” for loss recoupment
On 6 April 2016, the Government issued Exposure Draft legislation addressing the proposed new “similar business test” for loss recoupment. This announcement is part of the National Innovation and Science Agenda (NISA) whereby the Government is seeking to encourage and reward innovation.
On 6 April 2016, the Government released exposure draft (ED) legislation to introduce a “similar business test” for companies (and listed widely held trusts) to access prior year tax losses. This is further to the 7 December 2015 Government announcement of a package of measures designed to encourage and reward innovation as part of the National Innovation and Science Agenda.
Presently, prior year tax losses can be recouped if the continuity of ownership test is passed, or failing that, the same business test is satisfied. The ED supplements the same business test with a more flexible “similar business test”, as an alternative to the same business test.
The amendments are intended to apply with respect to losses incurred in income years starting on or after 1 July 2015.
The measure should apply to all companies and listed widely held trusts.
Submissions on the ED are due by 22 April 2016.
In addition, the Government has also proposed a relaxation of the existing same business test to address the no new business / no new transactions tests. This has not been included in the ED.