ATO ID 2006/258: Company Tax Losses: same business test-whether it applies only to business carried on by a company in Australia
Date of decision: 12 September 2006
Year of income: Year ended 30 June 2006
Business line: Public Groups and International

Issue
Where a foreign resident company carries on business both in and out of Australia, is the business examined under the same business test (SBT) in section 165-13 of the Income Tax Assessment Act 1997 (ITAA 1997) restricted to the business carried on by the company in Australia?

Decision
No. The SBT is applied to the business carried on by the company both in and out of Australia.

Facts
A foreign resident company has a tax loss for an earlier income year (the loss year) which it seeks to deduct in a later income year. The company does not satisfy the conditions of section 165-12 of the ITAA 1997 relating to maintenance of the same owners and therefore seeks to satisfy the SBT under section 165-13 of the ITAA 1997. The company carries on business both in and out of Australia at all relevant times.

Reasons for decision
Summary: The conditions of the SBT are outlined in Subdivision 165-E of the ITAA 1997. Subsection 165-210 of the ITAA 1997 provides: Section 165-210 of the ITAA 1997 refers to 'the business' carried on by the company and to 'a business of a kind or 'a transaction of a kind'. There are no references in section 165-210 to the tax jurisdiction in which the business is carried on or the transaction is entered into. Further, the business of a foreign resident company conducting activities both in and out of Australia may only be properly ascertained by reference to the company's global activities. Therefore it is concluded that the SBT applies to the business carried on by the company both in and out of Australia.

Legislative references: Income Tax Assessment Act 1997 section 165-12 section 165-13 Subdivision 165-E section 165-210 subsection 165-210(1) subsection 165-210(2) subsection 165-210(3) subsection 165-210(4)
Related public rulings and determinations: Taxation Ruling TR 1999/9
Subject references: Same business test Tax loss