Private ruling: Company losses
Date of advice: 20 May 2026
Published: 10 August 2026
Ruling period: 1 July AAAA to 30 June ZZZZ | 1. <Paragraph redacted for confidentiality reasons, as it disclosed the incorporation date.> | 2. After incorporation, Company A registered an ABN and business names, entered a commercial lease, acquired a fit-out at the leased premises, and completed regulatory and operational preconditions for trade in Industry B. | 3. It performed these activities for the purpose of establishing and operating an Industry B retail business in Location C. | 4. By <date>, Company A had accumulated about $X in tax losses from these establishment activities. | 5. Company A didn't start trading until a later income year because of delays in getting Industry B regulatory approvals from the relevant agencies. | 6. Company A: | acquired a lease during the <x> income year (taking over from a previous tenant who had already fitted out the premises for Industry B) | registered the Business Name E during the <y> income year | completed a minor refit and modernisation of the leased premises, received the relevant regulatory approvals necessary to trade, and started trading as an Industry B retail business during the XXXX income year. | 7. After starting trading, Company A operated an Industry B retail business out of the leased premises, using the assets it acquired during the establishment phase (including the fit-out, leasehold interest, regulatory approvals and licences, goodwill and branding, and information systems and equipment). Company A hasn't disposed of or replaced assets to any significant extent. | 8. Company A has an agreement with 'Retail Chain F'. | 9. Under the 'Retail Chain F' model, individual Industry B retail businesses are wholly independent, but may choose to include, or not include, the words 'Retail Chain F' in their trading names. Several individual retail businesses in the 'Retail Chain F' chain have chosen not to use 'Retail Chain F'. | 10. Company A changed its business name from Business Name D to Business Name E sometime after Company A started trading. The change didn't affect Company A's services, customers, premises, or operations. Company A executed an agreement with Retail Chain F as soon as practical after beginning to trade. The name change just reflected a branding decision, as Company A was already part of the Retail Chain F Group. (For example, it already had adopted the Retail Chain F logo while trading as Business Name D.) | 11. Company A's original owners always planned that Company A would enter an agreement with Retail Chain F from Company A's incorporation. <Paragraph partly redacted for confidentiality reasons.> | 12. Company A hasn't commenced any new or unrelated business activities, materially expanded, or entered transactions outside the ordinary course of operating an Industry B retail business. | 13. Company A intends to facilitate share transfers which will cause it to fail the continuity of ownership test in section 165-12. | Assumption | Company A's business won't materially change during the rest of the ruling period.

Ruling: Q1: Will Company A satisfy the 'similar business test' under Subdivision 165-E for the purposes of utilising tax losses incurred in income years up to and including the XXXX income year? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 165-211

Reasons for decision: Summary: 14. We're satisfied that Company A: • was carrying on business from incorporation, and • continued (or will continue) to run a similar Industry B retail business throughout the ruling period. | Detailed Reasoning - Explanation: 15. Section 165-10 prevents a company from deducting a tax loss unless it meets either a) an ownership continuity condition (section 165-12), or b) a business continuity condition (section 165-13). 16. The business continuity condition is that the business must satisfy the business continuity test for the income year, applying the test to the start of the loss year (or the latest time it passed the ownership continuity test): subsection 165-13(2). 17. A company passes the business continuity test if it passes either a) the same business test (section 165-210) or b) the similar business test (section 165-211). 18. A company will pass the similar business test if it carries on a business that 'is similar to' the 'former business' it carried on immediately before the test time: subsection 165-211(1). 19. Subsection 165-211(2) lists factors relevant to deciding whether the current business is similar to the former business. Those factors include: • the extent to which the current and former businesses used the same assets, activities, and operations to generate assessable income • the identity of the current and former business • the extent to which any changes to the former business resulted from developing or commercialising the former business's assets, products, or services. 20. Whether an entity carries on a business is a question of fact, determined by general impression, balancing relevant indicia. Those indica include the taxpayer's purpose and intention to make a profit, size, commercial character, regularity of operations, and whether the activity is conducted in a businesslike manner. See generally TR 97/11. [1] 21. While experimental or pilot activities don't amount to a business, some activities carried on before a taxpayer derives income may have a sufficient commercial character to mean the taxpayer is carrying on business: see TR 97/11 at paragraph 41. 22. We're satisfied that Company A was carrying on an Industry B retail business from incorporation, despite not earning assessable income until the XXXX income year. Company A took over the lease a short time after incorporation. We think taking out a commercial lease over premises already fitted out for the relevant industry is more than a pilot activity. It has enough of a commercial character to mean Company A was carrying on business from the beginning. 23. Having considered the relevant factors in subsection 165-211(2), we're satisfied that Company A: • continued to carry on at least a similar business (if not the same business) from incorporation until it applied for this ruling, and • will continue to carry on a similar business (or the same business) for the rest of the ruling period, if there are no material changes to its operations. [1] Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production?