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TAXATION LAWS AMENDMENT ACT (NO. 5) 2003 NO. 142, 2003 - SCHEDULE 7

- Application of same business test Part 1—Tax losses

Division 1—Main amendment

Income Tax Assessment Act 1997

1 Section 165-13

Repeal the section, substitute:

165-13 Alternatively, company must carry on same business
(1)
This section sets out the condition that the company must meet to be able to deduct the * tax loss if:

(a) the company fails to meet a condition in subsection 165-12(2), (3) or (4); or
(b) it is not practicable to show that the company meets the conditions in those subsections.

Note: Other provisions may treat the company as meeting, or failing to meet, the conditions in subsections 165-12(2), (3) and (4).

(2)
The company must satisfy the * same business test for the income year (the same business test period ). Apply the test to the * business the company carried on immediately before the time (the test time ) shown in the relevant item of the table.


Test time


Item


If:


The test time is:


1


It is practicable to show there is a period that meets these conditions:

(a) the period starts at the start of the * ownership test period or, if the company came into being during the * loss year, at the time the company came into being;
(b) the company would meet the conditions in subsections 165-12(2), (3) and (4) if the period were the ownership test period for the purposes of this Act


The latest time that it is practicable to show is in the period


2


Item 1 does not apply and the company was in being throughout the * loss year


The start of the loss year


3


Item 1 does not apply and the company came into being during the * loss year


The end of the loss year


For the same business test: see Subdivision 165-E.

Division 2—Consequential amendments

Income Tax Assessment Act 1997

2 Paragraph 165-10(b)

Omit "conditions", substitute "condition".

3 Subsection 165-115B(3) (second sentence)

Repeal the sentence, substitute:

The changeover time is the test time for applying section 165-13 to the company.

4 Subsection 165-115B(4)

Omit "conditions", substitute "condition".

5 Subsections 165-115BA(4) and (5)

Omit "conditions", substitute "condition".

6 Paragraph 165-115BA(5)(c)

Omit "continuity period ended at the changeover time", substitute "changeover time is the test time ".

7 Paragraph 707-125(1)(b)

Omit "subsection 165-13(3),", substitute "section 165-13 or subsection".

8 Subsection 707-125(2)

Omit "subsection 165-13(3)", substitute "section 165-13".

9 Subparagraph 707-125(2)(a)(ii)

Repeal the subparagraph, substitute:

(ii) the income year that included the * test time worked out for section 165-13 for the joining entity (disregarding paragraph (b) of this subsection), if that income year started before the trial year; and

10 Subsection 707-125(2) (note)

Repeal the note.

11 Subsection 715-90(2)

Repeal the subsection, substitute:

(2)
In applying to the leaving entity for the * changeover time that is the leaving time, subsection 165-115B(3) has effect as if it provided that the time just after the changeover time were the test time for applying section 165-13 to the company.

Note: This ensures that the same business test is applied to the business that the leaving entity carries on at the leaving time.

12 Subsection 719-260(2) (note)

Omit "conditions", substitute "condition".

13 Subsection 995-1(1) (definition of test time )

After "165-45,", insert "165-115B, 165-115BA,".

14 Subsection 995-1(1) (definition of test time )

After "715-70,", insert "715-90,".

Division 3—Application of amendments

15 Application

(1) The amendments made by this Part apply to assessments for the 1997-98 income year and later income years.
(2) However, an amendment made by this Part affecting a provision does not apply to anything to which the provision did not apply before the amendment.

Example: Section 707- 125 of the Income Tax Assessment Act 1997 applies on and after 1 July 2002. Despite the reference in subitem (1) to the 1997-98 income year, the amendments of that section made by this Part do not apply before 1 July 2002.

Part 2—Bad debts

Division 1—Main amendment

Income Tax Assessment Act 1997

16 Section 165-126

Repeal the section, substitute:

165-126 Alternatively, company must carry on same business
(1)
This section sets out the condition that the company must meet to be able to deduct a debt or part of a debt that it writes off as bad in the * current year if:

(a) either:
(i) the company fails to meet a condition in subsection 165-123(2), (3) or (4); or
(ii) it is not practicable to show that the company meets the conditions in those subsections; and
(b) paragraph 165-120(1)(b) (about the Commissioner thinking it is unreasonable to require the company to meet the conditions in section 165-123) does not apply.

Note: Other provisions may treat the company as meeting, or failing to meet, the conditions in subsections 165-123(2), (3) and (4).

(2)
The company must satisfy the * same business test for the * second continuity period (the same business test period ). Apply the test to the * business the company carried on immediately before the time (the test time ) shown in the relevant item of the table.


Test time


Item


If:


The test time is:


1


It is practicable to show there is a period that meets these conditions:

(a) the period starts at the start of the * first continuity period;
(b) the company would meet the conditions in subsections 165-123(2), (3) and (4) if the period were the * ownership test period for the purposes of this Act


The latest time that it is practicable to show is in the period


2


Item 1 does not apply and either:

(a) the debt was incurred before the * current year; or
(b) the company came into being during the current year


The end of the day on which the debt was incurred


3


All these conditions are met:

(a) item 1 does not apply;
(b) the debt was incurred in the * current year;
(c) the company was in being throughout the current year


The start of the current year


For the same business test: see Subdivision 165-E.

Division 2—Consequential amendments

Income Tax Assessment Act 1997

17 Paragraph 165-120(1)(c)

Omit "conditions", substitute "condition".

18 Paragraph 165-132(1)(c)

Omit " * minimum continuity period", substitute " * test time worked out under section 165-126".

19 Subsection 165-132(2)

Omit "time (the test time ) when the * minimum continuity period ended", substitute " * test time worked out for section 165-126".

20 Subsection 995-1(1) (definition of minimum continuity
period )

Repeal the definition.

21 Subsection 995-1(1) (definition of test time )

Omit "165-132,".

Division 3—Technical correction

Income Tax Assessment Act 1997

22 Subsection 166-40(5)

Omit "(2)(a) or (b)", substitute "(2)(c) or (d)".

Division 4—Application of amendments

23 Application

The amendments made by this Part apply to assessments for the 1998-99 income year and later income years.


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