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Continuity of business test re carried over losses

Discussion in 'Accounting, Tax & Legal' started by SH, 19th Aug, 2013.

  1. SH

    SH Member

    26th Oct, 2008
    Sydney, NSW

    Quick question re continuity of business test.

    We understand that in order for a company to offset carried-over losses against income, either the 'continuity of ownership' test or the 'continuity of business' test need to be satisfied.

    The ownership test is clear, but how is the 'continuity of business' test approached? Can a company simply change its 'business', by director resolution, at any time, including just prior to selling the shares that results in a change of ownership?

    So, if a company initially established to operate a cafe decides, by board resolution, to change its focus to professional services, and then, after such a resolution, the shares are bought by owners who continue to use the business to provide professional services, is the continuity of business test satisfied, or is there a need for the business actually to have provided professional services itself in order for the test to be satisfied?

    Many thanks