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Where a loss company came into being during the loss year and is unable to demonstrate some period when it satisfied the continuity of ownership test (COT), does the loss company have a test time for the purpose of applying the same business test (SBT) in order to deduct the relevant tax loss?

Yes. The loss company's test time for the purpose of applying the SBT is the end of the loss year pursuant to Item 3 of subsection 165-13(2) of the Income Tax Assessment Act 1997 (ITAA 1997).

The loss company came into being after 1 July 2001 and incurred a tax loss for the 2001-02 income year.

For the 2002-03 income year, the loss company's total assessable income exceeds its total deductions (except tax losses). The loss company wishes to deduct an amount of tax loss incurred for the 2001-02 income year.

The loss company is unable to demonstrate that the COT is satisfied for any period from when it came into being as, in the circumstances, it is not practicable to obtain details of the ultimate beneficial ownership of a non-resident shareholder which is a majority shareholder.

Division 166 of the ITAA 1997 does not apply to the loss company.

Section 165-12 of the ITAA 1997 requires the conditions of the COT to be satisfied at all times during the ownership test period from the start of the loss year (being 1 July 2001 in this instance) to the end of the income year (being 30 June 2003).

Where the conditions of section 165-12 of the ITAA 1997 are not satisfied, section 165-13 of the ITAA 1997 provides an alternative SBT condition. Item 1 of subsection 165-13(2) of the ITAA 1997 does not apply to the loss company as the COT conditions are not satisfied for any period from the time the loss company came into being.

Where Item 1 of subsection 165-13(2) of the ITAA 1997 does not apply and the company came into being during the loss year, item 3 provides that the test time for the purposes of applying the SBT is the end of the loss year.

In accordance with Item 3 of subsection 165-13(2) of the ITAA 1997, the loss company's test time for the SBT is 30 June 2002.