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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?

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

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.

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 The test 165-210(1) A company (other than a company covered by section 165-212A) satisfies the same business test if throughout the *same business test period it carries on the same *business as it carried on immediately before the *test time. Note: Companies whose total income for an income year is more than $100 million cannot satisfy the same business test for the same business test period: see section 165-212A. 165-210(2) However, the company does not satisfy the *same business test if, at any time during the *same business test period, it *derives assessable income from: (a) a *business of a kind that it did not carry on before the *test time; or (b) a transaction of a kind that it had not entered into in the course of its business operations before the *test time. 165-210(3) The company also does not satisfy the *same business test if, before the *test time, it: (a) started to carry on a *business it had not previously carried on; or (b) in the course of its business operations, entered into a transaction of a kind that it had not previously entered into; and did so for the purpose, or for purposes including the purpose, of being taken to have carried on throughout the *same business test period the same business as it carried on immediately before the test time. 165-210(4) ... * denotes a term defined in section 995-1 of the ITAA 1997

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.