The new ‘similar business test’ is more flexible. It allows companies that have evolved and entered into new transactions or business activities in carrying on a similar business to access prior year losses.
For this test to apply, companies must consider:
- how the same physical and intangible assets are used to generate income;
- whether the company generates income from the same operations;
- whether the identity of the business remains the same; and
- whether the changes to the business are from development or commercialisation of assets, products, processes, services or marketing.
The ‘similar business test’ also applies to listed widely held trusts.
The ‘similar business test’ removes the ‘no new transactions or business activities’ aspect of the 'same business test'. This allows access to prior year losses when businesses make innovative or developmental changes to their operations.