The ATO has clarified on how the business continuity test applies for companies affected by COVID 19.
To utilise carried-forward losses in a particular year, a company must satisfy the continuity of ownership test or business continuity test. The business continuity test will not be met where a company has ceased its business with no intention to resume. However, a company that continues to carry on its business will not fail the business continuity test merely because it has:
• reduced the scale of its business to a minimum or activities are almost entirely suspended • suspended or temporarily closed business due to reasons beyond its control which it intends to overcome.
The reasons for inactivity and expectation of resuming active operations within a reasonable time are indicative of whether a company’s business is still being carried on. The mere receipt of JobKeeper payments also does not prevent a company from satisfying the business continuity test.
From CAP TAX News – 29 October 2020 / Edition 42