COVID-19 and carried-forward losses

We understand that the way some businesses operate has been impacted for the first time as a result of COVID-19.

Some of these impacts may have resulted in changes that affect whether they are able to utilise their carried-forward losses in the current or a future income year.

For companies to utilise their carried-forward losses in a particular year, they need to satisfy the continuity of ownership test (COT). If they fail the COT, they need to satisfy the business continuity test (BCT).

Examples of COVID-19 impacts on companies include where it suddenly changes its business model or activities, or where a company closes its business. Each company's situation and whether it can utilise carried-forward losses requires a consideration of its facts and circumstances.

Generally, a company that has completely closed its business with no intention to resume will fail the BCT. However, a company that has temporarily closed its business may still be able to satisfy the BCT.

The mere receipt of JobKeeper payments will not cause a company to fail the BCT.

For more information, head to our updated guidance on How to claim a tax loss.