Issues remain with proposed tax losses legislation, says mid-tier

According to BDO tax partner Mark Molesworth, the government's response was a step in the right direction, but indicated that problems with the legislation still remain.

“The existing same business test is very restrictive and can lead to the stifling of innovation in order to ensure that existing losses remain available,” he said.

“Any steps to liberalise the same business test would be good for the economy and for taxpayers," Mr Molesworth noted, while adding that the means by which that has been done may increase compliance costs for such businesses and may not have the desired effect.

Mr Molesworth added that the requirement that changes made to the business are ones that would be reasonably expected will result in ATO officers and taxpayers needing to obtain evidence of what such businesses would do.

“This requires either a large degree of business experience – which ATO officers may not have – or a potentially expensive and time-consuming evidence collection exercise. Furthermore, what others may, or may not, do may not necessarily be relevant to assessing the outcomes for a particular company’s circumstances," he said.

“It may make the task too hard or too costly and lead businesses down the path of least resistance – don’t innovate and be certain the losses remain available.”