From the time of its incorporation in 2001, Hassle Pty Ltd ran a business of importing and
Question:
From the time of its incorporation in 2001, Hassle Pty Ltd ran a business of importing and selling trucks. The head office of the business was in Melbourne and warehouses and retail outlets were located in Melbourne, Sydney and Adelaide. Rick and seven other shareholders each held 125 shares of the total 1000 issued shares in the company.
On 1 July 2020, three shareholders sold their shares to Rick following a disagreement about the way the business should be run. Part of the reason for the dispute between the shareholders was the downturn in Hassle's trading activities in 2019/20, and Hassle ended up having a tax loss of $125,000 for that year. Once Rick and the remaining shareholders had control of the company, they moved the head office to Sydney. He continued to import trucks for sale but also purchased and sold Australian made bicycles and commenced a new property development business.
Question
Explain whether Hassle can carry forward to 2020/21 the $125,000 tax loss incurred in 2019/20.
Assuming Hassle cannot satisfy the Continuity of Ownership test, advise whether the company can rely on either the same business test or similar business test.
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer