Simon runs his own accounting practice and is preparing the tax return for several separate and...

Transcribed Image Text:

Simon runs his own accounting practice and is preparing the tax return for several separate and unrelated Australian tax resident companies that have carry forward tax loss balances: Company Unused tax loss balance Ownership notes Barley Pty Ltd Bark Pty Ltd Tree Pty Ltd ($550,000) from the income year ended 30 June 2020 ($600,000) from the income year ended 30 June 2019 ($500,000) from the income year ended 30 June 2018 T Income year ended 30 June 2022 (prior to use of tax losses) 800,000 700,000 575,000 On 1 July 2019, Barley was owned by Marcel (60%) and Ben (40%). On 1 July 2021, Barley was owned by Ben (40%) and Emma (60%). On 1 July 2018, Bark was owned by Rachel (60%), Carol (20%) and Emily (20%). On 15 September 2020, Bark was owned by Rachel (10%), Carol (60 %) and Emily (30%). On 1 July 2017, Tree was owned by Este (60%) and Danielle (40%). On 1 July 2018, Tree was owned by Este (60%), Danielle (25%) and Alana (15%). On 2 July 2019, Tree was owned by Este (20%), Danielle (45%) and Alana (35%). On 1 July 2020, Tree was owned by Este (50%) and Danielle (50%). Determine whether Barley, Bark and Tree satisfy the continuity of ownership test and can therefore offset their carry forward tax loss against their taxable income for the income year ended 30 June 2022. Please explain answer and show workings and references. Simon runs his own accounting practice and is preparing the tax return for several separate and unrelated Australian tax resident companies that have carry forward tax loss balances: Company Unused tax loss balance Ownership notes Barley Pty Ltd Bark Pty Ltd Tree Pty Ltd ($550,000) from the income year ended 30 June 2020 ($600,000) from the income year ended 30 June 2019 ($500,000) from the income year ended 30 June 2018 T Income year ended 30 June 2022 (prior to use of tax losses) 800,000 700,000 575,000 On 1 July 2019, Barley was owned by Marcel (60%) and Ben (40%). On 1 July 2021, Barley was owned by Ben (40%) and Emma (60%). On 1 July 2018, Bark was owned by Rachel (60%), Carol (20%) and Emily (20%). On 15 September 2020, Bark was owned by Rachel (10%), Carol (60 %) and Emily (30%). On 1 July 2017, Tree was owned by Este (60%) and Danielle (40%). On 1 July 2018, Tree was owned by Este (60%), Danielle (25%) and Alana (15%). On 2 July 2019, Tree was owned by Este (20%), Danielle (45%) and Alana (35%). On 1 July 2020, Tree was owned by Este (50%) and Danielle (50%). Determine whether Barley, Bark and Tree satisfy the continuity of ownership test and can therefore offset their carry forward tax loss against their taxable income for the income year ended 30 June 2022. Please explain answer and show workings and references.

Answer rating: 100% (QA)

The continuity of ownership test in Australia is used to assess whether a company has undergone significant ownership changes that might disallow the ... View the full answer