How will this work in practice? 

RePoly Pty Ltd has developed a way to turn algae into biodegradable plastic. It incurs large initial expenditure on manufacturing equipment. In the first three years of operation, RePoly makes a loss.

To ensure its viability, RePoly brings in an early stage (angel) investor who contributes additional capital. This results in a majority change in ownership.

After this change, RePoly seeks to expand its business in an effort to reach profitability. This expansion allows RePoly to make a profit in year four. RePoly seeks to offset its past losses against current year profits.

Possible treatment under existing law

RePoly would fail to meet the ‘same business test’ and access to past losses would be denied.

Possible treatment after new measure introduced

RePoly would pass the ‘similar business test’ because it makes use of the same assets, generates the majority of its income from the same business, and took advantage of an opportunity a similarly placed business would take advantage of. As a result, RePoly would be able to access past year losses.