The Same Business Test Clarified

Article by Peter Norman and Christine Hutchinson

Lilyvale Hotel Pty Ltd v Commissioner of Taxation [2009] FCAFC 21

The Full Federal Court has allowed Lilyvale Hotel Pty Ltd (Lilyvale) to bring forward losses in reliance on the same business test where Lilyvale previously ran a hotel business using a manager. Following a sale of all shares in Lilyvale, the management arrangement was terminated and Lilyvale directly managed the business. In the decision at first instance, this aspect caused a failure of the same business test and a denial of a deduction for the carry forward losses. This decision has now been overturned by a decision of the Full Federal Court that clarifies the operation of the same business test where managers are involved in a business.