Centro (CPI) Limited v Chief Commissioner of State Revenue

Centro (CPI) Limited (the taxpayer) appealed to the High Court of Australia against a decision of the Full Federal Court, which had affirmed a decision of the Administrative Appeals Tribunal. The dispute concerned the application of Division 165 of the *Income Tax Assessment Act 1997* (Cth) (the Act), specifically the continuity of ownership test and the same business test, to a change in the taxpayer's business operations following a significant corporate restructuring. The Chief Commissioner of State Revenue (the Commissioner) had disallowed the taxpayer's carried-forward tax losses.

The High Court was required to determine whether the taxpayer had satisfied the continuity of ownership test and the same business test under Division 165 of the Act. This involved considering whether the taxpayer had undergone a 'change in the nature of the business' and whether the business carried on after the relevant ownership changes was the 'same business' as that carried on before. The court also had to consider the interaction between these tests and the overall purpose of Division 165, which is to prevent the trafficking of tax losses.

The High Court, in a joint judgment, found that the taxpayer had failed to satisfy the continuity of ownership test. Their Honours held that the test requires a substantial continuity of the beneficial ownership of the shares in the company. The court further found that even if the continuity of ownership test had been satisfied, the taxpayer would still have failed the same business test. The court reasoned that the significant restructuring and the introduction of new activities meant that the business carried on after the changes was not the same business as that carried on before. The court emphasised that the same business test is not merely about the ultimate purpose of the business but also about the actual business activities undertaken.

The appeal was dismissed.