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  • Loans put on hold during COVID-19

    We've clarified our position on loans that have been put on hold during COVID-19.

    We consider a debt to be forgiven for tax purposes if, generally:

    • the debtor is somehow relieved from the legal obligation to repay it, or
    • there is evidence that the creditor won't insist on repayment or rely on the obligation for repayment.

    If a creditor only postpones an amount payable and the debtor acknowledges the debt, a debt is not considered forgiven. This is unless there is evidence that the creditor will no longer rely on the obligation for repayment.

    Debt forgiveness for Division 7A

    If a private company forgives a debt, it is considered a deemed dividend under Division 7A. A debt is forgiven if a reasonable person would conclude a creditor will not insist on payment or rely on the borrower’s obligation to pay.

    Without more, allowing more time to repay a debt due to COVID-19 will not result in the debt being treated as forgiven.

    See also:

    Last modified: 04 Aug 2020QC 63337