Income Tax Assessment Act 1997



Division 245 - Forgiveness of commercial debts  

Guide to Division 245  

SECTION 245-2   Simplified outline of this Division  

This Division applies to any commercial debt (or part of a commercial debt) you owe that is forgiven.


This Division does not apply if:

  • (a) the debt is waived and the waiver constitutes a fringe benefit; or
  • (b) the amount of the debt has been, or will be, included in your assessable income in any income year; or
  • (c) the debt is forgiven under an Act relating to bankruptcy; or
  • (d) the debt is forgiven by will; or
  • (e) the debt is forgiven for reasons of natural love and affection; or
  • (f) the debt is a tax-related liability.
  • 245-2(2)  
    The net forgiven amount of a debt is worked out by reducing the value of your forgiven debt by:

  • (a) any consideration you provided for the forgiveness; and
  • (b) any amounts that this Act already brings to account because of the forgiveness.
  • 245-2(3)  
    The net forgiven amounts of all your forgiven debts in an income year are added up. This total net forgiven amount is applied to reduce the following amounts (in the following order):

    (a) your tax losses from previous income years;

    (b) your net capital losses from previous income years;

    (c) the deductions you would otherwise get in the income year, or in a later year, because of expenditure from a previous year (e.g. the capital allowance deductions you would get for the cost of a depreciating asset);

    (d) the cost bases of your CGT assets.

    Any unapplied total net forgiven amount is disregarded.

    Special rules apply to debts of partnerships.

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