INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 245 - Forgiveness of commercial debts  

Subdivision 245-C - Calculation of gross forgiven amount of a debt  

Working out if an amount is offset against the value of the debt

SECTION 245-65   Amount offset against amount of debt  

245-65(1)  
The table explains how to work out the amount (if any) that is offset against the value of a debt when it is forgiven (calculated under section 245-55, 245-60 or 245-61) in working out the *gross forgiven amount of the debt.


Amount offset against value of debt
Item Column 1
In this case:
Column 2
the amount offset is:
1 the debt is a *moneylending debt, and neither of items 4 and 6 applies the sum of:
(a) each amount that the debtor has paid; and
(b) the *market value, at the time of the *forgiveness, of each item of property (other than money) that the debtor has given; and
(c) the market value, at that time, of each obligation of the debtor to pay an amount, or to give such an item of property;
as a result of, or in respect of, the forgiveness of the debt.
2 the debt is not a *moneylending
debt, and none of items 3, 4, 5 and 6 applies
the sum of:
(a) each amount that the debtor has paid, or is required to pay; and
(b) the *market value, at the time of the *forgiveness, of each item of property (other than money) that the debtor has given, or is required to give;
as a result of, or in respect of, the forgiveness of the debt.
3 the debt is not a *moneylending debt, the conditions in subsection (2) are met and none of items 4, 5 and 6 applies the *market value of the debt at the time of the *forgiveness.
4 the debt is assigned as mentioned in section 245-36, and item 5 does not apply the sum of:
(a) the amount or *market value of the consideration (if any) that the debtor has paid or given, or is required to pay or give, in respect of the assignment; and
(b) the amount or market value of the consideration (if any) paid or given by the new creditor in respect of the assignment.
5 the debt is assigned as mentioned in section 245-36, and:
(a) the debt is not a *moneylending debt; and
(b) the creditor and the new creditor were not dealing with each other at *arm's length in connection with the assignment
the *market value of the debt at the time of the assignment.
6 the debt is *forgiven by subscribing for *shares in a company as mentioned in section 245-37 the amount worked out using the formula in subsection (3).

245-65(2)  
The conditions for the purposes of item 3 of the table in subsection (1) are:


(a) at least one of the following is satisfied:


(i) at the time when the debt was *forgiven, the creditor was an Australian resident;

(ii) the forgiveness of the debt was a *CGT event involving a *CGT asset that was *taxable Australian property; and


(b) at least one of the following is satisfied:


(i) there is no amount, and no property, covered by column 2 of item 2 of the table;

(ii) the amount worked out under item 2 of the table is greater or less than the *market value of the debt at the time of the forgiveness and the debtor and creditor did not deal with each other at *arm's length in connection with the forgiveness.

245-65(3)  
The formula for the purposes of item 6 of the table in subsection (1) is:


Amount applied × Market value of shares subscribed for
Amount subscribed

where:

amount applied
means the amount applied by the company as mentioned in section 245-37.

amount subscribed
means the amount subscribed as mentioned in section 245-37.

market value of shares subscribed for
means the *market value of all the shares in the company that were subscribed for as mentioned in section 245-37, immediately after those shares were issued.


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