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Taxation Determination

TD 93/152

Income tax: if a moneylender (A) sells its loan book to a taxpayer (B) and later B writes off some of the debts in the loan book as bad, can B claim those bad debts as deductions under paragraph 63(1)(b)?

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FOI status:

may be releasedFOI number: I 1215805

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

1. No. Deductions for bad debts are only allowable under paragraph 63(1)(b) of the Income Tax Assessment Act 1936 where those bad debts are in respect of money lent in the ordinary course of a moneylending business carried on by the taxpayer claiming the deduction (see FCT v. National Commercial Banking Corporation of Australia Ltd 83 ATC 4715, at p. 4719, (1983) 15 ATR 21; 15 TBRD Case 49 at p. 383; 3 TBRD (NS) Case C3 at p. 17).

2. The purchase of an existing debt from another person is not a loan of money by the purchaser of the debt. A deduction is not, therefore, allowable under paragraph 63(1)(b) for a bad debt where that debt was purchased from another person. This is the case whether or not the person who originally lent the money did so in the ordinary course of a business of moneylending.

3. Certain taxpayers who fail to satisfy the requirements under paragraph 63(1)(b) may be entitled to a bad debt deduction under subsection 51(1). This Taxation Determination does not address the circumstances in which a bad debt deduction is available under subsection 51(1). That issue is addressed in Taxation Ruling TR 92/18.

Commissioner of Taxation
5 August 1993

Previously issued as Drafts TD 93/D143, and

TD 92/D5

References

ATO references:
NO 93/2965-0 (NO)

ISSN 1038 - 8982

Related Rulings/Determinations:

Taxation Ruling TR 92/18

Subject References:
bad debts
moneylending
deductions
transfer of loan book

Legislative References:
ITAA 63(1)(b)

Case References:
FC of T v. National Commercial Banking Corporation of Australia Limited
83 ATC 4715
(1983) 15 ATR 21


Case 49
(1949) 15 TBRD Case 49

Case C3
3 TBRD (NS) Case C3

Case 12
3 CTBR (NS) 73

TD 93/152 history
  Date: Version: Change:
You are here 5 August 1993 Original ruling  
  15 October 1997 Withdrawn  

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