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ATO Interpretative Decision

ATO ID 2003/549

Income Tax

Commercial debt forgiveness - forgiving part of a debt
FOI status: may be released

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  • This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Does forgiveness of a debt under section 245-35 of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) include forgiving part of a commercial debt?

Decision

Yes, subsection 245-245(1) of Schedule 2C to the ITAA 1936 provides that for the purposes of applying Schedule 2C the term 'debt' includes part of a debt.

Facts

After 27 June 1996 Creditor released Debtor from its obligation to pay part of a debt.

The debt was a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936.

Reasons for Decision

Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C applies where a forgiveness of a commercial debt occurs after 27 June 1996.

Pursuant to subsection 245-35(1) of Schedule 2C to the ITAA 1936 a debt is forgiven if the debtor's obligation to pay the debt is released.

Subsection 245-245(1) of Schedule 2C to the ITAA 1936 provides that for the purposes of applying Schedule 2C a debt includes part of a debt.

Date of decision:  27 June 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2C, section 245-10
   Schedule 2C, section 245-25
   Schedule 2C, section 245-35
   Schedule 2C, subsection 245-35(1)
   Schedule 2C, subsection 245-245(1)

Keywords
Debt forgiveness

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  11 July 2003

ISSN: 1445-2782

history
  Date: Version:
You are here 27 June 2003 Original statement
  21 November 2008 Archived

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