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ATO Interpretative Decision

ATO ID 2003/304 (Withdrawn)

Income Tax

Commercial debt forgiveness - Forgiveness of debt due to natural love and affection
FOI status: may be released
  • This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.
    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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Where a commercial debt is forgiven by a creditor due to reasons of natural love and affection does Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) apply?

Decision

No. Where a commercial debt is forgiven by a creditor due to reasons of natural love and affection paragraph 245-40(c) of Schedule 2C to the ITAA 1936 operates to disregard the forgiveness.

Facts

After 27 June 1996 a debtor is forgiven a debt because of the creditor's natural love and affection.

The debt is 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.

Paragraph 245-40(c) of Schedule 2C to the ITAA 1936 provides that Schedule 2C does not apply where the debt is forgiven for reasons of natural love and affection.

Date of decision:  7 April 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2C
   Schedule 2C, section 245-10
   Schedule 2C, section 245-25
   Schedule 2C, paragraph 245-40(c)

Keywords
Debt forgiveness
Debt waivers

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  16 May 2003

ISSN: 1445-2782

history
  Date: Version:
  7 April 2003 Original statement
You are here 21 November 2008 Archived

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