ATO Interpretative Decision
ATO ID 2003/307 (Withdrawn)
Income Tax
Commercial Debt Forgiveness - Moneylending debtFOI status: may be released
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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since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.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is a commercial debt a moneylending debt, for the purposes of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936), where the debt is a loan made in the ordinary course of business by another group company (Creditor), that carries on a business of lending money.
Decision
Yes. Subsection 245-245(1) of Schedule 2C to the ITAA 1936 provides that a debt is a moneylending debt if it is a loan made by a creditor in the ordinary course of its business of lending money.
Facts
Debtor company entered into a loan agreement with another group company, Creditor. The loan was a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936.
The loan was made by Creditor in the ordinary course of its business of lending money.
After 27 June 1996 the debt was forgiven by Creditor for commercial reasons under section 245-35 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.
In calculating the consideration under section 245-65 of Schedule 2C to the ITAA 1936 it needs to be determined whether the debt was a moneylending debt.
The term moneylending debt is defined in subsection 245-245(1) of Schedule 2C to the ITAA 1936 as follows:
'moneylending debt
means a debt resulting from a loan of money to the debtor made by the creditor in the ordinary course of a business of lending money carried on by the creditor.'
As the loan was made in the ordinary course of Creditor's business as a moneylender it therefore constitutes a moneylending debt for the purposes of applying Schedule 2C to the ITAA 1936 to forgiveness of the debt.
This ATO Interpretative Decision has been amended to remove references to 'Creditor' being a group financier, as this unnecessarily limits the scope of the ATO ID. Subsection 245-245 of Schedule 2C to the ITAA 1936 requires only that the creditor carries on a business of lending money.
Date of decision: 2 April 2003Year 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, section 245-35
Schedule 2C, section 245-65
Schedule 2C, subsection 245-245(1)
Keywords
Debt forgiveness
Debt waivers
ISSN: 1445-2782
| Date: | Version: | |
| 2 April 2003 | Original statement | |
| You are here | 21 November 2008 | Archived |