ATO Interpretative Decision
ATO ID 2003/453 (Withdrawn)
Income Tax
Commercial debt forgiveness - taxation debt owed to the CommonwealthFOI 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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since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.
Status of this decision: Decision Withdrawn 21 November 2008
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxation debt forgiven by the Commonwealth on the grounds of hardship a commercial debt for the purposes of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The forgiven debt is not a commercial debt because subsection 245-25(4A) of Schedule 2C to the ITAA 1936 specifically excludes it from being a commercial debt.
Facts
An individual who operated a business as a sole trader owed the AustralianTaxation Office tax for a year which ended after 27 June 1996.
The individual applied to the Relief Board to be released from paying the Australian Taxation Office the unpaid tax.
The Relief Board released the individual from the debt having regard to hardship being suffered by them.
Reasons for Decision
Section 245-10 of Schedule 2C to the ITAA 1936 provides that Division 245 of the ITAA 1936 applies to the forgiveness of a commercial debt after 27 June 1996.
The amount of tax owing to the Australian Taxation Office was a debt owed to the Commonwealth relating to taxation.
Subsection 245-25(4A) of the ITAA 1936 provides that 'A debt owed to the Commonwealth that arose under a law relating to taxation is not a commercial debt'.
Date of decision: 27 November 2002Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
Schedule 2C
Schedule 2C, Division 245
Schedule 2C, section 245-10
Schedule 2C, subsection 245-25(4A)
ATO ID 2003/74
Keywords
Debt waivers
Debt forgiveness
ISSN: 1445-2782
| Date: | Version: | |
| 27 November 2002 | Original statement | |
| You are here → | 21 November 2008 | Archived |