ATO Interpretative Decision
ATO ID 2003/41 (Withdrawn)
Fringe Benefits Tax
Commercial Debt Forgiveness: waiver of employee's obligation - fringe benefitFOI 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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since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.
Status of this decision: Decision Withdrawn 21 November 2008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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Do the commercial debt forgiveness provisions contained in Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) apply where an enforceable obligation of an employee was waived by an employer and the waiver of the obligation constitutes a fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?
Decision
No. The provisions of Schedule 2C do not apply where the waiver of the obligation constitutes a fringe benefit within the meaning of the FBTAA 1986.
Facts
An employee was loaned $1 000 by their employer in 1998. In February 2001, for commercial reasons, the employer waived the obligation for the employee to repay the loan.
The waiving of the loan constituted a debt waiver fringe benefit for the purposes of Division 3 of the Fringe Benefits Tax Assessment Act 1986.
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.
The term 'debt' is defined in subsection 245-15(1) of Schedule 2C to the ITAA 1936 as '...an enforceable obligation imposed by law on a person to pay an amount to another person'.
That definition is subject to modification by subsection 245-15(2) of Schedule 2C to the ITAA 1936, which specifies that:
If such an obligation is waived and the waiver constitutes a fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986, the debt constituted by the obligation is to be disregarded for the purposes of this Division.
Therefore Schedule 2C to the ITAA 1936 has no application to the forgiveness of the loan by the employer as the relevant debt is disregarded because of the operation of subsection 245-15(2) of Schedule 2C to the ITAA 1936.
Date of decision: 14 November 2002Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
section 245-10
subsection 245-15(1)
subsection 245-15(2)
Schedule 2C
Division 3
Keywords
Debt waivers
Debt forgiveness
ISSN: 1445-2782
| Date: | Version: | |
| 14 November 2002 | Original statement | |
| You are here → | 21 November 2008 | Archived |
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
