ATO Interpretative Decision

ATO ID 2003/572 (Withdrawn)

Income Tax

Commercial debt forgiveness - group of related companies - special rules
FOI status: may be released

This ATO Interpretative Decision is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1936 that doesn't apply after the 2009-2010 income year. Despite its withdrawal from the database, this ATO Interpretative Decision continues to be a precedential view in respect of decisions for income years up to, and including the 2009-2010 income year.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

If debtor company and another company were under common ownership at one of the two times specified in subsection 245-225(2) of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) can paragraph 245-225(3)(a) of Schedule 2C apply?

Decision

Yes. Paragraph 245-225(3)(a) of Schedule 2C to the ITAA 1936 only requires that debtor company and another company not be under common ownership for at least one of the times in subsection 245-225(2) of Schedule 2C not necessarily both times.

Facts

Debtor Company had a net forgiven amount for the purpose of subsection 245-85(2) of Schedule 2C to the ITAA 1936 to be applied as a result of a forgiveness of a debt after 27 June 1996.

Debtor Company and Company R do not constitute a group of related companies for the purposes of subsection 245-225(2) of Schedule 2C to the ITAA 1936 as they do not satisfy paragraph 245-225(2)(b) of Schedule 2C in that they were not under common ownership at any time on the last day of the year of income immediately preceding the forgiveness year of income.

Debtor Company and Company R had been under common ownership during the two years of income immediately preceding the forgiveness year of income.

The two companies were not under common ownership during the income year in which the debt was forgiven.

A taxpayer was the 'controller' of both companies at all times specified in paragraph 245-225(3)(c) of Schedule 2C to the ITAA 1936.

Reasons for Decision

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

Pursuant to section 245-225 of Schedule 2C to the ITAA 1936 special rules in Subdivision 245-G of Schedule 2C apply in respect of the relevant debt as Debtor company and at least one other company constitute a group of related companies.

Companies can be taken to be part of a group of related companies for the purposes of applying subsection 245-225(1) of Schedule 2C to the ITAA 1936 if they are related within the meaning of subsection 245-225(3) of Schedule 2C.

As paragraphs 245-225(3)(a) to (c) inclusive of Schedule 2C to the ITAA 1936 apply to Debtor Company and Company R, the two companies are taken to constitute a group of related companies for the purposes of subsection 245-225(1) of Schedule 2C to the ITAA 1936.

In applying paragraph 245-225(3)(a) of Schedule 2C to the ITAA 1936 the reference to '... at the times mentioned in subsection (2)...' only requires the companies not to be under common ownership for at least one of the relevant times and not necessarily both.

Accordingly Subdivision 245-G of Schedule 2C to the ITAA 1936 has application in respect of the relevant forgiveness.

Date of decision: 3 Jun 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2C, Subdivision 245-G
   Schedule 2C, section 245-10
   Schedule 2C, subsection 245-225(1)
   Schedule 2C, paragraph 245-225(2)
   Schedule 2C, subsection 245-225(2)(b)
   Schedule 2C, subsection 245-225(3)
   Schedule 2C, paragraph 245-225(3)(a)
   Schedule 2C, paragraph 245-225(3)(b)
   Schedule 2C, paragraph 245-225(3)(c)

Keywords
CDF net capital losses
CDF related companies
CDF revenue losses
Commercial debt forgiveness
Commercial debt forgiveness and related companies
Companies
Dealings & transactions
Group companies

Business Line: Losses and CGT Centre of Expertise

Date of publication: 11 July 2003

ISSN: 1445-2782

history

	Date:	Version:
	3 June 2003	Original statement
You are here	5 April 2012	Archived

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