ATO Interpretative Decision

ATO ID 2003/581 (Withdrawn)

Income Tax

Commercial debt forgiveness - debt owed by trust to trustee forgiven
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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.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.

Status of this decision: Decision Withdrawn 21 November 2008

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Does Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) apply to a debt which is owed to a trustee?

Decision

Yes. Section 245-26 of Schedule 2C to the ITAA 1936 provides that the Schedule has application where a commercial debt owed by the trustee of a trust estate is forgiven after 27 June 1996.

Facts

Prior to 27 June 1996 the trustee of a trust loaned money to the trust.

After 27 June 1996 that debt was forgiven because of the trust's inability to repay the debt.

Interest paid in respect of debt constituted an allowable deduction.

Reasons for Decision

Subsection 245-15(1) of Schedule 2C to the ITAA 1936 defines a 'debt' as an enforceable obligation imposed by law on a 'person' to pay an amount to another person.

Pursuant to section 245-26 of Schedule 2C to the ITAA 1936 that Schedule applies to a person acting in the capacity of a trustee of a trust estate in respect of the trust estate's debts.

As interest paid in respect of the debt was an allowable deduction the debt is therefore a commercial debt, as defined in section 245-25 of Schedule 2C to the ITAA 1936.

Accordingly, section 245-10 of Schedule 2C to the ITAA 1936 provides that the Schedule applies in these circumstances as there has been the forgiveness of a commercial debt after 27 June 1996.

Date of decision: 23 June 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2C, section 245-10
   Schedule 2C, subsection 245-15(1)
   Schedule 2C, section 245-25
   Schedule 2C, section 245-26

Keywords
Commercial debt
Commercial debt forgiveness
Dealings & transactions
Debt forgiveness
Debt waivers
Entities & taxpayer groups
Trustees
Trusts

Business Line: Losses and CGT Centre of Expertise

Date of publication: 18 July 2003

ISSN: 1445-2782

history

	Date:	Version:
	23 June 2003	Original statement
You are here →	21 November 2008	Archived

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