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Edited version of private ruling
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Ruling
Subject: Fringe Benefits Tax -Debt waiver
Can a 'debt waiver benefit' as defined in section 14 of the Fringe Benefits tax Assessment Act 1986 (FBTAA) arise when an employee discharges an asset purchase assistance loan by sharing the proceeds of the asset sale with the employer (according to an agreed percentage) which may be less than the amount originally loaned?.
No.
A 'debt waiver benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit referred to in section 14 of that Act.
Section 14 of the FBTAA states that:
Where, at a particular time, a person (in this section referred to as the 'provider' ) waives the obligation of another person (in this section referred to as the 'recipient') to pay or repay to the provider an amount, the waiver shall be taken to constitute a benefit provided at that time by the provider to the recipient.
The word 'waive' was considered by the Court in Banning v. Wright (1972) 2 All ER 987 where it was held to mean the giving up or abandoning of some right.
Where, under the terms of a loan agreement, a lender accepts an agreed proportion of the sale price of the asset in full satisfaction of the loan balance, there is no release or waiver of any obligation to pay or repay an amount.
Thus, the discharge of the loan through the payment of an agreed proportion of the sale price of the asset where the payment amount may have a lesser value than the loan balance is not considered to give rise to a debt waiver benefit.
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