Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 245 - Forgiveness of commercial debts  

Subdivision 245-D - Calculation of net forgiven amount of a debt  

Operative provisions

SECTION 245-90   Agreement between companies under common ownership for creditor to forgo capital loss or deduction  

245-90(1)    
This section applies if:

(a) a debt owed by a company to another company is *forgiven; and

(b) from the time when the debt was incurred until the time when the debt is forgiven, the companies were *under common ownership.

245-90(2)    
If, apart from this subsection, the creditor would have made a *capital loss as a result of the *forgiveness of the debt:

(a) the debtor and creditor may agree that the creditor is to forgo so much of the loss as is stated in the agreement and does not exceed the amount that would be the net forgiven amount of the debt apart from this section (the provisional net forgiven amount of the debt); and

(b) if such an agreement is made:

(i) the creditor ' s capital loss is reduced by the agreed amount; and

(ii) the provisional net forgiven amount of the debt is also reduced by the agreed amount; and

(iii) the amount remaining after the reduction of the provisional net forgiven amount of the debt under subparagraph (ii) is the net forgiven amount of the debt.

245-90(3)    
If, apart from this subsection, the creditor could deduct an amount in respect of the debt under section 8-1 (about general deductions) or section 25-35 (about bad debts) for the *forgiveness income year:

(a) the debtor and creditor may agree that the creditor is to forgo so much of the deduction as is stated in the agreement and does not exceed the amount that would be the net forgiven amount of the debt apart from this section (the provisional net forgiven amount of the debt); and

(b) if such an agreement is made:

(i) the amount the creditor can deduct is reduced by the agreed amount; and

(ii) the provisional net forgiven amount of the debt is also reduced by the agreed amount; and

(iii) the amount remaining after the reduction of the provisional net forgiven amount of the debt under subparagraph (ii) is the net forgiven amount of the debt.

245-90(4)    
Neither subsection (2) nor (3) applies in relation to an agreement unless the agreement:

(a) is in writing and signed by the public officer of each company; and

(b) is made before:

(i) the first of those companies lodges its *income tax return for the *forgiveness income year; or

(ii) any later day that the Commissioner determines in writing.

245-90(5)    
A determination made under subparagraph (4)(b)(ii) is not a legislative instrument.