Income Tax Assessment Act 1997
SECTION 245-50 245-50 Extent of forgiveness if consideration is given
If any consideration is paid or given in respect of the *forgiveness of a debt, the debt that is forgiven is:
(a) the obligation that existed before the forgiveness to pay so much of the debt as is expressed, or is taken, to be forgiven; and
(b) the obligation that existed before the forgiveness to pay any part of the debt to which paragraph (a) does not apply but which ceases to be payable as a result of the payment or giving of the consideration.
Example:
Daniel owes Samara $100. Samara agrees to accept $60 in full payment of the debt.
If their agreement specifies that Samara forgives the whole debt in return for $60, paragraph (a) provides that the forgiven debt is $100.
If their agreement instead requires Daniel to repay $60 and specifies that Samara forgives the remaining $40, paragraph (a) would deal with the $40 and paragraph (b) would add the remaining $60, again producing a forgiven amount of $100.
In either case, the $60 Daniel pays is offset against the forgiven amount of $100 in working out the gross forgiven amount of the debt: see sections 245-65 and 245-75 .
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