Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 245 - Forgiveness of commercial debts  

Subdivision 245-C - Calculation of gross forgiven amount of a debt  

Working out if an amount is offset against the value of the debt

SECTION 245-65   Amount offset against amount of debt  

245-65(1)    
The table explains how to work out the amount (if any) that is offset against the value of a debt when it is forgiven (calculated under section 245-55 , 245-60 or 245-61 ) in working out the *gross forgiven amount of the debt.

Amount offset against value of debt
Item	Column 1 In this case:	Column 2 the amount offset is:
1	the debt is a * moneylending debt, and neither of items 4 and 6 applies	the sum of: (a) each amount that the debtor has paid; and (b) the * market value, at the time of the * forgiveness, of each item of property (other than money) that the debtor has given; and (c) the market value, at that time, of each obligation of the debtor to pay an amount, or to give such an item of property; as a result of, or in respect of, the forgiveness of the debt.
2	the debt is not a * moneylending debt, and none of items 3, 4, 5 and 6 applies	the sum of: (a) each amount that the debtor has paid, or is required to pay; and (b) the * market value, at the time of the * forgiveness, of each item of property (other than money) that the debtor has given, or is required to give; as a result of, or in respect of, the forgiveness of the debt.
3	the debt is not a * moneylending debt, the conditions in subsection (2) are met and none of items 4, 5 and 6 applies	the * market value of the debt at the time of the * forgiveness.
4	the debt is assigned as mentioned in section 245-36, and item 5 does not apply	the sum of: (a) the amount or * market value of the consideration (if any) that the debtor has paid or given, or is required to pay or give, in respect of the assignment; and (b) the amount or market value of the consideration (if any) paid or given by the new creditor in respect of the assignment.
5	the debt is assigned as mentioned in section 245-36, and: (a) the debt is not a * moneylending debt; and (b) the creditor and the new creditor were not dealing with each other at * arm ' s length in connection with the assignment	the * market value of the debt at the time of the assignment.
6	the debt is * forgiven by subscribing for * shares in a company as mentioned in section 245-37	the amount worked out using the formula in subsection (3).

245-65(2)    
The conditions for the purposes of item 3 of the table in subsection (1) are:

(a) at least one of the following is satisfied:

(i) at the time when the debt was *forgiven, the creditor was an Australian resident;

(ii) the forgiveness of the debt was a *CGT event involving a *CGT asset that was *taxable Australian property; and

(b) at least one of the following is satisfied:

(i) there is no amount, and no property, covered by column 2 of item 2 of the table;

(ii) the amount worked out under item 2 of the table is greater or less than the *market value of the debt at the time of the forgiveness and the debtor and creditor did not deal with each other at *arm ' s length in connection with the forgiveness.

245-65(3)    
The formula for the purposes of item 6 of the table in subsection (1) is:

Amount applied	×	Market value of shares subscribed for
Amount subscribed

where:

amount applied
means the amount applied by the company as mentioned in section 245-37 .

amount subscribed
means the amount subscribed as mentioned in section 245-37 .

market value of shares subscribed for
means the *market value of all the shares in the company that were subscribed for as mentioned in section 245-37 , immediately after those shares were issued.