Document ID: chunk:federal_register_of_legislation:C2011C00610:clause:2_2:p1
Version: federal_register_of_legislation:C2011C00610
Segment Type: clause
Provision Reference: sch 2 cl 2 (pt 1/7)
Character Range: 77760–80525

2  After Division 243
Insert:

Division 245—Forgiveness of commercial debts

Table of Subdivisions

 Guide to Division 245
245‑A Debts to which operative rules apply
245‑B What constitutes forgiveness of a debt
245‑C Calculation of gross forgiven amount of a debt
245‑D Calculation of net forgiven amount of a debt
245‑E Application of net forgiven amounts
245‑F Special rules relating to partnerships
245‑G Record keeping

Guide to Division 245

245‑1  What this Division is about

      When a creditor forgives a commercial debt you owe, you make a gain. This is usually not included in your assessable income. Instead, this Division offsets the forgiven amount against amounts that could otherwise reduce your taxable income in the same or a later income year. Those amounts are:

                (a) your tax losses and net capital losses; and
                (b) capital allowances and some similar deductions; and
                (c) the cost bases of your CGT assets.

245‑2  Simplified outline of this Division

 (1) This Division applies to any commercial debt (or part of a commercial debt) you owe that is forgiven.

Note: This Division does not apply if:

(a) the debt is waived and the waiver constitutes a fringe benefit; or

(b) the amount of the debt has been, or will be, included in your assessable income in any income year; or

(c) the debt is forgiven under an Act relating to bankruptcy; or

(d) the debt is forgiven by will; or

(e) the debt is forgiven for reasons of natural love and affection; or

(f) the debt is a tax‑related liability.

 (2) The net forgiven amount of a debt is worked out by reducing the value of your forgiven debt by:
 (a) any consideration you provided for the forgiveness; and
 (b) any amounts that this Act already brings to account because of the forgiveness.

 (3) The net forgiven amounts of all your forgiven debts in an income year are added up. This total net forgiven amount is applied to reduce the following amounts (in the following order):
 (a) your tax losses from previous income years;
 (b) your net capital losses from previous income years;
 (c) the deductions you would otherwise get in the income year, or in a later year, because of expenditure from a previous year (e.g. the capital allowance deductions you would get for the cost of a depreciating asset);
 (d) the cost bases of your CGT assets.

 (4) Any unapplied total net forgiven amount is disregarded.

 (5) Special rules apply to debts of partnerships.

Subdivision 245‑A—Debts to which operative rules apply

Guide to Subdivision 245‑A

245‑5  What this Subdivision is about

      This Division applies to a debt if you can deduct interest payable on the debt.

Table of sections

Application of Division

245‑10 Commercial