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Do the related companies rules in Subdivision 245-G of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) apply where a debtor company and another company were not under common ownership prior to the forgiveness year of income and the common control requirements of subsection 245-225(3) of Schedule 2C to the ITAA 1936 are not satisfied?

No. Subdivision 245-G of Schedule 2C to the ITAA 1936 cannot apply if the debtor company and another company were not under common ownership on the last day of the income year immediately preceding the forgiveness year of income or were not under common control at specified times, pursuant to subsections 245-225(2) and 245-225(3) respectively of Schedule 2C to the ITAA 1936.

Debtor company had a net forgiven amount for the purposes of subsection 245-85(2) of Schedule 2C to the ITAA 1936 to be applied as a result of a forgiveness of a debt after 27 June 1996.

Debtor company and Company K were under common ownership for the purposes of section 245-250 of Schedule 2C to the ITAA 1936 at the time of the debt forgiveness.

The two companies did not come under common ownership until the income year in which the debt was forgiven.

The two companies were not under common control as required under subsection 245-225(3) of Schedule 2C to the ITAA 1936.

Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C to the ITAA 1936 applies where the forgiveness of a commercial debt occurs after 27 June 1996.

Subdivision 245-G of Schedule 2C applies in certain circumstances if, at the time when a debt incurred by a company is forgiven, the debtor company and at least one other company constitute a group of related companies.

Subsection 245-225(2) of Schedule 2C to the ITAA 1936 defines a group of related companies as follows: 'The debtor company and another company or other companies constitute a group of related companies in respect of the relevant debt for the purposes of this section if the companies concerned were under common ownership: (a) at the time when the relevant debt was forgiven; and (b) at any time on the last day of the year of income that immediately preceded the forgiveness year of income in respect of the relevant debt.'

As Debtor company and Company K were not under common ownership at any time on the last day of the year of income immediately preceding the forgiveness year of income in respect of the debt they do not constitute a group of related companies under subsection 245-225(2) of Schedule 2C to the ITAA 1936.

Subsection 245-225(3) of Schedule 2C to the ITAA 1936 may apply where the debtor company and another company were not under common ownership at the times mentioned in subsection 245-225 (2) of Schedule 2C. The common control requirements for subsection 245-225(3) of Schedule 2C to the ITAA 1936 to apply are not met in this case.

Accordingly Subdivision 245-G of Schedule 2C to the ITAA 1936 does not apply as Debtor company and Company K are not related companies.