Issue
Where an individual is forgiven a commercial debt because of a Part X arrangement made under the Bankruptcy Act 1966 does Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) apply to the forgiveness?
Decision
No. Schedule 2C to the ITAA 1936 does not apply where an individual owed a debt that was forgiven under an arrangement made pursuant to Part X of the Bankruptcy Act 1966 . Such arrangements are excluded by paragraph 245-40(a) of Schedule 2C to the ITAA 1936.
Facts
After 27 June 1996 an individual is forgiven a debt as part of a Part X arrangement made under the Bankruptcy Act 1966.
The debt is a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936.
Reasons for Decision
Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C applies where a forgiveness of a commercial debt occurs after 27 June 1996.
Paragraph 245-40(a) of Schedule 2C to the ITAA 1936 provides that Schedule 2C does not apply where the forgiveness is effected under an Act relating to bankruptcy. It is not necessary for the debtor to be made a bankrupt for paragraph 245-40(a) of Schedule 2C to the ITAA 1936 to apply.