Issue
Where a commercial debt is forgiven by a creditor due to reasons of natural love and affection does Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) apply?
Decision
No. Where a commercial debt is forgiven by a creditor due to reasons of natural love and affection paragraph 245-40(c) of Schedule 2C to the ITAA 1936 operates to disregard the forgiveness.
Facts
After 27 June 1996 a debtor is forgiven a debt because of the creditor's natural love and affection.
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(c) of Schedule 2C to the ITAA 1936 provides that Schedule 2C does not apply where the debt is forgiven for reasons of natural love and affection.