Issue
If debtor company and another company were under common ownership at one of the two times specified in subsection 245-225(2) of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) can paragraph 245-225(3)(a) of Schedule 2C apply?
Decision
Yes. Paragraph 245-225(3)(a) of Schedule 2C to the ITAA 1936 only requires that debtor company and another company not be under common ownership for at least one of the times in subsection 245-225(2) of Schedule 2C not necessarily both times.
Facts
Debtor Company had a net forgiven amount for the purpose 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 R do not constitute a group of related companies for the purposes of subsection 245-225(2) of Schedule 2C to the ITAA 1936 as they do not satisfy paragraph 245-225(2)(b) of Schedule 2C in that they were not under common ownership at any time on the last day of the year of income immediately preceding the forgiveness year of income.
Debtor Company and Company R had been under common ownership during the two years of income immediately preceding the forgiveness year of income.
The two companies were not under common ownership during the income year in which the debt was forgiven.
A taxpayer was the 'controller' of both companies at all times specified in paragraph 245-225(3)(c) of Schedule 2C to the ITAA 1936.
Reasons for Decision
Subdivision 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.
Pursuant to section 245-225 of Schedule 2C to the ITAA 1936 special rules in Subdivision 245-G of Schedule 2C apply in respect of the relevant debt as Debtor company and at least one other company constitute a group of related companies.
Companies can be taken to be part of a group of related companies for the purposes of applying subsection 245-225(1) of Schedule 2C to the ITAA 1936 if they are related within the meaning of subsection 245-225(3) of Schedule 2C.
As paragraphs 245-225(3)(a) to (c) inclusive of Schedule 2C to the ITAA 1936 apply to Debtor Company and Company R, the two companies are taken to constitute a group of related companies for the purposes of subsection 245-225(1) of Schedule 2C to the ITAA 1936.
In applying paragraph 245-225(3)(a) of Schedule 2C to the ITAA 1936 the reference to '... at the times mentioned in subsection (2)...' only requires the companies not to be under common ownership for at least one of the relevant times and not necessarily both.
Accordingly Subdivision 245-G of Schedule 2C to the ITAA 1936 has application in respect of the relevant forgiveness.