INCOME TAX ASSESSMENT ACT 1997 - SECT 245.50 Extent of forgiveness if consideration is given

INCOME TAX ASSESSMENT ACT 1997 - SECT 245.50

    If any consideration is paid or given in respect of the * forgiveness of a debt, the debt that is forgiven is:

  (a)   the obligation that existed before the forgiveness to pay so much of the debt as is expressed, or is taken, to be forgiven; and

  (b)   the obligation that existed before the forgiveness to pay any part of the debt to which paragraph   (a) does not apply but which ceases to be payable as a result of the payment or giving of the consideration.

Example:   Daniel owes Samara $100. Samara agrees to accept $60 in full payment of the debt.

  If their agreement specifies that Samara forgives the whole debt in return for $60, paragraph   (a) provides that the forgiven debt is $100.

  If their agreement instead requires Daniel to repay $60 and specifies that Samara forgives the remaining $40, paragraph   (a) would deal with the $40 and paragraph   (b) would add the remaining $60, again producing a forgiven amount of $100.

  In either case, the $60 Daniel pays is offset against the forgiven amount of $100 in working out the gross forgiven amount of the debt: see sections   245 - 65 and 245 - 75.