Bad Debts - Ensuring consistent treatment in related party financing arrangements
17 Jul 2012
As part of the 2012-13 Budget, the Government announced it will ensure a more consistent tax treatment for bad debts between related parties that are not members of a tax consolidated group.
The measure will deny the creditor a tax deduction for a bad debt written-off, where the debtor is a related party. In addition, the corresponding gain to the debtor will be disregarded.
It is intended that the measure will introduce better symmetry between the tax treatments of the creditor and the borrower where they are related parties.
Treasury has now released a discussion paper in relation to the proposed amendments.
The closing date for submissions is Friday 10 August 2012.