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Australian property divorce settlements set for shake-up
A recent ruling by the Australian Taxation Office (ATO) may have profound implications on property divorce settlements.
Companies in Australia are no longer able to ‘forgive’ debts “for reasons of natural love and affection” after new rules stating that only individuals can now do this came into effect in November 2019.
Previously, the commercial debt forgiveness rules were commonly used in both business break-ups and family law cases to mitigate tax implications connected with the process of separation.
The ATO has now taken the stance that the creditor who’s ‘forgiving’ the loan must be an individual and not a company or an individual acting in the capacity of a trustee.
The previous interpretation had enabled entities – like a business – to forgive debts, particularly in the marriage breakdown space, thus enabling family groups to resolve asset splitting and sharing issues.
For more information, contact:
Murray Howlett
Pilot Partners, Australia
T: +61 7 3023 1300
E: mhowlett@pilotpartners.com.au
W: www.pilotpartners.com.au
