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Australia: Tax treatment of suspended loans, debt forgiveness (COVID-19)

Australia: Tax treatment of suspended loans

The Australian Taxation Office (ATO) issued a release to clarify its position regarding loans that have been “put on hold” during the coronavirus (COVID-19) pandemic.


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The ATO guidance (4 August 2020) also addresses the tax treatment of debt that is forgiven in response to COVID-19. The ATO considers a debt to be forgiven for tax purposes, generally, if:

  • The debtor is somehow relieved from the legal obligation to repay it; or
  • There is evidence that the creditor will not insist on repayment or rely on the obligation for repayment.

The ATO release states if a private company forgives a debt, it is considered to be a deemed dividend.

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