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Timbercorp Group of Companies (In Liquidation)
23 April 2009
Craig Shepard and Leanne Chesser and Mark Korda and Mark Mentha
Liquidation: 29 June 2009
The Australian Taxation Office (ATO) has provided guidance on the tax implications for Borrowers who enter into a repayment arrangement under the Timbercorp Finance Financial Hardship Policy. The guidance is below:
Timbercorp Finance Hardship Policy - ATO Correspondence
Borrowers who enter into a repayment arrangement under the Timbercorp Finance Financial Hardship Policy should distinguish between amounts of interest and principal. This can include any accrued but unpaid interest.
In relation to principal, any amount released, waived or otherwise extinguished should not result in an amount of assessable income. The commercial debt forgiveness rules will apply to the "net forgiven amount" which may result in a Borrower's tax attributes being reduced.
In relation to interest, Borrowers who have not previously claimed a tax deduction for accrued unpaid interest on their loans will now be entitled to claim a deduction for amounts of interest actually paid (ie under the Financial Hardship Policy). Conversely, Borrowers that have previously claimed a tax deduction for accrued unpaid interest may now have to include amounts of interest they are no longer required to pay in their assessable income.
Despite the ATO’s letter, Borrowers should still obtain independent tax advice specific to their circumstances from their accountant or tax agent or request a private ruling from the ATO.
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