On 6 February 2019, the Australian Taxation Office (ATO) withdrew Interpretative Decision 2003/589 (decision) which provided that a company can forgive a debt owed by a natural person for reasons of “natural love and affection” without consequence.

The ATO has traditionally allowed outstanding amounts to be forgiven for reasons of ‘love and affection’ without tax consequences, usually in the context of a family group, e.g., a trustee of a family discretionary trust forgiving a debt owed by a beneficiary or a company forgiving a trustee.

Withdrawal of the decision means proposals for debt forgiveness in family groups will require more care.

In withdrawing the decision, the ATO stated that the decision no longer represents the ATO’s view, and that the ATO is developing guidance on this issue. 

This adds to the ATO’s pipeline of guidance on section 100A, including the “ordinary family and commercial dealing” exception to that provision, which is also still yet to be released. It is possible that the withdrawal of the decision may be a step in a process of coming to a uniform view on dealings within family groups within Division 245, section 100A, and other provisions (including Part IVA), which would be welcome.

Watch this space for future updates on this area of law.

For further information on tax law, or for general business law advice, please contact:

Paul Gray
Principal Lawyer
T  03 5225 5231


Rod Payne
T: 03 5226 8541
E: rpayne@ha.legal