Love Equality!!! and Tax

You know you are not funny when you have to start a blog post with “please understand this is an attempt at humour and not some political/moral/ethical statement.” Simply put, I thought it might make you laugh…

I’m angry! Really angry! Its 2019 and still the Government wants to regulate what type of love is acceptable, what type of love is “natural”. In my town of Canberra we have had roundabouts to celebrate “Marriage Equality”, but it looks like the Government has decided that it won’t allow love to go any further.

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You see the Commissioner of Taxation has recently reversed a position he has had since 2003 (ATO Interpretative Decision ATO ID 2003/589) and has said some love just is not “natural”…

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In a recent draft Taxation Determination, the Commissioner has considered whether a certain type of love can be “natural”. In the commercial debt forgiveness rules in Division 245 of the ITAA97, where a debt is forgiven, the lucky party that no longer has to pay the debt can have some bad tax consequences. But this does make sense…

Example

Friendly Bank loans Ken $1,000 which he used to buy a widget machine. As the machine in less than $30,000 and Ken uses this in his business he gets an immediate deduction for the $1,000.

But Ken convinces the bank to forgive the debt. So what has Ken actually paid for the widget machine? $0, nil, nothing. So what do the commercial debt forgiveness rules do? deny deductions (and losses) like these.

But there is an exemption. If rather than Friendly Bank making the loan it was Ken’s amazing wife, who loves him dearly and forgives the loan. Division 245 excludes a debt forgiven for reasons of natural love and affection from the application of the commercial debt forgiveness provisions.

But who can show “natural and affection” according to the Commissioner?

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The Commissioner has just decided that poor defenceless companies and trusts, merely trying to get along in a hard world, might be able to love, but they are no longer able to show “natural love”.

Being serious for a second, he has decided that if my wife was the director or trustee and wanted forgive the loan from the company or trust to me, that loan cannot be exempt as the company or trust cannot show natural love.

So lets protest. Companies and trusts should not be discriminated against. Let’s paint roundabouts the colours of companies and trusts – I suggest concrete grey and asphalt back are good colours for this.

About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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