Home – New Forums Money matters Written off director’s loan to company

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  • #989292
    RileyGH
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    Hi all. Just wondering if anyone can help. If a director makes a loan to his or her own company, and that loan ends up having to be written off (because the company fails etc), how can that loan be treated in the director’s personal tax? Is a tax deduction possible? If you inject funds into you own company by buying more shares, and the company fails, then I guess you have personally suffered a capital loss, which may be offset against personal capital gains. That seems straightforward, I guess (I’m not even sure that is correct, but it sounds correct). How are bad loans treated in your personal tax?

    Thanks again.
    Riley

    #1171390
    James Millar
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    Subject to a liquidators final determination being made – yes a capital loss may arise for you to personally use. You may need to perform a members voluntary liquidation to meet the requirements.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1171391
    ZoeGillard
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    Hi Riley

    If the ‘loan’ was actually an injection into the company for more shares, then I believe what James has advised is accurate (based on the information you have provided).

    However, if the loan is an actually loan I do not think a deduction will be allowable. I suggest that you look at some of the legislation that is available, this website might be helpful; note the section referring to paragraph 63(1)(a): http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9218/NAT/ATO/00001

    I hope this helps.

    Regards,
    Zoe

    #1171392
    VFRBoy
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    Hi Guys,

    What about the company side – if the debt to the director is forgiven – does this then appear as assessable income, or just as an adjustment to the company balance sheet?

    Thanks!

    Peter

    #1171393
    Salmin
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    Hi Guys.

    I did a quick video on this question.

    [MEDIA=youtube]uk50S4ES_G0[/MEDIA]

    Feel free to message me.

    #1171394
    paranda
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    • Total posts: 20
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    Hi
    Salmin – just wondering where you found that on the Company’s side it is treated as a Capital Gain ?
    Does it not fall under the Commercial Debt Forgiveness Rules and just reduce any tax losses etc from past years ?
    Thanks for any help.

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