The ATO has “clarified” its position on loans put on hold during COVID-19. The ATO will consider a debt to be forgiven for tax purposes if:
- the debtor is somehow relieved from the legal obligation to repay it; or
- there is evidence that the creditor won’t insist on repayment or rely on the obligation for repayment.
A debt is not considered to be forgiven if a creditor only postpones an amount payable and the debtor acknowledges the debt – unless there is evidence that the creditor will no longer rely on the obligation for repayment.