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Summary Tax-Concession or Compromise
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A Summary of Concession or Compromise
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Concession or Compromise1.What are the Triggers?
Debt is cancelled /Waived.
Extinguished by repayment/Merger.
Debt (owed by a Co) settled by shares or by proceeds from the Co’s share. (Debt to Equity)
2.Is there a concession or compromise? According to the definition
3.What is the debt benefit?
For Debt Waived=Amount Waived
For Repayment/Merger=Face Value of Debt (prior)- Expenditure incurred ito the
repayment/Merger
Debt to Equity Conversion=Face Value of Debt (prior)-MV of the shares acquired because of
the conversion,If a person held interest before then Debt Benefit=Debt Benefit-(MV of
shares after-MV before)GG
4.Is the Debt Benefit excluded by s19(8)/Para12A (6)? (If Yes then S19/para12A) is not applicable)
5.What the debt benefit used for?
Trading Stock, tax deductible expenses/asset=s19
Capital Asset (No allowance) =Para12A
6.Was the Asset still on hand and not disposed in there prior YOA?
If Yes:
Allowance asset=Reduce BC by debt benefit and any excess debt benefit is a section
19(6) read with section 8(4)(a) recoupment.
Capital Asset=Reduce the BC by the Debt Benefit
7.Was the asset disposed in the prior YOA?
If Yes:
Calculate disposal in prior year as normal (1)
Calculate disposal in prior year as if the concession or compromise had happened in that
prior year (2)
(2)-(1)
Diff in recoupment and capital gain will be taxed in the year of assessment in which the
concession or compromise actually takes place and the debt benefit arises (Basically a
possible additional Capital Gain and Recoupment, if any)
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