There are two changes made here. Firstly in the areaof debt forgiveness (formal or otherwise, such as a non recourse loan whichcannot be pursued beyond the proceeds of a sale of the underlying property), which covers a situation of a taxpayer who is involved/deemed to be involved in the trade of dealing in or developing land, and there has been a release of debt incurred in respect of monies borrowed to acquire land held as trading stock. In those circumstances, any release of the debt will be treated as an Income receipt for Income Tax purposes. Trading losses brought forward will be available for use against this deemed receipt. This provision is applicable in respect of debt released on or after 13 February 2013.
The other provision restricts the tax relief availableon trading losses against other income of the taxpayer. The restriction appliesto individuals where less than 50% of their total income for the tax year in question along with the two preceding years were derived from dealing in or developing land. In these cases, any losses generated by unpaid interest (on borrowings for property held as trading stock) and unrealised write downs in the value of trading stock will not be available for use against other income. This provision also takes effect from 13 February 2013.
Contact your OSK tax consultants for more information.
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