I’ve been on the aged pension for 2 years. I have my own company I’ve lent $20k to over many years but want to close/wind up the company. If I prepare a Deed of Debt Forgiveness for the $20k between me as the lender and my company as the borrower, what are the tax implications (if any) for me and the company? Also would this affect my aged pension entitlements? (I’m paid under Centrelink’s “assets test” not “income test”)
Usually, a debt forgiveness would result in income for the business. Saying that if you have lent the business money and there are no assets then I would assume that you have carried forward losses? Those losses should soak up the income.
So assuming there are sufficient carried forward losses then I would say that is ok. When you close it down there is an ASIC form to sign confirming there are no substantial debts owing. Also, don't forget you will need to do a final return and then also cancel the ABN.
As for the Centrelink stuff Ill be honest not my forte. If the company trades at a loss or breakeven then I would suspect you just inform them and provide the financials and then close the company.
If the company has losses to be applied to the debt forgiveness then no one has to pay any tax, and everything is sweet. However if the company ends up paying $6000 tax on the $20k that is not a great result.
So what can you do if you want to wind up your company but you ALSO dont want to pay any tax on debt forgiveness????
I presume the company has no assets or cash in the bank to pay you the $20k?
SO you have tipped $20k into your own company ages ago and all the money is gone?
What about if you take $20k worth of share capital as consideration for your loan??
Company no longer owes you any money, and has no income to report.
if the company has less than $1000 in assets you can simply deregister it
if there are more than $1000 in assets you need to do a members voluntary winding up......not a cheap exercise, so you need to get the assets out of the company THEN shut it down.
the problem you have is that you need good advice from someone who knows what they are talking about, and many tax agents dont know their arse from their elbow when it comes to comapny law and winding up. Find a qualified and experienced guy to help you out. The last thing you need is Centrelink coming along and assessing you on $20k of deemed income because someone did something to wind your company up without considering all the implications.