Notice - QWBA "Loan guarantor's loss when guarantee is called on - deductibility"

QWBA "Loan guarantor's loss when guarantee is called on - deductibility" (the QWBA) was published in Tax Information Bulletin Vol 7, No 2 (August 1995).  The QWBA concerns provisions in Part EH of the Income Tax Act (ITA) 1994.  Relevantly, it sets out how s EH 4(8) of the Income Tax Act 1994 (now s DB 15 of the Income Tax Act 2007) applies to a guarantor claiming a deduction for an amount paid out under a guarantee.

In the Commissioner's view, there are a number of aspects of the QWBA which are ambiguous, misleading or incorrect.  The QWBA is withdrawn effective from the beginning of the 2015-16 income year.  Taxpayers taking a taxpayer's tax position after that date should not rely on the views set out in the item.

In the course of attempting to clarify these matters, a number of further issues have arisen around how the financial arrangements rules apply to guarantees.  Because some of these issues are policy matters, the Commissioner is first going to consider the policy matters to determine whether the law should be amended.  Once this has been done, the Commissioner will consider issuing a statement clarifying the issues for guarantees.