On 3 September 2015, New Zealand Revenue Minister Todd McClay announced that the Cabinet has approved proposed rules to address issues of over taxation in cases of debt remission between related parties. Over taxation may result because a forgiven debt is treated as taxable income for the debtor, but since the parties are related, does not become deductible as a bad loan for the creditor.
The proposed rules include that there should be no debt remission income for the debtor when the debtor…