Australia Inter Co Loans- HELP PLS

[Aussie Accountant]

Good morning all,

I have a query that is doing my head in.

We have a consolidated group where the Parent company owes subsidiary $2m.

The parent company has no income (ie. non-trading) and incurs some overheads. How can I clear this loan in the eyes of the subsidiary? Can it be done by netting it off against retained earnings?

I would really appreciate any help that can be provided!

 

[kirby]

If indeed parent will not be able to repay then sub needs to writeoff interco receivable and dr interco expense and parent to writeoff interco payable and dr interco income. Of course, make related elimination entries.
If they are in different countries expect the tax authorities of the country of the sub to have a huge problem with this.
If sub is an insured bank expect a ton of problems.