Debt review removal itself does not trigger any tax liability. The court order, clearance certificate, or DHS update is a legal and administrative event, not a financial transaction that SARS regards as taxable income.
There is one situation during the debt review process that can have tax implications: debt write-offs or waivers.
If a creditor agreed to write off a portion of your outstanding debt as part of a settlement during debt review, SARS may treat the amount written off as taxable income under Section 19 of the Income Tax Act. A reduction in your debt liability is treated as a financial benefit received.
Example: if you owed R50,000 on a personal loan and the creditor accepted R30,000 as full and final settlement, the R20,000 write-off may be treated as income by SARS.
Debt write-offs during debt review are uncommon. Most debt review plans involve full repayment of restructured amounts rather than debt forgiveness. If you are uncertain whether any write-offs occurred, check with your previous debt counsellor or review your settlement correspondence.
NDRC is not a tax advisory firm. For specific tax advice relating to debt write-offs during your debt review, consult a registered tax practitioner or SARS directly at 0800 00 7277.