Proposed Australian thin capitalisation changes – revamp or regression?
Published Date: 17 Aug 2023
This article analyses the significant overhaul of Australia’s thin capitalisation rules as we move to an earnings-based approach. The new rules include the fixed ratio test, group ratio test and third party debt test to better align Australia’s thin capitalisation rules with the OECD’s recommended approach.
The article discusses the application of the new tests, the interaction of the new rules with other legislative provisions and the new debt deduction creation rule. While certain sectors may benefit from increased debt capacity, the new rules include some measures that go beyond OECD best practice, which may impose compliance burdens for some entities or inadvertently disadvantage certain entities. Some sectors, particularly capital-intensive industries or start-ups, may face challenges from the changes, such as applying transfer pricing rules to allowable debt, limiting intra-group debt creation and excluding deductions for prior year tax losses from the tax EBITDA calculation.
Sorry, this is subscriber only content.
To gain access to this material and much more - Subscribe Now.
(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).
Already a Subscriber? Login now
Already a Subscriber? Login now
Details
- Published By: Annie Giang, Alexander Fedan, Stefan Hempelmann
- Published On:17 Aug 2023
The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.
Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.
The Tax Institute
(ABN 45 008 392 372 (PRV14016))
("TTI")
The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009.
Copyright Statement
All materials provided on this site are protected by copyright and are owned by or licensed to TTI.
Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.
Tags
Share this page