Australia’s new thin capitalisation regime
Published Date: 1 Aug 2024
After a long journey, the government’s fundamental changes to Australia’s thin capitalisation rules were passed by parliament and received royal assent on 8 April 2024 (with application from 1 July 2023). This article outlines the amendments made to the thin capitalisation rules and the three new tests that may apply to limit an entity’s debt deductions in Australia. The changes are significant. The new rules are complex, challenging to apply in practice (particularly the third party debt test) and, despite comprehensive submissions by industry participants, still include many legislative uncertainties. The lack of grandfathering or transitional relief also results in retrospectivity that will require the application of significant compliance resources by taxpayers. We have sought to address many of these issues in the article, but it is hoped that the Commissioner of Taxation will over time develop guidance to provide at least some certainty on the key areas identified.
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- Published By: Scott Heezen, Peter Scott, Michael D’Anella
- Published On:1 Aug 2024
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