Key changes include:
The changes will align Australia’s rules closer to rules adopted by USA and the EU (and endorsed by OECD). The changes should simplify the tests required to calculate thin capitalisation. However, entities currently relying on the 60% of assets safe harbour debt test will be required to review and rethink their multinational debt capital structures to ensure no debt deductions are denied. Further, project feasibility models will need to be adjusted to ensure after-tax expected cash flows are accurate.
The existing rules and proposed changes are complex therefore we urge affected entities to seek advice on how the changes will effect their debt financing outcomes prior to 1 July 2023.
Click here for a detailed summary of the proposed changes.
Mazars specialises in providing tax advice regarding international business and tax issues, advising many Australians taxpayers on such issues. Our dedicated Infrastructure Finance team can also assist with feasibility models forecasting the impact of the proposed changes. For further information or assistance please contact your usual Mazars advisor or our tax specialists via the form or contact details below:
Brisbane – Jamie Towers | Melbourne – Robert James | Sydney – Lauren Hill |
+61 7 3218 3900 | +61 3 9252 0800 | +61 2 9922 1166 |
Author: Lauren Hill and Eileen Li
Published: 14/4/2023
All rights reserved. This publication in whole or in part may not be reproduced, distributed or used in any manner whatsoever without the express prior and written consent of Mazars, except for the use of brief quotations in the press, in social media or in another communication tool, as long as Mazars and the source of the publication are duly mentioned. In all cases, Mazars’ intellectual property rights are protected and the Mazars Group shall not be liable for any use of this publication by third parties, either with or without Mazars’ prior authorisation. Also please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.
On 16 March 2023, the Government released the much-anticipated changes to the thin capitalisation regime that were originally announced in the October 2022 budget. As most Australian taxpayers subject to thin capitalisation have been calculating their debt deductions with reference to 60% of its gross assets, the proposed legislation in subdivision 820-AA of the Income Tax Assessment Act 1997 (‘ITAA...