Finalised ATO guidance on the third-party debt test released

A strict interpretation of the guidance will mean that taxpayers with almost any form of offshore operations or investment will be practically excluded from relying on the third-party debt test, as detailed by Minh Dao, Katrina Piva and Amanda Maguire.

The Australian Taxation Office (ATO), on 1 October 2025, released its finalised guidance on the third party debt test (TPDT), Taxation Ruling TR 2025/2 (the Ruling). The ATO also released its finalised guidance on restructures in response to the TPDT, included within Schedule 3 of Practical Compliance Guideline PCG 2025/2 (the PCG). The TPDT forms part of the new thin capitalisation rules which apply for income years on or after 1 July 2023. Under the TPDT, an entity's debt deductions (e.g...

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Authors: Minh Dao, Katrina Piva,

Published Date: 03 October 2025