Proposed amendments to thin capitalisation rules

We expect the proposed changes to the safe harbour debt test will result in a significantly higher proportion of real estate investment trusts needing to rely on the arm’s length debt test.

During the recent election campaign, the Australian Labor Party announced it will replace the existing thin capitalisation safe harbour debt test (60 percent of assets) with the Organisation for Economic Cooperation and Development’s (OECD) recommended approach under BEPS Action 4 (Limiting Base Erosion Involving Interest Deductions and Other Financial Payments Action 4 and 2016 update). This would limit deductions for net interest expenses to 30 percent of earnings before interest, taxes, d...

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Authors: Scott Farrell, Tony Mulveney,

Published Date: 29 June 2022