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New thin capitalisation rules

New thin capitalisation rules

The Government will implement new thin capitalisation rules that will operate from 1 July 2023.

The proposed new rules will apply to deny interest deductions for taxpayers with foreign shareholders, or foreign operations, or that are part of multinational groups.

The new rules (as currently drafted) seek to change the basis of acceptable gearing for tax purposes from an asset-based test to an earnings-based test. In an environment of rising interest rates, the new earnings-based approach is likely to have a significant impact on taxpayers, as they will no longer be able to rely on a safe-harbour asset-based gearing ratio.

This webinar covers:

  • Explain how the each of the three new earnings based tests will operate and their impact on the deductibility of interest costs
  • Explore options available under the new rules
  • Consider issues affecting trusts and managed funds
  • Outline potential deficiencies in the current draft rules that Treasury should be considering
  • Identify issues in respect of financing arrangements that need to be considered prior to 1 July 2023

The information presented in this webinar was accurate at the time of recording, 4 April 2023.
This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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