We're a Baker Tilly network member
Learn more
Back to top
Our advocacy work: Multinational tax integrity
Article

Our advocacy work: Multinational tax integrity

In August 2022, Treasury released a consultation paper seeking feedback on the implementation of certain pre-election policies of the new Labor Government.

The consultation paper comprised three parts, with the main proposal being to amend Australia’s thin capitalisation rules from a balance sheet-based safe harbour to an earnings-based safe harbour.

This would have the effect of limiting annual net interest deductions to 30% of EBITDA from 1 July 2023.

The measure has the potential to significantly impact entities in the middle market, particularly those in the property sector where entities are highly leveraged, earnings are volatile and where long-term arrangements have been entered to prior to any proposed changes to the thin capitalisation rules.

In our response to Treasury, we made a number of recommendations on various design features of the new measure including:

  • Proposing carry forward rules (so that denied deductions are not permanently lost)
  • Grouping rules (to allow excess debt capacity in related entities to be utilised)
  • transitional rules
  • Increasing the current $2m de minis
  • Limiting the application of the rules to widely-held entities (e.g. managed investment trusts)
  • Introducing additional safe harbours for entities who are primarily funded through arm’s length domestic debt
  • Further clarification of the arm’s length debt test.

Additionally, we also made recommendations on Part 2 of the consultation paper (relating to the limitation of deductions in respect of cross-border royalties) to ensure the measure is focused on multinational tax avoidance so as not to affect ordinary commercial arrangements.

We also made recommendations on Part 3 of the paper (relating to tax transparency) to ensure any additional compliance costs and reporting obligation are limited to multinational enterprises with a substantial presence in Australia.

You can read out submission below

You can find out more about our advocacy work on the website here

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.
Nigel Fischer

Nigel Fischer

Managing Partner

Brisbane


View profile
Alexis Kokkinos

Alexis Kokkinos

Partner

Melbourne


View profile
Michael Minter

Michael Minter

Managing Partner

Newcastle and Hunter


View profile
Leon Mok

Leon Mok

Managing Director

Perth


View profile
Chris Ardagna

Chris Ardagna

Partner

Sydney


View profile

Pitcher Partners insights

Get the latest Pitcher Partners updates direct to your inbox

Thank you for you interest

How can we help you?

Business or personal advice
General information
Career information
Media enquiries
Contact expert
Become a member
Specialist query
Please provide as much detail to ensure appropriate allocation of your query
Please highlight a realistic time frame that will enable us to provide advice within a suitable and timely manner. Please note given conflicting demands with our senior personnel, we will endeavour to respond to you within the nominated time frame. If you require an urgent response, please contact us on 03 8610 5477.
CPN Enquiry
Business Radar 2023
Tax facts 2023-24
Student careers 2023-24
Search by industry