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Our advocacy work: New thin capitalisation rules exposure draft
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Our advocacy work: New thin capitalisation rules exposure draft

In March 2023, Treasury released exposure draft legislation for public comment containing new thin capitalisation rules proposed to apply from 1 July 2023.

Broadly, thin capitalisation applies to entities part of multinational groups that incur debt deductions (e.g. interest) of more than $2 million for an income year on a group basis.

The new rules seek to implement the Government’s pre-election commitment to replace the current balance sheet-based tests (e.g. the 60% safe-harbour) with an earnings based test seeking to directly limit annual debt deductions to 30% of tax earnings before interest, taxes, depreciation and amortisation (tax EBITDA). The new rules also contain two alternative elective methods.

Refer to our article with further detail about the proposed new rules. Also refer to our previous submission in response to Treasury’s August 2022 Consultation Paper on the proposed new measures.

In April 2023, we made a comprehensive submission in response to the exposure draft legislation and continues to engage with Treasury regarding the design of the legislation to advocate for rules that achieve appropriate outcomes for taxpayers.

You can read our 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.

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