Changes to the thin capitalisation rules
Published Date: 2 Nov 2023
The changes to the thin capitalisation rules from an asset-based approach to an earningsbased method will require careful consideration for all taxpayers within the scope of the new rules. While these changes have previously been foreshadowed by the government, there is “devil in the detail”. Non-corporate and non-consolidated group structures will need to review application of the fixed ratio test to their circumstances. Entities seeking to rely on the third party debt test will need to review the terms of the debt and security arrangements in relation to their external borrowings. The surprise inclusion of new debt creation rules, on which there was no earlier consultation and which are very broad in scope, will potentially apply to many financing arrangements (including existing financial arrangements). The new measures apply for income years commencing on or after 1 July 2023 and, therefore, taxpayers need to commence a review of their existing financing arrangements now.
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Details
- Published By: Ed Ng, Richard Goodwin CTA
- Published On:2 Nov 2023
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