ATO consultation on PCG 2024/D3 and TR 2024/D3
The Tax Institute welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in relation to the draft Taxation Ruling TR 2024/D3 Income tax: aspects of the third-party debt test in Subdivision 820-EAB of the Income Tax Assessment Act 1997 (Cth) (draft TR) and PCG 2024/D3: Restructures and the new thin capitalisation and debt deduction creation rules (draft PCG) (collectively, the draft guidance).
In the development of this submission, we have closely consulted with our National Large Business and International Technical Committee to prepare a considered response that represents the views of the broader membership of The Tax Institute.
The Tax Institute welcomes the provision of guidance on the thin capitalisation rules in a binding form, given the importance of these rules to taxpayers with Australian operations and having regard to the substantial changes recently made to them. Guidance on the third-party debt test is particularly important given that for many taxpayers, the amount of debt deductions allowable under the fixed ratio test will be substantially less than the amount of debt deductions available under the previous safe harbour rules.
However, we consider that the existing guidance can be improved and expanded in a number of areas. Further, given the prevalence of conduit financing arrangements in the infrastructure and property sectors, in particular, we would welcome the publication of guidance on the conduit financing rules as soon as possible.
Our detailed response and recommendations to further improve the draft guidance are contained in Appendix A.
The Tax Institute is the leading forum for the tax community in Australia. We are committed to shaping the future of the tax profession and the continuous improvement of the tax system for the benefit of all. In this regard, The Tax Institute seeks to influence tax and revenue policy at the highest level with a view to achieving a better Australian tax system for all.