In the 2018-19 Budget, the Government announced that it will implement two changes to improve the integrity of Australia's thin capitalisation rules. The changes are:
- requiring entities to align the value of their assets for thin capitalisation purposes with the value included in their financial statements; and
- ensuring that foreign controlled Australian consolidated entities and multiple entry consolidated groups that have foreign operations are treated as both outward and inward investing entities.
The changes apply from income years commencing on or after 1 July 2019.
The Government has released for public consultation exposure draft legislation and accompanying explanatory material for these changes. The release of the exposure draft legislation follows the publication of the statement of policy intent for the valuation of assets on the Treasury website.
The Government invites interested parties to make a submission.