As part of the 2022-23 Budget, an integrity measure was announced to address risks to Australia’s domestic tax base stemming from the use of excessive debt deductions. This measure strengthens Australia’s thin capitalisation rules in line with the Organisation for Economic Cooperation and Development (OECD)’s best practice guidance.
The government has prepared exposure draft legislation giving effect to this measure, which replaces the existing asset-based thin capitalisation rules with new earnings-based rules for certain entities. Additionally, the arm’s length debt test, referred to as an external third-party debt test in the draft legislation, will be available for most entities claiming debt deductions on their external third-party debts.
A previous consultation on this initiative, along with other multinational enterprise (MNE) tax integrity and transparency proposals, was held in August and September 2022.
The government is seeking stakeholders’ views on the exposure draft legislation and accompanying explanatory material implementing this measure. Stakeholders’ views are also sought in relation to whether the legislation operates with sufficient integrity, in line with the OECD’s best practice guidance. We also seek stakeholder feedback on priority issues that would inform the ATO's administrative approach and public advice and guidance on this measure.
The government will consult on the other elements of its multinational tax integrity package as separate measures.
You can submit responses to this consultation up until 13 April 2023. Interested parties are invited to comment on this consultation.
While submissions may be lodged electronically or by post, electronic lodgement is preferred. For accessibility reasons, please submit responses sent via email in a Word or RTF format. An additional PDF version may also be submitted.
All information (including name and address details) contained in submissions will be made available to the public on the Treasury website unless you indicate that you would like all or part of your submission to remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose. Respondents who would like part of their submission to remain in confidence should provide this information marked as such in a separate attachment.
Legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the confidentiality of your submission.
View our submission guidelines for further information.
How To Respond
Address written submissions to:
Corporate and International Tax Division
Parkes ACT 2600