08 May 07 Thin cap amendments - excluded equity interestThe Government will change the definition of ‘excluded equity interest’ in the thin capitalisation rules to ensure that the rules operate as intended. This measure will apply to income years beginning on or after 1 July 2002.
To prevent manipulation of the thin capitalisation rules - through temporary, artificial inflation of equity and asset levels - certain short term equity interests are excluded from thin capitalisation calculations for income years beginning on or after 1 July 2002. This measure will ensure that taxpayers are not inadvertently disadvantaged by the exclusion of long term equity interests from thin capitalisation calculations.
See Budget Paper No 2 p 25