05 Sep 2019 Thin capitalisation: ATO provides arm’s length debt test guidance
The ATO recently released its draft guidance contained in Practical Compliance Guideline 2019/D3, on applying the arm’s length debt test contained in Division 820 of the Income Tax Assessment Act 1997.
The taxpayer application of the arm’s length debt test is currently a key focus of the ATO. Once finalised, the guidance will have effect from 1 July.
The PCG guidance should be read in conjunction with draft Taxation Ruling 2019/D2 Income tax: thin capitalisation – the arm’s length debt test, which replaces Taxation Ruling 2003/1.
More information on the arm’s length debt test can be found here.