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02 Jul 14 Thin capitalisation exemption for special purpose entities - TD 2014/18

On 2 July 2014 the ATO released a final taxation determination about the application of the exemption in s 820-39 of the Income Tax Assessment Act 1997 for certain special purpose entities: TD 2014/18 “Income tax: can the exemption in section 820-39 of the Income Tax Assessment Act 1997 apply to the special purpose finance entity established as part of the ‘securitised licence structure’ used in some social infrastructure Public Private Partnerships?”.

Section 820-39 exempts certain special purpose entities from the application of the thin capitalisation rules in Division 820.

The determination says that the exemption in s 820-39 can apply to the special purpose entity (SPE) that seeks finance for the project which is established as part of the securitised licence structure used in some social infrastructure Public Private Partnerships (PPPs) provided the SPE satisfies the conditions in s 820-39(3).

In the securitised licence structures recently examined by the Commissioner (described in the determination), the conditions in s 820-39(3) had been satisfied.

The determination was previously released in draft as TD 2014/D8.

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