Income tax 2017

The proposed debt and equity amendments: Improvements or more uncertainty?

Source: Taxation In Australia Journal Article

Published Date: 1 Feb 2017


The long-awaited proposed debt and equity amendments were released on 10 October 2016. The proposed amendments provide for the welcome repeal of the controversial s 974-80 of the Income Tax Assessment Act 1997. The amendments also replace the existing related schemes rules with a new two-pronged aggregation scheme test. Under this regime, two or more schemes will be treated as a single aggregated debt or equity scheme only when the interdependence test and the design test are satisfied.

This article analyses the new rules as recommended by the Board of Taxation against historic developments and questions if they provide taxpayers with the desired certainty. To provide guidance on the application of the new rules, the government released an accompanying exposure draft legislative instrument containing eight examples. However, the authors conclude that the new rules and the examples increase doubt on the operation of the provisions as they are difficult to reconcile and apply in practice.

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Income tax 2017

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