Business taxation International tax & business Thin capitalisation

Amendments to the Thin capitalisation rules – ATO’s Public Advice and Guidance Consultation

Published Date: 26 Mar 2024


Sorry, this is subscriber only content.

If you're not yet a subscriber, to gain access to this material and much more - Subscribe Now.

Already a Subscriber? Login now

Already a Subscriber? Login now

Amendments to the Thin capitalisation rules – ATO’s Public Advice and Guidance Consultation

The Tax Institute welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in respect of its Public Advice and Guidance (PAG) consultation on the changes to the thin capitalisation rules.

In the development of this submission, we have closely consulted with our National Large Business & International Technical Committee and a working group of members with expertise in this area to prepare a considered response that represents the views of the broader membership of The Tax Institute.

The Tax Institute commends the ATO on its proactiveness in preparing PAG for the implementation of the new thin capitalisation rules.

We are of the view that guidance on a range of issues associated with the new rules is crucial in assisting taxpayers and their advisors in complying with their obligations. The provision of such guidance by the ATO will provide certainty to taxpayers and help ensure compliance with the intended effect of these fundamental changes to the Australian tax treatment of interest and equivalent costs.

By way of priority, The Tax Institute is of the view that comprehensive guidance needs to be issued as soon as practicable dealing with the:

  • proposed debt deduction creation rule (DDCR), by way of a comprehensive law companion ruling (LCR) coupled with a practical compliance guide (PCG), including risk assessment frameworks;
  • impact of the transfer pricing rules as to the quantum of debt, by way of a PCG, coupled with revisions to existing PCGs and/or the issue of a new PCG including risk assessment frameworks;
  • Commissioner’s intended approach towards, and management of, transitional and compliance issues arising from the rules, including its approach to the application of Part IVA to restructures etc, by way of a PCG, including risk assessment frameworks; and
  • guidance to address ambiguity in the revised ‘financial entity’ definition.

Comprehensive guidance is also recommended in relation to the operation of the fixed ratio test (FRT), group ratio test (GRT), and third-party debt test (TPDT), as well as a range of specific issues.

Our detailed response and recommendations are contained in Appendix A.

The Tax Institute is the leading forum for the tax community in Australia. We are committed to shaping the future of the tax profession and the continuous improvement of the tax system for the benefit of all. In this regard, The Tax Institute seeks to influence tax and revenue policy at the highest level with a view to achieving a better Australian tax system for all.



  • Published On:26 Mar 2024

The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.

Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

The Tax Institute
(ABN 45 008 392 372 (PRV14016))


The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009. 

Copyright Statement

All materials provided on this site are protected by copyright and are owned by or licensed to TTI.

Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.


Business taxation International tax & business Thin capitalisation

Share this page