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Trading one uncertainty for another? Ten years’ experience with the debt-equity rules


The debt-equity rules in Div 974 of the Income Tax Assessment Act 1997 have now been in operation for more than 10 years. This article presents results from a survey, conducted by the authors, to gather and collate the views of tax professionals in industry and private practice. The particular focus of this article is on “the user experience”: how have the professionals and the institutions which have to work with these rules found them to operate in practice? The authors conclude that the debt-equity rules have not proved to be an unqualified success.

There are many problematic areas in the text of the law, it has not proved to be a robust and reliable test that is easily grasped and applied, and the search for the single organising principle has not been completely successful. However, there appears to be no appetite for major repeal; legislative tinkering and ongoing support by administrative guidance are seen to be preferable.

Author profiles:

Author Photo - Tony FROST
Tony Frost FTIA has been a Director with the Sydney office of Greenwoods & Freehills since 2003. Tony has more than 20 years experience in tax, with a focus on financial services and financial transactions. Tony has advised clients on a wide range of tax matters, including innovative financial products, structured finance, mergers and acquisitions, cross-border dealings, transfer pricing, tax audits and negotiations with the Australian Taxation Office. Prior to joining the firm in 2003, Tony had been a Tax Partner for seven years with one of the major international accounting firms. Earlier in his career, Tony spent five years with Westpac Banking Corporation. He has over 20 years experience in tax and has advised clients on a wide range of issues, but with an emphasis on financial products and financial institutions. Tony has had significant involvement in the tax reform process via industry and professional bodies. In particular, Tony has written or coordinated many submissions over the last 18 years for the banking industry, including on the TOFA reforms. Tony lectures on the taxation of financial transactions in the Masters of Law course at the University of Sydney and is a regular speaker and writer on this subject for the Taxation Institute and other organisations.
Current at 11 February 2009 Current at 23 February 2009 Click here to expand/collapse more articles by Tony FROST.
Author Photo - Graeme COOPER

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