Australian tax reforms for debt deductions — thin capitalisation rules and arm’s-length debt test

By Karen Payne

The Board of Taxation has released a discussion paper as part of its review and consultation on the arm’s-length debt test (ALDT) in the thin capitalisation rules. The ALDT is one of three alternatives available to taxpayers to determine the maximum level of debt on which interest deductions may be claimed and is an alternative to the safe harbour threshold in the thin capitalisation rules.  

Debt deductions are not subject to thin capitalisation limits where they are (in aggregate) below the de minimis thresholds (currently AUD250,000 or £135,500, proposed to be increased to AUD2m)…

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