Australia considers changes to thin capitalization rules

March 2013

Overview

In advance of the expected release of the 2013-2014 Australian Federal Budget on May 14, it has been suggested that there could be a change to the country’s thin capitalization regime – specifically, a reduction in the thin capitalization threshold from a maximum debt to equity ratio of 3:1 to 2:1 or even 1.5:1. This change has been discussed for the last two years. US multinational corporations (MNCs) should consider the possible impact on their tax relief for interest expenses in Australia if the thin capitalization changes are implemented.

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