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ARTICLE · 04 OCTOBER 2024

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Thin Capitalisation And Recent Changes For The Financial Services Sector: What To Consider Next

Alvarez & Marsal
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Recent amendments to Australia's thin capitalisation rules in Division 820 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) to implement new earnings-based tests for general class investors...

AustraliaFinance and Banking
Lisa Cusano
Lisa Cusano
Joanna Black
Joanna Black
Michael Rockefeller
Michael Rockefeller
Karan Subramanyam
Karan Subramanyam

Recent amendments to Australia's thin capitalisation rules in Division 820 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) to implement new earnings-based tests for general class investors (A&M's summary of the general changes is here 1) have resulted in complexity within the financial services sector, despite the existing thin capitalisation tests for ADIs and financial entities being largely retained. This is especially the case for those entities that are not ADIs or are not eligible exempt special purpose and securitisation vehicles.

In May, the ATO published its guidance priorities 2 on the thin capitalisation amendments, listing high priority and second tier issues. Of note are the following 'second tier' issues:

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