ARTICLE · 22 NOVEMBER 2019

ATO Issues Draft Guidance On The Thin Capitalization Arm's Length Debt Test

Duff and Phelps

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The PCG will have effect from July 1, 2019.

AustraliaTax

George Condoleon

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On August 28, 2019, the Australian Taxation Office (ATO) published Draft Practical Compliance Guideline (PCG) 2019/D3 which provides administrative guidance to taxpayers in applying the arm's length debt test (ALDT) contained in the thin capitalization rules. The PCG can be found here.

The Draft PCG follows the release of Draft Taxation Ruling (TR) 2019/D2 which provides interpretative guidance on key technical issues that may arise in applying the ALDT. TR 2019/D2 was discussed in the April 2019 issue of Duff & Phelps' Transfer Pricing Times.

PCG 2019/D3 and TR 2019/D2, once finalized, will replace existing Taxation Ruling TR 2003/1 on applying the ALDT. The PCG will have effect from July 1, 2019.

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