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ARTICLE · 15 MAY 2019

ATO Issues Draft Guidance On Thin Capitalization Arm's Length Debt Test

Duff and Phelps
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This will include a schedule outlining risk indicators for the application of the ALDT.

AustraliaTax
George Condoleon
George Condoleon
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On April 5, 2019, the Australian Taxation Office ("ATO") published Draft Taxation Ruling TR 2019/D2 (Ruling) setting out the ATO's preliminary views on the application of the arm's length debt test ("ALDT") contained in the thin capitalization rules enacted in 2001. This ruling can be found here.

The purpose of this Ruling is to provide interpretative guidance on key technical issues that may arise in applying the ALDT and is intended to have retrospective application.

In addition to TR 2019/D2, the ATO is planning to release a draft practical compliance guideline which will provide administrative guidance to taxpayers in applying the test. This will include a schedule outlining risk indicators for the application of the ALDT.

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