ATO guidance on thin capitalisation arm’s length debt test and outbound interest-free loans
BDO Tax Technical Update
On 12 August 2020, the ATO issued a final taxation ruling on the thin capitalisation arm’s length debt test (ALDT) as well as administrative guidance on its compliance approach, including expanded risk zones. A BDO Tax Technical Update on this ruling is now available.
The ATO also released an updated draft version of its administrative guidance on outbound interest-free loans between related parties, for comment by 14 October 2020. A BDO Tax Technical Update on this guidance is also now available.
Taxpayers should assess their current application of the ALDT and position under the ATO’s risk assessment framework, as well as revisit any interest-free outbound debt arrangements.
If these measures are applicable to your facts and circumstances, or if you would like further information in relation to any of the above, please contact your local BDO specialist.