Australia: Guidance on thin capitalization rules, franked distributions, insurance premiums paid to nonresident insurers

Guidance includes draft income taxation ruling, draft practical compliance guideline, and draft practical compliance guideline update

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December 4, 2024

The Australian Taxation Office (ATO) today released the following draft guidance:

  • Draft income taxation ruling on the “third party debt conditions” an entity must meet to satisfy the new third party debt test in the thin capitalization provisions (TR 2024/D3) (read a December 2024 report prepared by the KPMG member firm in Australia)
  • Draft practical compliance guideline update to Schedules 3 and 4 relating to the third party test under the thin capitalization provisions and restructuring in response to the thin capitalization provisions, respectively (PCG 2024/D3)
  • Draft practical compliance guideline on the integrity measure relating to capital raised for the purpose of funding franked distributions (PCG 2024/D4)

The ATO also issued guidance on its website on the application of Division 15 to insurance premiums paid to nonresident insurers.

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