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Australia: Guidance on thin capitalization rules

Ruling and updated practical compliance guideline

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October 1, 2025

The Australian Taxation Office (ATO) released the following guidance regarding the thin capitalization rules introduced as part of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity And Transparency) Act 2024:

  • TR 2025/2: Ruling providing interpretive guidance on aspects of the third-party debt test in Subdivision 820-EAB of the Income Tax Assessment Act 1997
  • PCG 2025/2: Updated practical compliance guideline explaining the ATO’s compliance approach to restructures and the thin capitalization and debt deduction creation rules

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