Australia's Tax Office has opened public consultation on Draft Practical Compliance Guideline PCG 2026/D1, setting out its approach to determining risk-weighted assets attributable to Australian branches of foreign banks for thin capitalisation purposes, with comments due by 8 May 2026.
The Australian Taxation Office has opened a public consultation on Draft Practical Compliance Guideline PCG 2026/D1, covering thin capitalisation and the allocation of risk-weighted assets to Australian branches of foreign banks.
This guideline:
- addresses a thin capitalisation issue impacting foreign banks that conduct their banking business in Australia through a branch
- outlines our approach to determining the risk-weighted assets (RWA) attributable to a branch for the purposes of the thin capitalisation rules for inbound banks in section 820-405 of the Income Tax Assessment Act 1997
- builds on feedback we received about the discussion paper, Thin capitalisation – attribution of risk weighted assets to Australian branches of foreign banks
- highlights several other tax issues you should actively consider relevant to assigning a location to assets.
This draft guideline is proposed to take effect from the first income year that commences 6 months after its date of issue, and is proposed to apply to assets in existence from the date of effect of this guideline, which includes assets that came into existence prior to the date of effect. The use and application of this Guideline will be reviewed over the next 3 years following its finalisation, and consultation will take place in relation to any proposed material changes to this guideline.
The deadline for sending comments 8 May 2026.
