The ATO is seeking public feedback on a draft guidance to limit interest payment deductions on multinational debt. Comments are due by 30 June 2025.
The Australian Taxation Office (ATO) has opened a public consultation regarding a draft guidance to limit interest payment deductions on multinational debt on 29 May 2025.
The government approved the draft guidance for implementing “thin capitalization rules” last year. It aims to curb tax avoidance by linking debt interest deductions to an entity’s taxable income in Australia.
The legislation aligns Australia with the OECD’s thin capitalization rules.
This draft guideline has been prepared following the enactment of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share — Integrity and Transparency) Act 2024 (Act) on 8 April 2024. A rule allowing businesses to deduct debt up to 60% of asset value was changed to permit deductions up to 30% of profits. The regulations were officially enacted on 8 April 2024, following the receipt of Royal Assent.
The draft guidelines provide a framework to help companies assess and manage transfer pricing risks associated with inbound cross-border financing.
The guideline can be used to:
- Assess the transfer pricing risk in relation to the amount of your inbound, cross-border related party financing arrangement using our risk assessment framework;
- Understand the compliance approach we are likely to adopt having regard to the circumstances surrounding your inbound, cross-border related party financing arrangement;
- Mitigate the transfer pricing risk in relation to the amount of your inbound, cross-border related party financing arrangement.
The deadline to submit comments on the draft guidance is 30 June 2025.
