The Australian Taxation Office (ATO) has updated its form and instructions for taxpayers on 13 February 2025, allowing individuals to select either the group ratio test or the third-party debt test (thin capitalisation test choice) for a specific income year.
The updated instructions now incorporate additional guidance from the ATO on:
- Submitting revocation requests for the 2024 income year in light of changes to finalised ATO views
- Requesting extensions of time for the 2024 income year due to changes in finalised ATO views
Taxpayers can use the updated form to make a thin capitalisation test choice if all of the following apply:
- You want to make a thin capitalisation test choice for an income year.
- You are a general class investor, outward investing financial entity (non-ADI) or inward investing financial entity (non-ADI) for the income year.
- You do not meet the requirements in section 820-37 of the ITAA 1997 (the 90% Australian asset threshold exemption) for the income year.
Outward investing financial entities (non-ADI) and inward investing financial entities (non-ADI) can only make a thin capitalisation test choice to apply the third party debt test.
Due date
A thin capitalisation test choice in relation to an income year must be made in the approved form by the following dates:
- on or before the earlier of the day your entity
- lodges its tax return for the income year
- is required to lodge its tax return for the income year
- a later day allowed by the Commissioner.
The ATO notes it will update the website soon to include an approved form for revocations and guidance on how to submit these requests.
