Australia Debt-Deduction Guidance Seen As Restrictive, Vague

Australia’s recent draft guidance for multinationals seeking interest deductions on their debt is so restrictive and murky that it may end up hurting some of the very companies that authorities are supposed to be helping, critics say.

The Australian Taxation Office’s draft guidance, issued in early December, proposes standards for the use of a test on whether companies can deduct interest payments on their debt, under Australia’s new “thin-capitalization” rules.

That test had been offered up as a way to make it easier for certain capital-intensive companies like those in the infrastructure and property industries to take such deductions.

But ...