Australian Senate Approves Revised Thin Capitalization Rules

The Australian Senate passed a bill Wednesday that will limit the amount of interest payments on debt multinational companies can deduct.

The bill, aimed at curbing tax avoidance, ensures that debt interest deductions are linked to an entity’s taxable income in Australia.

The legislation would bring Australia in line with the Organization for Economic Cooperation and Development’s so-called “thin capitalization rules,” the government said.

A safe harbor rule that had allowed businesses to deduct debt up to a threshold of 60% of the value of assets was changed to allow deductions up to 30% of profits.

Debt deductions disallowed under ...