Australia Issues Guidance on Limiting Tax Deductions From Debt

The Australian Tax Office issued final guidance Wednesday limiting the amount of deductions that multinational companies can claim from interest payments on their debt.

The guidance implements legislation passed last year to curb tax avoidance through use of debt deductions. It applies to company restructures entered into on or after June 22, 2023, when the legislation was introduced in Parliament.

The so-called thin capitalization rules detail what could result in deductions being disallowed, including deductions arising on some related-party arrangements—called debt deduction creation rules.

The debt deduction creation rule applies to assessments for income years that began on or ...