The Government has asked the Board of Taxation to independently review the recent changes to Australia’s thin capitalisation rules. These changes were introduced in Schedule 2 of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Act 2024.
Background
Section 4 of the Act requires this review. The Board will assess whether the changes are operating as intended.
Terms of Reference
In conducting the review, the Board will assess whether the amendments are operating in a manner consistent with the policy intent, which was to strengthen Australia’s thin capitalisation regime to address risks arising from the use of excessive debt deductions, informed by the OECD’s best practice guidance. In considering the operation of the amendments, the Board is requested to consider:
- The overall performance of the amendments in strengthening Australia’s thin capitalisation regime to address risks arising from the use of excessive debt deductions.
- Any minor and technical drafting changes which are necessary for the practical administration of the laws, with a particular focus on the third‑party debt test provisions and related undefined legislative terms.
- If the $2 million exemption threshold should operate as a net debt deduction concept.
- Whether the default tax EBITDA calculation operates to appropriately reflect an entity’s economic activity in the income year and across multiple income years, as intended.
- The practical impact on the cost of complying with the debt deduction creation rules after restructures, including whether the rules have effectively discouraged debt creation schemes.
Consultation
How to participate
The Board is interested in receiving feedback from stakeholders who operate within, or advise on, Australia’s thin capitalisation regime.
The Board has prepared a consultation guide [PDF 281 KB | DOCX 331 KB] to explain the review process. The guide details the consultation process, how stakeholders can contribute and questions to consider.
In addition to public consultation, and consistent with the Terms of Reference, the Board will also engage with Treasury and the Australian Taxation Office throughout the review process.
Written submissions
Interested parties are invited to contribute to consultation through written submissions.
Email your submission to taxboard@taxboard.gov.au by 18 May 2026.
Timing
The review will commence on 1 February 2026. The Board will provide its final written report to the Government within 12 months of the review starting.
More information
For more information, contact the Board of Taxation Secretariat at taxboard@taxboard.gov.au