Thin capitalisation: eroding asset values and increasing debt ... - PwC

TaxTalk – Electronic Bulletin of Australian Tax Developments
registered or required to be registered
for GST.
This proposed measure is to have
effect from the date of Royal Assent.
• amendments (as foreshadowed in
our August 2008 edition of TaxTalk)
to the thin capitalisation (TC) rules
of the income tax law in relation to
the use of accounting standards for
identifying and valuing an entity’s
assets, liabilities and equity capital.
It aims to adjust for certain impacts
of the adoption of the Australian
equivalent International Financial
Reporting Standards (AIFRS) on the
TC position of complying entities.
The amendments will generally:
–
–
prohibit the recognition of deferred
tax liabilities and assets and
defined benefit liability or assets
for TC purposes where they are
recognised under the accounting
standards, and
subject to complying with certain
valuation requirements, permit
entities (other than those treated
as authorised deposit-taking
institutions) to recognise internally-
generated intangible assets and
revalue intangible assets where this
is currently prohibited due to the
absence of an ‘active market’.
The proposed amendments are to
apply to the first and subsequent
income years after Royal Assent.
• amendments to the fringe benefits
tax law to ensure that the ‘otherwise
deductible rule’ applies appropriately
to benefits provided in relation to
investments that the employee holds
jointly with a third party
The proposed commencement date of
this measure depends on the nature of
the benefit provided.
• amendments to the ‘eligible
investment business’ rules
for managed funds to:
–
clarify the scope and meaning of
investing in land for the purpose
of deriving rent to ensure that
fixtures on land are included,
and introduce a 25 per cent
safe harbour allowance for nonrental,
non-trading income from
–
–
investments in land, which will
operate in conjunction with the
existing rental purposes tests on an
overall land portfolio basis
provide an additional safe harbour
test by allowing up to 2 per cent
of gross revenue of the trustee to
be income from other than eligible
investment businesses (except from
carrying on a trading activity on a
commercial basis) so as to reduce
the scope for inadvertent minor
breaches that would otherwise
trigger company taxation for a
trust, and
expand the range of financial
instruments that a managed fund
may invest in or trade to include
additional financial instruments
that arise under financial
arrangements other than certain
excluded arrangements.
The proposed amendments are to
apply to the first and subsequent
income years after Royal Assent.
Further information
If you have any queries about issues
raised in this edition or would like to be
placed on the mailing list for TaxTalk,
please contact one of the following:
Adelaide
Scott Bryant, Partner
Phone: +61 8 8218 7450
Fax: +61 8 8218 7812
scott.a.bryant@au.pwc.com
Brisbane
Tom Seymour, Partner
Phone: + 61 7 3257 8623
Fax: + 61 7 3031 9312
tom.seymour@au.pwc.com
Melbourne
David Wills, Partner
Phone: +61 3 8603 3183
Fax: +61 3 8613 2880
david.a.wills@au.pwc.com
Perth
Frank Cooper, Partner
Phone: +61 8 9238 3332
Fax: +61 8 9488 8771
frank.cooper@au.pwc.com
Sydney
Lyndon James, Partner
Phone: +61 2 8266 3278
Fax: +61 2 8286 3278
lyndon.james@au.pwc.com
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used as a substitute for consultation with professional accounting, tax, legal or other advisers.
This document is not intended or written by PricewaterhouseCoopers to be used, and cannot be used, for the purpose of avoiding tax
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PP255003/01192.
Editor
Elly Parker
PricewaterhouseCoopers Tax
Phone: +61 3 8603 2673
elly.parker@au.pwc.com
Technical Editor
Geoff Dunn, Director
Tax Technical Knowledge Centre
PricewaterhouseCoopers Tax
Phone: +61 2 8266 5220
geoff.dunn@au.pwc.com
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