Australian Federal Budget

Key changes announced in the Australian Federal Budget include:

Debt deduction rules: the government proposed changes to the thin capitalisation rules which broadly align with the Organisation for Economic Co-operation and Development (OECD) (i.e., limiting net interest deductions to 30% of earnings before interest, taxes, depreciation, and amortisation [EBITDA]). However, Australia will retain the arm’s length debt test for external third-party debt (which is beyond the OECD’s recommended approach).

Tax Transparency: significant global enterprises (SGEs) have increased tax transparency reporting from 1 July 2023. SGEs will need to prepare for public release certain tax information on a country-by-country basis, and make a statement on their approach to taxation, for public disclosure by the Australia Taxation Office (ATO).

ATO review activity: the government has increased funding for the ATO Tax Avoidance Taskforce by around AU$200 million per year over four years. This will support the ATO to pursue new areas of observed business tax risks, completing the ongoing focus on multinational enterprises, large public and private businesses.

New Australian fund vehicle: The long awaited new limited partnership collective investment vehicle (proposed in the 2018-2019 Budget and to follow the introduction of a corporate collective investment vehicle) will not proceed.

For further information on these developments, see here:

• Deloitte’s Federal Budget October 2022
• Deloitte’s brief on various proposed measures dated 18 July 2022 (including the EBITDA measures)
• Deloitte’s brief on the proposed changes to debt deduction rules dated 1 June 2022

For further information, please contact Siew Kee Chen, Nari Kye and Megan Spears.