Changes to the thin capitalisation rules to prevent double gearing structures
On 5 April 2019, legislation was enacted to improve the integrity of the income tax law by modifying the thin capitalisation rules to prevent double gearing structures. Double gearing structures involve the use of multiple layers of ‘flow-through’ entities (such as trusts and partnerships) to issue debt against the same underlying asset.
These changes apply to income years starting on or after 1 July 2018.
The changes will affect entities with interests in trusts (other than public trading trusts) and partnerships, as the threshold for the purposes of the associate entity debt, associate entity equity, and the associate entity excess amounts has been reduced from 50% to 10%.
Label W - Was the aggregate amount of the transactions with international parties (including the value of any property or service transferred or the balance of any loans) greater than $2 million?
This is a mandatory question and must be answered. The default for this question is No.
If the answer is Yes click label W to complete and attach an International dealings schedule (I). Refer to International dealings schedule (IDS).
Label O - Did the thin capitalisation provisions apply?
If you answer Y you must prepare an International Dealings Schedule (ids) for lodgment with the return.
Label D - Interest expenses overseas
Click label D to complete and attach an International dealings schedule (ids).
Label E - Royalty expenses overseas
Show at label E the royalty expenses paid to non-residents during the income year.
Click label E to complete and attach an International dealings schedule (ids).
Label C - Transactions with specified countries
Click label C to complete and attach an International dealings schedule (ids).
