Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2022-2023
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TREASURY LAWS AMENDMENT (MAKING MULTINATIONALS PAY THEIR
FAIR SHARE--INTEGRITY AND TRANSPARENCY) BILL 2023
SUPPLEMENTARY EXPLANATORY MEMORANDUM
(Circulated by authority of the Assistant Minister for Competition, Charities and
Treasury, the Hon Dr Andrew Leigh MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 5
Thin capitalisation - Parliamentary amendments ........ 7
Statement of Compatibility with Human Rights .......... 19
Glossary
This Supplementary Explanatory Memorandum uses the following abbreviations and
acronyms.
Abbreviation Definition
AMIT Attribution managed investment trust
Bill Treasury Laws Amendment (Making
Multinationals Pay Their Fair Share--
Integrity and Transparency) Bill 2023
CGT Capital gains tax
Commissioner Commissioner of Taxation
EBITDA Earnings before interest, taxes,
depreciation, and amortisation
FRT Fixed ratio test
ITAA 1936 Income Tax Assessment Act 1936
ITAA 1997 Income Tax Assessment Act 1997
Treasury Laws Amendment (Making Multinationals Pay Their Fair Share--Integrity and
Transparency) Bill 2023
General outline and financial impact
Thin capitalisation - Parliamentary amendments
Outline
The Parliamentary amendments amend Schedule 2 to the Bill to ensure the new thin
capitalisation rules are appropriately targeted.
Date of effect
The Parliamentary amendments commence at the start of the first quarter following
Royal Assent and apply to assessments for income years beginning on or after 1 July
2023. However, Subdivision 820-EAA (the debt deduction creation rules) applies in in
relation to assessments for income years starting on or after 1 July 2024.
Proposal announced
Together with Schedule 2 to the Bill, the Parliamentary amendments implement the
MNE interest limitation rules from the Government election commitment on
multinational tax integrity, included as the 'Multinational Tax Integrity Package -
amending Australia's interest limitation (thin capitalisation) rules' measure from the
October 2022-23 Budget.
Financial impact
The Parliamentary amendments are estimated to decrease receipts by $20 million over
the three years from 2023-24, reflecting an amendment to the tax EBITDA calculation
to accommodate the forestry and plantation industry.
All figures in this table represent amounts in $m.
2023-24 2024-25 2025-26
- -10.0 -10.0
- denotes nil
Human rights implications
The Parliamentary amendments to Schedule 2 to the Bill do not affect the analysis of
human rights issues. See the Statement of Compatibility with Human Rights --
Chapter 2.
5
General outline and financial impact
Compliance cost impact
The compliance cost impact is unchanged by the Parliamentary amendments.
6
Thin capitalisation -
Parliamentary amendments
Table of Contents:
Outline of chapter .................................................................................. 7
Context of amendments ......................................................................... 8
Detailed explanation of amendments ..................................................... 8
Choices under Subdivision 820-AA ................................................. 8
Obligor group .................................................................................. 9
Tax EBITDA .................................................................................... 9
Third party debt test ...................................................................... 11
Debt deduction creation rules ........................................................ 14
Other matters ................................................................................ 17
Commencement, application, and transitional provisions .................... 17
Outline of chapter
1.1 The Parliamentary amendments to Schedule 2 to the Bill ensure the new thin
capitalisation rules are appropriately targeted. The amendments relate to the
following matters:
• Choices under Subdivision 820-AA.
• The meaning of 'obligor group'.
• The meaning of 'tax EBITDA'.
• The third party debt test.
• The debt deduction creation rules.
• Other matters.
1.2 All legislative references are to the ITAA 1997 unless otherwise indicated.
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Thin capitalisation - Parliamentary amendments
Context of amendments
1.3 The Bill was introduced into the House of Representatives on 22 June 2023.
Schedule 2 to the Bill contains the new thin capitalisation rules.
1.4 On 22 June 2023, the Government referred the provisions of the Bill to the
Senate Economics Legislation Committee (the Committee). The Committee
published its report on 22 September 2023 and recommended that Schedule 2
to the Bill be passed subject to technical amendments.
1.5 The Parliamentary amendments represent these technical amendments.
Detailed explanation of amendments
1.6 The Parliamentary amendments amend Schedule 2 to the Bill to ensure the new
thin capitalisation rules are appropriately targeted.
Choices under Subdivision 820-AA
1.7 New subsection 820-47(4A) clarifies the ordering between a deemed choice
under subsection 820-46(5) (third party debt test choice) and a choice under
subsection 820-46(3) (group ratio test choice). In relation to a single income
year, if a choice under subsection 820-46(5) is taken to have been made by the
entity, the entity cannot subsequently make a choice under subsection 820-
46(3) and any choice previously made under subsection 820-46(3) by the entity
is revoked and taken never to have been made.
[Amendment 12, subsection 820-47(4A)]
1.8 The conditions for revoking certain choices under Subdivision 820-AA has
been simplified. Revoking a choice no longer requires the particular entity that
made the choice to always satisfy certain conditions. However, the
Commissioner must still be satisfied that it is fair and reasonable, having
regard to matters the Commissioner considers relevant, to allow the entity to
revoke the choice. Such matters may include whether the entity made the
choice on a reasonable and genuine basis, and not as a part of aggressive tax
planning.
[Amendment 14, subsection 820-47(6)]
1.9 An entity must apply to revoke a choice in relation to an income year within
four years after they lodge their income tax return for the income year (or are
required to lodge their income tax return for the income year if that date is
earlier). This time limit provides administrative certainty and ensures that
entities have a reasonable amount of time to revoke choices.
[Amendment 15, paragraph 820-47(6)(c)]
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Treasury Laws Amendment (Making Multinationals Pay Their Fair Share--Integrity and
Transparency) Bill 2023
Obligor group
1.10 An amendment clarifies that a creditor does not need to have recourse to all the
assets of an entity for that entity to be an "obligor entity". It is sufficient for
recourse to be had to one or more assets of the entity.
[Amendment 20, paragraph 820-49(1)(b)]
1.11 Where a creditor only has recourse to the assets of an entity that are
membership interests in the borrower, then that entity will not be an obligor
entity. Lenders often have recourse to the membership interests in the entity
they lend to. An amendment ensures that entities which merely hold
membership interests in the borrower do not become obligor entities.
[Amendment 21, subsection 820-49(3)]
Tax EBITDA
1.12 Paragraph 820-52(1)(c) requires entities to add the value of some of their
deductions to their tax EBITDA calculation. Two new deductions are now
included under this paragraph. Firstly, general deductions under section 8-1
that relate to forestry establishment and preparation costs. Secondly,
deductions under section 70-120 (capital costs of acquiring trees). These
changes enable plantation forestry entities to better apply the FRT, given their
sector's unique harvesting timelines that results in long lead-times for earnings.
[Amendment 24, paragraph 820-52(1)(c)]
1.13 A corporate tax entity may choose the amount of its tax loss that it deducts in
an income year. To account for this choice, amendments clarify how corporate
tax entities calculate their tax EBITDA. Broadly, in working out the taxable
income or tax loss of a corporate tax entity for the purposes of subsection 820-
52(1), it is assumed that the entity chooses to deduct, under subsection 36-
17(2) or (3), all the entity's tax loss and subsection 36-17(5) does not apply to
that choice.
[Amendment 27, subsection 820-52(1A)]
1.14 In line with the treatment of trusts and partnerships, dividends are now only
disregarded for tax EBITDA purposes where the entity receiving the dividend
is an associate entity of the company paying the dividend. The modified
associate entity test provided by subsection 820-52(9) applies for these
purposes.
[Amendment 29, subsection 820-52(3)]
1.15 New provisions in section 820-52 specifically cater for AMITs. Subsections
820-52(6A) and (6B) make modifications to the calculation of tax EBITDA for
AMITs and members of AMITs, respectively.
[Amendment 34, subsections 820-52(6A) and (6B)]
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Thin capitalisation - Parliamentary amendments
1.16 Paragraphs 820-52(6)(b) and (6B)(b) require distributions from a trust or
AMIT to a beneficiary or member (as the case may be) to be disregarded. The
provisions are intended to ensure that, as a result of the specific statutory
assessment regimes being disregarded by paragraphs 820-52(6)(b) and (6B)(b),
such distributions are not considered ordinary income under section 6-5 in the
hands of the beneficiary or member. The paragraphs are not intended to have a
broader operation.
[Amendment 34, subsections 820-52(6) and (6B)]
1.17 Notional deductions of R&D entities are now required to be subtracted from
tax EBITDA. Division 355 provides R&D entities a tax offset in respect of
their notional deductions. Absent the amendments, R&D entities applying the
FRT would receive a double benefit of the tax offset and disregarding their
notional deductions for tax EBITDA purposes.
[Amendment 37, subsection 820-52(10)]
1.18 Amendments are made to the tax EBITDA calculation to allow eligible entities
to transfer their excess tax EBITDA amounts to other eligible entities. The
amendments allow the tax EBITDA calculation to facilitate a greater variety of
financing structures involving eligible entities.
[Amendments 25 and 39, paragraph 820-52(1)(ca) and section 820-60]
1.19 Broadly, the amendments only apply in relation to the following kinds of
entities:
• A company that is an Australian entity.
• A unit trust that is a resident trust for CGT purposes.
• A managed investment trust. Note, the residency requirement in
subsection 275-10(3) applies.
• A partnership that is an Australian entity.
[Amendment 39, section 820-60]
1.20 The following requirements must also be satisfied in relation to each eligible
entity.
• The entity is general class investor and is using the FRT for the income
year.
• The transferee entity has a direct control interest of 50% or more in the
transferor entity at any time in the income year.
[Amendment 39, section 820-60]
1.21 Excess tax EBITDA amounts are transferred according to the transferee
entity's average direct control interest in the transferor entity for the income
year. This requires a consideration of the direct control interest for each day of
the income year. For a day to count towards the calculation of the average
direct control interest, the direct control interest for that day must be 50% or
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Treasury Laws Amendment (Making Multinationals Pay Their Fair Share--Integrity and
Transparency) Bill 2023
greater.
[Amendment 39, section 820-60]
1.22 In relation to a single income year, an excess amount transferred to an eligible
entity is taken into account when considering whether that entity has an excess
amount itself, which it can, in turn, transfer to another eligible entity.
1.23 As mentioned in paragraph 1.19 above, certain eligible entities are required to
be an 'Australian entity'. This term is defined in subsection 995-1(1). For the
purposes of section 820-60, the meaning of this term is modified in relation to
partnerships to ensure the term reflects partnerships with a strong connection to
Australia and does not allow avoidance behaviour. A partnership will be an
Australian entity where Australian residents and Australian trusts together hold
at least a 50% direct participation interest in the partnership.
[Amendment 39, subsection 820-60(7)]
Third party debt test
1.24 Amendments are made to Subdivision 820-EAB (third party debt test). The
following paragraphs explain the broad effect of the amendments.
1.25 An interest rate swap cost that relates to multiple debt interests is now
generally deductible under the third party debt test, to the extent subsection
820-427A(2) is satisfied in relation to the cost.
[Amendment 66, subsection 820-427A(2)]
1.26 In conduit financer cases, an interest rate swap cost incurred by a borrower is
now generally deductible under the third party debt test, to the extent
subsection 820-427A(2) is satisfied in relation to the cost. Additionally,
borrowers can recover these costs from other borrowers further down the
'borrowing chain'.
[Amendment 79, paragraph 820-427C(2)(e)]
1.27 Paragraph 820-427C(1)(d) broadly requires the terms of a 'relevant debt
interest' that relate to costs to be same as the terms of the associated 'ultimate
debt interest' that relate to costs. This paragraph has been amended so that it
only focuses on the terms of:
• a relevant debt interest that relate to costs incurred by the borrower,
rather than costs incurred by any entity; and
• the associated ultimate debt interest that relate to costs incurred by the
conduit financer, rather than costs incurred by any entity.
[Amendment 74, paragraph 820-427C(1)(d)]
1.28 The changes to paragraph 820-427C(1)(d) allow the conduit financing
conditions to account for a greater variety of interest rate swap arrangements,
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Thin capitalisation - Parliamentary amendments
including arrangements where the proceeds of the arrangement are passed on
to other borrowers further down the borrowing chain.
1.29 The holder of the debt interest being tested under the third party debt test
(referred to in this document as the 'tested debt interest') can now have
recourse to the following kinds of assets (disregarding recourse to minor and
insignificant assets):
• Australian assets held by the entity that issued the tested debt interest.
In conduit financer cases, this condition is modified to also refer to the
Australian assets of the conduit financer and borrowers.
• Australian assets that are membership interests in the entity that issued
the tested debt interest, unless the entity has a legal or equitable
interest, directly or indirectly, in an asset that is not an Australian asset.
The proviso ensures that membership interests cannot be representative
of non-Australian assets.
In conduit financer cases, this condition is modified to also refer to the
Australian assets that are membership interests in the conduit financer
and borrowers. The proviso continues to apply in these cases.
• Australian assets held by an Australian entity that is a member of the
obligor group in relation to the tested debt interest.
[Amendments 68, 70 and 73, paragraph 820-427A(3)(c), subsection
820-427A(4) and subsection 820-427B(2)]
1.30 Recourse to minor and insignificant ineligible assets (i.e., assets which are not
mentioned in the paragraph immediately above, such as an asset which is not
an Australian assets) is disregarded. This allowance is intended to prevent
paragraph 820-427A(3)(c) being contravened for inadvertent and superficial
reasons. Determining whether recourse to ineligible assets is minor and
insignificant will generally require a consideration of the ineligible assets to
which recourse for payment of the debt can be had and whether those ineligible
assets are of a minor and insignificant nature.
[Amendment 68, paragraph 820-427A(3)(c)]
1.31 The general prohibition on recourse to credit support rights is maintained. The
prohibition ensures that multinational groups do not have an unfettered ability
to 'debt dump' third party debt in Australia that is recoverable against the
global group.
[Amendments 68 and 71, paragraph 820-427A(3)(c) and subsection 820-
427A(5)]
1.32 The exemption for certain kinds of credit support rights under the third party
debt conditions is expanded. The following kinds of rights are now exempt:
• A right that provides recourse, directly or indirectly, only to one or
more Australian assets (other than another credit support right that is
not exempt) covered by subsection 820-427A(4). This exemption is
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Treasury Laws Amendment (Making Multinationals Pay Their Fair Share--Integrity and
Transparency) Bill 2023
intended to facilitate the operation of subparagraph 820-427A(3)(c)(i)
and subsection 820-427A(4).
• A right that is provided by an entity that is not an associate entity of
the entity that issued the tested debt interest.
• A right that relates wholly to the creation or development of offshore
renewable energy infrastructure situated, or to be situated, in a declared
area for the majority of its useful life. This includes offshore electricity
transmission infrastructure that is directly related to the offshore
renewable energy infrastructure. The terms 'offshore renewable energy
infrastructure', 'declared area' and 'offshore electricity transmission
infrastructure' take their meaning from the Offshore Electricity
Infrastructure Act 2021.
• The allowance for recourse to credit support rights that wholly relate to
the creation or development of land situated in Australia has been
updated. This allowance now extends to the creation and development
of certain moveable property situated on the land. The extension is
intended to cater for the creation or development of property that is not
part of the land but has a close economic connection to the land and is
situated on the land with a substantial degree of permanence.
Moveable property situated on the land is captured by the allowance if
the property is, or is reasonably expected to be, relevant to the income
producing use of the land and situated on the land for the majority of
its useful life. For example, where land is being used to produce or
facilitate the generation of renewable energy for sale, then the
renewable energy producing moveable property that is situated on the
land will be relevant to the income producing of the land. This is the
case even where the land, by itself, does not have a direct income
producing use.
When the creation and development of a CGT asset begins and ends is
a question of fact that will vary depending on the nature of the asset
and the relevant creation or development activities.
• Notwithstanding the above listed exemptions, a right is not exempt
where the right is provided (or ultimately provided) by a foreign entity
that is an associate entity of the entity that issued the tested debt
interest.
[Amendment 71, subsection 820 427A(5)]
1.33 Several refinements have been made to sections 820-427C and 820-427B to
clarify the operation of these sections and ensure correct outcomes are
achieved. The refinements also ensure a reasonable degree of flexibility in how
the sections operate. For example, where a relevant debt interest fails the
conduit financing conditions in 820-427C, then this does not necessarily result
13
Thin capitalisation - Parliamentary amendments
in the related ultimate debt interest and other relevant debt interests failing the
conduit financing conditions.
[Amendments 73 and 74, sections 820-427B and 820-427C]
1.34 The 'Australian entity' term is now used in Subdivision 820-EAB to ensure
trusts and partnerships can access the third party debt test. The modified
definition of 'Australian entity' applies for these purposes (see paragraph 1.23
above).
[Amendment 84, section 820-427E]
Debt deduction creation rules
1.35 New section 820-31 clarifies the ordering between Subdivision 820-EAA (debt
deduction creation rules) and all other provisions in Division 820. An entity
first works out if their debt deductions are disallowed under the debt deduction
creation rules. To the extent their debt deductions are disallowed under those
rules, the disallowed debt deductions are disregarded for the purposes of
applying all other provisions in Division 820. The other provisions in Division
820 may further disallow the entity's debt deductions.
[Amendment 8, section 820-31]
1.36 The exemption of certain special purpose entities from the thin capitalisation
rules is extended to the debt deduction creation rules.
[Amendments 9 and 10, section 820-39]
1.37 ADIs and securitisation vehicles are now also excluded from the debt
deduction creation rules.
[Amendments 46 and 47, subsection 820-423A(1)]
1.38 There are now three exemptions to the condition provided by paragraph 820-
423A(2)(a) (about the acquisition of an asset from an associate pair):
• The acquisition of a new membership interest in an Australian entity,
or a foreign entity that is a company, are disregarded.
• The acquisition of certain new tangible depreciating assets is
disregarded. This exception is broadly intended to allow an entity to
bulk-acquire tangible depreciating assets on behalf of its associate
pairs.
• The acquisition of certain debt interests is disregarded. This is a
technical exemption which ensures that mere related party lending is
not caught by the rules.
[Amendment 59, section 820-423AA]
1.39 Provisions make clear that subsection 820-423A(2) may apply in relation to the
indirect acquisition by an entity of a CGT asset through an interposed entity,
even if the indirect acquisition happens because of the direct acquisition by the
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Treasury Laws Amendment (Making Multinationals Pay Their Fair Share--Integrity and
Transparency) Bill 2023
first entity of a CGT asset covered by one of the three exceptions.
[Amendment 52, subsection 820-423A(3A)]
1.40 Australian currency is not a CGT asset when it is used as legal tender.
Accordingly, the acquisition of Australian currency is generally not expected
to be caught by paragraph 820-423A(2)(a).
1.41 For subsections 820-423A(2) and (5) to apply to a debt deduction, a new
related party debt deduction condition must now be satisfied. Broadly, the
condition will be satisfied where the relevant entity's debt deduction is paid or
payable, directly or indirectly, to an associate pair of the entity.
[Amendments 51 and 54, paragraphs 820-423A(2)(e) and (5)(e)]
1.42 The related party debt deduction condition ensures the debt deduction creation
rules are appropriately targeted. Where a group finances a related party
transaction with related party debt, there may be little to no real economic cost
borne by the group in relation to the transaction and debt.
1.43 Schemes that seek to exploit the related party debt deduction condition to
artificially locate or 'debt-dump' third-party debt in Australia will be subject to
the anti-avoidance rules in section 820-423D and Part IVA of the ITAA 1936.
For example, such schemes may involve third party debt (and the associated
debt deductions) being located in Australia, whilst the proceeds of the debt are
ultimately used for business activities outside Australia. Such schemes may
have a sophisticated commercial guise or may be embedded into genuine
commercial activity.
1.44 The anti-avoidance rules in section 820-423D may also apply to any avoidance
schemes relating to the debt deduction creation rules. However, these rules are
not intended to apply to schemes where a taxpayer is merely restructuring,
without any associated artificiality or contrivance, out of an arrangement that
would otherwise be caught by the debt deduction creation rules. The
application of section 820-423D will ultimately depend on the facts and
circumstances of each case.
1.45 Broadly, an entity that chooses the third party debt test for the income year will
effectively be exempt from the debt deduction creation rules for that income
year. This exemption recognises that such entities are subject to the third party
debt conditions in Subdivision-EAB. These conditions are intended to ensure
that an entity's debt deductions are only allowed where they are attributable
genuine third party debt that is borrowed against Australian assets and is used
to fund Australian operations.
[Amendments 51 and 54, paragraphs 820-423A(2)(g) and (5)(f)]
1.46 Subsection 820-423A(5) now applies in relation to a defined list of payments
or distributions, rather than payments or distributions generally. This helps
ensure that subsection 820-423A(5) is targeted towards kinds of payments and
distributions that are common in debt deduction creation schemes. It also
mitigates tracing requirements under the debt deduction creation rules, which
15
Thin capitalisation - Parliamentary amendments
is of particular relevance to high-volume transaction accounts such as cash
pooling facilities.
[Amendment 54, subsection 820-423A(5A)]
1.47 Subsection 820-423A(5) now applies in relation to financial arrangements
rather than debt interests. This aligns with the new definition of 'debt
deduction' in section 820-40, under which debt deductions may be incurred in
relation to various financial arrangements.
[Amendment 54, subsection 820-423A(5)]
1.48 Paragraphs 820-423A(5)(a) and (b) have been reframed to refer to the 'payer'
entering into or having as financial arrangement with another entity and using
that financial arrangement to fund, or facilitate the funding, of one or more
listed payments or distributions. These changes ensure the paragraphs focus on
the use of the financial arrangement and how that use might change over time.
[Amendment 54, paragraphs 820-423A(5)(a) and (b)]
1.49 As mentioned in the paragraph immediately above, section 820-423A(5)
requires a consideration of whether the payer uses the financial arrangement to
fund, or facilitate funding of, one or more listed payments or distributions. For
the payer to facilitate the funding of a payment or distribution, there must be an
indirect connection between the use of the financial arrangement and the
funding of the payment or distribution. This may involve a consideration of
whether the use of the financial arrangement can reasonably be said to have
allowed for, directly or indirectly, the funding of the payment or distribution.
1.50 Debt deductions to which subsection 820-423A(5) applies are now disallowed
on a proportionate basis. This provides a more appropriate and clearer basis for
the disallowance of debt deductions. If the conditions in subsection 820-
423A(5) are met, then the debt deduction is disallowed to the same extent as
the extent to which the payer uses the financial arrangement to fund, or
facilitate the funding of, a listed payment or distribution (as described in 820-
423A(5)(b)).
[Amendment 60, subsection 820-423B(2)]
1.51 A modified definition of 'associate pair' applies in relation to unit trusts for the
purposes of the debt deduction creation rules. This modified definition is
intended to narrow the ordinary operation of the definition of 'associate' in
section 318 of the ITAA 1936.
[Amendment 62, section 820-423E]
1.52 The modified definition of 'Australian entity' applies for the purposes of the
debt deduction creation rules (see paragraph 1.23 above).
[Amendment 63, section 820-423F]
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Treasury Laws Amendment (Making Multinationals Pay Their Fair Share--Integrity and
Transparency) Bill 2023
Other matters
1.53 A modified definition of 'associate entity' is used throughout the new thin
capitalisation rules. Minor amendments are made to this modified definition to
ensure the related definition of 'associate' in section 318 of the ITAA 1936
does not conflict with the modifications to the definition of 'associate entity' in
the ITAA 1997.
[Amendments 29, 36, 38 and 82, subsections 820-48(2), 820-52(9), 820-54(5)
and 820-427D(1)]
1.54 Amendments ensure that FRT disallowed amounts are appropriately dealt with
under the allocable cost amount provisions in Division 705.
[Amendments 1 to 7, sections 705-60, 705-65, 705-75, 705-102, 705-105, 705-
160 and 705-235]
Commencement, application, and transitional
provisions
1.55 The Parliamentary amendments commence at the start of the first quarter
following Royal Assent and apply to assessments for income years beginning
on or after 1 July 2023.
1.56 However, Subdivision 820-EAA (the debt deduction creation rules) applies in
in relation to assessments for income years starting on or after 1 July 2024.
[Amendment 89]
17
Statement of
Compatibility with Human Rights
Thin capitalisation - Parliamentary amendments
Overview
2.1 The Parliamentary amendments are compatible with the human rights and
freedoms recognised or declared in the international instruments listed in
section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
2.2 The Parliamentary amendments amend Schedule 2 to the Bill to ensure the new
thin capitalisation rules are appropriately targeted. Broadly, the thin
capitalisation rules limit the tax deductibility of financing expenses for certain
multinational entities.
2.3 The amendments relate to the following matters:
• Choices under Subdivision 820-AA.
• The meaning of 'obligor group'.
• The meaning of 'tax EBITDA'.
• The third party debt test.
• The debt deduction creation rules.
• Other matters.
Human rights implications
2.4 The Parliamentary amendments does not engage any of the applicable rights or
freedoms.
Conclusion
2.5 This Parliamentary amendment are compatible with human rights as it does not
raise any human rights issues.
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