Volume 15, Issue 2 – Dimac

AUSTRALIA’S THIN CAPITALISATION REGIME: OECD COMPLIANCE, POLICY ISSUES AND AN INTERNATIONAL COMPARISON

By Adam Dimac

A nation’s thin capitalisation laws are an important instrument for preventing revenue loss resulting from excessive allocation of debt to resident operations. These laws can also act as a tool for regulating the structures and processes of entities within a nation’s borders. The principal purpose of this paper is to establish the merits of Australia’s thin capitalisation laws based on three criteria: the extent to which they comply with OECD guidelines; the extent to which they reflect the policy behind their enactment; and their strength relative to the thin capitalisation regimes of fellow OECD member countries. The paper will also provide comment on the recent proposals to reform the thin capitalisation regime following the 2013-14 Federal budget release.

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