Australia: Detailed analysis on final taxation ruling and guidance on the Australian thin capitalization arm’s-length debt test

Executive summary

On 12 August 2020, the Australian Taxation Office (ATO) released final Taxation Ruling TR 2020/4 (the Ruling) and Practical Compliance Guideline PCG 2020/7 (the PCG) relating to the use of the Arm’s-Length Debt Test (ALDT) for the purposes of Australia’s thin capitalization regime following its consultative draft released last year (PCG 2019/D3).

The Ruling addresses the application of the ALDT from a legislative perspective and the PCG provides administrative guidance …