Home       What's New?       Corporate       Business       Published Information       Ministers       Related Websites

Exposure Draft – Thin Capitalisation (AIFRS and ADIs): Modification of the Rules in Relation to the Application of Accounting Standards


Thursday, 17 December 2009

Content ID:



The Assistant Treasurer, Senator the Hon Nick Sherry, has released for public consultation the Government's draft "Thin Capitalisation (AIFRS and ADIs): modification of the rules in relation to the application of accounting standards" legislation, together with explanatory material.

The thin capitalisation regime is an important integrity measure designed to ensure Australian and foreign owned multi-national entities do not allocate an excessive amount of global debt to their Australian operations and therefore inappropriately reduce Australian profits and tax. The rules operate to disallow a proportion of otherwise deductible expenses where the debt used to fund the Australian operations exceeds certain limits.

The proposed amendments in the exposure draft legislation will adjust for some impacts from the 2005 adoption of the Australian equivalents to International Financial Reporting Standards (AIFRS) on the thin capitalisation position of authorised deposit taking institutions (ADIs). Amendments made in 2008 adjusted for the impact of AIFRS on the thin capitalisation position of non ADI entities.

The proposed changes, which were announced in the 2009-10 Budget, will apply to ADIs and will clarify how treasury shares, the business insurance asset known as 'excess market value over net assets' (EMVONA) and capitalised software costs, will be treated under the thin capitalisation provisions.

The proposed changes take into account the views expressed by stakeholders in relation to how the AIFRS apply to certain thin capitalisation arrangements for ADIs. It is intended that the proposed changes will have effect from 1 January 2009.

Making a submission

Interested parties are invited to comment on the exposure draft legislation and associated explanatory material. While submissions may be lodged electronically or by post, electronic lodgement is preferred. For accessibility reasons, please submit responses sent via email in a Word or RTF format. An additional PDF version may also be submitted.

All information (including name and address details) contained in submissions will be made available to the public on the Treasury website unless you indicate that you would like all or part of your submission to remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose. Respondents who would like part of their submission to remain in confidence should provide this information marked as such in a separate attachment. Legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the confidentiality of your submission.

Closing date for submissions: Friday, 15 January 2010

Address written submissions to:
International Tax Unit
International Tax and Treaties Division
The Treasury
Langton Crescent

Email: AIFRSthincapADI@treasury.gov.au

For enquiries, please call William Potts on (02) 6263 4467

Documents Available:

Acrobat (PDF) documents

 Acrobat (PDF)

AIFRS and ADIs Exposure Draft Legislation  18.61kb
AIFRS and ADIs Explanatory Statement  34.63kb
Consultation Summary  33.23kb

Microsoft Word (RTF) documents

 Microsoft Word (RTF)

AIFRS and ADIs Exposure Draft Legislation  77.17kb
AIFRS and ADIs Explanatory Statement  202.47kb
Consultation Summary  848.39kb

Related Items:

Submissions: Exposure Draft – Thin Capitalisation (AIFRS and ADIs): Modification of the Rules in Relation to the Application of Accounting Standards - 23/07/2010

Treasury has received two submissions in response to its consultation on the Thin Capitalisation (AIFRS and ADIs): Modification of the Rules in Relation to the Application of Accounting Standards - Exposure Draft. All of the submissions are public and are accessible by selecting the author.

The opinions expressed in the submissions are those of the authors and do not necessarily reflect the views of the Government or the Treasury.

Treasury Portfolio Ministers - Link to website MoreSuper  - Link to website Carbon Price Modelling - Link to Website Clean Energy Future  - Link to website Review of compensation arrangements for consumers of financial services - Consultation Paper  - Link to website