10 October 2016
Media Release - #2016089, 2016

In the role of: Minister for Revenue and Financial Services [19 July 2016 - 28 August 2018]

Greater certainty on integrity rules regarding the taxation of debt and equity: Exposure draft legislation

Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, today released Exposure Draft legislation and explanatory material to provide greater certainty in relation to integrity rules regarding the taxation of debt and equity. 

Australia’s tax rules classify financing arrangements as debt (with deductible interest) or equity according to their economic substance.  They also contain integrity rules designed to prevent taxpayers from artificially splitting a single scheme into multiple schemes to achieve favourable tax outcomes. 

These integrity rules have been seen to be uncertain and have created significant practical difficulties for taxpayers.

The draft legislation provides greater certainty in relation to the integrity rules by implementing the Board of Taxation’s recommendations to ensure that multiple schemes are treated as a single scheme only when this accurately reflects the economic and commercial substance of the schemes. The Board’s recommendations were developed following extensive consultations with industry.

Consistent with the Board of Taxation’s recommendations, examples of how the rules would work in practice are also set out in a draft legislative instrument supporting the Exposure Draft legislation.

The final legislation will apply prospectively from a day to be fixed by proclamation or six months after Royal Assent, whichever is later.

The Exposure Draft legislation and Explanatory Memorandum are available on the Treasury website. Submissions will close on 21 November 2016.