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  • Draft PCG 2019/D3 ATO compliance approach to the arm’s length debt test

    We are working to provide large businesses and their advisors with more guidance in relation to the application of the arm’s length debt test. The arm’s length debt test is one of the tests available to establish an entity’s maximum allowable debt for thin capitalisation purposes.

    Our draft Practical Compliance Guideline (PCG) contains:

    • clarification on what we consider to be a reasonable approach to applying the test
    • a risk assessment framework and circumstances we consider may fall within a low risk zone
    • example to demonstrate an application of the test.

    If you have relied on the arm’s length debt test or are considering doing so, we encourage you to read the draft PCG and provide your comments to the contact officer by 9 October 2019.

    For more information you can email us at

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    Last modified: 28 Aug 2019QC 59985