Part A: Explaining the tests for debt and equity interests

The debt and equity rules determine what is equity in a company and what is debt in an entity for taxation purposes, with effect from 1 July 2001.

The debt and equity rules improve certainty in the tax law by establishing tests that provide a clearer and more coherent distinction between equity and debt interests.

These rules implemented the general approach recommended by the Review of Business Taxation: A Tax System RedesignedExternal Link.

Regulations can be made to provide further guidance in applying the debt and equity rules.

    Last modified: 26 Mar 2015QC 36047