Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Competition, Charities and Treasury, the Hon Dr Andrew Leigh MP)

General outline and financial impact

Thin capitalisation - Parliamentary amendments

Outline

The Parliamentary amendments amend Schedule 2 to the Bill to ensure the new thin capitalisation rules are appropriately targeted.

Date of effect

The Parliamentary amendments commence at the start of the first quarter following Royal Assent and apply to assessments for income years beginning on or after 1 July 2023. However, Subdivision 820-EAA (the debt deduction creation rules) applies in in relation to assessments for income years starting on or after 1 July 2024.

Proposal announced

Together with Schedule 2 to the Bill, the Parliamentary amendments implement the MNE interest limitation rules from the Government election commitment on multinational tax integrity, included as the 'Multinational Tax Integrity Package – amending Australia's interest limitation (thin capitalisation) rules' measure from the October 2022-23 Budget.

Financial impact

The Parliamentary amendments are estimated to decrease receipts by $20 million over the three years from 2023-24, reflecting an amendment to the tax EBITDA calculation to accommodate the forestry and plantation industry.

All figures in this table represent amounts in $m.

- denotes nil

Human rights implications

The Parliamentary amendments to Schedule 2 to the Bill do not affect the analysis of human rights issues. See the Statement of Compatibility with Human Rights — Chapter 2.

Compliance cost impact

compliance cost impact is unchanged by the Parliamentary amendments.