For overseas property developers investing in Australia, early funding decisions can have a material impact on tax outcomes, deductibility and overall returns. Where debt, equity and related party funding are treated differently under Australian tax rules, the structure chosen at the outset matters. 

In this conversation, Anika Reside, National Head of Real Estate and Construction, and George Sinanis, Corporate Tax Partner, discuss the main funding options available to overseas developers, the tax treatment of debt and equity, and the recent reforms increasing scrutiny on cross-border funding structures. 

Listen back for practical insights into where funding structures can come under pressure and why getting the position right early can shape outcomes over the life of an Australian development. 

Key themes for discussion

1. Funding classification matters | [18:13 – 19:48] and [1:50 – 3:20] 

Overseas property developers typically fund Australian projects through equity, debt or a combination of both. Under Australian tax rules, however, the treatment of a funding instrument depends on its substance rather than the label attached to it, making classification an important issue from the outset. 

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2. The tax trade-offs of equity and debt | [3:22 – 4:53]

Once a funding arrangement is treated as debt or equity, the tax implications can differ significantly. Equity funding will generally give rise to dividend returns, while debt funding can support interest deductibility, but the withholding tax treatment and overall tax outcome for investors may differ. 

3. Interest deductibility is not a given | [4:54 – 8:36] 

Debt has often been viewed as the more tax-effective funding option, but Australia’s thin capitalisation changes have made that position harder to rely on. For property developers, particularly in the early stages of a development, earnings-based limits can restrict deductions even where borrowing is commercially justified. 

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4. Related party funding under greater scrutiny | [8:37 – 13:09] 

Related party funding introduces another layer of complexity. New debt deduction creation rules can restrict deductions in some financing arrangements, while transfer pricing rules apply across cross-border funding more broadly. Together, they increase the need to assess not only whether deductions are available, but whether the overall arrangement can be supported. 

1.      Why upfront structuring matters | [13:11 – 14:49]

Funding decisions are far easier to address at the start of a project than after a structure has been implemented. Early advice and upfront modelling can help overseas property developers test assumptions, compare options and make more informed decisions from day one. 

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Explore how these trends impact your business

Shifting market dynamics, rising costs, and regulatory changes are demanding more of real estate and construction businesses. Start a conversation with us today about how these trends apply in the context of your business, or get tailored advice on investment, asset strategies, or structuring your projects for long-term success. We’re here to help you explore practical solutions, identify opportunities, and take steps to help position your organisation for growth.

For more information, please contact:

Anika Reside

Anika is a Partner in Grant Thornton's national indirect tax team and specialises in GST and fuel tax. Anika is committed to delivering an exceptional client experience while solving complex problems.
Anika Reside
Partner and National Head of Real Estate & Construction

George Sinanis

George is a highly skilled and motivated Tax Director with over 10 years of experience including 1 year on secondment as the Taxation Manager at a large multinational organisation. George has a proven track record in providing corporate tax compliance and advisory services to a number of ASX listed companies, foreign multinationals and privately held entities in a variety of sectors including real estate and construction, telecommunications, mining, manufacturing and aviation industries.
George Sinanis
Partner – Corporate Tax

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