Thin capitalization changes to stifle business investment

Federal Budget 2013

The announcement that the Government will be amending the thin capitalisation rules to reduce the safe harbour rules will not be welcomed by foreign companies investing in Australia, and other Australian companies conducting business with the Australian subsidiaries of those foreign companies.

The reduction in tax deductions for interest payments made by the Australian subsidiary will make those businesses less profitable. By its very nature, this move will then discourage foreign companies from establishing or maintaining operations in Australia.

These companies do no operate in a vacuum, so any other Australian company providing services to these companies risks losing customers. according to leading accounting and advisory firm Grant Thornton Australia.

“We are expecting that Australia will then become a less desirable location for foreign investment” said Vince Tropiano, Tax Partner at Grant Thornton Australia.

“While this change will be dressed up as an attempt to prohibit foreign companies artificially reducing their Australian tax liabilities, the fact remains that the knock on effects of this change will have painful ramifications for Australian business generally”

“The fact remains that the economy needs to supported both by Government and foreign investment. This move does neither.” 

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For more information, please contact:

Helina Lilley
National Public Relations Manager
T  +61 2 8297 2421
M  0437 725 520
E helina.lilley@au.gt.com

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