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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Grant Thornton Australia provides audit, tax and advisory services to dynamic, growing organisations and is a single national firm, with over 150 Partners, more than 1,200 people across Australia and national turnover of AUD $232 million. Grant Thornton International is the fastest growing international accounting network in the world, with a global turnover of US$3.7billion and more than 30,000 people, and was recently named 2013 Network of the Year by the International Accounting Bulletin.