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Intra-group financing arrangements are a critical transfer pricing focus area of the Australian Taxation Office (ATO). These arrangements often include loans, guarantees and other financial transactions between international related entities that means greater scrutiny on how financing is structured, priced and supported.
Getting debt pricing right
Interest rates on related party loans must reflect what independent parties would agree to. The ATO looks closely at whether pricing matches the commercial reality of the arrangement.
This assessment considers factors such as credit strength, loan terms, currency and market conditions. Clear economic support helps explain why pricing makes sense.
Managing debt levels under new rules
Recent changes to Australia’s thin capitalisation rules raise the bar further. It is no longer enough to price debt correctly. The amount of debt itself must also be supportable as arm’s length.
What that means for you is a need to assess leverage and debt serviceability. In some cases, existing arrangements may need to be repaid or reshaped for the interest to remain deductible.
Documentation and risk signals
Strong documentation remains essential. Records should explain the commercial purpose of financing arrangements and how key decisions were made.
ATO Practical Compliance Guidelines, including PCG 2017/4, help signal how your arrangements may be viewed and where risk may sit.
Staying ahead of change
Financing arrangements should not stand still. Regular reviews help ensure capital structures remain aligned with market realities, business performance and strategy, and regulatory guidance, including developments from the ATO and OECD.
Consistency between legal form and economic substance strengthens your position and reduces uncertainty.
How we can help
Our team offers comprehensive support in navigating intra-group financing challenges. As technical experts, we are across both ATO and OECD guidance on financial transactions. Whether you are establishing new loans or reviewing existing structures, our specialists assist with economic analyses, documentation, risk assessments, and strategic planning to ensure your financing arrangements are aligned with regulatory expectations. Reach out to learn how we can help you challenge assumptions and align your intra‑group financing with today’s expectations.
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