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Trading one uncertainty for another? Ten years’ experience with the debt-equity rules

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Published on 01 Aug 13 by "THE TAX SPECIALIST" JOURNAL ARTICLE

The debt-equity rules in Div 974 of the Income Tax Assessment Act 1997 have now been in operation for more than 10 years. This article presents results from a survey, conducted by the authors, to gather and collate the views of tax professionals in industry and private practice. The particular focus of this article is on “the user experience”: how have the professionals and the institutions which have to work with these rules found them to operate in practice? The authors conclude that the debt-equity rules have not proved to be an unqualified success.

There are many problematic areas in the text of the law, it has not proved to be a robust and reliable test that is easily grasped and applied, and the search for the single organising principle has not been completely successful. However, there appears to be no appetite for major repeal; legislative tinkering and ongoing support by administrative guidance are seen to be preferable.

Author profiles

Prof Graeme Cooper FTI
Photo of author, Graeme COOPER Graeme Cooper, FTI, is an Emeritus Professor at Sydney University Law School and consultant to Herbert Smith Freehills. He is a former Chair of the New South Wales State Council of The Tax Institute and former member of the National Council. He has worked as a consultant to the ATO, Treasury, Board of Taxation, United Nations, OECD, World Bank, the International Monetary Fund and several foreign governments. He was admitted to legal practice in New South Wales and Victoria, and practised commercial law and tax in Sydney before entering teaching. He has taught in law schools in Australia, Europe, Canada and the United States, and holds degrees from the University of Sydney, University of Illinois and Columbia University, New York. - Current at 18 July 2023
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Anthony Frost CTA
Photo of author, Tony FROST Tony Frost in his first, 34-year career was one of Australia’s leading corporate tax advisers. He was, and still is, a lawyer and a Chartered Accountant. His clients included BHP Billiton, Macquarie Bank, Westpac Banking Corporation and the Commonwealth Bank of Australia. Before joining Greenwoods in 2003, he had been a tax partner at PwC for seven years. Prior to that, Tony spent five years working in-house at Westpac Banking Corporation. Throughout his tax career, Tony was a regular speaker at TTI events. Tony finished his tax career in 2018, after being Managing Partner, for seven years, of tax advisory firm Greenwoods & Herbert Smith Freehills, one of Australia’s most lauded professional service firms. Since 2019, and after completing a Master of Science in Coaching Psychology degree at the University of Sydney, Tony has been having a second career as an executive coach, mentor, leadership consultant, facilitator and trainer. He holds a number of non-executive company directorships and is the non-executive Chairman of the Leadenhall Valuation Services group. Tony is a graduate of the Australian Institute of Company Directors and now teaches the AICD’s prestigious Company Directors’ Course. Tony is also the author of The Professional: A Playbook to Unleash Your Potential and Futureproof Your Success, Tony has been a proud member of The Tax Institute for about 40 years. - Current at 06 July 2026
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