The proposed debt and equity amendments: Improvements or more uncertainty?

Published on 01 Feb 17 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

The long-awaited proposed debt and equity amendments were released on 10 October 2016. The proposed amendments provide for the welcome repeal of the controversial s 974-80 of the Income Tax Assessment Act 1997. The amendments also replace the existing “related schemes” rules with a new two-pronged “aggregation scheme test”. Under this regime, two or more schemes will be treated as a single aggregated debt or equity scheme only when the “interdependence test” and the “design test” are satisfied.

This article analyses the new rules as recommended by the Board of Taxation against historic developments and questions if they provide taxpayers with the desired certainty. To provide guidance on the application of the new rules, the government released an accompanying exposure draft legislative instrument containing eight examples. However, the authors conclude that the new rules and the examples increase doubt on the operation of the provisions as they are difficult to reconcile and apply in practice.

Author profiles

Aldrin De Zilva CTA

Aldrin is the Head of Projects and Infrastructure at Greenwoods & Herbert Smith Freehills and has over 20 years experience in a specialist taxation role. He acts predominantly for large multinational and Australian listed companies and has significant experience in advising both vendors and purchasers in multi-billion dollar infrastructure projects. As well as providing taxation advice, Aldrin has been the instructing solicitor on a number of matters before the Federal Court and High Court of Australia. Aldrin has been recognised as one of Australia’s leading tax controversy advisers by the International Tax Review and is heavily involved in consultations regarding taxation law reforms, including assisting the Board of Taxation. Aldrin is a Senior Fellow at the University of Melbourne and lectures in the Masters of Taxation program. - Current at 24 January 2017

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Alistair Haskett CTA

Alistair is a Senior Associate in the Melbourne office of Greenwoods & Herbert Smith Freehills. Alistair advises on a wide range of tax matters in the context of mergers and acquisitions, privatisations, projects and disputes across various industry sectors including infrastructure, financial services and property. - Current at 30 August 2021

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