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Thin capitalisation: A focus on trusts
Published on 01 Oct 16 by "THE TAX SPECIALIST" JOURNAL ARTICLE
Unit trusts are the investment vehicle of choice for many investors involved in infrastructure projects. The two key features of infrastructure transactions that especially require careful consideration involve deductibility of interest assumptions and assumptions in relation to the tax transparency of vehicles. There are many tax issues which are critical to availability of debt deductions to trust vehicles holding infrastructure projects, including unit trusts. This article looks at the thin capitalisation rules, with a particular focus on domestic infrastructure projects in which eligible investment business activities are conducted within a unit trust. The article examines the thin capitalisation rules, as amended in 2014, in the light of changes to the worldwide gearing test, the Australian Taxation Office’s compliance position in respect of negative control and changes to the definition of public unit trust. The article discusses the exemption for the 90% Australian assets test and the exemption for special purpose entities.
Author profiles
Stephen Ford CTA
Steve Ford, CTA, is a Tax Partner at PwC, specialising in M&A in the infrastructure, PPP and energy sectors. Steve is a member of the IPA Tax Committee. Steve was previously an Executive Director with Macquarie Capital, specialising in project finance and infrastructure. - Current at 26 June 2019
Angela Van
Angela is a Manager with PricewaterhouseCoopers.Current at 1 May 2016
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