CA ANZ slams limited consultation period for revised thin capitalisation measures
The accounting body says the consultation period for the thin revised thin capitalisation amendments was too short to address the complexity of the provisions.
The eight working day consultation period provided by the government for the draft amendments to the thin capitalisation changes is inadequate for considering the complex changes in the bill, Chartered Accountants ANZ has told the government.
“The exposure draft legislation is seeking to amend very complex provisions in the Income Tax Assessment Acts,” CA ANZ said in a recent submission on the draft provisions.
“The 8 working day consultation period is not enough time for stakeholders to be able to digest the proposed amendments and test the draft provisions to see if the stated outcome is achieved by the draft provisions.”
CA ANZ said it has deep concerns that many issues, particularly those relating to the debt deduction creation rules, will not be properly identified during the short consultation period.
It also noted that with only four sitting weeks remaining to pass the bill, there is also a limited amount of time for Treasury and the Office of Parliamentary Counsel to consider stakeholders’ feedback on the draft provisions.
The accounting body said while the amendments have addressed many issues previously raised by stakeholders, it has identified several further issues.
One of these in the need to align the thin capitalisation direct control interest tests for accessing trust excess tax EBITDA and disregarding trust distributions from Tax EBITDA, it said.
It also has concerns about the appropriateness of requiring tax losses to be utilised, and the various adjustments to the third-party debt test.
CA ANZ said there is also still substantial drafting issues with subdivision EAA, containing the debt deduction creation provisions, even though the scope of the Subdivision has narrowed to related party arrangements.
“There are also great concerns about the retrospective nature of the proposed changes,” it said.
“CA ANZ is particularly concerned that the specific anti-avoidance provisions will still capture entities that are trying to restructure their existing financing arrangements during the transitional period to ensure that they do not fall within the debt deduction creation rules.”
The accounting body also still has concerns that the provisions will inadvertently capture arrangements that should not be within scope.
The submission called for Subdivision EAA of the Income Tax Assessment Act 1997 (ITAA 1997) containing the new debt deduction creation rules be excluded from the bill.
“This will allow Treasury to immediately prioritise addressing stakeholders’ concerns with the drafting of the amendments to the thin capitalisation rules for general class investors in Subdivision 820-AA for introduction in the Senate,” it said.
“Thereafter, Treasury can focus on fixing the drafting of Subdivision EAA. The debt deduction rules can then be introduced in a later Bill.”
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