Threshold for application of interest apportionment rules

2012 amendment sets a threshold for the application of interest apportionment rules applying to conduit tax relief companies.

Section 65 of the Taxation (GST and Remedial Matters) Act 2010

The Rewrite Advisory Panel considered this provision contains an unintended change in outcome. The unintended change in outcome is that section FF 4(1)(a) of the 2007 Act incorrectly provides that a conduit tax relief company is required to perform a "thin-cap" interest allocation (deductible/non-deductible interest) if its conduit tax credits exceed $50,000, even if the relevant debt percentage in the foreign group is less than or equal to 66%.

Under the corresponding provision in the 2004 Act, the conduit tax relief company was only required to perform this allocation if its conduit tax credits amount was at least $50,000 and its relevant debt percentage was less than or equal to 66%.

Key features

The amendment ensures that a conduit tax relief company is not required to make this "thin-cap" interest allocation if the company's debt percentage in the foreign group is less than or equal to 66% and its conduit tax relief credits are at least $50,000.

Application date

The amendment applies from the beginning of the 2008-09 income year.