The 2016-17 Budget will be released tomorrow and it is expected there will be an adjustment to the “thin capitalisation” rules that govern international companies operating in Australia. To understand the concept and the reasoning behind the Government’s concern with thin capitalisation, we read the explanation from the ATO's website. A reader could be mistaken for thinking it describes negative gearing. Thin capitalisation (i.e. excessive gearing) is used by both international companies and investors alike to lower assessable income in Australia, and whilst thin capitalisation is seldom used to describe negatively geared property investments – perhaps it should... (VIEW LINK)
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