In the fifth installment of Tax Chats (International Tax 101) Danielle discusses Intercompany Financing, which is a key area of tax reform and ATO review activity. 

Tax Chats (International Tax 101) is a series designed to distill intricate international tax matters into succinct updates. Designed specifically for professionals like yourself, each episode sheds light on complex topics, empowering you to proactively navigate the ever-evolving landscape.

Join us for the latest episode, as we unravel some of the intricacies of Intercompany Financing.

Do you have questions in relation to this topic or this series? If so, please contact Danielle Sherwin by emailing [email protected].  

Key takeaways:

1. Farewell, 60% Debt Safe Harbor: The thin capitalisation rules are now legislated, so the commonly adopted 60% safe harbor debt threshold has been replaced by the 30% EBITDA test (though other tests also exist). 

2. Quantum of Debt: Transfer pricing principles will now govern whether the quantum of intercompany debt is arm’s length, so will require additional consideration for all taxpayers (no $2million de-minimis rule exists under transfer pricing).

3. ATO Review: Intercompany financing is under the ATO’s magnifying glass, with PCG 2017/4 outlining their risk assessment framework. This extends beyond consideration of the actual T&C’s associated with the financing arrangement.

Danielle Sherwin

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Danielle is a Partner in the Tax Services division in the Sydney office. 

Danielle specialises in international tax, with a focus on transfer pricing and international tax. She assists her clients with their international tax planning and transfer pricing needs, ranging from Significant Global Entities (SGE) assessment, Country-by-Country (CBC) reporting, transfer pricing planning and advisory to transfer pricing compliance and documentation. 

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