Improving the integrity of the tax treatment of concessional loans

The Government has released for public consultation exposure draft legislation and accompanying explanatory material to improve the integrity of the tax treatment of concessional loans, as announced in the 2018-19 Budget.

Currently, when a tax exempt entity become taxable (for example via a privatisation), loans issued on concessional terms can unintentionally give rise to a tax deduction on the repayment of the loan principal. This arises due to the complex interaction between the Taxation of Financial Arrangements (TOFA) rules and the rules dealing with tax exempt entities that become taxable.

The draft explanatory memorandum and explanatory materials released for consultation today will disallow these tax deductions.

Protecting the integrity of Australia’s tax system is part of the Coalition Government’s plan for a stronger Australian economy, more jobs for Australians and guaranteeing the essential services that Australians rely on.

The closing date for submissions is Monday, 5 November, 2018. The Government invites interested parties to make a submission.

The exposure draft legislation and explanatory materials are available on the Treasury website.

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