Changes to thin capitalisation rules expected in Budget

With the Federal Budget being released next week, many are speculating that the Government will be cracking down on business concessions with thin capitalisation rules being targeted. The rules which affect large, multinational companies may have unintended consequences for small businesses. For example, if a big business is forced to downsize it could hit smaller suppliers in a domino effect, possibly resulting in closures and creating struggling businesses.  There were expectations by the business community that any changes to thin capitalisation would be offset with a company tax cut; however, this has been ruled out by the Treasurer in light of deficit concerns.

Furthermore, the proposition to change thin capitalisation rules hint at an increase in the capital gains tax which would have far reaching consequences for the entire business community.