A number of changes to thin capitalisation have been announced, including the safe harbour gearing ratio for general non-bank entities will be changed from 3:1 to 1.5:1 and from 20:1 to 15:1 for certain financial entities. Most companies have 13 months to transition as the proposed commencement is on or after 1 July 2014. The safe harbour minimum equity requirement for banks has also been lifted from 4 percent to 6 percent.
From 1 July 2014 interest on borrowings used to purchase non-portfolio share investments in overseas subsidiaries will not be deductible. The government considers that the compliance benefits of allowing these deductions is outweighed by risks to the integrity of the corporate tax base.
Deductions for the purchase of mining exploration licences and information first used for exploration will no longer be available in the year of purchase but instead will be spread over the shorter of 15 years or the anticipated life of the mine.
The previously announced change to move large corporate tax entities to monthly PAYG instalments has been extended to all large taxpayers (including trusts and superannuation funds).
Deductions for work-related self-education expenses will be capped at $2,000 annually from 1 July 2014. Employer provided education and training will continue to be exempt from FBT unless acquired by employee salary sacrifice. The FBT rate will increase by 0.5 percent (to 47 percent) when the government increases the Medicare Levy from 1 July 2014.
For additional measures see KPMG's 2013 Federal Budget Brief.