Australia/New Zealand

Guide to the Thin Capitalisation Support Schedules - October 2025

This guide provides an overview of the new Thin Capitalisation (Thin Cap) support workpapers for both Single (AUS) and Consolidation (AUC) calculations. It is not intended to provide tax technical advice on the Thin Cap rules and how they apply to your calculations.
This is an initial introduction of supporting schedules that should assist with competing the International Delaings Schedule in relation to the Thin Capitalisation section. There is limited automation and linking and no links have currently been applied to the IDS.
The Thin Cap rules are quite complex and our initial design is trying to start with a simple to follow approach that allows details of calculations to support the IDS disclosures. The design is subject to future updates and improvements based on usage and feedback.
These schedules are available in both the Single template and the Consolidation template. The initial design primarily focuses on providing details for the Fixed ratio test, however there is provision for inclusion of Group ratio data and the Third Party Debt Test.
For any questions or further assistance regarding the Release Notes, please do not hesitate to contact Support ANZ:

A30 – Thin capitalisation support schedule

A30 – Thin capitalisation supporting calculations – General
This worksheet provides a comprehensive calculation framework for assessing thin capitalisation compliance under Australian tax rules. It is structured to guide users through the key tests and calculations relevant for the income year commencing from 1 July 2024 including:
  • Entity Type and Test Selection:
     Users specify the entity type (e.g., Controlled Entity) and select the applicable thin capitalisation test (e.g., Fixed Ratio Test).
  • Tax EBITDA Calculation:
     Detailed steps to calculate Tax EBITDA, starting from taxable income, with adjustments for losses, debt deductions, interest income, depreciation, and forestry costs.
  • Fixed Ratio Test (FRT):
     Calculates the fixed ratio earnings limit (30% of Tax EBITDA) and determines any disallowed debt deductions if net debt deductions exceed this limit.
  • Group Ratio Test (GRT):
     Includes fields for group ratio calculations, group net third party interest expense, group EBITDA, and the group earnings limit.
  • Third Party Debt Test:
     Captures deductions attributable to external third-party debt and calculates the corresponding earnings limit.
  • Controlled Entity Transfers:
     Provides space to record the three highest Excess Tax EBITDA amounts transferred from controlled entities, in line with legislative requirements.
All calculation blocks are clearly labelled and follow the legislative method statements, with placeholders for entity-specific data input.
Where possible some amounts are linked to existing amounts within the calculation. There are manual entry rows in each block to allow for specific adjustments and corrections if required.
Setup
  • Entity Type – Choice of Entity (Controlled Entity) or Group (Controlling Entity) – determines what tests should be used and what information displays.
  • Test – Determines the type of Thin Cap calculation to be undertaken and information that displays.
  • Note: If a workpaper is not loaded that is included in a formula the cell will appear blank.
Fixed ratio test analysis
Tax EBITDA calculation
  • Starts with the Taxable income – directly linked to the STI and will exclude any Thin Cap adjustments already calculated if relevant. This links to Sheet A15 – Sundry STI Adjustments if inserted. (See separate updates for A15).
  • Provides for legislative adjustments, including the prior year tax losses, which are linked to the relevant Revenue loss workpaper and calculates to
    Modified taxable income.
  • Provides calculation of
    Total Net Debt Deductions
    :
    • Includes net debt deductions, such as interest expenses, which are linked to the calculation
    • Includes other net debt deduction items such as borrowing costs and bank fees.
    • provides for other manual debt deduction adjustments
    • Provides calculation of any debt amounts included in assessable income, such as interest income, which is linked to the calculation.
    • provides for other manual debt income adjustments
  • Provides for the inclusion of Modified depreciation and forestry adjustments:
    • Forestry expenditure
    • Decline in value and other Division 40 claims
  • Provides for the calculation of Excess Tax EBITDA – see separate sheet and calculation.
Fixed ratio earnings limit
  • Calculates the Fixed ratio earnings limit and associated amounts:
    • Current period Fixed Ratio Test (FRT) Disallowed Amount - Total Disregarded amounts
    • Prior year FRT disallowed amounts claimed in the current period
    • Provides for the inclusion of the past years FRT disallowed amounts. (This will be managed with a separate FRT disallowed amounts workpaper in the future.)
  • Provides for the 3 highest Excess tax EBITDAs of Controlled Entities.
Group ratio test analysis
  • Provides the minimum details to calculate amounts under the Group ratio test
  • Provides for the Group EBITDA calculation:
    • Adjusted net third party interest expenses
    • Depreciation and Amortisation expenses
    • Entity's GR Group ratio
    • Entity's GR earnings limit
  • Provides for the top 3 Group members’ data
Third Party Debt analysis
  • Provides the minimum details to calculate amounts under the Third Party Debt test
  • Provides for the external Third Party debt deductions
  • Provides for debt related expenses and disqualifying amounts
  • Calculates the Third Party earnings limit

A31 – Excess Tax EBITDA Calculation

This worksheet sets out the calculation steps for determining the controlling entity’s excess tax EBITDA for the income year, as required under s820-60(3):
  • Method Statement:
     Outlines the process for each controlled entity, comparing the fixed ratio earnings limit to net debt deductions and prior disallowed amounts.
  • Stepwise Calculation:
    • Step 1: Calculate the excess of the fixed ratio earnings limit over net debt deductions and prior disallowed amounts for each controlled entity.
    • Step 2: Determine the controlling entity’s direct control interest percentage for each day of the income year.
    • Step 3: Multiply the excess from Step 1 by the percentage from Step 2.
    • Step 4: Aggregate the results across all controlled entities.
    • Step 5: Arrive at the total excess tax EBITDA for the controlling entity.
  • Compliance Reference:
     The worksheet follows the statutory method and provides clear guidance for input and calculation, ensuring compliance with thin capitalisation rules.
Excess Tax EBITDA calculation
This sheet is included with A30 – Thin Capitalisation support schedule. It will only be active when the Group ratio test is selected and is only completed by Controlling Entities.
  • Provides the method statement for calculating the Fixed ratio Earnings limit
  • Provides for the data entry of direct control interests of controlled entities, which includes the steps to calculating the Excess tax EBITDA

This article applies to:

  • Product: ONESOURCE Corporate Tax