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Thin cap changes consistent with Basel III

Deloitte Federal Budget media release


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15 May 2013: Tuesday’s Budget effectively picked up the Basel III changes to Tier 1 capital, by increasing the thin capitalisation minimum capital requirements for banks from 4% to 6%.  

Deloitte Banking Tax Partner Patrick Broughan explained that thin capitalisation rules limit tax deductions according to a formula based on the amount of debt or capital held.  He said: "For financial institutions it's not maximum debt levels, as for industrial companies, but minimum capital levels.

"For Authorised Deposit Taking Institutions, the 'thin cap' rules require minimum risk weighted capital to allow a tax deduction for interest paid. Under Basel III this has been increased from 4% to 6% and in 2016 it will increase further to 8.5%.

“For Australian banks this is unlikely to have significant impact in the short term as they are well capitalised," Broughan said.

Contacts

Name:
Patrick Broughan
Company:
Deloitte Australia
Job Title:
Partner – Tax
Phone:
Tel: +61 3 9671 6606
Email
pbroughan@deloitte.com.au
Name:
Louise Denver
Company:
Deloitte
Job Title:
Director, Corporate Affairs & Communications
Phone:
Tel: + 61 2 9322 7615, +61 4 1488 9857
Email
ldenver@deloitte.com.au

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