Tax – What are the debt equity rules?

The debt equity rules came into effective operation on 1 July 2005 when the transitional period ended.

The rules are aimed at stopping the long existing practice of companies repaying loans from shareholders out of profits in a tax free way.

The debt equity rules would only apply to private companies having a turnover greater than $20 Million.

This means the debt equity rules have no application for the majority of private companies.