Tier-two capital instruments that include a loss absorbency clause – as the Australian Prudential Regulation Authority will require from next year – will not be precluded from being classified as debt for tax purposes.
This is the position outlined in a Treasury discussion paper issued yesterday, setting out changes the Government will make to the tax treatment of tier-two instruments under the Basel III capital reforms.
The changes will cover authorised deposit-taking institutions and certain other related entities regulated by APRA, and will take effect from January 1 next...
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