Entity Setup
Structuring Your Entity under Australia’s Tax Incentives and Integrity Framework
Recent legislative acts in Australia introduce changes for business structuring, thin capitalisation, and tax incentives. Learn how to structure entities to benefit from the new Integrity Act and Production Tax Credits.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## Key Legislative Acts to Know
- **Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025** – Assented 27 March 2025; introduces measures around **tax incentives**, **integrity**, and stricter rules for **thin capitalisation** and deductibility. ([ato.gov.au](https://www.ato.gov.au/law/view/print?DocID=PAC%2F20250029%2F00001&PiT=99991231235958&utm_source=openai))
- **Future Made in Australia (Production Tax Credits and Other Measures) Act 2025** – Assented 14 February 2025; offers **production tax credits** and specific incentives for domestically produced goods and infrastructure. ([ato.gov.au](https://www.ato.gov.au/law/view/print?DocID=PAC%2F20250009%2F00001&PiT=99991231235958&utm_source=openai))
## What the New Integrity Rules Mean for Entity Structure
### Thin Capitalisation & Debt Deduction Creation Rules (DDCR)
Entities must watch:
- The **Reportable Tax Position (RTP) schedule** now requires disclosure if you restructured in response to DDCR. The ATO’s compliance reviews are more active in this space. ([ato.gov.au](https://www.ato.gov.au/about-ato/consultation/in-detail/stewardship-groups-key-messages/large-business-stewardship-group/large-business-stewardship-group-key-messages-5-march-2025?utm_source=openai))
- New compliance expectations for large, private, public and multinational entities about how they are funded with debt vs equity. Overuse of debt deductions is now an audit red flag.
### Tax Incentives & Production Tax Credits
- Take advantage of incentives under **Future Made in Australia**: eligible entities can claim production tax credits where applicable. Know whether you qualify under the scheme based on your operations or output. ([ato.gov.au](https://www.ato.gov.au/law/view/print?DocID=PAC%2F20250009%2F00001&PiT=99991231235958&utm_source=openai))
- When evaluating projects, include incentive potential in your financial and entity structuring — sometimes forming subsidiaries or capturing domestic manufacturing can unlock credits.
## Practical Structuring Advice
- Use appropriate **holding / operating company** structures when that leads to genuine economic activity in Australia and eligibility for incentives.
- Avoid excessive debt just for tax deductions — with DDCR and thin capitalisation measures in force, the ATO is stricter and expects reasonable arm’s-length financing.
- Keep strong records of every restructure, financing or incentive claim. Use external valuation or expert opinion as needed.
## Example Scenarios
| Scenario | Advice |
|----------|--------|
| A private company finances acquisition via large external debt exclusively | May trigger thin capitalisation concerns; better to use some equity, document reasons, ensure RTP disclosure. |
| A startup making manufacturing investments in Australia under “Future Made in Australia” | Evaluate if production tax credits apply; possibly structure separate entity for eligible production lines. |
| Multinational entity with group borrowing | Apply DDCR carefully; declare reportable tax positions; expect increased audit focus. |
## What To Do Now
1. Review current financing and restructuring activities — assess exposure under new integrity rules.
2. Identify whether your business is eligible for production tax credits, align operations accordingly.
3. Update entity governance: ensure RTP schedules, record keeping and disclosures are robust.
4. Engage a tax advisor familiar with recent Acts (2025) to optimise your structure while staying compliant.