One of the potential reforms to be considered by the Henry Review is a proposal by the Institute of Chartered Accountants Australia and Deloitte for the introduction of a tax transparent company (the ICAA proposal). The central proposition of the ICAA proposal is that the introduction of a tax transparent company will be beneficial to closely held businesses in Australia. An issue facing closely held businesses can be in terms of financing, and this article will consider whether the introduction of a tax transparent company is likely to assist closely held businesses with this. This analysis will consider the model outlined in the ICAA proposal, as well as a number of foreign transparent company forms, particularly: United States' S Corporations and limited liability companies (LLC), the United Kingdom's limited liability partnership (LLP) and New Zealand's Loss Attribution Qualifying Company (LAQC). Through this analysis, a number of areas of concern will be raised about the interaction of a tax transparent company with financing, particularly in terms of eligibility requirements, assessment for unpaid allocations, comparison to corporate tax treatment and active members. It will be argued that as currently structured the ICAA proposal is unlikely to substantially assist closely held businesses address their financing problems and that a partial loss transparent company would be preferable model in this regard.
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