This nil base cost rule could result in economic double tax in some circumstances. For example, if the transferee de-groups within six years, the de-grouping claw back would be triggered in the hands of the transferee, whereas the transferor would still have a nil base cost for the loan and would trigger tax on the repayment or sale of the loan.

The 2021 amendments provided for additional circumstances in which the nil base cost can be ignored. These circumstances now include:

• the expiration of six years from the date of the asset transfer;
• a de-grouping event within six years of the asset transfer; and
• where the asset is on-sold outside of the group of companies within 18 months.

The 2021 amendments did not go far enough, as there are still other circumstances in which the nil base cost should be ignored. For example, it should be ignored where the asset is disposed of within six years (not 18 months). It has therefore been proposed in the 2022 Budget Speech that further circumstances be introduced in which the nil base cost can be disregarded.