This article explores Australia’s updated thin capitalization rules alongside the ATO’s recently issued guidance, TR 2024/D3 and PCG 2024/D3. It delves into key aspects such as the third-party debt test and the debt deduction creation rule, shedding light on the compliance challenges faced by MNEs operating in Australia. The analysis also provides actionable insights for tax functions, emphasizing the need for robust documentation, strategic restructuring, and proactive engagement with the ATO. With further refinements to the guidance anticipated following industry consultation, this article equips MNEs with practical strategies to navigate the evolving regulatory environment while maintaining compliance and operational agility.