The Government will change the definition of limited recourse debt in the Income Tax Assessment Act to overcome the impact of a High Court ruling last year.A limited recourse debt will include arrangements where, at the beginning, the creditor's rights against the debtor are limited wholly or predominantly to certain rights of the financed property or another property in the event of a default in payment of the debt. Importantly, this definition will apply whether or not the creditor's rights are established by contract.In the May Budget, the Government announced that it would stop tax deductions for expenditure on assets that have been financed by limited recourse debt.     The rationale is that the use of a limited recourse loan means the taxpayer is not at risk of loss if there is a default.In limited recourse financing the lender relies on cash flows and the asset being financed for repayment and security. There is a limitation on the lender's right of recourse if the debtor defaults.The tax treatment of limited recourse loans was affected by a High Court ruling in June last year (Commissioner of Taxation v BHP Billiton). The court said there may be different treatment of arrangements that have the same economic and substantive outcome, based on the timing and form of the "capacity to bring about the limitation".The Government will amend the definition of limited recourse debt in section 243-20 of the Act, to provide the same tax treatment for arrangements that are economically and substantively the same, "notwithstanding their different legal form".The measure will have effect from May 8, 2012. Treasury has called for submissions by August 10.