Step 1: Calculate the adjusted average equity capital

Step 1.1: Calculate the average value, for the income year, of all the ADI's equity capital, other than ADI equity capital attributable to its overseas permanent establishments.

Insert this amount at A on Worksheet 24: outward investing entity (ADI)'s step 1.

ADI equity capital is the total value of the entity's equity capital and the total value of all the debt interests issued by the entity. To be included, a debt interest must be on issue for 90 days or more and not give rise to any costs for the issuer.

Equity capital (excluding any equity capital attributable to any of the ADI's overseas permanent establishments) includes:

• the issue price of each equity interest in the entity that is still on issue less any of the issue price that remains unpaid
• the entity's general reserves and asset revaluation reserves
• the entity's retained earnings
• the entity's current year earnings, net of expected tax and distributions
• provisions for distributions.

Step 1.2: Calculate the average value, of all the ADI's controlled foreign entity equity for that year, unless it is attributable to any of the ADI's overseas permanent establishments.

Insert this amount at B on Worksheet 24: outward investing entity (ADI)'s step 1.

ADI equity capital is then reduced by equity invested in controlled foreign entities for which the ADI is an Australian controller. However, disregard any equity investment attributable to any of the ADI's overseas permanent establishment as it has already been excluded in step 1.1.

Step 1.3: Calculate the adjusted average equity capital. This is the result of A − B.

Adjusted average equity capital represents total equity capital (A) less any equity invested in controlled foreign entities (B).

Step 1.1: Average ADI equity capital

(A)_____________

Step 1.2: Average controlled foreign entity equity

(B)_____________

Step 1.3: Adjusted average equity capital (A − B)

= ______________