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Explains thin capitalisation terms we use that begin with I.

Last updated 19 March 2025

Inward investing financial entity (non-ADI)

An entity is an inward investing financial entity (non-ADI) if it is an:

  • inward investment vehicle (financial) – an Australian entity that is controlled by a foreign entity or foreign entities
  • inward investor (financial) – a foreign entity. Although all foreign entities are inward investors, the thin capitalisation rules only affect foreign entities  
    • with an Australian permanent establishment or other Australian income producing assets
    • that are claiming debt deductions.

However, an entity is not an inward investing financial entity (non-ADI) for a period that is all or part of an income year if it is a general class investor for that year.

For more information, see subsection 820-185(2) of the ITAA 1997.

Inward investing entity (ADI)

An entity will be an inward investing entity (ADI) for a period that is all or part of an income year if throughout that period the entity is a foreign bank which carries on its banking business in Australia at or through one or more Australian permanent establishments.

However, an entity is not an inward investing entity (ADI) for a period that is all or a part of an income year if it is a general class investor for that year.

For more information, see subsection 820-395(2) of the ITAA 1997.

Inward investment vehicle (financial)

This is an Australian entity that is foreign controlled. See foreign controlled Australian entity.

For more information, see subsection 820-185(2) of the ITAA 1997.

Inward investor (financial)

An inward investor is any foreign entity. Such entities are effectively only subject to the thin capitalisation rules if they have Australian income-producing assets. For more information, see subsection 820-185(2) of the ITAA 1997.

 

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