Is an entity an Australian controller?
An entity is an Australian controller at a particular time if it is an Australian entity and satisfies certain conditions in relation to the control of either a:
- controlled foreign company (except a corporate limited partnership)
- controlled foreign trust
- controlled foreign corporate limited partnership.
If the entity is an Australian controller of an Australian controlled foreign entity, it is subject to the thin capitalisation rules. How the thin capitalisation rules apply to an Australian controller is determined according to which category the entity is in. This is explained in Entity categories.
Australian controlled foreign entity
An Australian controlled foreign entity, in relation to a particular time, is an entity that is any of the following:
- A controlled foreign company (except a corporate limited partnership) – a non-resident company that satisfies one of the 3 control tests in section 340 of the ITAA 1936.
- A controlled foreign trust – a non-resident trust that satisfies either one or both of 2 tests in section 342 of the ITAA 1936.
- A controlled foreign corporate limited partnership – a corporate limited partnership is a controlled foreign corporate limited partnership at a particular time, if at that time it is not an Australian entity and either of the following apply
- at least one general partner of the partnership is an Australian entity or an Australian controlled foreign entity
- no more than 5 Australian entities (each of which holds a thin capitalisation control interest of at least 1%) hold a total of thin capitalisation control interests in the partnership of at least 50%. See section 820-760(2) of the ITAA 1997.
Thin capitalisation control interest is discussed below. It includes interests held by associate entities.
An Australian controller of an Australian controlled foreign entity is subject to the thin capitalisation rules.
Australian controller of a controlled foreign company
An Australian controller of a controlled foreign company is an Australian entity that is either of the following:
- a holder of a thin capitalisation control interest of 10% or more in the controlled foreign company
- an entity to which all the following apply
- the controlled foreign company is such a company because of the application of paragraph 340(c) of the ITAA 1936,
- the Australian entity holds a thin capitalisation control interest of at least 1% in the controlled foreign company,
- the Australian entity is one of a group of 5 or fewer Australian entities that, alone or with associate entities, controls the controlled foreign company.
For more information on what is an Australian controller of a controlled foreign company, see section 820-750 of the ITAA 1997.
Australian controller of a controlled foreign trust
An Australian controller of a controlled foreign trust is an Australian entity that holds a thin capitalisation control interest of 10% or more in the trust.
For more information, see section 820-755 of the ITAA 1997.
Australian controller of a controlled foreign corporate limited partnership
An Australian controller of a controlled foreign corporate limited partnership is an Australian entity that is either or both of the following:
- a general partner of the partnership
- the holder of a thin capitalisation control interest of 10% or more in the partnership.
For more information, see subsection 820-760(1) of the ITAA 1997.