Income Tax Assessment Act 1997
CHAPTER 4
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INTERNATIONAL ASPECTS OF INCOME TAX
PART 4-5
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GENERAL
Division 820
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Thin capitalisation rules
Subdivision 820-AA
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Thin capitalisation rules for general class investors
Operative provisions
SECTION 820-60 Excess tax EBITDA amount
Scope
820-60(1)
This section applies to an entity (the controlling entity ) if: (a) the controlling entity is, for a period that is all or part of an income year, one of the following entities:
820-60(2)
An entity (the test entity ) satisfies the conditions in this subsection in relation to the controlling entity for an income year if: (a) the controlling entity has a *TC direct control interest of 50% or more in the test entity at any time during the income year; and (b) the test entity is, for a period that is all or part of the income year, one of the following entities:
Excess tax EBITDA amount
820-60(3)
The controlling entity ' s excess tax EBITDA amount for the income year is the amount worked out using the following method statement.
Modification of TC direct control interest - companies
820-60(4)
For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a company, apply subsection 820-855(2) as if it instead included the modifications of Part X of the Income Tax Assessment Act 1936 set out in the following table.
Modification of TC direct control interest - trusts
820-60(5)
For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a trust, apply subsection 820-860(2) as if it also included the modifications of Part X of the Income Tax Assessment Act 1936 set out in the following table.
Modification of TC direct control interest - partnerships
820-60(6)
For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a partnership, apply section 820-865 as if: (a) the reference to " greatest " were a reference to " least " ; and (b) paragraph 820-865(b) were omitted.
Modified meaning of Australian entity
820-60(7)
For the purposes of this section, in determining whether an entity is an *Australian entity (including for the purposes of determining whether another entity is a *foreign entity) at a particular time: (a) for the purposes of paragraph 336(a) of the Income Tax Assessment Act 1936 , treat a partnership as being an Australian entity if, at that time, a *direct participation interest of 50% or more is held in the partnership by one or more of the following:
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Hide history noteSECTION 820-60 Excess tax EBITDA amount
Scope
820-60(1)
This section applies to an entity (the controlling entity ) if: (a) the controlling entity is, for a period that is all or part of an income year, one of the following entities:
(i) a company that is an *Australian entity;
(ii) a unit trust that is a *resident trust for CGT purposes;
(iii) a *managed investment trust;
(b) the controlling entity is a *general class investor for all or part of the income year; and (c) the controlling entity has not made a choice under subsection 820-46(3) or (4) in relation to the income year; and (d) one or more other entities (each of which is a controlled entity ) satisfy the conditions in subsection (2) of this section in relation to the controlling entity for the income year.
(iv) a partnership that is an Australian entity; and
820-60(2)
An entity (the test entity ) satisfies the conditions in this subsection in relation to the controlling entity for an income year if: (a) the controlling entity has a *TC direct control interest of 50% or more in the test entity at any time during the income year; and (b) the test entity is, for a period that is all or part of the income year, one of the following entities:
(i) a company that is an *Australian entity;
(ii) a unit trust that is a *resident trust for CGT purposes;
(iii) a *managed investment trust;
(c) the test entity is a *general class investor for all or part of the income year; and (d) the test entity has not made a choice under subsection 820-46(3) or (4) in relation to the income year.
(iv) a partnership that is an Australian entity; and
Excess tax EBITDA amount
820-60(3)
The controlling entity ' s excess tax EBITDA amount for the income year is the amount worked out using the following method statement.
Method statement
(a) the controlled entity
'
s *net debt deductions for the income year (for the purposes of this paragraph, treat a negative amount of net debt deductions as nil);
(b) the total of the controlled entity
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s *FRT disallowed amounts for the 15 income years ending immediately before the income year (to the extent those amounts have not been applied under section
820-56
).
(a) work out the controlling entity
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s *TC direct control interest for each day in the income year; and
(b) for each day on which the amount was 50% or greater, add the amounts; and
(c) divide the result of paragraph (b) by the number of days in the income year during which the controlled entity was in existence. Express the result as a percentage.
Step 1. For each controlled entity, work out the amount (if any) by which the *fixed ratio earnings limit of the controlled entity for the income year exceeds the sum of the following:
Step 2. For each controlled entity:
Step 3. For each controlled entity, multiply the result of step 1 by the percentage worked out under step 2. If the amount worked out under step 1 for a controlled entity is nil, the result for that controlled entity under this step will be nil.
Step 4. Add up the amounts worked out under step 3.
Step 5. Divide the result of step 4 by 0.3. The result of this step is the excess tax EBITDA amount .
Modification of TC direct control interest - companies
820-60(4)
For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a company, apply subsection 820-855(2) as if it instead included the modifications of Part X of the Income Tax Assessment Act 1936 set out in the following table.
| Modifications of provisions in Part X of the Income Tax Assessment Act 1936 | ||
| Item | Provisions | Modifications |
| 1 | Section 350 (including any other provision in Part X of the Income Tax Assessment Act 1936 that defines a term used in the section) | The section applies for the purposes of this section and Subdivision 820-H rather than only for the purposes of Part X of the Income Tax Assessment Act 1936 |
| 2 | Subsection 350(1) | The reference to " greater or greatest " is taken to be a reference to " lesser or least " |
| 3 | Subsection 350(2) | The reference to " highest " is taken to be a reference to " lowest " |
| 4 | Subsections 350(6) and (7) | The subsections do not apply |
Modification of TC direct control interest - trusts
820-60(5)
For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a trust, apply subsection 820-860(2) as if it also included the modifications of Part X of the Income Tax Assessment Act 1936 set out in the following table.
| Modifications of provisions in Part X of the Income Tax Assessment Act 1936 | ||
| Item | Provisions | Modifications |
| 3 | Subsection 351(1) | The reference to " greater of those percentages " reads " lesser of those percentages " |
| 4 | Subsections 351(2) to (4) | The subsections do not apply |
Modification of TC direct control interest - partnerships
820-60(6)
For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a partnership, apply section 820-865 as if: (a) the reference to " greatest " were a reference to " least " ; and (b) paragraph 820-865(b) were omitted.
Modified meaning of Australian entity
820-60(7)
For the purposes of this section, in determining whether an entity is an *Australian entity (including for the purposes of determining whether another entity is a *foreign entity) at a particular time: (a) for the purposes of paragraph 336(a) of the Income Tax Assessment Act 1936 , treat a partnership as being an Australian entity if, at that time, a *direct participation interest of 50% or more is held in the partnership by one or more of the following:
(i) an Australian resident;
(b) disregard section 337 of that Act.
(ii) an *Australian trust; and
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