Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-G - Calculating the average values  

How to calculate the average values

SECTION 820-640   The 3 measurement days method  

Application

820-640(1)    
An entity must not use the 3 measurement days method for a period that is a part of an income year unless the following days occur during that period:

(a) the last day of the first half of the income year;

(b) one or both of the following days:

(i) the first day of that year;

(ii) the last day of that year.

Method statement

820-640(2)    
An entity that uses the 3 measurement days method for a period must apply the following method statement to calculate the average value of a matter for that period. Method statement

Example:

RJ Corporation held assets valued at $115 million on the first day of an income year. It held assets valued at $105 million on the last day of the first half of that year, and $80 million on the last day of that year. Adding these amounts and dividing the result by 3 gives the average value of its assets for that year, which is $100 million.

Measurement days

820-640(3)    
The following are the first , second and third measurement days :

(a) the first measurement day is the first day of the income year if it occurs during that period, otherwise it is the first day of that period;

(b) the second measurement day is the last day of the first half of that year;

(c) the third measurement day is the last day of that year if it occurs during that period, otherwise it is the last day of that period.