Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-C - Thin capitalisation rules for inward investing financial entities (non-ADI)  

Operative provisions

SECTION 820-225   Application to part year periods  

820-225(1)    

This subsection disallows all or a part of each *debt deduction of an entity for an income year that is an amount incurred by the entity during a period that is a part of that year, if:

(a)    the entity is an *inward investing financial entity (non-ADI) for that period, but is not also an *outward investing financial entity (non-ADI) for all or any part of that period; and

(b)    the entity ' s *adjusted average debt for that period exceeds the entity ' s *maximum allowable debt for that period.

Note:

To determine whether an entity is an inward investing financial entity (non-ADI) for a period, see subsection 820-185(2) .

820-225(2)    

The entity ' s adjusted average debt for that period is the result of applying the method statement in this subsection. Method statement

Note:

To calculate an average value for the purposes of this Division, see Subdivision 820-G .

820-225(2A)    
The entity ' s *adjusted average debt does not exceed its *maximum allowable debt if the adjusted average debt is nil or a negative amount.

820-225(3)    

For the purposes of determining:

(a)    the *maximum allowable debt for the period mentioned in subsection (1) ; and

(b)    the amount of each *debt deduction to be disallowed;

sections 820-190 to 820-220 apply in relation to that entity and that period with the modifications set out in the following table:

Modifications of sections 820-190 to 820-220
Item	Provisions	Modifications
1	Sections 820-190 to 820-220	A reference to an income year is taken to be a reference to that period
2	Section 820-220	A reference to subsection 820-185(1) is taken to be a reference to subsection (1) of this section
3	Section 820-220	adjusted average debt is taken to have the meaning given by subsection (2) of this section
		average debt is taken to be the sum of: (a) the average value, for that period, of the entity ' s *debt capital that is covered by step 1 of the method statement in subsection (2) of this section; and (b) the average value, for that period, of the entity ' s *cost-free debt capital that is covered by step 4 of that method statement.