Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-EA - Some financial entities may choose to be treated as ADIs  

SECTION 820-435   Conditions  

820-435(1)    
An entity satisfies this subsection for an income year if the average value, for that income year, of the entity's *on-lent amount is at least 80% of the average value, for that income year, of all the entity's assets.

820-435(2)    
An entity satisfies this subsection for an income year if the first period that is all or part of that income year, and for which the entity would be treated in accordance with a choice under section 820-430 , consists of one or more periods, each of which is either or both of these:

(a)    a period throughout which the entity is a *financial entity because of paragraph (d) of the definition of financial entity in subsection 995-1(1) (which covers licensed (or exempt) dealers in derivatives);

(b)    a period throughout which:

(i) the entity is the *head company of a *consolidated group or *MEC group; and

(ii) at least one *member of the group is a financial entity because of that paragraph.

820-435(3)    

An entity satisfies this subsection for an income year if it satisfies subsection (2) and the amount worked out using this formula is greater than or equal to 0.8:

On-lent amount + (UG on derivatives − UL on derivatives) Total assets − UL on derivatives

where:

on-lent amount
means the average value, for that income year, of the entity's *on-lent amount.

total assets
means the average value, for that income year, of all the entity's assets.

UG on derivatives
means the average value, for that income year, of the entity's assets consisting of unrealised gains on trading derivatives within the meaning of Chapter 7 of the Corporations Act 2001 .

UL on derivatives
means the lesser of:

(a) the average value, for that income year, of the entity's liabilities consisting of unrealised losses on trading derivatives within the meaning of Chapter 7 of the Corporations Act 2001 ; and

(b) the average value, for that income year, of the entity's assets consisting of unrealised gains on trading derivatives within the meaning of Chapter 7 of that Act.

On-lent amount increased for financial entity whose assets include precious metals

820-435(4)    
In working out whether an entity satisfies subsection (1) or (3) for an income year, the average value, for that income year, of the entity's *on-lent amount is increased by the average value, for that income year, of the entity's assets that consist of *precious metals, but only if the entity satisfies subsection (5) for that income year.

820-435(5)    
An entity satisfies this subsection for an income year if the first period that is all or part of that income year, and for which the entity would be treated in accordance with a choice under section 820-430 , consists of one or more periods, each of which is either or both of these:

(a)    a period throughout which the entity is a *financial entity;

(b)    a period throughout which:

(i) the entity is the *head company of a *consolidated group or *MEC group; and

(ii) at least one *member of the group is a financial entity.