Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-AA - Thin capitalisation rules for general class investors  

Operative provisions

SECTION 820-52   Meaning of tax EBITDA  

820-52(1)    
An entity ' s tax EBITDA for an income year is worked out as follows:

(a)    first, work out the entity ' s taxable income or *tax loss for the income year (disregarding the operation of this Division (other than Subdivision 820-EAA ) and treating a tax loss as a negative amount);

(b)    next, add the entity ' s * net debt deductions for the income year;

(c)    next, add the sum of the entity ' s deductions (if any) from its assessable income for the income year that are any of the following:

(i) *general deductions that relate to forestry establishment and preparation costs unless those costs relate to the clearing of native forests;

(ii) deductions under Divisions 40 and 43 (other than deductions for the entire amount of an expense incurred by the entity);

(iii) deductions under section 70-120 ;

(ca)    next, if the entity is an entity to which subsection 820-60(1) applies - add the *excess tax EBITDA amount (if any) worked out under that section for the income year;

(d)    next, make adjustments to the result of paragraph (c) or (ca) , as the case requires, in accordance with regulations (if any) made for the purposes of this paragraph.

If the result of paragraph (d) is less than zero, treat it as being zero.

Note:

The entity ' s net debt deductions for the income year can be a negative amount.

Tax losses from earlier income years

820-52(1A)    
In working out the taxable income or *tax loss of a *corporate tax entity for an income year for the purposes of subsection (1) , assume that:

(a)    the entity chooses to deduct, under subsection 36-17(2) or (3) , all of the entity ' s tax losses for *loss years occurring before the income year; and

(b)    subsection 36-17(5) does not apply to that choice.

Franked distributions

820-52(2)    
For the purposes of this section, disregard Division 207 , to the extent that Division results in an amount of, or a *share of, a *franking credit being included in the entity ' s assessable income for the income year.

Dividends etc.

820-52(3)    
In working out the taxable income or *tax loss of an entity for the purposes of subsection (1) , disregard any *dividend or *non-share dividend paid to the entity by an *associate entity and included in the entity ' s assessable income under section 44 of the Income Tax Assessment Act 1936 .

Trusts other than AMITs

820-52(4)    
If the entity is a trust other than an *AMIT:

(a)    treat the reference in subsection (1) to the entity ' s taxable income as being a reference to the * net income of the entity; and

(b)    treat the reference in subsection (1) to the entity ' s * net debt deductions as being a reference to the entity ' s net debt deductions taken into account in working out that net income; and

(c)    treat the reference in subsection (1) to the entity ' s deductions as being a reference to the entity ' s deductions taken into account in working out that net income; and

(d)    treat the references in subsection (1) to the entity ' s assessable income as being a reference to the entity ' s assessable income taken into account in working out that net income.

820-52(5)    
To avoid doubt, for the purposes of references in subsection (4) to net income, do not make the assumption in subsection 102UX(3) of the Income Tax Assessment Act 1936 .

Beneficiaries of trusts other than AMITs

820-52(6)    
In working out the taxable income or *tax loss of an entity for the purposes of subsection (1) , if the entity is a beneficiary of a trust other than an *AMIT, and is an *associate entity of the trust:

(a)    disregard the operation of the following provisions in relation to the trust:

(i) Subdivision 115-C ;

(ii) Division 6 of Part III of the Income Tax Assessment Act 1936 ; and

(b)    disregard distributions from the trust to the entity.

Attribution managed investment trusts

820-52(6A)    
If the entity is an *AMIT:

(a)    treat the reference in subsection (1) to the entity ' s taxable income as being a reference to the *net income of the entity; and

(b)    treat the reference in subsection (1) to the entity ' s *net debt deductions as being a reference to the entity ' s net debt deductions taken into account in working out that net income; and

(c)    treat the reference in subsection (1) to the entity ' s deductions as being a reference to the entity ' s deductions taken into account in working out that net income; and

(d)    treat the references in subsection (1) to the entity ' s assessable income as being a reference to the entity ' s assessable income taken into account in working out that net income.

Members of AMITs

820-52(6B)    
In working out the taxable income or *tax loss of an entity for the purposes of subsection (1) , if the entity is a member of an *AMIT, and is an *associate entity of the AMIT:

(a)    disregard the operation of Division 276 in relation to the AMIT; and

(b)    disregard distributions from the AMIT to the entity.

Partnerships

820-52(7)    
If the entity is a partnership:

(a)    treat the reference in subsection (1) to the entity ' s taxable income as being a reference to the * net income of the entity; and

(b)    treat the reference in subsection (1) to the entity ' s * net debt deductions as being a reference to the entity ' s net debt deductions taken into account in working out that net income.

(c)    treat the reference in subsection (1) to the entity ' s deductions as being a reference to the entity ' s deductions taken into account in working out that net income; and

(d)    treat the references in subsection (1) to the entity ' s assessable income as being a reference to the entity ' s assessable income taken into account in working out that net income.

Partners in partnerships

820-52(8)    
In working out the taxable income or * tax loss of an entity for the purposes of subsection (1) , if the entity is a partner in a partnership, and is an * associate entity of the partnership, disregard the operation of Division 5 of Part III of the Income Tax Assessment Act 1936 .

Associate entity test - TC control interest of 10 % or more

820-52(9)    
For the purposes of subsections (3) , (6) , (6B) and (8) , in determining whether an entity is an associate entity of another entity:

(aa)    disregard the requirement in subsections 820-905(1) and (2A) that the entity is an *associate of the other entity, unless only paragraph 820-905(1)(b) applies; and

(a)    treat the references in paragraphs 820-905(1)(a) and 820-905(2A)(a) to " an * associate interest of 50 % or more " as instead being a reference to " a * TC control interest of 10 % or more " ; and

(b)    treat subsection 820-860(3) as applying for the purposes of determining whether the entity is an associate entity of the other entity (as a result of paragraph (a) of this subsection); and

(c)    treat the purposes mentioned in subparagraphs 820-870(1)(b)(i) and (ii) as including the purposes of determining whether the entity is an associate entity of the other entity (as a result of paragraph (a) of this subsection).

Notional deductions of R & D entities

820-52(10)    
In working out the taxable income or *tax loss of an entity for the purposes of subsection (1) , if the entity is an *R & D entity that is entitled to a notional deduction for an income year under Division 355 in relation to *R & D activities of the R & D entity, subtract an amount equivalent to the amount of the notional deduction.