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 820-56   Special deduction for previously FRT disallowed amounts - fixed ratio test  

820-56(1)    
An entity can deduct the amount worked out under subsection (2) from its assessable income for the income year if:

(a)    the entity has not made a choice under subsection 820-46(3) or (4) in relation to the income year (fixed ratio test applies); and

(b)    the entity ' s * fixed ratio earnings limit for the income year exceeds the sum of the entity ' s * net debt deductions for the income year.

Note:

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

820-56(2)    
Work out the amount of the deduction as follows:

(a)    first, work out the amount of the excess mentioned in paragraph (1)(b) ;

(b)    next, apply against that excess each of the entity ' s * FRT disallowed amounts for the previous 15 income years (to the extent that they have not already been applied under this paragraph in respect of any of those previous income years).

The amount of the deduction is the total amount applied under paragraph (b) .

820-56(3)    
For the purposes of paragraph (2)(b) :

(a)    apply * FRT disallowed amounts in sequence, where a FRT disallowed amount for an earlier income year is applied before a FRT disallowed amount from a later income year; and

(b)    apply FRT disallowed amounts up to, but not beyond, the excess mentioned in paragraph (1)(b) .

Note:

As a result of paragraph (3)(b) , part of a FRT disallowed amount may be applied against the excess mentioned in paragraph (1)(b) .