Income Tax Assessment Act 1997

Chapter 4 inserted by No 162 of 2001.

Part 4-5 inserted by No 162 of 2001.

Division 820 inserted by No 162 of 2001.

Subdiv 820-B heading amended by No 23 of 2024, s 3 and Sch 2 item 30, by inserting " financial " , effective 1 July 2024. For application provisions, see note under s 705-60 .

Subdiv 820-B inserted by No 162 of 2001.

S 820-110(2) amended by No 23 of 2024, s 3 and Sch 2 item 48, by substituting " If the entity is an *outward investing financial entity (non-ADI) " for " (2) If the entity is an *outward investor (financial) " , effective 1 July 2024. For application provisions, see note under s 705-60 .

S 820-110(2) amended by No 110 of 2014, s 3 and Sch 1 items 12, 32 and 33, by substituting steps 3 and 4 for steps 2, 3 and 4 in the method statement, inserting " and not also an *inward investment vehicle (financial) for all or any part of that year, " and substituting the example, applicable to assessments for income years starting on or after 1 July 2014. The steps and example formerly read:

Step 2.

Multiply the result of step 1 by 12/10 .

Step 3.

Add 1 to the result of step 2.

Step 4.

Divide the result of step 2 by the result of step 3.

Example:

GLM Limited, a company that is an Australian entity, has an average value of worldwide debt of $120 million and an average value of worldwide equity of $40 million. The result of applying steps 1 and 2 is therefore 3.6. Dividing 3.6 by 4.6 (through applying steps 3 and 4) and multiplying the result by $126 million (which is the result of step 7 of the method statement in subsection 820-100(2) ) equals $98.61 million. The average value of zero-capital amount (see step 7 of the method statement in subsection 820-100(2) ) is $4 million. Adding that amount to $98.61 million results in $102.61 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $102.61 million.

Former s 820-110(1) repealed by No 23 of 2024, s 3 and Sch 2 item 46, effective 1 July 2024. For application provisions, see note under s 705-60 . S 820-110(1) formerly read:

Outward investor (general) that is not also an inward investment vehicle (general)

820-110(1)
If the entity is an *outward investor (general) for the income year, and not also an *inward investment vehicle (general) for all or any part of that year, the worldwide gearing debt amount is the result of applying the method statement in this subsection. Method statement

Step 1.

Divide the average value of all the entity ' s *worldwide debt for the income year by the average value of all the entity ' s *worldwide equity for that year.

Step 2.

(Repealed by No 110 of 2014)

Step 3.

Add 1 to the result of step 1.

Step 4.

Divide the result of step 1 by the result of step 3.

Step 5.

Multiply the result of step 4 in this method statement by the result of step 6 in the method statement in section 820-95.

Step 6.

Add to the result of step 5 the average value, for that year, of the entity ' s *associate entity excess amount. The result of this step is the worldwide gearing debt amount .

Example:

AK Pty Ltd, a company that is an Australian entity, has an average value of worldwide debt of $90 million and an average value of worldwide equity of $30 million. The result of applying step 1 is therefore 3. Dividing 3 by 4 (through applying steps 3 and 4) and multiplying the result by $65 million (which is the result of step 6 in the method statement in section 820-95) equals $48.75 million. As the average value of the company ' s associate entity excess amount is $4.5 million, the worldwide gearing debt amount is therefore $53.25 million.

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S 820-110(1) amended by No 110 of 2014, s 3 and Sch 1 items 11, 29 and 30, by substituting steps 3 and 4 for steps 2, 3 and 4 in the method statement, inserting " and not also an *inward investment vehicle (general) for all or any part of that year, " and substituting the example, applicable to assessments for income years starting on or after 1 July 2014. The steps and example formerly read:

Step 2.

Multiply the result of step 1 by 12/10 .

Step 3.

Add 1 to the result of step 2.

Step 4.

Divide the result of step 2 by the result of step 3.

Example:

AK Pty Ltd, a company that is an Australian entity, has an average value of worldwide debt of $83.4 million and an average value of worldwide equity of $27 million. The result of applying steps 1 and 2 is therefore 3.706. Dividing 3.706 by 4.706 (through applying steps 3 and 4) and multiplying the result by $70 million (which is the result of step 6 in the method statement in section 820-95) equals $55.13 million. As the average value of the company ' s associate entity excess amount is $4.5 million, the worldwide gearing debt amount is therefore $59.63 million.

Former s 820-110 inserted by No 162 of 2001.