Income Tax Assessment Act 1997
CHAPTER 4
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INTERNATIONAL ASPECTS OF INCOME TAX
PART 4-5
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GENERAL
Division 820
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Thin capitalisation rules
Subdivision 820-B
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Thin capitalisation rules for outward investing financial entities (non-ADI)
Operative provisions
SECTION 820-90 Maximum allowable debt
Entity is not also an inward investment vehicle (financial)
820-90(1)
The entity ' s maximum allowable debt for an income year is the greatest of the following amounts if the entity is not also an *inward investment vehicle (financial) for all or any part of that year: (a) the *safe harbour debt amount;
(b) (Repealed by No 23 of 2024) (c) unless the entity has *worldwide equity of nil or a negative amount - the *worldwide gearing debt amount.
Entity is also an inward investment vehicle (financial)
820-90(2)
The entity ' s maximum allowable debt for an income year is the greatest of the following amounts if the entity is also an *inward investment vehicle (financial) for all or any part of that year: (a) the *safe harbour debt amount;
(b) (Repealed by No 23 of 2024) (c) unless subsection (3) applies to the entity - the *worldwide gearing debt amount.
Inward investment vehicles that are not eligible for the worldwide gearing debt amount
820-90(3)
This subsection applies to an entity, if: (a) the entity has *statement worldwide equity, or *statement worldwide assets, of nil or a negative amount; or (b) *audited consolidated financial statements for the entity for the income year do not exist; or (c) the result of applying the following formula is greater than 0.5:
(a) any assets attributable to the entity ' s *overseas permanent establishments; or
(b) any *debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity debt of the entity; or
(c) any *equity interests or debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity equity of the entity.
820-90(4)
For the purposes of the definition of average Australian assets in subsection (3) the statement period is the period for which the *audited consolidated financial statements for the entity for the income year have been prepared.
820-90(5)
For the purposes of the formula in paragraph (3)(c) , if: (a) an amount is included in *statement worldwide assets in respect of an asset; and (b) the asset was acquired, held or otherwise dealt with by an entity for a purpose (other than an incidental purpose) that included ensuring that subsection (3) does not apply to an entity; and (c) as a result of the acquisition, holding or dealing with of the asset, the amount included in statement worldwide assets exceeds the amount (including nil) that would otherwise be so included;
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Hide history noteSECTION 820-90 Maximum allowable debt
Entity is not also an inward investment vehicle (financial)
820-90(1)
The entity ' s maximum allowable debt for an income year is the greatest of the following amounts if the entity is not also an *inward investment vehicle (financial) for all or any part of that year: (a) the *safe harbour debt amount;
(b) (Repealed by No 23 of 2024) (c) unless the entity has *worldwide equity of nil or a negative amount - the *worldwide gearing debt amount.
Entity is also an inward investment vehicle (financial)
820-90(2)
The entity ' s maximum allowable debt for an income year is the greatest of the following amounts if the entity is also an *inward investment vehicle (financial) for all or any part of that year: (a) the *safe harbour debt amount;
(b) (Repealed by No 23 of 2024) (c) unless subsection (3) applies to the entity - the *worldwide gearing debt amount.
Inward investment vehicles that are not eligible for the worldwide gearing debt amount
820-90(3)
This subsection applies to an entity, if: (a) the entity has *statement worldwide equity, or *statement worldwide assets, of nil or a negative amount; or (b) *audited consolidated financial statements for the entity for the income year do not exist; or (c) the result of applying the following formula is greater than 0.5:
| Average Australian assets of the entity | ||
| *Statement worldwide assets of the entity for the income year |
where:
average Australian assets
of an entity is the average value, for the statement period mentioned in subsection
(4)
, of all the assets of the entity, other than:
(a) any assets attributable to the entity ' s *overseas permanent establishments; or
(b) any *debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity debt of the entity; or
(c) any *equity interests or debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity equity of the entity.
820-90(4)
For the purposes of the definition of average Australian assets in subsection (3) the statement period is the period for which the *audited consolidated financial statements for the entity for the income year have been prepared.
820-90(5)
For the purposes of the formula in paragraph (3)(c) , if: (a) an amount is included in *statement worldwide assets in respect of an asset; and (b) the asset was acquired, held or otherwise dealt with by an entity for a purpose (other than an incidental purpose) that included ensuring that subsection (3) does not apply to an entity; and (c) as a result of the acquisition, holding or dealing with of the asset, the amount included in statement worldwide assets exceeds the amount (including nil) that would otherwise be so included;
apply the amount of the excess to reduce statement worldwide assets (or statement worldwide assets as reduced by a previous application of this subsection).
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