Taxation Laws Amendment Act (No. 4) 2002 (53 of 2002)

Schedule 1   Thin capitalisation

Part 1   Amendments

Income Tax Assessment Act 1997

28   After section 820-875

Insert:

Subdivision 820-HA - Controlled foreign entity debt and controlled foreign entity equity

Guide to Subdivision 820-HA

820-880 What this Subdivision is about

Controlled foreign entity debt and controlled foreign entity equity are concepts used in this Division. This Subdivision sets out the meaning of each of these concepts.

Table of sections

820-881 Application

820-885 What is controlled foreign entity debt ?

820-990 What is controlled foreign entity equity ?

[This is the end of the Guide.]

820-881 Application

This Subdivision applies to:

(a) an entity (the relevant entity ) that is an *outward investing entity (non-ADI), or an *outward investing entity (ADI), for a period (the relevant period ) that is all or a part of an income year; and

(b) each entity ( controlled entity of the relevant entity ) that is an *Australian controlled foreign entity of which:

(i) the relevant entity is an *Australian controller; or

(ii) an *associate entity of the relevant entity is an Australian controller.

820-885 What is controlled foreign entity debt ?

(1) The relevant entity's controlled foreign entity debt at a particular time during the relevant period is the total value of all the *debt interests held by the relevant entity at that time that satisfy all of the following:

(a) the interests are *on issue at that time;

(b) each of the interests was *issued by an entity that is a controlled entity of the relevant entity at that time;

(c) each of the interests gives rise to a cost, at any time, that is covered by paragraph 820-40(1)(a).

(2) For the purposes of subsection (1), take into account the value of a *debt interest issued by a controlled entity of the relevant entity only to the extent that the interest is not attributable to any of the following assets that are held by the controlled entity throughout the relevant period:

(a) assets attributable to the controlled entity's *Australian permanent establishments;

(b) other assets that are held by the controlled entity for the purposes of producing assessable income of the controlled entity.

820-890 What is controlled foreign entity equity ?

(1) The relevant entity's controlled foreign entity equity at a particular time during the relevant period is the total value of:

(a) all the *equity interests that the entity holds, at that time, in entities that are controlled entities of the relevant entity at that time; and

(b) all the *debt interests *on issue and held by the entity at that time that satisfy both of the following:

(i) the interests were *issued by entities that are controlled entities of the relevant entity at that time;

(ii) none of the interests gives rise to any cost, at any time, that is covered by paragraph 820-40(1)(a).

(2) For the purposes of subsection (1), take into account the value of an *equity interest in, or a *debt interest issued by, a controlled entity of the relevant entity only to the extent that the interest is not attributable to any of the following assets that are held by the controlled entity throughout the relevant period:

(a) assets attributable to the controlled entity's *Australian permanent establishments;

(b) other assets that are held by the controlled entity for the purposes of producing assessable income of the controlled entity.