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 820-54   Meaning of GR group net third party interest expense, financial statement net third party interest expense and adjusted net third party interest expense  

820-54(1)    
The GR group net third party interest expense , for a period, of a * GR group for the period, is the amount that would be the group ' s * financial statement net third party interest expense for the period, if:

(a)    where paragraph 820-53(2)(a) applies - the * audited consolidated financial statements for the period for the * GR group parent for the period of the group were prepared on the basis that the following were treated as interest:

(i) an amount in the nature of interest;

(ii) any other amount that is economically equivalent to interest; or

(b)    where paragraph 820-53(2)(b) applies - the * global financial statements for the period for the GR group parent for the period of the group were prepared on the basis that the following were treated as interest:

(i) an amount in the nature of interest;

(ii) any other amount that is economically equivalent to interest.

820-54(2)    
The financial statement net third party interest expense , for a period, of a * GR group for the period, is:

(a)    the amount of the * GR group ' s net third party interest expense for the period, as disclosed in the following statements:

(i) if paragraph 820-53(2)(a) applies - the * audited consolidated financial statements for the * GR group parent for the period for the GR group;

(ii) if paragraph 820-53(2)(b) applies - the * global financial statements for the GR group parent for the period for the GR group;

reduced by the amount of each payment (if any) covered by subsection (3) , to the extent that it was a factor in working out that net third party interest expense; or

(b)    if those statements do not disclose that net third party interest expense - the amount worked out as follows:

(i) first, identify the amount of the group ' s third party interest expenses for the period disclosed in those statements;

(ii) next, reduce the result of subparagraph (i) by the amount of each payment (if any) covered by subsection (3) , to the extent that it was a factor in working out those third party interest expenses;

(iii) next, reduce the result of subparagraph (ii) by the amount of the group ' s third party interest income for the period disclosed in those statements;

(iv) next, increase the result of subparagraph (iii) by the amount of each payment (if any) covered by subsection (3) , to the extent that it was a factor in working out that third party interest income.

820-54(3)    
For the purposes of subsection (2) , this subsection covers a payment if:

(a)    the payment is made by an entity to an * associate entity of the entity; and

(b)    either:

(i) the entity is a * GR group member for the period of the * GR group and the associate entity is not such a GR group member; or

(ii) the entity is not a GR group member for the period of the GR group and the associate entity is such a GR group member.

820-54(4)    
The adjusted net third party interest expense , for a period, of an entity or a * GR group is:

(a)    for an entity - the amount that would be the entity ' s net interest expense for the period if the following payments were disregarded:

(i) a payment that is made by the entity to an * associate entity of the entity;

(ii) a payment that is made by an associate entity of the entity to the entity; or

(b)    for a GR group - the amount that would be the GR group ' s net interest expense for the period if the following payments were disregarded:

(i) a payment that is made by a * GR group member of the GR group to an associate entity of any GR group member of the GR group;

(ii) a payment that is made by an associate entity of a GR group member of the GR group to any GR group member of the GR group.

820-54(5)    
For the purposes of subsections (3) and (4) , 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 20 % 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).