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

Schedule 1   Thin capitalisation

Part 1   Amendments

Income Tax Assessment Act 1997

30   Section 820-915

Repeal the section, substitute:

820-915 Associate entity equity

(1) This section applies to an entity (the relevant entity ) that is an *outward investing entity (non-ADI) or an *inward investing entity (non-ADI) for a period (the relevant period ) that is all or a part of an income year.

(2) This section also applies, for the relevant entity, to each entity ( relevant associate entity ) that is an *associate entity of the relevant entity and that is:

(a) an *Australian entity; or

(b) a *foreign entity that, throughout the relevant period, holds any of the following assets:

(i) assets that are attributable to the foreign entity's *Australian permanent establishments;

(ii) other assets that are held for the purposes of producing the foreign entity's assessable income.

(3) The relevant entity's associate 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 relevant associate entities; and

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

(i) the interests were *issued by relevant associate entities;

(ii) neither the value of each of the interests, nor any part of that value, is all or a part of any *cost-free debt capital of the issuer of the interest at that time;

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

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

(i) the interests were issued by relevant associate entities;

(ii) each of the interests gives rise to a cost, at any time, that is covered by paragraph 820-40(1)(a), but the cost is not deductible from the assessable income of the issuer of the interest for any income year.

(4) For the purposes of subsection (3), take into account the value of an *equity interest in, or a *debt interest issued by, a *foreign entity only to the extent that the interest is attributable to assets covered by subparagraph (2)(b)(i) or (ii) that are held by the foreign entity throughout the relevant period.