Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 (110 of 2014)

Schedule 1   Thin capitalisation

Part 6   Worldwide gearing debt amount for inward investing entities (non-ADI)

Income Tax Assessment Act 1997

21   After Subdivision 820-J

Insert:

Subdivision 820-JA - Worldwide debt and equity concepts

Guide to Subdivision 820-JA

820-931 What this Subdivision is about

This Subdivision provides for the meanings of worldwide debt, worldwide equity, statement worldwide debt, statement worldwide equity and statement worldwide assets.

Table of sections

Operative provisions

820-932 Worldwide debt and worldwide equity

820-933 Statement worldwide debt, statement worldwide equity and statement worldwide assets

820-935 Requirements for audited consolidated financial statements

Operative provisions

820-932 Worldwide debt and worldwide equity

Worldwide debt

(1) An entity’s worldwide debt at a particular time, means the total of the following amounts:

(a) all the *debt interests issued by the entity:

(i) to entities other than any *Australian controlled foreign entities (the controlled entities ) of which the entity is an *Australian controller at that time; and

(ii) that are still *on issue at that time;

(b) all the debt interests issued by the controlled entities:

(i) to entities other than the entity or other controlled entities; and

(ii) that are still on issue at that time.

Worldwide equity

(2) An entity’s worldwide equity at a particular time, means the total of the following amounts:

(a) all the *equity capital of the entity as at that time, but worked out disregarding *equity interests in the entity held at that time by *Australian controlled foreign entities (the controlled entities ) of which the entity is an *Australian controller at that time;

(b) all the equity capital of the controlled entities as at that time, but worked out disregarding equity interests in the controlled entities held at that time by:

(i) the entity; or

(ii) other controlled entities.

820-933 Statement worldwide debt, statement worldwide equity and statement worldwide assets

Statement worldwide debt

(1) An entity’s statement worldwide debt for a period is the amount (see subsection (4)) of liabilities for the entity for the period, reduced (but not below zero) by the sum of the following amounts (see subsection (4)) for the entity for the period:

(a) provisions;

(b) liabilities in relation to distributions to equity participants;

(c) trade payables;

(d) deferred tax liabilities;

(e) liabilities relating to employee benefits;

(f) current tax liabilities;

(g) deferred revenue;

(h) liabilities relating to insurance;

(i) any other amount specified in a legislative instrument under subsection (5).

Statement worldwide equity

(2) An entity’s statement worldwide equity for a period means the amount (see subsection (4)) of net assets for the entity for the period.

Statement worldwide assets

(3) An entity’s statement worldwide assets for a period means the amount (see subsection (4)) of assets for the entity for the period.

Amounts from audited consolidated financial statements to be used

(4) For the purposes of this section:

(a) an amount for an entity for a period is taken to be that amount as shown in the *audited consolidated financial statements for the entity for the period; and

(b) sections 820-680, 820-682, 820-683 and 820-684 do not apply.

Other amounts

(5) The Minister may, by legislative instrument, specify one or more amounts for the purposes of paragraph (1)(i).

820-935 Meaning of audited consolidated financial statements

(1) Audited consolidated financial statements for an entity for a period are:

(a) the financial statements that meet the requirements in subsection (2) for the entity for the period; or

(b) if more than one set of financial statements meet the requirements in subsection (2) for the entity for the period - whichever of those sets of financial statements the entity chooses.

(2) Financial statements meet the requirements in this subsection for an entity for a period (the relevant period ) if:

(a) the statements have been prepared on a consolidated basis in relation to the entity and one or more other entities in accordance with standards covered by subsection (3) or (4) (the recognised overseas accounting standards ); and

(b) one of the entities is a worldwide parent entity mentioned in subsection (6); and

(c) the statements show the amounts mentioned in subsections 820-933(1), (2) and (3) (however described) on that consolidated basis and in accordance with those standards; and

(d) the statements have been audited (and the auditor’s report is unqualified) in accordance with a requirement in the law of:

(i) a foreign jurisdiction mentioned in subsection (3) of this section; or

(ii) another jurisdiction that has adopted the standards mentioned in subsection (4); and

(e) the statements are for the most recent period ending:

(i) no later than the end of the relevant period; and

(ii) no earlier than 12 months before the start of the relevant period.

Recognised overseas accounting standards

(3) This subsection covers the standards (however described) that apply to the preparation of financial statements and are made, or adopted, by the responsible body in any of the following (a foreign jurisdiction ):

(a) the European Union;

(b) the United States of America;

(c) Canada;

(d) Japan;

(e) New Zealand;

(f) a jurisdiction specified in an instrument under subsection (5).

(4) This subsection covers the international financial reporting standards that are made or adopted by the International Accounting Standards Board.

(5) The Minister may, by legislative instrument, specify one or more jurisdictions for the purposes of paragraph (3)(f).

Worldwide parent entity

(6) For the purposes of paragraph (2)(b), an entity in relation to which financial statements have been prepared is a worldwide parent entity if, for the purposes of the standards in accordance with which the statements were prepared, the entity is not controlled by another entity.