Debt and equity tests

The debt and equity tests help you work out the difference between a debt interest and an equity interest for tax purposes.

The debt and equity tests explain:

• when a scheme gives rise to a debt interest or an equity interest
• how to identify debt for
  • thin capitalisation purposes
  • the consolidation measure
   

The tests determine if a return on an interest in an entity is:

• frankable and non-deductible (like a dividend)
• deductible to the entity and not frankable (like interest payments).

Next steps:

• How to apply the debt and equity tests