Debt and equity tests: guide to 'at call' loans

This guide is designed for tax professionals as well as controlling shareholders, directors and other connected entities of companies who lend money 'at call' to a company. It explains when the debt/equity measures contained in Division 974 of the Income Tax Assessment Act 1997 - 'the debt/equity rules' - apply to 'at call' loans made to a company by a connected entity.

A connected entity is either an associate of the entity, or another member of a wholly owned corporate group. For example, in the context of ‘at call loans’, a controlling shareholder would be a connected entity of the company.

This guide also explains the annual turnover test. This guide will only apply to trusts if the trust is taxed as a company. It is also not intended to apply to 'at call' loans between a resident company and a foreign entity or in situations where an 'at call' loan forms part of a more complex related scheme.