Step 2.1: Calculate the average value of all the entity's assets for the income year

Insert this amount at D on Worksheet 17: Non-ADI general inward investment vehicle's step 2

The first step is to work out the average value of the entity's assets

Step 2.1A: Calculate the average value of all the entity's excluded equity interests for the income year

Insert this amount at JJ on Worksheet 17: Non-ADI general inward investment vehicle's step 2

Certain short-term equity interests reduce the safe harbour debt amount for integrity reasons

See excluded equity interests

Step 2.2: Transfer the amount from B on Worksheet 16: Non-ADI general inward investment vehicle's step 1 to B on Worksheet 17: Non-ADI general inward investment vehicle's step 2

This is the average associate entity debt and is the same amount calculated at B on Worksheet 16: Non-ADI general inward investment vehicle's step 1 (step 1.2) and can be transferred directly from there. Associate entity debt is a loan asset of the lending entity that broadly represents the debt interest issued to the lender by its associate entity

Step 2.3: Calculate the average value of all the entity's associate entity equity for that year

Insert this amount at E on Worksheet 17: Non-ADI general inward investment vehicle's step 2

Broadly, associate entity equity is the sum of the equity invested in, and interest-free loans granted to, associate entities. Associate entity equity is an asset of the investing entity

Step 2.4: Calculate the average value, for that year, of all the entity's non-debt liabilities

Insert this amount at F on Worksheet 17: Non-ADI general inward investment vehicle's step 2

Step 2.5: Calculate the net Australian assets funded by debt and equity. This is the result of D – JJ – B – E – F.

Insert the result at G on Worksheet 17: Non-ADI general inward investment vehicle's step 2

This step reduces total assets D by the amounts worked out in steps 2.2 to 2.4. The amount at G represents the net Australian assets funded by debt and equity

Step 2.6: Multiply the amount at G by 3/5. Insert the result at H on Worksheet 17: Non-ADI general inward investment vehicle's step 2

Multiplying the amount at G (net assets) by 3/5 reflects the debt to equity ratio of 1.5:1

Step 2.7: If the entity does not have any associate entities that are non-ADIs and subject to the thin capitalisation rules, insert 0 (nil) at J on Worksheet 17: Non-ADI general inward investment vehicle's step 2. Otherwise, calculate the entity's average associate entity excess amount – see Worksheet 18: Non-ADI general inward investment vehicle's step 2A

Transfer the amount at J on Worksheet 18: Non-ADI general inward investment vehicle's step 2A to J on Worksheet 17: Non-ADI general inward investment vehicle's step 2

Broadly, the average associate entity excess amount is the excess borrowing capacity of any associate entity that is either a non-ADI inward investment vehicle or a non-ADI inward investor. It also recognises any premium paid for the investment in an associate entity. This amount is worked out in step 2A – J on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

If the entity does not have any associate entities that are non-ADIs and subject to the thin capitalisation rules, the average associate entity excess amount is zero

Step 2.8: Calculate the entity's safe harbour debt amount by adding the amounts at H and J

The safe harbour debt amount represents 3/5 of net Australian assets, increased by any associate entity excess amount

Step 2.1: Average assets

(D) _____________

Step 2.1A: Average excluded equity interests

(JJ) _____________

Step 2.2: Average associate entity debt from B on Worksheet 16: Non-ADI general inward investment vehicle's step 1

(B) _____________

Step 2.3: Average associate entity equity

(E) _____________

Step 2.4: Average non-debt liabilities

(F) _____________

Step 2.5:D – JJ – B – E – F

(G) _____________

If G is negative, it is taken to be zero.

Step 2.6:G   3/5

(H) _____________

Step 2.7: Average associate entity excess amount from J on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

(J) _____________

Step 2.8: Safe harbour debt amount (H + J)

= _____________

Step 2A.1: Calculate, on a particular measurement day, the value of the entity's associate entity equity attributable to the associate entity, less the value of debt interests issued to the investing entity by the associate entity

Insert this amount at K on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This is the value, on a measurement day, of the equity the entity has invested in its associate entity. This excludes any debt interests that may be included in associate entity equity

Step 2A.2: Calculate, on the measurement day, the value of the associate entity's equity capital attributable to the investing entity, less the value of equity interests held by the investing entity that are controlled foreign entity equity for the investing entity

Insert this amount at L on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This is the value, on a measurement day, of the associate entity's equity capital attributable to equity interests the investing entity holds in its associate entity

This excludes the value that represents controlled foreign entity equity for the investing entity

This is measured by the associate entity in accordance with the accounting standards

Step 2A.3: Calculate the premium excess amount by deducting the amount at L from the amount at K and multiplying the result by 3/5

Insert this result at M on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

Step 2A.4: Calculate the associate entity's safe harbour debt amount on the measurement day as if the period consisted of one day only

If the associate entity is a financial outward investor or a financial inward investment vehicle, it is treated as a general entity, inward or outward, for these purposes

Insert this amount at N on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

The safe harbour debt amount must be calculated for the associate entity on a measurement day. If the associate entity is:

• an inward investment vehicle, complete the calculations in step 2 in Non-ADI general inward investment vehicle for the associate entity
• a non-ADI inward investor, complete the safe harbour debt calculation in Non-ADI general inward investors.

Step 2A.5: Calculate, on the measurement day, the value of the associate entity's adjusted average debt as if the period consisted of one day only. Again, the associate entity is always treated as a general entity

Insert this amount at P on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

You must also work out the associate entity's adjusted average debt on a measurement day

Step 2A.6: Deduct the amount at P from the amount at N

Insert the result at Q on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

Taking the adjusted average debt at P away from the safe harbour debt amount at N gives the associate entity's excess borrowing capacity on a measurement day. If the associate entity has exceeded its safe harbour debt amount, this amount will be negative and is treated as zero

Step 2A.7: Calculate, on the measurement day, the sum of all of the following:

• the value of the associate entity's equity capital attributable to the investing entity
• the value of the debt interests issued to the investing entity by the associate entity
•  that are on issue
  • of which no part forms part of the associate entity's cost-free debt capital
  • that do not give rise to costs covered by paragraph 820-40(1)(a)  
   
• the value of the debt interests issued to the investing entity by the associate entity that  
  • are on issue
  • give rise to costs covered in paragraph 820-40(1)(a) but those costs are not deductible from the associate entity's assessable income in any income year.
   

Insert the result at R on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This works out the value of the associate entity's equity capital (including certain debt interests) attributable to the investing entity on a measurement day.

Step 2A.8: Calculate, on the measurement day, the sum of all of the following:

• the value of all the associate entity's equity capital
• the value of all the debt interests issued by the associate entity  
  • that are on issue
  • of which no part forms part of the associate entity's cost-free debt capital
  • that do not give rise to costs covered by paragraph 820-40(1)(a)  
   
• the value of all the debt interests issued by the associate entity that  
  • are on issue
  • give rise to costs covered by paragraph 820-40(1)(a) but those costs are not deductible from the associate entity's assessable income in any income year
   

Insert the result at S on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This is to work out the value of the associate entity's total equity capital (including certain debt interests) on a measurement day

Step 2A.9: Divide the amount at R by the amount at S. Insert the result at T on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This works out the proportion of the associate entity's equity capital attributable to the investing entity on a measurement day

Step 2A.10: Calculate the entity's attributable safe harbour excess amount by multiplying the amount at Q – the associate entity's excess capacity by the amount at T – the proportion of equity capital attributable to the investing entity.

Insert the result at U on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This applies the proportion worked out in step 2A.9 to the associate entity's excess borrowing capacity to work out the amount of that excess capacity that can be attributed to the investing entity

Step 2A.11: Calculate the entity's associate entity excess amount by adding the amounts at M – premium excess amount and U – attributable safe harbour excess amount

Insert the result at V on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

This is the associate entity excess amount for a single associate entity on a measurement day of the investing entity

Step 2A.12: If the entity has only one associate entity, transfer any positive amount at V to W on Worksheet 18: Non-ADI general inward investment vehicle's step 2A. Otherwise, repeat steps 2A.1 to 2A.11 for each associate entity

Then add all positive results at V and insert at W on Worksheet 18: Non-ADI general inward investment vehicle's step 2A

The associate entity excess amount must be worked out for each associate entity on a measurement day. Add all the positive associate entity excess amounts together to get the total associate entity excess amount on any particular measurement day. If the entity has only one associate entity, the amount at W will be the same as the amount at V, provided V is positive. If V is negative, it is disregarded

Step 2A.13: Calculate W – the total associate entity excess amount – steps 2A.1 to 2A.12 – on each other measurement day

The associate entity excess amount for all associate entities is calculated on each of the investing entity's measurement days

Step 2A.14: Calculate the entity's average associate entity excess amount by adding the results at W for each measurement day and divide by the number of measurement days

Insert the result at J on Worksheet 17: Non-ADI general inward investment vehicle's step 2

The results are added together and divided by the number of measurement days to get the average associate entity excess amount

Step 2A.1: Investing entity's associate entity equity on a measurement day

(K) _____________

Step 2A.2: Associate entity's equity capital attributable to the investing entity on a measurement day

(L) _____________

If L is negative, it is taken to be nil

Step 2A.3: Premium excess amount (K – L)   3/5

(M) ____________

M may be a negative amount

Step 2A.4: Associate entity's safe harbour debt amount on a measurement day

(N) _____________

Step 2A.5: Associate entity's adjusted average debt on a measurement day

(P) _____________

Step 2A.6: N – P

(Q) _____________

If Q is negative, it is taken to be zero

Step 2A.7: Associate entity's equity capital attributable to investing entity on a measurement day

(R) _____________

Step 2A.8: Associate entity's total equity capital on a measurement day

(S) _____________

Step 2A.9: R /  S

(T) _____________

Step 2A.10: Attributable safe harbour excess amount (Q  x T)

(U) _____________

Step 2A.11: Associate entity excess amount on a measurement day for one associate entity (M + U)

(V) _____________

Step 2A.12: Associate entity excess amount on a measurement day for all associate entities – the sum of positive results at V

Now calculate the associate entity excess amount for all associate entities on the investing entity's other measurement days – see step 2A.13

(W) _____________

Step 2A.14: The average value of the associate entity excess amount – the sum of results at W divided by the number of measurement days

= (J) ___________

(Transfer this amount to J on Worksheet 17: Non-ADI general inward investment vehicle's step 2)