Show download pdf controls
  • Australian controller

    An Australian entity will be an Australian controller if both of the following apply:

    • There is an Australian controlled foreign entity.
    • There is an Australian controller of the foreign entity.

    Australian controlled foreign entity

    Whether a foreign entity is Australian controlled is largely determined by the control rules contained in Part X of ITAA 1936. An Australian controlled foreign entity is any of the following:

    • a controlled foreign company (except a corporate limited partnership) – that is, a non-resident company that satisfies one of the three control tests in section 340 of the ITAA 1936
    • a controlled foreign trust – that is, a non-resident trust that satisfies either one or both of two tests in section 342 of the ITAA 1936
    • a controlled foreign corporate limited partnership. The test for a controlled foreign corporate limited partnership is contained in section 820-760 of the ITAA 1997. A controlled foreign corporate limited partnership is a foreign corporate limited partnership in which either of the following apply
      • either one or more of the general partners is an Australian entity or an Australian controlled foreign entity
      • there are no more than five Australian entities (each of which holds a thin capitalisation control interest of at least 1%) which, together with associate entities, hold a total of thin capitalisation control interests of at least 50% in the controlled foreign entity. See section 820-760(2) of the ITAA 1997.
       

    Thin capitalisation control interest is discussed below. It includes interests held by associate entities.

    Once you have established that there is an Australian controlled foreign entity, you then need to determine which Australian entities are Australian controllers of those foreign entities. Australian controllers are subject to the thin capitalisation rules.

    Australian controller of a controlled foreign company

    An Australian controller of a controlled foreign company is an Australian entity that is either of the following:

    • a holder of a thin capitalisation control interest of 10% or more in the controlled foreign company
    • an entity to which all of the following apply
      • the company is a controlled foreign company because of the application of the test in paragraph 340(c) of the ITAA 1936
      • the Australian entity has a thin capitalisation control interest of at least 1% in the controlled foreign company
      • that entity is one of a group of five or fewer Australian entities that, alone or with associate entities, controls the controlled foreign company.
       

    See also:

    Australian controller of a controlled foreign trust

    An Australian controller of a controlled foreign trust is an Australian entity that holds a thin capitalisation control interest of 10% or more in the trust.

    See also:

    Australian controller of a controlled foreign corporate limited partnership

    An Australian controller of a controlled foreign corporate limited partnership is an Australian entity that is either of the following:

    • a general partner of the partnership
    • a holder of a thin capitalisation control interest of 10% or more in the partnership.

    See also:

    If your entity is an Australian controller

    If the entity is an Australian controller of an Australian controlled foreign entity, it is subject to the thin capitalisation rules. How the thin capitalisation rules actually apply to an Australian controller is determined according to which category the entity is in. This is explained in Entity categories, which also directs you to the relevant thin capitalisation calculations.

    Last modified: 09 Mar 2016QC 48152