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Entities that are both outward and inward investing entities

How the thin capitalisation rules apply where an entity is both outward investing and inward investing.

Last updated 8 March 2016

If an entity is both an outward investing entity and an inward investing entity, the rules for outward investing entities apply. For example, if an Australian resident entity is foreign controlled and also carries on business through an overseas permanent establishment, the rules for outward investing entities apply subject to two qualifications:

  1. The entity is not able to apply the assets threshold test in section 820-37 of the ITAA 1997.
  2. The entity may choose to apply a worldwide gearing debt test, provided that certain requirements are met including a requirement that the entity’s Australian assets represent no more than 50% of the entity’s statement worldwide assets.

The following tables summarise the rules explained in this section. They also tell you which section explains how to apply the thin capitalisation rules to the type of entity you are dealing with.

Table 1: How to categorise the entity and where to find the rules for different entity types

 

General entity

Financial entity

ADI entity

Outward investor

Non-ADI general outward investor

Non-ADI financial outward investor

ADI outward investing entity

Inward investment vehicle

Non-ADI general inward investment vehicle

Non-ADI financial inward investment vehicle

Not applicable

Inward investor

Non-ADI general inward investor

Non-ADI financial inward investor

ADI inward investing entity

Outward investor and inward investment vehicle

Non-ADI general outward investor

Non-ADI financial outward investor

ADI outward investing entity

Table 2: How to categorise a financial entity that has elected to apply the ADI rules and where to find the rule

Type of entity

Elected classification and rules

Outward investor – financial

Outward investing ADI. The rules in Subdivision 820-D of the ITAA 1997 apply

Refer to ADI outward investing entity

Inward investment vehicle – financial

Outward investing ADI. The rules in Subdivision 820-D of the ITAA 1997 apply

Refer to ADI outward investing entity

Inward investor – financial

Inward investing ADI. The rules in Subdivision 820-E of the ITAA 1997 apply

Refer to ADI inward investing entity

Outward investor – financial, and inward investment vehicle – financial

Outward investing ADI. The rules in Subdivision 820-D of the ITAA 1997 apply

Refer to ADI outward investing entity

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