Work out if the thin capitalisation rules apply

Work out if the thin capitalisation rules apply to:

• Australian entities
• Foreign entities

Australian entities

1. Do any of the following apply?
   1. The entity has an overseas permanent establishment
   2. The entity is an Australian controller of a foreign entity
   3. The entity is an associate of an Australian controller of a foreign entity
   4. The entity is foreign controlled
      • Yes – see question 2
      • No – the thin capitalisation rules do not apply 
       
    
2. Does the entity have any debt deductions against the assessable income in the income year?
   • Yes – see question 3
   • No – the thin capitalisation rules do not apply
    
3. Do the combined debt deductions of the entity and its associate entities exceed $2 million in the income year?
   • Yes – see question 4
   • No – the thin capitalisation rules do not apply
    
4. Is the entity foreign controlled?
   • Yes – see question 6
   • No – see question 5
    
5. Is the combined value of the entity's average Australian assets of its associates less than 90% of the entity's average total assets and the average total assets of is associates in the income year?
   • Yes – see question 6
   • No – the thin capitalisation rules do not apply
    
6. Is the entity a special purpose entity that meets the tests in section 820-39 of the ITAA 1997?
   • Yes – the thin capitalisation rules do not apply
   • No – the thin capitalisation rules apply
    

Foreign entities

1. Does the entity have any assets in Australia that are capable of producing Australian assessable income?
   • Yes – see question 2
   • No – the thin capitalisation rules do not apply
    
2. Does the entity have any debt deductions against the assessable income in the income year?
   • Yes – see question 3
   • No – the thin capitalisation rules do not apply
    
3. Do the combined debt deductions of the entity and its associate entities exceed $2 million in the income year?
   • Yes – see question 4
   • No – the thin capitalisation rules do not apply
    
4. Is the entity a special purpose entity that meets the tests in section 820-39 of the ITAA 1997?
   • Yes – the thin capitalisation rules do not apply
   • No – the thin capitalisation rules apply