Show download pdf controls
  • Work out if the thin capitalisation rules apply

    Work out if the thin capitalisation rules apply to:

    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
         
       
    1. 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
       
    2. 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
       
    3. Is the entity foreign controlled?
      • Yes – see question 6
      • No – see question 5
       
    4. 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
       
    5. 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
       
    Last modified: 02 Sep 2020QC 48124