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  • Section D: Thin capitalisation

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Question 30

    This question provides us with information as to whether the thin capitalisation rules affect you.

    Question 30a Did the thin capitalisation rules affect you?

    You may be excluded from the requirement to apply the thin capitalisation provisions in subdivision 820-B, 820-C, 820-D or 820-E of the ITAA 1997 if one of the following applies:

    • you and all of your relevant associate entities have total debt deductions of $2 million or less for the income year under section 820-35 of the ITAA 1997.
    • you satisfy section 820-37 of the ITAA 1997.
    • you satisfy section 820-39 of the ITAA 1997.

    If one of the above exclusions applied, answer No at A item 30a and go to question 30b.

    If the thin capitalisation rules in subdivision 820-B, 820-C, 820-D or 820-E of the ITAA 1997 applied to you, answer Yes at A item 30a then go to question 31.

    For more information about the thin capitalisation rules, see Thin capitalisation.

    Question 30b Did you rely on one of the following tests in determining the thin capitalisation rules did not disallow any of your debt deductions?

    The information you provide at this question tells us which threshold or exemption you have utilised to exclude yourself from the requirement to apply the thin capitalisation provisions in subdivision 820-B, 820-C, 820-D or 820-E of the ITAA 1997.

    If you and all your associate entities have total debt deductions of $2 million or less for the income year under section 820-35 of the ITAA 1997, answer Yes at A item 30b then go to item 40.

    If you are an outward investing entity that is not also an inward investing entity, and the sum of you and your associate’s average Australian assets is equal or greater than 90% of the sum of you and your associate’s total assets, answer Yes at B item 30b then go to item 40.

    If you are a special purpose entity for the purposes of section 820-39 of the ITAA 1997, you are exempt from the thin capitalisation rules.

    A special purpose entity is:

    • an entity established for the purposes of managing some or all of the economic risk associated with assets, liabilities or investments, and
    • the total value of debt interest in the entity is at least 50% of the total value of the entity’s assets, and
    • the entity satisfies the criteria for an insolvency-remote special purpose entity of an internationally recognised rating agency.

    If this exemption applies to you, answer Yes at C item 30b then go to item 40.

    Last modified: 06 Nov 2018QC 55230