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  • Section D: Thin capitalisation

    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 2020–21 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.

    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 2020–21 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.

    Question 31 Election under subdivision 820-FB

    This question is relevant if you are an Australian resident company that has elected under subdivision 820-FB of the ITAA 1997 to treat their qualifying branch operations as part of a consolidated group, multiple entry consolidated (MEC) group or single company for thin capitalisation purposes.

    If you carry on qualifying Australian branch operations that your related Australian consolidated group, MEC group or single company has elected under subdivision 820-FB of the ITAA 1997 to treat as part of itself for thin capitalisation purposes, you will not be required to complete the remaining thin capitalisation questions. This is because the questions must be completed in the return of the head company or the single company on the basis of including your branch operations.

    If an Australian resident company has elected under subdivision 820-FB of the ITAA 1997 to treat your qualifying Australian branch operations as part of its consolidated group, MEC group or single company for thin capitalisation purposes, answer Yes at A item 31 and write the ABN of the electing Australian company at B item 31 and then go to question 40.

    If you do carry on qualifying Australian branch operations that are not treated as part of a consolidated group, MEC group or single company by reason of the operation of subdivision 820-FB, you must complete the following thin capitalisation questions for the branch operations.

    Question 32 Entity type

    This question ascertains your thin capitalisation entity type at the end of the year.

    The thin capitalisation rules apply differently depending on an entity's type. To work out how the thin capitalisation rules apply to a particular entity we need to know which category the entity belongs to.

    If your type of thin capitalisation entity changed during 2020–21, you only need to complete section D for the type of thin capitalisation entity you were at the end of 2020–21 or relevant period.

    To complete this question, ascertain your entity code from the table below.

    At A, write the code which represents the type of thin capitalisation entity you are at the end of 2020–21 or relevant period. If you do not know what type of entity you are, see the relevant provisions in Division 820 of the ITAA 1997.

    Non-authorised deposit-taking institution (Non-ADI)

    Code

    Type

    1

    Outward investor (general) under subsections 820-85(2) and 820-583(2) and is not also an inward investment vehicle (general) under subsections 820-185(2) and 820-583(5)

    2

    Outward investor (financial) under subsections 820-85(2) and 820-583(3) and is not also an inward investment vehicle (financial) under subsections 820-185(2), 820-583(6) and 820-609(6)

    3

    Inward investment vehicle (general) under subsections 820-185(2) and 820-583(5) and is not also an outward investor (general) under subsections 820-85(2) and 820-583(2)

    4

    Inward investment vehicle (financial) under subsections 820-185(2), 820-583(6) and 820-609(6) and is not also an outward investor (financial) under subsections 820-85(2) and 820-583(3)

    5

    Inward investor (general) under subsection 820-185(2)

    6

    Inward investor (financial) under subsection 820-185(2)

    9

    Inward investment vehicle (general) under subsections 820-185(2) and 820-583(5) and is also an outward investor (general) under subsections 820-85(2) and 820-583(2)

    10

    Inward investment vehicle (financial) under subsections 820-185(2), 820-583(6) and 820-609(6) and is also an outward investor (financial) under subsections 820-85(2) and 820-583(3)

    Authorised deposit-taking institution (ADI)

    Code

    Type

    7

    Outward investing entity (ADI) under subsections 820-300(2), 820-583(7), 820-587 and 820-609

    8

    Inward investing entity (ADI) under subsections 820-395(2) and 820-609(4)

    Last modified: 08 Feb 2022QC 64900