Debt and equity tests

The debt and equity tests help you work out the difference between a debt interest and an equity interest for tax purposes.

The debt and equity tests explain:

  • when a scheme gives rise to a debt interest or an equity interest
  • how to identify debt for
    • thin capitalisation purposes
    • the consolidation measure

The tests determine if a return on an interest in an entity is:

  • frankable and non-deductible (like a dividend)
  • deductible to the entity and not frankable (like interest payments).

Next steps:

Last modified: 15 Feb 2016QC 17055