• Step 1: Calculate the average equity capital

    Broadly, the average equity capital of an ADI inward investing entity is the equity capital allocated to its Australian operations.

    Table 54: ADI inward investing entity's step 1 and Worksheet 46: ADI inward investing entity's step 1 explain how an ADI inward investing entity calculates its average equity capital.

    See also:

    Table 54: ADI inward investing entity's step 1

    Steps

    Comments

    Step 1.1: Calculate the average value, for the income year, of all the ADI's equity capital attributable to its Australian permanent establishments through which it carries on its banking business in Australia that has not been allocated to the offshore banking activities of those Australian permanent establishments

    Insert this amount at A on Worksheet 46: ADI inward investing entity's step 1

    ADI equity capital is the total value of the ADI's equity capital plus certain, long-term debt interests.

    Disregard any equity capital allocated to any of the Australian permanent establishments' offshore banking activities – see section 121D of the ITAA 1936

    Step 1.2: Calculate the average value, for that year, of all the amounts the ADI has lent to its Australian permanent establishments through which it carries on its banking business in Australia that do not give rise to any debt deductions for the ADI in that year or any other income year

    Insert this amount at B on Worksheet 46: ADI inward investing entity's step 1

    ADI equity capital is increased by amounts the ADI has made available as loans to its Australian permanent establishments through which it carries on a banking business in Australia, if these amounts do not give rise to any debt deductions for the ADI in that or any other income year; that is, dotation capital

    Step 1.3: Calculate the average equity capital by adding the amounts at A and B

    Average equity capital represents the ADI equity capital attributable to the Australian permanent establishments (A), plus any debt deduction free amounts made available to the Australian permanent establishments (B)

    Worksheet 46: ADI inward investing entity's step 1

    Steps

    $

    Step 1.1: Average ADI equity capital attributable to the Australian permanent establishments through which it carries on its banking business in Australia

    (A) _____________

    Step 1.2: Average debt deduction free amounts made available to the Australian permanent establishments through which it carries on its banking business in Australia

    (B) _____________

    Step 1.3: Average equity capital (A + B)

    = ______________

    Compare this to the ADI's minimum capital amount, which is the lesser of the safe harbour capital amount – step 2 – and the arm's length capital amount – step 3.

    See also:

    • Worked example of calculations for an ADI inward investing entity.
    Last modified: 09 Mar 2016QC 48169