• Step 1: Calculate the adjusted average equity capital

    Broadly, the adjusted average equity capital of an ADI outward investing entity is the ADI equity capital allocated to its Australian operations. Table 50: ADI outward investing entity's step 1 and Worksheet 42: ADI outward investing entity's step 1 explain how an ADI outward investing entity calculates its adjusted average equity capital.

    See also:

    Table 50: ADI outward investing entity's step 1

    Steps

    Comments and instructions

    Step 1.1: Calculate the average value, for the income year, of all the ADI's equity capital, other than ADI equity capital attributable to its overseas permanent establishments

    Insert this amount at A on Worksheet 42: ADI outward investing entity's step 1

    ADI equity capital is the total value of the entity's equity capital and the total value of all the debt interests issued by the entity. To be included, a debt interest must be on issue for 90 days or more and not give rise to any costs for the issuer

    Equity capital (excluding any equity capital attributable to any of the ADI's overseas permanent establishments) includes:

    • the issue price of each equity interest in the entity that is still on issue less any of the issue price that remains unpaid
    • the entity's general reserves and asset revaluation reserves
    • the entity's retained earnings
    • the entity's current year earnings, net of expected tax and distributions
    • provisions for distributions
     

    Step 1.2: Calculate the average value, of all the ADI's controlled foreign entity equity for that year, unless it is attributable to any of the ADI's overseas permanent establishments

    Insert this amount at B on Worksheet 42: ADI outward investing entity's step 1

    ADI equity capital is then reduced by equity invested in controlled foreign entities for which the ADI is an Australian controller. However, disregard any equity investment attributable to any of the ADI's overseas permanent establishment as it has already been excluded in step 1.1

    Step 1.3: Calculate the adjusted average equity capital. This is the result of AB

    Adjusted average equity capital represents total equity capital (A) less any equity invested in controlled foreign entities (B)

    Worksheet 42: ADI outward investing entity's step 1

    Steps

    $

    Step 1.1: Average ADI equity capital

    (A)_____________

    Step 1.2: Average controlled foreign entity equity

    (B)_____________

    Step 1.3: Adjusted average equity capital (– B)

    = ______________

    Now compare the ADI's adjusted average equity capital to its minimum capital amount, which is the least of the safe harbour capital amount – step 2, the worldwide capital amount – step 3 and the arm's length capital amount – step 4.

    See also:

    • Worked example of calculations for an ADI outward investing entity.
    Last modified: 09 Mar 2016QC 48195