Step 2.1: Calculate the average value of all the entity's assets for the income year

Insert this amount at E on Worksheet 3: Non-ADI general outward investor's step 2

The first step is to work out the average value of the entity's assets

Step 2.2: Calculate the average value of the entity's excluded equity interests for that year

Insert this amount at QQ on Worksheet 3: Non-ADI general outward investor's step 2

Certain short-term equity interests reduce the safe harbour debt amount for integrity reasons. See excluded equity interests

Step 2.3: Transfer the amount from B on Worksheet 2: Non-ADI general outward investor's step 1 to B on Worksheet 3: Non-ADI general outward investor's step 2

This is the average associate entity debt and is the same amount calculated at B on Worksheet 2: Non-ADI general outward investor's step 1 – step 1.2 – and can be transferred directly from there. Associate entity debt is a loan asset of the lending entity, representing, broadly, the debt interest issued to the lender by its associate entity

Step 2.4: Calculate the average value of all the entity's associate entity equity for that year

Insert this amount at F on Worksheet 3: Non-ADI general outward investor's step 2

Associate entity equity is, broadly, the sum of the equity invested in, and interest-free loans granted to, associate entities. Associate entity equity is an asset of the investing entity

Step 2.5: Transfer the amount from C on Worksheet 2: Non-ADI general outward investor's step 1 to C on Worksheet 3: Non-ADI general outward investor's step 2

This is the average value of debt lent to controlled foreign entities of which the outward investor is an Australian controller. It is the same amount calculated at C on Worksheet 2: Non-ADI general outward investor's step 1 – step 1.3 – and can be transferred directly from there.

Controlled foreign entity debt is a loan asset of the lender, representing the debt interests issued to the lender by the controlled foreign entity

Step 2.6: Calculate the average value of all the entity's controlled foreign entity equity for that year

Insert this amount at G on Worksheet 3: Non-ADI general outward investor's step 2

This is the average value of equity invested in controlled foreign entities for which the outward investor is an Australian controller. Controlled foreign entity equity is an asset of the investing entity

Step 2.7: Calculate the average value of all the entity's non-debt liabilities for that year

Insert this amount at H on Worksheet 3: Non-ADI general outward investor's step 2

Step 2.8: Calculate the net Australian assets funded by debt and equity. This is the result of E – QQ PP – B – F – C – G – H

Insert the result at J on Worksheet 3: Non-ADI general outward investor's step 2

This step reduces the total assets at F by the amounts worked out in steps 2.2 to 2.7. The amount at J represents the net Australian assets funded by debt and equity

Step 2.9: Multiply the amount at J by 3/5. Insert the result at K on Worksheet 3: Non-ADI general outward investor's step 2

Multiplying the amount at J (net assets) by 3/5 reflects the debt to equity ratio of 1.5:1

Step 2.10: If the entity does not have any associate entities that are non-ADI outward investors or inward investors, insert 0 (zero) at L on Worksheet 3: Non-ADI general outward investor's step 2

Otherwise, calculate the entity's average associate entity excess amount – see Worksheet 4: Non-ADI general outward investor's step 2A

Transfer the amount at L on Worksheet 4: Non-ADI general outward investor's step 2A to L on Worksheet 3: Non-ADI general outward investor's step 2

The average associate entity excess amount is, broadly, the excess borrowing capacity of any associate entities. It also recognises any premium paid for the investment in an associate entity. This amount is worked out in step 2A – L on Worksheet 4: Non-ADI general outward investor's step 2A

Note: If the entity has no associate entities that are non-ADI outward investors or non-ADI inward investors, the average associate entity excess amount is zero

Step 2.11: Calculate the entity's safe harbour debt amount by adding the amounts at K and L

The safe harbour debt amount represents 3/5 of net Australian assets, increased by any associate entity excess amount

Step 2.1: Average assets

(E) __________

Step 2.2: Average excluded equity interests

(QQ) _________

Step 2.3: Average associate entity debt – from B on Worksheet 2: Non-ADI general outward investor's step 1

(B) __________

Step 2.4: Average associate entity equity

(F) __________

Step 2.5: Average controlled foreign entity debt – from C on Worksheet 2: Non-ADI general outward investor's step 1

(C) __________

Step 2.6: Average controlled foreign entity equity

(G) __________

Step 2.7: Average non-debt liabilities

(H) __________

Step 2.8:E – QQ – B – F – C – G – H

(J) __________

If J is negative, it is taken to be zero

Step 2.9:J x 3/5

(K) __________

Step 2.10: Average associate entity excess amount – from L on Worksheet 4: Non-ADI general outward investor's step 2A

(L) __________

If no associate entities, this is zero

Step 2.11 : Safe harbour debt amount = (K + L)

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