Steps
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Comments
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Step 2A.1: Calculate, on a particular measurement day, the value of the entity's associate entity equity attributable to the associate entity, less the value of any debt interests issued to the investing entity by the associate entity
Insert this amount at M on Worksheet 4: Non-ADI general outward investor's step 2A.
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This is the value, on a measurement day, of the equity the entity has invested in its associate entity. This excludes any debt interests that may be included in associate entity equity
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Step 2A.2: Calculate, on the measurement day, the value of the associate entity's equity capital attributable to the equity interests the investing entity holds in its associate entity, less the value of equity interests held by the investing entity that are controlled foreign entity equity for the investing entity
Insert this amount at N on Worksheet 4: Non-ADI general outward investor's step 2A
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This is the value, on a measurement day, of the associate entity's equity capital attributable to equity interests the investing entity holds in its associate entity. This excludes the value that represents controlled foreign entity equity for the investing entity. This is measured by the associate entity in accordance with the accounting standards.
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Step 2A.3: Calculate the premium excess amount by deducting the amount at N from the amount at M and multiplying the result by 3/5
Insert the result at P on Worksheet 4: Non-ADI general outward investor's step 2A
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Step 2A.4: Calculate the associate entity's safe harbour debt amount on the measurement day as if the period consisted of one day only. If the associate entity is a financial entity, it is treated as a general entity for these purposes
Insert this amount at Q on Worksheet 4: Non-ADI general outward investor's step 2A
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The safe harbour debt amount must be calculated for the associate entity on a measurement day.
If the associate entity is an:
- outward investor, complete step 2 in 'Non-ADI general outward investor' for the associate entity
- inward investor, complete step 2 in 'Non-ADI inward investors' for the associate entity
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Step 2A.5: Calculate, on the measurement day, the value of the associate entity's adjusted average debt as if the period consisted of one day only. Again, the associate entity is always treated as a general entity
Insert this amount at R on Worksheet 4: Non-ADI general outward investor's step 2A
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You must also work out the associate entity's adjusted average debt on a measurement day
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Step 2A.6: Deduct the amount at R from the amount at Q
Insert the result at S on Worksheet 4: Non-ADI general outward investor's step 2A
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Taking the adjusted average debt (R) away from the safe harbour debt amount (Q) gives the associate entity's excess borrowing capacity on a measurement day.
If the associate entity has exceeded its safe harbour debt amount, this amount will be negative and is treated as zero
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Step 2A.7: Calculate, on the measurement day, the sum of the following values:
- the associate entity's equity capital attributable to the investing entity
- debt interests issued to the investing entity by the associate entity
- that are on issue
- of which no part forms part of the associate entity's cost-free debt capital
- that do not give rise to costs covered in paragraph 820-40(1)(a)
- the debt interests issued to the investing entity by the associate entity that
- are on issue, and
- give rise to costs covered in paragraph 820-40(1)(a) but those costs are not deductible from the associate entity's assessable income in any income year
Insert the result at T on Worksheet 4: Non-ADI general outward investor's step 2A
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This works out the value of the associate entity's equity capital (including certain debt interests) attributable to the investing entity on a measurement day.
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Step 2A.8: Calculate, on the measurement day, the sum of the following values:
- all the associate entity's equity capital
- all the debt interests issued by the associate entity
- that are on issue
- of which no part of the associate entity's cost-free debt capital
- that do not give rise to costs covered by paragraph 820-40(1)(a) of the ITAA 1997
- all the debt interests issued by the associate entity that
- are on issue
- give rise to costs covered in paragraph 820-40(1)(a) of the ITAA 1997 but those costs are not deductible from the associate entity's assessable income in any income year
Insert the result at U on Worksheet 4: Non-ADI general outward investor's step 2A
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This works out the value of the associate entity's total equity capital (including certain debt interests) on a measurement day
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Step 2A.9: Divide the amount at T by the amount at U. Insert the result at V on Worksheet 4: Non-ADI general outward investor's step 2A
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This works out the proportion of the associate entity's equity capital attributable to the investing entity on a measurement day
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Step 2A.10: Calculate the entity's attributable safe harbour excess amount by multiplying the amount at S by the amount at V, where:
- S is the associate entity's excess capacity
- V is the proportion of equity capital attributable to the investing entity
Insert the result at W on Worksheet 4: Non-ADI general outward investor's step 2A
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This applies the proportion worked out in step 2A.9 to the associate entity's excess borrowing capacity to work out the amount of that excess capacity that can be attributed to the investing entity
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Step 2A.11: Calculate the entity's associate entity excess amount by adding the amounts at
- P – premium excess amount
- W – attributable safe harbour excess amount
Insert the result at X on Worksheet 4: Non-ADI general outward investor's step 2A
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This is the associate entity excess amount for a single associate entity on a measurement day of the investing entity
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Step 2A.12: If the entity has only one associate entity, transfer any positive amount at X to Y on Worksheet 4: Non-ADI general outward investor's step 2A. Otherwise, repeat steps 2A.1 to 2A.11 for each associate entity. Then add all positive results at X and insert at Y on Worksheet 4: Non-ADI general outward investor's step 2A
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The associate entity excess amount must be worked out for each associate entity on a measurement day. Add all the positive associate entity excess amounts together to get the total associate entity excess amount on any particular measurement day. If the entity has only one associate entity, the amount at Y will be the same as the amount at X, provided X is positive. If X is negative, it is disregarded
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Step 2A.13: Calculate X; that is, the total associate entity excess amount – steps 2A.1 to 2A.12 – on each other measurement day
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The associate entity excess amount for all associate entities is calculated on each of the investing entity's measurement days
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Step 2A.14: Calculate the entity's average associate entity excess amount by adding the results at X for each measurement day and divide by the number of measurement days
Insert the result at L on Worksheet 3: Non-ADI general outward investor's step 2
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The results are added together and divided by the number of measurement days to get the average associate entity excess amount
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