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:Debt and equity rules help you to understand the difference between a debt interest and an equity interest.