Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-C - Thin capitalisation rules for inward investing entities (non-ADI)  

Operative provisions

SECTION 820-219   820-219   Worldwide gearing debt amount - inward investor (financial)  


If the entity is an *inward investor (financial) for the income year, the worldwide gearing debt amount is the result of applying the method statement in this section. Method statement

Step 1.

Divide the entity ' s *statement worldwide debt for the income year by the entity ' s *statement worldwide equity for that year.


Step 2.

Add 1 to the result of step 1.


Step 3.

Divide the result of step 1 by the result of step 2.


Step 4.

Multiply the result of step 3 in this method statement by the result of step 5 in the method statement in subsection 820-210(2) .


Step 5.

Add to the result of step 4 the average value, for that year, of the entity ' s *zero-capital amount that has arisen because of the Australian investments mentioned in step 1 of the method statement in subsection 820-210(2) .


Step 6.

Add to the result of step 5 the average value, for that year, of the entity ' s *associate entity excess amount. The result of this step is the worldwide gearing debt amount .

Example:

MSR Limited, a company that is not an Australian entity, has investments in Australia. MSR Limited has statement worldwide debt of $90 million and statement worldwide equity of $30 million. The result of applying step 1 is therefore 3. Dividing 3 by 4 (through applying steps 2 and 3) and multiplying the result by $100 million (which is the result of step 5 of the method statement in subsection 820-210(2) ) equals $75 million. The zero-capital amount is $5 million. Adding that amount to $75 million results in $80 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $80 million.


View surrounding sectionsView surrounding sectionsBack to top


This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.