Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 (110 of 2014)

Schedule 1   Thin capitalisation

Part 7   Consequential amendments

Income Tax Assessment Act 1997

38   Subsection 820-200(3) (example)

Repeal the example, substitute:

Example: KJW Finance Pty Ltd, a company that is an Australian entity, has an average value of assets of $120 million.

The average values of its excluded equity interests, associate entity equity, non-debt liabilities and on-lent amount are $5 million, $3 million, $2 million and $35 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 4) leaves $75 million. Multiplying $75 million by 3/5 results in $45 million. Adding the average on-lent amount of $35 million results in $80 million. Reducing $80 million by the associate entity debt amount of $5 million results in $75 million. As the company does not have any associate entity excess amount, the adjusted on-lent amount is therefore $75 million.