INCOME TAX ASSESSMENT ACT 1997 [ARCHIVE]

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-F - Thin capitalisation rules for resident TC groups  

How this Division applies to a resident TC group

SECTION 820-575 [ARCHIVE]   Additional application of Subdivision 820-E to group that includes Australian permanent establishment of foreign bank  

820-575(1)  
Subdivision 820-E applies to a *resident TC group for an income year, as if the group were an *inward investing entity (ADI), if:


(a) the group includes at least one *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia; and


(b) the group includes no entity that, apart from this Subdivision, would be an *outward investing entity (non-ADI), or an *outward investing entity (ADI), for a period ending at the end of the income year; and


(c) the group includes no entity that is at the end of the income year both a *foreign controlled Australian entity and an *ADI.

However, it applies with the modifications in this section (in addition to the other modifications in this Subdivision).

820-575(2)  
The group's average equity capital for the income year is the average value, for that year, of the amount worked out under subsection (2A).

Note:

To calculate an average value for the purposes of this Division, see Subdivision 820-G .

820-575(2A)  
The amount worked out under this subsection as at a particular day is the total of the amounts worked out under the table below for each member of the group that is covered by an item in the table and is in the group on that day.

Note:

To work out the times during the income year when an entity or Australian permanent establishment was in the group, see section 820-530 .


Resident TC group treated as an inward investing entity (ADI)
Item For: The amount is:
1 a company the total value, as at the end of that day, of the company's *paid-up share capital, retained earnings, general reserves and asset revaluation reserves; minus

the value of the company's *debt capital that is part of the company's paid-up share capital at the end of that day; plus

the value of the company's debt capital at the end of that day that does not give rise to any *debt deductions of the company for the income year or any other income year
2 a partnership or trust the total value, as at the end of that day, of the capital and reserves of the partnership or trust; minus

the value of the *debt capital of the partnership or trust that is part of the capital of the partnership or trust at the end of that day; plus

the value of the debt capital of the partnership or trust at the end of that day that does not give rise to any *debt deductions of the partnership or trust for the income year or any other income year
3 an *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia the *equity capital of the foreign bank, as at the end of that day, that:

(a)   is attributable to that Australian permanent establishment; but

(b)   has not been allocated to the *OB activities of the foreign bank;

plus the total of the amounts that, as at the end of that day:

(c)   are made available by the foreign bank to the Australian permanent establishment as loans to the Australian permanent establishment; and

(d)   do not give rise to any *debt deductions of the foreign bank for the income year or any other income year

820-575(3)  
The group's safe harbour capital amount for the income year is worked out using the following method statement. Method statement


Step 1.

Work out the average value, for the income year, of the group's *risk-weighted assets.


Step 2.

Multiply the result of step 1 by 4%. The result of this step is the safe harbour capital amount.

820-575(4)  
For each *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia and that is in the group, the group's *risk-weighted assets include that part of the *risk-weighted assets of the foreign bank that:


(a) is attributable to that Australian permanent establishment; but


(b) is not attributable to the *OB activities of the foreign bank.




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