Income Tax Assessment Act 1997
View history note
Hide history note[ CCH Note: Subdiv 820-B heading will be amended by No 23 of 2024, s 3 and Sch 2 item 30, by inserting " financial " after " investing " , effective 1 July 2024. For application provisions, see note under s 705-60 .]
SECTION 820-100 Safe harbour debt amount - outward investor (financial)
[ CCH Note: S 820-100 heading will be amended by No 23 of 2024, s 3 and Sch 2 item 43, by substituting " investing financial entity (non-ADI) " , for " investor (financial) " , effective 1 July 2024. For application provisions, see note under s 705-60 .]
If the entity is an *outward investor (financial) for the income year, the safe harbour debt amount is the lesser of the following amounts: (a) the *total debt amount (worked out under subsection (2) ); (b) the *adjusted on-lent amount (worked out under subsection (3) ).
However, if the 2 amounts are equal, it is the total debt amount.
[ CCH Note: S 820-100(1) will be amended by No 23 of 2024, s 3 and Sch 2 item 44, by substituting " investing financial entity (non-ADI) " for " investor (financial) " , effective 1 July 2024. For application provisions, see note under s 705-60 .]
Total debt amount
820-100(2)
The total debt amount is the result of applying the method statement in this subsection. In applying the method statement, disregard any amount that is attributable to the entity ' s *overseas permanent establishments. Method statement
Step 1.
Work out the average value, for the income year, of all the assets of the entity.
Step 1A.
Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity.
Step 2.
Reduce the result of step 1A by the average value, for that year, of all the *associate entity debt of the entity.
Step 3.
Reduce the result of step 2 by the average value, for that year, of all the *associate entity equity of the entity.
Step 4.
Reduce the result of step 3 by the average value, for that year, of all the *controlled foreign entity debt of the entity.
Step 5.
Reduce the result of step 4 by the average value, for that year, of all the *controlled foreign entity equity of the entity.
Step 6.
Reduce the result of step 5 by the average value, for that year, of all the *non-debt liabilities of the entity.
Step 7.
Reduce the result of step 6 by the average value, for that year, of the entity ' s *zero-capital amount. If the result of this step is a negative amount, it is taken to be nil.
Step 8.
Multiply the result of step 7 by 15/16 .
Step 9.
Add to the result of step 8 the average value, for that year, of the entity ' s *zero-capital amount.
Step 10.
Add to the result of step 9 the average value, for that year, of the entity ' s *associate entity excess amount. The result of this step is the total debt amount .
Example:
GLM Limited, a company that is an Australian entity, has an average value of assets (other than assets attributable to its overseas permanent establishments) of $160 million.
The average values of its relevant excluded equity interests, associate entity debt, associate entity equity, controlled foreign entity debt, controlled foreign entity equity, non-debt liabilities and zero-capital amount are $5 million, $5 million, $5 million, $9 million, $6 million, $5 million and $4 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 7) leaves $121 million. Multiplying $121 million by 15/16 results in $113.4375 million. Adding the average zero-capital amount of $4 million results in $117.4375 million. As the company does not have any associate entity excess amount, the total debt amount is therefore $117.4375 million.
Adjusted on-lent amount
820-100(3)
The adjusted on-lent amount is the result of applying the method statement in this subsection. In applying the method statement, disregard any amount that is attributable to the entity ' s *overseas permanent establishments. Method statement
Step 1.
Work out the average value, for the income year, of all the assets of the entity.
Step 1A.
Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity.
Step 2.
Reduce the result of step 1A by the average value, for that year, of all the *associate entity equity of the entity.
Step 3.
Reduce the result of step 2 by the average value, for that year, of all the *controlled foreign entity debt of the entity.
Step 4.
Reduce the result of step 3 by the average value, for that year, of all the *controlled foreign entity equity of the entity.
Step 5.
Reduce the result of step 4 by the average value, for that year, of all the *non-debt liabilities of the entity.
Step 6.
Reduce the result of step 5 by the amount (the average on-lent amount ) which is the average value, for that year, of the entity ' s *on-lent amount (other than *controlled foreign entity debt of the entity). If the result of this step is a negative amount, it is taken to be nil.
Step 7.
Multiply the result of step 6 by ⅗ .
Step 8.
Add to the result of step 7 the average on-lent amount.
Step 9.
Reduce the result of step 8 by the average value, for that year, of all the *associate entity debt of the entity.
Step 10.
Add to the result of step 9 the average value, for that year, of the entity ' s *associate entity excess amount. The result of this step is the adjusted on-lent amount .
Example:
GLM Limited, a company that is an Australian entity, has an average value of assets (other than assets attributable to its overseas permanent establishments) of $160 million.
The average values of its relevant excluded equity interests, associate entity equity, controlled foreign entity debt, controlled foreign entity equity, non-debt liabilities and on-lent amount are $5 million, $5 million, $9 million, $6 million, $5 million and $35 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 6) leaves $95 million. Multiplying $95 million by ⅗ results in $57 million. Adding the average on-lent amount of $35 million results in $92 million. Reducing the result of step 8 by the associate entity debt amount of $5 million equals $87 million. As the company does not have any associate entity excess amount, the adjusted on-lent amount is therefore $87 million.
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