Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-B - Thin capitalisation rules for outward investing entities (non-ADI)  

Operative provisions

SECTION 820-115  

820-115   Amount of debt deduction disallowed  

The amount of *debt deduction disallowed under subsection 820-85(1) is worked out using the following formula:

Debt deduction   ×

Excess debt   Average debt

where:

average debt
means the sum of:

(a) the average value, for the income year, of the entity ' s *debt capital that is covered by step 1 of the method statement in subsection 820-85(3) ; and

(b) the average value, for that year, of the entity ' s *cost-free debt capital that is covered by step 5 of that method statement;

(disregarding any amount that is attributable to the entity ' s *overseas permanent establishments in working out the average values).

debt deduction
means each *debt deduction covered by subsection 820-85(1) .

excess debt
means the amount by which the entity ' s *adjusted average debt for that year (see subsection 820-85(3) ) exceeds its *maximum allowable debt for that year.

Note:

The disallowed amount also does not form part of the cost base of a CGT asset. See section 110-54 .