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.


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