Income Tax Assessment Act 1997
CHAPTER 4
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INTERNATIONAL ASPECTS OF INCOME TAX
The amount of *debt deduction disallowed under subsection 820-185(1) is worked out using the following formula:
(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 820-185(3) ; and
(b) the average value, for that year, of the entity ' s *cost-free debt capital that is covered by step 4 of that method statement.
PART 4-5
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GENERAL
Division 820
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Thin capitalisation rules
Subdivision 820-C
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Thin capitalisation rules for inward investing entities (non-ADI)
Operative provisions
SECTION 820-220
820-220
Amount of debt deduction disallowed
The amount of *debt deduction disallowed under subsection 820-185(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 820-185(3) ; and
(b) the average value, for that year, of the entity ' s *cost-free debt capital that is covered by step 4 of that method statement.
debt deduction
means each *debt deduction of the entity for that year.
excess debt
means the amount by which the *adjusted average debt (see subsection
820-185(3)
) exceeds the entity
'
s *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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