Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-G - Calculating the average values  

How to calculate the average values

SECTION 820-635   820-635   The opening and closing balances method  


An entity that uses the opening and closing balances method for a period must apply the following method statement to calculate the average value of a matter for that period. Method statement

Step 1.

Work out the value of the particular matter as at the first day of that period.


Step 2.

Work out the value of the particular matter as at the last day of that period.


Step 3.

Add the results of steps 1 and 2.


Step 4.

Divide the result of step 3 by 2. The result of this step is the average value.

Example:

ALWZ Corporation, a company that is an Australian entity, held assets valued at $95 million on the first day of an income year. It held assets valued at $105 million at the end of that year. Adding those amounts and dividing the result by 2 gives the average value of its assets for that year, which is $100 million.


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