# 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 820-640   The 3 measurement days method

Application

820-640(1)
An entity must not use the 3 measurement days method for a period that is a part of an income year unless the following days occur during that period:

(a) the last day of the first half of the income year;

(b) one or both of the following days:

(i) the first day of that year;

(ii) the last day of that year.
Method statement

820-640(2)
An entity that uses the 3 measurement days 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 measurement day (see subsection (3)).

Step 2.

Work out the value of the particular matter as at the second measurement day (see subsection (3)).

Step 3.

Work out the value of the particular matter as at the third measurement day (see subsection (3)).

Step 4.

Add the results of steps 1, 2 and 3.

Step 5.

Divide the result of step 4 by 3. The result of this step is the average value.

Example:

RJ Corporation held assets valued at \$115 million on the first day of an income year. It held assets valued at \$105 million on the last day of the first half of that year, and \$80 million on the last day of that year. Adding these amounts and dividing the result by 3 gives the average value of its assets for that year, which is \$100 million.

Measurement days

820-640(3)
The following are the first , second and third measurement days :

(a) the first measurement day is the first day of the income year if it occurs during that period, otherwise it is the first day of that period;

(b) the second measurement day is the last day of the first half of that year;

(c) the third measurement day is the last day of that year if it occurs during that period, otherwise it is the last day of that period.