INCOME TAX ASSESSMENT ACT 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

SECTION 820-1   What this Division is about  

This Division applies to foreign controlled Australian entities, Australian entities that operate internationally and foreign entities that operate in Australia.

Financing expenses that an entity can otherwise deduct from its assessable income may be disallowed under this Division in the following circumstances:

  • · for an entity that is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (an ADI ) - the entity's debt exceeds the prescribed level (and the entity is therefore "thinly capitalised");
  • · for an entity that is an ADI - the entity's capital is less than the prescribed level (and the entity is therefore "thinly capitalised").

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