Income Tax Assessment Act 1997
View history note
Hide history note[ CCH Note: Subdiv 820-B heading will be amended by No 23 of 2024, s 3 and Sch 2 item 30, by inserting " financial " after " investing " , effective 1 July 2024. For application provisions, see note under s 705-60 .]
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 .
[ CCH Note: S 820-115 will be amended by No 23 of 2024, s 3 and Sch 2 item 52, by substituting " (1) If subparagraph 820-85(1A)(b)(i) applies, the amount (the total disallowed amount ) disallowed under subsection 820-85(1) of the *debt deductions of an entity for an income year is the amount by which those debt deductions (to the extent that they are not attributable to an *overseas permanent establishment of the entity) exceed the entity ' s *third party earnings limit for the income year (see section 820-427A). Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110-54. " for " The amount of *debt deduction disallowed under subsection 820-85(1) is worked out using the following formula: " , effective 1 July 2024. For application provisions, see note under s 705-60 .]
[ CCH Note: S 820-115(2) and (3) will be inserted by No 23 of 2024, s 3 and Sch 2 item 52, effective 1 July 2024. For application provisions, see note under s 705-60 . S 820-115(2) and (3) will read:
]
820-115(2)
The amount by which a particular * debt deduction is disallowed as a result of subsection (1) is worked out as follows:
(a) first, divide the total disallowed amount by the * debt deductions of the entity for the income year;
(b) next, multiply the amount of the particular debt deduction by the result of paragraph (a) .
820-115(3)
If subparagraph 820-85(1A)(b)(ii) applies, the amount of a * debt deduction of an entity for an income year disallowed under subsection 820-85(1) is worked out using the following formula:
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