Income Tax Assessment Act 1997
The entity ' s maximum allowable debt for an income year is the greatest of the following amounts:
(a) the *safe harbour debt amount;
(b) the *arm ' s length debt amount;
(c) unless subsection (2) applies to the entity - the *worldwide gearing debt amount.
The safe harbour debt amount differs depending on whether the entity is an inward investment vehicle (general), inward investment vehicle (financial), inward investor (general) or inward investor (financial), see sections 820-195 to 820-215 .
The worldwide gearing debt amount differs depending on whether the entity is an inward investment vehicle (general), inward investment vehicle (financial), inward investor (general) or an inward investor (financial), see sections 820-216 to 820-219 .Entities that are not eligible for the worldwide gearing debt amount 820-190(2)
This subsection applies to an entity, if:
(a) the entity has *statement worldwide equity, or *statement worldwide assets, of nil or a negative amount; or
(b) *audited consolidated financial statements for the entity for the income year do not exist; or
(c) the result of applying the following formula is greater than 0.5:
|Average Australian assets of the entity|
|*Statement worldwide assets of the entity for the income year|
(a) of an *Australian entity - is the average value, for the statement period mentioned in subsection (3), of all the assets of the entity, other than:
(i) any *debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity debt of the entity; or
(ii) any *equity interests or debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity equity of the entity; and
(b) of a *foreign entity - is the average value, for the statement period mentioned in subsection (3), of all the assets of the entity that are:
(i) located in Australia; or
(ii) attributable to the entity ' s *Australian permanent establishments; or
(iii) debt interests held by the entity, that were *issued by an *Australian entity and are *on issue;
(iv) equity interests held by the entity in an *Australian entity.
For the purposes of the definition of average Australian assets in subsection (2) the statement period is the period for which the *audited consolidated financial statements for the entity for the income year have been prepared. 820-190(4)
For the purposes of the formula in paragraph (2)(c), if:
(a) an amount is included in *statement worldwide assets in respect of an asset; and
(b) the asset was acquired, held or otherwise dealt with by an entity for a purpose (other than an incidental purpose) that included ensuring that subsection (2) does not apply to an entity; and
(c) as a result of the acquisition, holding or dealing with of the asset, the amount included in statement worldwide assets exceeds the amount (including nil) that would otherwise be so included;
apply the amount of the excess to reduce statement worldwide assets (or statement worldwide assets as reduced by a previous application of this subsection).
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