Income Tax Assessment Act 1997
This subsection disallows all or a part of each *debt deduction of an entity for an income year that is an amount incurred by the entity during a period that is a part of that year, if:
(a) the entity is an *inward investing entity (non-ADI) for that period, but is not also an *outward investing entity (non-ADI) for all or any part of that period; and
(b) the entity ' s *adjusted average debt for that period exceeds the entity ' s *maximum allowable debt for that period.
To determine whether an entity is an inward investing entity (non-ADI) for a period, see subsection 820-185(2) .820-225(2)
The entity ' s adjusted average debt for that period is the result of applying the method statement in this subsection. Method statement
Work out the average value, for that period, of all the *debt capital of the entity that gives rise to *debt deductions of the entity for that or any other income year.
Reduce the result of step 1 by the average value, for that period, of:
If the entity is a *financial entity throughout that period, add to the result of step 2 the average value, for that period, of the entity ' s *borrowed securities amount.
Add to the result of step 3 the average value, for that period, of the *cost-free debt capital of the entity. The result of this step is the adjusted average debt .
To calculate an average value for the purposes of this Division, see Subdivision 820-G .
The entity ' s *adjusted average debt does not exceed its *maximum allowable debt if the adjusted average debt is nil or a negative amount. 820-225(3)
For the purposes of determining:
(a) the *maximum allowable debt for the period mentioned in subsection (1); and
(b) the amount of each *debt deduction to be disallowed;
sections 820-190 to 820-220 apply in relation to that entity and that period with the modifications set out in the following table:
|Modifications of sections 820-190 to 820-220|
|1||Sections 820-190 to 820-220||A reference to an income year is taken to be a reference to that period|
|2||Section 820-220||A reference to subsection 820-185(1) is taken to be a reference to subsection (1) of this section|
|3||Section 820-220||adjusted average debt is taken to have the meaning given by subsection (2) of this section|
is taken to be the sum of:
(a) the average value, for that period, of the entity ' s *debt capital that is covered by step 1 of the method statement in subsection (2) of this section; and
(b) the average value, for that period, of the entity ' s *cost-free debt capital that is covered by step 4 of that method statement.
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