Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-A - Preliminary  

SECTION 820-37   Application - assets threshold  

820-37(1)  
Subdivision 820-B , 820-C , 820-D or 820-E does not apply to disallow any *debt deduction of an entity for an income year if:


(a) the entity is an *outward investing entity (non-ADI) or an *outward investing entity (ADI) for a period that is all or any part of that year; and


(b) the entity is not also an *inward investing entity (non-ADI) or an *inward investing entity (ADI) for all or any part of that period; and


(c) the result of applying the following formula is equal to or greater than 0.9:


Sum of the average Australian assets of the entity and the average
                        Australian assets of each of the entity ' s *associates                        
Sum of the average total assets of the entity and the average total
assets of each of the entity ' s associates

where:

average Australian assets :

(a) of an *Australian entity - is the average value, for that year, of all the assets of the entity, other than:


(i) any assets attributable to the entity ' s *overseas permanent establishments; or

(ii) 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

(iii) 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; or

(iv) any debt interests that are *issued by *associates of the entity, that are *on issue, and that are held by the entity; or

(v) any equity interests that the entity holds in associates of the entity; and


(b) of a *foreign entity - is the average value, for that year, 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, to the extent to which the interests are covered by subsection (2); or

(iv) equity interests held by the entity, to the extent to which the interests are covered by subsection (3);
other than:

(v) any debt interests that are issued by associates of the entity, that are on issue, and that are held by the entity; or

(vi) any equity interests that the entity holds in associates of the entity.

average total assets
of an entity is the average value, for that year, of all the assets of the entity, other than:


(a) any *debt interests that are *issued by *associates of the entity, that are *on issue, and that are held by the entity; or


(b) any *equity interests that the entity holds in associates of the entity.

Foreign entity - debt interest issued by an Australian entity

820-37(2)  


If a *foreign entity holds a *debt interest that:


(a) was *issued by an *Australian entity; and


(b) is *on issue;

this subsection covers the interest to the extent to which the interest is not attributable to any *overseas permanent establishments of the Australian entity.

Foreign entity - equity interest in an Australian entity

820-37(3)  


If a *foreign entity holds an *equity interest in an *Australian entity, this subsection covers the interest to the extent to which the interest is not attributable to any *overseas permanent establishments of the Australian entity.

 

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