Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-I - Associate entities  

SECTION 820-910   Associate entity debt  

820-910(1)  
This section applies to an entity (the relevant entity ) that is an *outward investing entity (non-ADI), or an *inward investing entity (non-ADI), for a period (the relevant period ) that is all or a part of an income year.

820-910(2)  


This section also applies, for the relevant entity, to an *associate entity (a relevant associate entity ) of the relevant entity, if:


(a) either:


(i) the associate entity is an *outward investing entity (non-ADI), an *inward investment vehicle (general), or an *inward investment vehicle (financial), for the relevant period; or

(ii) the associate entity is an *inward investor (general) or an *inward investor (financial) for the relevant period, and the condition in subsection (2A) of this section is satisfied; and


(b) neither section 820-35 ($2 million debt deductions threshold) nor section 820-37 (exemption for entity with 90% Australian assets) prevents Subdivision 820-B , 820-C , 820-D or 820-E from disallowing any *debt deduction of the relevant associate entity for the income year; and


(c) for some or all of the relevant period, the relevant associate entity does not meet the conditions in subsection 820-39(3) (about exemption of certain special purpose entities); and


(d) the relevant associate entity is not an *exempt entity for the income year.

820-910(2A)  


The condition referred to in subparagraph (2)(a)(ii) is that the relevant period consists of one or more periods each of which is either or both of these:


(a) a period throughout which the *associate entity carries on its *business in Australia at or through one or more of its *Australian permanent establishments;


(b) a period throughout which the associate entity holds any of the following assets:


(i) assets that are attributable to the associate entity ' s Australian permanent establishments;

(ii) other assets that are held for the purposes of producing the associate entity ' s assessable income.

820-910(3)  
The relevant entity ' s associate entity debt at a particular time during the relevant period is the total value of all the *debt interests held by the relevant entity at that time that satisfy all of the following:


(a) the interests are *on issue at that time;


(b) each of the interests was *issued by a relevant associate entity;


(c) each of the interests gives rise to costs:


(i) that are *debt deductions, for an income year, of the relevant associate entity that issued the interest; and

(ii) to the extent that the costs are not amounts mentioned in paragraph 820-40(2)(c) and are costs ordinarily payable to an entity other than the relevant entity - that are assessable income of the relevant entity for an income year;


(d) the terms and conditions for each of the interests are those that would apply if the relevant entity and the relevant associate entity that issued the interest were dealing at *arm ' s length with each other.

820-910(4)  
For the purposes of subsection (3), take into account the value of a *debt interest issued by a *foreign entity only to the extent that the interest is attributable to any of the following assets that are held by the foreign entity throughout the relevant period:


(a) assets that are attributable to the foreign entity ' s *Australian permanent establishments;


(b) other assets held by the foreign entity for the purposes of producing the foreign entity ' s assessable income.


 

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