Income Tax Assessment Act 1997



Division 820 - Thin capitalisation rules  

Subdivision 820-I - Associate entities  

SECTION 820-910   Associate entity debt  

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.


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.


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.

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.

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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