Private ruling: Financial entity definition
Date of advice: 3 November 2025
Published: 22 December 2025
Ruling period: XX July 20XX to XX June 20XX
Date scheme commenced: XX July 20XX

Ruling: Q1: For the purposes of the thin capitalisation rules in Division 820 of the Income Tax Assessment Act 1997 (ITAA 1997), is Entity X a 'financial entity' under paragraph (a) of the definition in subsection 995-1(1) of the ITAA 1997? | A1: Yes.

Relevant facts and circumstances: Entity Y Group Entity Y is a global financing institution that is in the business of banking, the provision of finance, asset management and other investment activities. Entity Y is headquartered in Country X. Entity Y has overseas branches and subsidiaries in different locations around the globe. Entity Y formulates the global general strategy and investment parameters for lending to world-wide customers. Entity X Entity X is an Australian incorporated company and a tax resident of Australia. Entity X is a member of the Entity Y Group, as a wholly owned subsidiary of Entity Y. Entity X is a registered financial corporation in Australia under the Financial Sector (Collection of Data) Act 2001 (FS(CoD)Act 2001) and is not an ADI (authorised deposit-taking institution) for the purposes of the Banking Act 1959 . Entity X's operations are limited to the provision of finance to Australian clients and focuses on commercial lending to specific industries in the Australian market. Entity X's income is predominately comprised of interest income derived from providing loans (mostly from syndicated loan facilities) to third-party borrowers. All Entity X's lending is provided to third parties (i.e. no lending is provided by Entity X to its associates). Entity X is fully funded by Entity Y through debt funding. Loans provided from Entity X to third-party borrowers Entity X is required to operate within investment parameters set by Entity Y on a global basis. Entity X identifies and assesses new borrowers and negotiates with those borrowing customers on lending contract terms/conditions. Entity Y does not provide Entity X with any referrals or instructions for the purposes of Entity X lending to any entity (i.e. Entity X is the sole entity that identifies its prospective borrowers). Entity X's investment management board has ultimate decision-making authority, prepares lending authorisations independently, and determines any particular loan conditions. Entity X determines specific lending considerations, within the parameters set by Entity Y. Entity X's investment management board is responsible for negotiating key lending terms. Entity X independently determines the interest rates charged to third-party customers, within the parameters set by Entity Y. Entity X makes an initial assessment of credit risk associated with a potential customer and proposes an initial credit rating (within the investment parameters set by Entity Y). Entity Y has approval authority over the internal rating set by Entity X as part of its global credit policies. Entity Y confirms the internal credit rating is correct and within the investment parameters. In some circumstances, Entity Y may set an internal credit rating which is not in line with that which Entity X applied for. If this occurs, Entity X will need to reconsider if it lends on the terms originally envisaged or negotiate a higher spread with the customer. Entity X seeks funding approval from Entity Y, who can deny funding when the credit risk of the customer loan is considered significantly high. If funding was denied by Entity Y, Entity X would consider if it lends without Entity Y funding as Entity X is not legally precluded from obtaining funding elsewhere. Loan contracts are signed by the borrowing customer and the Managing Director of Entity X (i.e. Entity X legally concludes these contracts in its own right). No arrangement (legal, equitable or any other form of understanding) exists between any borrowing entity and Entity Y in relation to the loan entered into with Entity X. When Entity X executes the customer loan, Entity X receives funding from Entity Y to support the underlying customer loan. Following execution of loans with third-party borrowers, loans are monitored by Entity X and Entity X bears any loss on the loans provided. Entity X monitors the individual credit risks of borrowers. Entity X bears the credit risk of providing loans. There is no risk participation structure in place with Entity Y. Assumptions Entity X will continue to be registered under the FS(CoD) Act 2001 throughout the ruling period. The predominance of financing income that Entity X generates, will not materially change throughout the ruling period. Entity X will continue to apply to Entity Y for funding of its loan portfolio on an aggregate basis throughout the ruling period. Entity X will not provide finance to any entity that is an associate in the ruling period. Entity X will continue to exercise sole discretion in decision making regarding origination of loans to entities that are not its associates through the ruling period. The investment parameters set by Entity Y (or any associate) for Entity X will not change in any way that inhibits or fetters the decision-making autonomy of Entity X such that Entity X is providing finance on behalf of Entity Y or another associate throughout the ruling period.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 995-1(1) | Treasury Laws Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Act 2024

Reasons for decision: Detailed Reasoning - Background: Treasury Laws Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Act 2024 modified the thin capitalisation rules to limit the amount of debt deductions multinational entities can claim in an income year. The new thin capitalisation rules seek to align with the Organisation for Economic Co-operation and Development's (OECD's) earnings-based best practice model which allows an entity to deduct net interest expense up to a benchmark earnings ratio. Under the new thin capitalisation rules, eligible financial entities may utilise the safe harbour or worldwide gearing tests, or may choose to apply the new third party debt test. Under the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Act 2024, two additional conditions were added to strengthen the definition of 'financial entity' in paragraph (a) of subsection 995-1(1) of the ITAA 1997. Paragraph 2.30 of the Explanatory Memorandum to the Treasury Law Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency Bill 2023(explanatory memorandum), states that the additional conditions act as an integrity measure to ensure the thin capitalisation rules are fit for purpose and the amendments to introduce the new earnings-based rules are not undermined. Prior to these amendments, a registered corporation under the Financial Sector (Collection of Data) Act 2011 (FS(CoD) Act 2001) would satisfy the definition of 'financial entity'. The revised definition of 'financial entity' in subsection 995-1(1) of the ITAA 1997 now provides: 'financial entity', at a particular time, means an entity other than an *ADI that is any of the following at that time: (a) an entity that: (i) is a registered corporation under the Financial Sector (Collection of Data) Act 2011; and (ii) at the particular time, carries on a *business of providing finance, but not predominantly for the purposes of providing finance directly or indirectly to, or on behalf of, the entity's associates; and (iii) in the income year in which the particular time occurs, derives all, or substantially all, of its profits from that business... | Detailed Reasoning - An entity other than an ADI: The definition of 'financial entity' deals with an entity other than an ADI. Subsection 995-1(1) of the ITAA 1997 defines ADI (authorised deposit-taking institution) as a body corporate that is an ADI for the purposes of the Banking Act 1959. Under section 9C of the Banking Act 1959 the Australian Prudential Regulation Authority (APRA) publishes a list of ADIs. Entity X is not listed as an ADI and is therefore not excluded from being a financial entity for this reason. Therefore, each subparagraph of the definition of 'financial entity' will be considered below. | Detailed Reasoning - Subparagraph (i) - is a registered corporation under the Financial Sector (Collection of Data) Act 2001: The FS(CoD) Act 2001 empowers APRA to collect information to assist it in the prudential regulation of bodies in the financial sector and to facilitate the formulation by the Reserve Bank of monetary policy. A 'registrable corporation' is defined in section 7 of the FS(CoD) Act 2001 as a corporation which is a foreign corporation, a trading corporation formed within the limits of Australia, or a financial corporation so formed and where: (1) the corporation engages in the provision of finance in the course of carrying on business in Australia... Entity X is a registered corporation under the FS(CoD) Act 2001 and therefore meets the requirements of subparagraph (a)(i) of the amended definition of 'financial entity' in subsection 995-1(1) of the ITAA 1997. Subparagraph (ii) - at the particular time, carries on a *business of providing finance, but not predominately for the purpose of providing finance directly or indirectly to, or on behalf of, the entity's associates | Detailed Reasoning - Carries on a business of providing finance: The term 'business' is defined in subsection 995-1(1) as including any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Taxation Ruling TR 2005/5 Income tax: ascertaining the right to tax United States (US) and United Kingdom (UK) resident financial institutions under the US and UK Taxation Conventions in respect of interest income arising in Australia (TR 2005/5) provides guidance on the term 'carrying on a business of providing finance' as follows: | Detailed Reasoning - Using those funds in carrying on a business of providing finance: 22. The term 'providing finance' takes on its ordinary meaning and in the Macquarie Dictionary is defined as:to supply with means of payment; provide capital for; obtain or furnish credit for. 23. ... a provision of finance entails the supply or provision of funds or assets with an obligation (either contingent or non-contingent) on the recipient to return these funds or assets in the future. | Detailed Reasoning - The meaning of the term 'using those funds in carrying on a business of providing finance': 95. .... whether an enterprise is 'carrying on a business of providing finance' is a question of fact and would need to be considered in the light of the general principles relevant to this question. 95B. Although there is a presumption that certain companies carry on a business, it is necessary to determine whether the presumption is maintained or rebutted. This requires consideration of the specific circumstances of, and activities carried out by, the company having regard to the indicia of carrying on a business. A range of indicia are relevant in determining whether a business is carried on, including: • whether the person intends to carry on a business; • the nature of the activities, particularly whether they have a profit-making purpose; • whether the activities are: • repeated and regular; • organised in a business-like manner, including the keeping of books, records and the use of a system; • the size and scale of the activities including the amount of capital employed in them; and • whether the activity is better described as a hobby, or recreation. Entity X was established as a registered financial corporation and its operations are focused on specific lending opportunities in Australia. Entity X identifies new customers/investment opportunities. Entity X prepares lending authorisations, determines loan conditions and sets the interest rates charged to third-party customers. Based on the range of indicia listed above, and the activities of Entity X, the Commissioner is satisfied that Entity X carries on a business of providing finance, as it was established in Australia for this purpose and engages in significant repeated and regular lending activities for the purposes of profit. | Detailed Reasoning - Not predominantly for the purpose of providing finance directly or indirectly to the entity's associates: Entity X does not provide finance directly or indirectly to its associates. All Entity X's financing is provided to third parties as part of its lending business. Entity X therefore does not carry on its business of providing finance predominantly for the purposes of providing finance directly or indirectly to its associates. | Detailed Reasoning - Not predominately for the purpose of providing finance on behalf of the entity's associates: Determining whether Entity X carries on a business of providing finance predominately for the purpose of providing finance on behalf of the entity's associates requires consideration of whether Entity X is predominantly providing finance 'on behalf of' Entity Y. | Detailed Reasoning - 'On behalf of': The phrase 'on behalf of' is used in paragraph (a), (c) and (d) of the definition of financial entity under subsection 995-1(1) of the ITAA 1997. This demonstrates that the categories of financial entity (other than securitisation vehicles) that rely on registration within the ambit of Australian financial services regulation all include a requirement that the entity's business dealings are not 'on behalf of' an associate. This consistency across definitions demonstrates that the categories of the 'financial entity' definition are intended to capture entities that carry on their business of providing finance when dealing in their own capacity independently, and is not generally available to captive, trustee or other intermediary entities that operate absent such independence. As a starting point, the phrase 'on behalf of' is not defined in the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936) and therefore, the ordinary meaning of the term is considered. The Macquarie Dictionary, [Online], viewed 28 March 2025 www.macquariedictionary.com.au defines 'behalf' as follows: phrase 1. on someone's behalf , Also, US , in someone's behalf . in someone's interest; in aid of someone: to increase one's efforts on someone's behalf. • 2. on behalf of , Also, US , in behalf of . • a. as a representative of: to accept the prize on behalf of the team. • b. in the interest of; in aid of: to work on behalf of the poor. In considering the interpretation of the provision of an Act, section 15AA of the Acts Interpretation Act 1901 states: In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation. The majority of the High Court in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 defined the modern approach to statutory interpretation, stating at 408: Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Earlier, in Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981)147 CLR 297, the High Court said at 320: Generally speaking, mere inconvenience of result in itself is not a ground for departing from the natural and ordinary sense of the language read in its context. But there are cases in which inconvenience of result or improbability of result assists the court in concluding that an alternative construction which is reasonably open is to be preferred to the literal meaning because the alternative interpretation more closely conforms to the legislative intent discernible from other provisions in the statute. Further in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 the High Court said at [78]: [T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision be read in a way that does not correspond with the literal or grammatical meaning. In R v Toohey; Ex parte Attorney General (N.T) (1980) 145 CLR 374 the High Court considered the phrase "on behalf of" and stated the following: The phrase "on behalf of" is, as Latham CJ observed in R v Portus; Ex parte Federated Clerks Union of Australia (1949) 79 CLR 428 at 435 "not an expression which has a strict legal meaning", it bears no single and constant significance. Instead it may be used in conjunction with a wide range of relationships, all however in some way concerned with the standing of one person as auxiliary to or representative of another person or thing. In what is perhaps its least specific use, "on behalf of" may be applied to someone who does no more than express support for persons or for a cause, as with one who speaks on behalf of the poor or on behalf of tolerance. It may be used when speaking of an agency relationship, but also of some quite ephemeral relationships, such as that which exists between a party to litigation and the witness he calls, a witness "on behalf of" the defence. Again, it may, as the Northern Territory here contends, be used where the relationship is that of trustee and cestui que trust. It was of such a use that Lord Cairns LC spoke when he said, in Gillespie v City of Glasgow Bank (1879) 4 App Cas 632; that the phrase could describe a relationship of trustee and cestui que trust "if the circumstances of the case are consistent with that interpretation" (at 640). Context will always determine to which of the many possible relationships the phrase "on behalf of" is in a particular case being applied; "the context and subject matter" (per Dixon J in the Federated Clerks' case, at 438 ) will be determinative. Based on the case law outlined above, the following principles can be drawn as being critical when considering if one entity is acting on behalf of another: • The phrase 'on behalf of' has no single meaning, nor a strict legal meaning. • 'On behalf of' can be used in a wide range of relationships, however all will in some way be concerned with the standing of one person as auxiliary to or representative of another person or thing. • The relevant context and subject matter will be determinative in understanding which of the many possible relationships is being applied in a particular case. | Detailed Reasoning - Context and purpose: As explained above, the relevant context and subject matter will be determinative in understanding which of the many possible relationships encompassed in the phrase 'on behalf of' achieves the object and purpose of the legislation. As stated above, the purpose of Division 820 is to ensure an excessive amount of debt deductions are not used to reduce tax liabilities by entities in financing their Australian operations. The Explanatory Memorandum provides the following guidance on the changes to the 'financial entity' definition: 2.28 Schedule 2 strengthens paragraph (a) of the definition of 'financial entity' in subsection 995-1(1) by adding two additional conditions to that part of the definition. Current paragraph (a) of the definition of 'financial entity' provides that "financial entity, at a particular time, means an entity other than an ADI that is ... a registered corporation under the Financial Sector (Collection of Data) Act 2001 ...". This is a broad definition that is used for different policy reasons regarding the collection of financial data. Non-ADI corporations may register even though the financial transactions relating to which they register are relatively minor when compared to their other business activities. Given the changes in 2018 to broaden the definition, an increasing number of entities are now claiming to be financial entities for tax purposes. 2.29 'Financial entities' and ADIs continue to have access to the existing thin capitalisation tests (with the exception of the arm's length debt test for financial entities, which is being replaced by the third party debt test). The existing asset-based tests are generally more favourable to taxpayers than the new earnings-based tests which only apply to general class investors. This has given rise to integrity concerns regarding whether entities which satisfy current paragraph (a) should genuinely be considered financial entities for income tax purposes, with access to the generally more favourable taxation treatment. 2.30 The additional conditions under paragraph (a) include requirements for the entity to be carrying on a business of providing finance but not predominantly for the purposes of providing finance directly or indirectly to or on behalf of the entity's associates. The entity must also derive all, or substantially all, of its profits from that business. The term 'all, or substantially all' is adopted to cover circumstances where all of the entity's profits are derived from that business but accommodating other minor or incidental profits. The additional requirements are an integrity measure to ensure the thin capitalisation rules are fit for purpose and that the amendments to introduce the new earnings-based rules are not undermined. Further, the Explanatory Memorandum states that the Government's Budget announcement to strengthen Australia's thin capitalisation rules to address risks to the domestic tax base arising from the use of excessive debt deductions was informed by the OECD's best practice guidance. Chapter 10 of the OECD's best practice guidance deals with applying the best practice approach to banking and insurance groups and outlines that the new thin capitalisation tests introduced for other investors are unlikely to be effective in addressing base erosion and profit shifting risks for banking and insurance companies. As these groups are important sources of debt funding for groups in other sectors and therefore these groups will often have net interest income rather than net interest expense. Therefore: 188. ... countries may consider excluding entities in groups operating in these sectors from the scope of these rules, in which case they should introduce targeted rules addressing base erosion and profit shifting in these sectors... 189. Any exclusion should not apply to treasury companies, captive insurance companies or other non-regulated entities which carry out quasi-banking or other financial activities where there are no regulatory restraints, or to investment vehicles whether or not regulated. These entities should remain subject to the rules contained in the best practice approach. The context, subject matter and purpose of the amendments indicates that a range of relationships could constitute one entity providing finance 'on behalf' of another entity in this context and that there was no singular relationship in contemplation. The above comments in the Explanatory Memorandum and the OECD's best practice guidance illustrate that the purpose of modifying the definition of 'financial entity' was to restrict the more favourable existing thin capitalisation tests to only be available to entities which should genuinely be considered financial entities for income tax purposes where the new thin capitalisation tests (that apply to limit net debt deductions) would be ill suited i.e. those who carry on a genuine business of providing finance to third parties, operating on the profit margin between the cost of funds and the income from the use of such funds in providing finance, and accounts for only minor or incidental profits from other activities. The amendments operate as an integrity measure with the aim of ensuring that the new earnings-based rules are not undermined. An entity which will be considered a financial entity for income tax purposes, is one that is carrying on a business of providing finance to third parties and conducting that business independently and free from undue external influence. Where an entity is carrying on such a business as a subsidiary member of a financial institution, the entity must be capable of demonstrating that it is carrying on its business with independence from other members of that financial institution (for example, it exercises autonomous decision making in issuing loans and sourcing its finance, and is not acting as a mere auxiliary or representative of an associate). Further, the condition that the purposes not be predominantly for providing finance 'directly or indirectly [...] on behalf of' requires a holistic understanding of the nature of direct and indirect relationships with the entity's associates. It is in this context that the phrase 'on behalf of' is adopted, and the context which guides the meaning of relationships intended to be covered by the use of that phrase. While each case must be considered on its own facts and circumstances, the definition of 'financial entity' excludes entities such as (but not limited to) treasury companies, captive insurance entities, investment companies, mere conduits, entities acting at the direction of an associate with little independence of their own, and those acting as agents or nominees. Such entities do not carry on business providing finance in their own right and accordingly cannot meet the requirements of not providing finance to or on behalf of (directly or indirectly) an associate. The existing asset-based tests will not apply to such entities as this would undermine the purpose of the amendments. | Detailed Reasoning - Application to Entity X: Whether Entity X is carrying on its business of providing finance 'on behalf of' Entity Y requires an examination of the relationship between Entity X and Entity Y, followed by an assessment of whether Entity X is standing in as auxiliary of or representative of Entity Y to such a degree that it is considered to be carrying on its business of providing finance on behalf of Entity Y. Relevant to determining whether Entity X is acting in such a manner in providing loans to third parties is determining who is responsible for certain tasks and decision making within the context of its overall lending operations and whether Entity Y is acting throughout this process with sufficient independence. In considering the operation of a business of providing finance, key functions of that business are the conclusion of loan contracts and the decisions around the provision of finance (e.g. who to lend to, the interest rate charged, the amount lent etc.). A clear indicator that an entity is acting in its own right and not 'on behalf of' its associate is the independence to make these critical business decisions. In considering the functions performed by Entity X and Entity Y in relation to Entity X's business of providing finance and the relationship between the two parties, there are some factors which indicate that Entity X is acting with a degree of dependence on Entity Y, including: • Entity X is a subsidiary of Entity Y and accordingly, is ultimately controlled by Entity Y. • Entity X is required to operate within investment parameters set by Entity Y on a global basis. • Entity Y has approval authority over Entity X's customer credit ratings as part of its global credit policies. • Entity X sources debt funding from Entity Y. However, the following features of the arrangement between Entity X and Entity Y are indicative of Entity X carrying on its business independently: • Entity X is not legally precluded from obtaining funding elsewhere. • Entity X identifies and assesses new borrowers and negotiates with those borrowing customers on lending contract terms/conditions. • Entity Y does not provide Entity X with any referrals or instructions for the purposes of Entity X lending to any entity (i.e. Entity X is the sole entity that identifies its prospective borrowers). • Entity X's Investment Management Board is the ultimate decision-making authority for issuing loans to third-party borrowers and monitors risks associated with loans. • Entity X makes an initial assessment of credit risk associated with a potential customer and proposes an initial credit rating (within the investment parameters), Entity Y then confirms this internal rating is within the investment parameters. • Entity X determines the interest rates charged to third-party customers, within the parameters set by Entity Y, and Entity X's Investment Management Board is responsible for negotiating key lending terms. • Loan contracts are signed by the borrowing customer and the CEO/Managing Director of Entity X (i.e. Entity X legally concludes these contracts in its own right). • No arrangement (legal, equitable or any other form of understanding) exists between any borrowing entity and Entity Y in relation to the loan entered into with Entity X. • Following execution of loans with third-party borrowers, loans are monitored by Entity X and Entity X bears any loss on the loans provided. Given the above, Entity X is responsible for key business decisions in relation to providing finance to unrelated borrowers. Entity Y provides debt financing to Entity X where its operations are consistent with the investment parameters; however, Entity X's decision-making authority is relevantly unfettered and it bears all risk for its business activities. While Entity X is an entity that is part of a global banking group, the facts and assumptions of the ruling posit that Entity X is not is undertaking its business on behalf of any of its other associates. The Commissioner is satisfied that Entity X is carrying on a business of providing finance in its own right and that Entity Y's interactions with Entity X's business operations do not impede Entity X's independence in a manner that rises to the level of Entity X being characterised as providing finance predominantly for the purposes of providing finance directly or indirectly 'on behalf of' Entity Y. This interpretation is consistent with the intention of paragraph (a) of subsection 995-1(1) of the ITAA 1997. Therefore, subparagraph (a)(ii) of the definition of 'financial entity' in subsection 995-1(1) is satisfied. | Detailed Reasoning - 'All or substantially all": Taxation Ruling TR 2025/2 Income tax: aspects of the third party debt test in Subdivision 820-EAB of the Income Tax Assessment Act 1997 ( TR 2025/2 ) provides guidance on the term 'all, or substantially all' in the context of paragraph 820-427A(3)(d) as follows: 113. Paragraph 820-427A(3)(d) is satisfied if, in relation to the relevant income year, the entity uses all, or substantially all, of the proceeds of issuing the debt interest to fund its commercial activities in connection with Australia that do not include any business carried on by the entity at or through its overseas permanent establishments, and the holding by the entity of any associate entity debt, controlled foreign entity debt or controlled foreign entity equity. ... 117. The words 'all, or substantially all' are designed to accommodate the minor or incidental use of proceeds of issuing the debt interest other than to fund the entity's commercial activities in connection with Australia. 118. The word 'substantially' should not be construed in isolation. It finds its place in the phrase 'all, or substantially all', and must be construed having regard to that whole phrase. Read as whole in the context it appears, 'substantially all' is synonymous with 'nearly all' or 'almost all'. Although the above comments are in relation to a different provision within the thin capitalisation regime, the comments are instructive given the similar context and identical wording of 'all, or substantially all'. Further, the Explanatory Memorandum provides some guidance on the phrase 'substantially all, of its profits' in the context of the definition of 'financial entity' stating: 2.30 The term 'all, or substantially all' is adopted to cover circumstances where all of the entity's profits are derived from that business but accommodating other minor or incidental profits. The additional requirements are an integrity measure to ensure the thin capitalisation rules are fit for purpose and that the amendments to introduce the new earnings-based rules are not undermined. Based on the above the term 'all, or substantially all'allows for circumstances where an entity's profits are derived from that business but accommodating other minor or incidental profits. Entity X's only business activity is providing loans to third-party borrowers, therefore the Commissioner is satisfied that Entity X derives all, or substantially all its income is from the business of providing finance. As Entity X derives all, or substantially all of its profits from its lending business it satisfies subparagraph (iii) of the definition of 'financial entity' under subsection 995-1(1) of the ITAA 1997. | Detailed Reasoning - Conclusion: Accordingly, Entity X satisfies paragraphs (i), (ii) and (iii) of the definition of 'financial entity' under paragraph (a) of subsection 995-1(1) of the ITAA 1997 and is therefore considered a 'financial entity' for the purposes of the thin capitalisation rules in Division 820 of the ITAA 1997.