Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 1/5)
Character Range: 7150997–7153870

3                                             Section 820‑325              adjusted average equity capital has the meaning given by subsection (2) of this section
                                                                           average debt is taken to be 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, to the extent that the debt capital is not attributable to any of the entity's *overseas permanent establishments

Subdivision 820‑E—Thin capitalisation rules for inward investing entities (ADI)

Guide to Subdivision 820‑E

820‑390  What this Subdivision is about

      This Subdivision applies to a foreign entity that is an authorised deposit‑taking institution (an ADI). These rules deal with the following matters:
         • how to work out the entity's minimum capital amount for an income year;
         • how all or a part of the debt deductions claimed by the entity may be disallowed if the minimum capital amount is not reached;
         • how to apply these rules to a period that is less than an income year.

Table of sections

Operative provisions
820‑395 Thin capitalisation rule for inward investing entities (ADI)
820‑400 Minimum capital amount
820‑405 Safe harbour capital amount
820‑410 Arm's length capital amount
820‑415 Amount of debt deduction disallowed
820‑420 Application to part year periods

Operative provisions

820‑395  Thin capitalisation rule for inward investing entities (ADI)

Thin capitalisation rule
 (1) This subsection disallows all or a part of each *debt deduction of an entity for an income year if, for that year:
 (a) the entity is an *inward investing entity (ADI) (see subsection (2)); and
 (b) the entity's *average equity capital (see subsection (3)) is less than its *minimum capital amount (see section 820‑400);
to the extent that the debt deduction:
 (c) is attributable to an *Australian permanent establishment of the entity at or through which it carries on its banking business; and
 (d) is not an *allowable OB deduction.
Note 1: This Subdivision does not apply if the total debt deductions of that entity and all its associate entities for that year are $2 million or less, see section 820‑35.
Note 2: To work out the amount to be disallowed, see section 820‑415.
Note 3: For the rules that apply to an entity that is an inward investing entity (ADI) for part of an income year, see section 820‑420 in conjunction with subsection (2) of this section.
Note 4: A consolidated group or MEC group may be an inward investing entity (ADI) to which this Subdivision applies: see Subdivision 820‑FB.

Inward investing entity (ADI)
 (2) The entity is an inward investing entity (ADI) for a period that is all or a part of an income year if, and only if, throughout that period, the entity is a