Document ID: chunk:federal_register_of_legislation:C2024A00023:clause:2_33
Version: federal_register_of_legislation:C2024A00023
Segment Type: clause
Provision Reference: sch 2 cl 33
Character Range: 56742–58970

33  Subsections 820‑85(1) and (2)
Repeal the subsections, substitute:

Thin capitalisation rule
 (1A) Subsection (1) applies if:
 (a) an entity is an *outward investing financial entity (non‑ADI) (see subsection (2)) for all of an income year; and
 (b) either:
 (i) the entity has made a choice under subsection (2C) in relation to the income year; or
 (ii) otherwise—the entity's *adjusted average debt (see subsection (3)) for the income year exceeds its *maximum allowable debt (see section 820‑90) for the income year.
Note: 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.
 (1) This subsection disallows:
 (a) if paragraph (1A)(b)(i) applies—all or part of the entity's *debt deductions for the income year (to the extent that they are not attributable to an *overseas permanent establishment of the entity); or
 (b) if paragraph (1A)(b)(ii) applies—all or a part of each debt deduction of the entity for the income year (to the extent that it is not attributable to an overseas permanent establishment of the entity).
Note 1: To work out the amount to be disallowed, see section 820‑115.
Note 2: For the rules that apply to an entity that is an outward investing financial entity (non‑ADI) for only a part of an income year, see section 820‑120 in conjunction with subsection (2) of this section.
Note 3: A consolidated group or MEC group may be an outward investing financial entity (non‑ADI) to which this Subdivision applies: see Subdivisions 820‑FA and 820‑FB.

Outward investing financial entity (non‑ADI)
 (2) The entity is an outward investing financial entity (non‑ADI) for a period that is all or a part of an income year if, and only if, it is an *outward investor (financial) for that period (according to the items of the following table).

Outward investing financial entity (non‑ADI)
Item                                          If:                                                                                                                                                                                          and:                                                               then: