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 1/13)
Character Range: 7163238–7166269

3                                             Section 820‑415              average debt is taken to be the average value, for that period, of all the *debt capital of the entity that gives rise to its *debt deductions (other than *allowable OB deductions) for that year that are amounts incurred by the entity during that period
                                                                           average equity capital has the meaning given by subsection (2) of this section

Subdivision 820‑EAA—Debt deduction limitation rules for debt deduction creation (all relevant entities)

Guide to Subdivision 820‑EAA

820‑423  What this Subdivision is about

      This Subdivision sets out debt deduction limitation rules that apply to entities that are dealt with in rules set out in Subdivisions 820‑AA, 820‑B, 820‑C, 820‑D or 820‑E. These rules deal with:
             (a) debt deductions in relation to the acquisition of CGT assets, or legal or equitable obligations, from associate pairs of the acquirer; and
             (b) debt deductions in relation to a financial arrangement that is entered into by an entity to fund etc. certain payments or distributions to one or more associate pairs of the entity.
      The rules in this Subdivision are applied before the rules set out in Subdivisions 820‑AA, 820‑B and 820‑C. If a debt deduction of an entity is disallowed under this Subdivision, the debt deduction is disregarded for the purpose of applying those other Subdivisions (see section 820‑31).

Table of sections

Operative provisions
820‑423A Debt deduction limitation rule for debt deduction creation (all relevant entities)
820‑423B Amount of debt deduction disallowed
820‑423C This Subdivision does not limit reduction of debt deductions other provisions
820‑423D Schemes relating to this Subdivision

Operative provisions

820‑423A  Debt deduction limitation rule for debt deduction creation (all relevant entities)

Debt deduction limitation rule
 (1) This subsection disallows all or part of a *debt deduction of an entity for an income year if, for that year:
 (a) the entity is any of the following for that year:
 (i) a *general class investor;
 (ii) an *outward investing financial entity (non‑ADI);
 (iii) an *inward investing financial entity (non‑ADI); and
 (aa) the entity is not a *securitisation vehicle; and
 (b) subsection (2) or (5) applies.
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 1A: This Subdivision does not apply to certain special purpose entities: see section 820‑39.
Note 2: To work out the amount to be disallowed, see section 820‑423B.

Acquisition of CGT asset, or legal or equitable obligation
 (2) This subsection applies if all of the following conditions are satisfied:
 (a) an entity (the acquirer) *acquires a *CGT asset, or a legal or equitable obligation, either directly, or indirectly through one or more interposed entities, from one