Document ID: chunk:federal_register_of_legislation:C2025C00029:section:9:p9
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 9 (pt 9/19)
Character Range: 7050077–7052731

creditor); and
 (b) the creditor has recourse for payment of the debt to which the debt interest relates to assets of one or more other entities (each of which is an obligor entity).
 (2) Each obligor entity and the borrower is a member of an obligor group in relation to the *debt interest.
 (3) For the purposes of paragraph (1)(b), disregard assets that are *membership interests in the borrower.

820‑50  Amount of debt deduction disallowed
 (1) The amount (the total disallowed amount) disallowed under subsection 820‑46(1) of the *debt deductions of an entity for an income year is:
 (a) if the entity has not made a choice under subsection 820‑46(3) or (4) in relation to the income year (fixed ratio test applies)—the amount by which the entity's *net debt deductions for the income year exceed the entity's *fixed ratio earnings limit for the income year (see section 820‑51); or
 (b) if the entity has made a choice under subsection 820‑46(3) in relation to the income year (group ratio test applies)—the amount by which the entity's net debt deductions for the income year exceed the entity's *group ratio earnings limit for the income year (see section 820‑51); or
 (c) if the entity has made a choice under subsection 820‑46(4) in relation to the income year (third party debt test applies)—the amount by which the entity's debt deductions for the income year exceed the entity's *third party earnings limit for the income year (see section 820‑427A).
Note 1: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54.
Note 2: The entity's net debt deductions for the income year can be a negative amount.
 (2) The amount by which a particular *debt deduction is disallowed as a result of subsection (1) is worked out as follows:
 (a) first, divide the total disallowed amount by the *debt deductions of the entity for the income year;
 (b) next, multiply the amount of the particular debt deduction by the result of paragraph (a).
 (3) An entity's net debt deductions for an income year is worked out as follows:
 (a) first, work out the sum of the entity's *debt deductions (disregarding this Division other than Subdivision 820‑EAA) for the income year;
 (b) next, work out the sum of each amount included in the entity's assessable income for that year that is:
 (i) interest, an amount in the nature of interest, or any other amount that is economically equivalent to interest; or
 (ii) any amount directly incurred by another entity in obtaining or maintaining the financial benefits received, or to be received, by the other entity under a *scheme giving rise to a *debt interest; or
 (iii) any