Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p7
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 7/8)
Character Range: 7098854–7101600

is an Australian entity, has a worldwide parent entity in the United States of America. TRR Limited also has permanent establishments in Malaysia. TRR Limited has statement worldwide debt of $90 million and statement worldwide equity of $30 million. The result of applying step 1 is therefore 3. Dividing 3 by 4 (through applying steps 2 and 3) and multiplying the result by $100 million (which is the result of step 7 of the method statement in subsection 820‑100(2)) equals $75 million. The zero capital amount is $5 million. Adding that amount to $75 million results in $80 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $80 million.

820‑115  Amount of debt deduction disallowed
 (1) If subparagraph 820‑85(1A)(b)(i) applies, the amount (the total disallowed amount) disallowed under subsection 820‑85(1) of the *debt deductions of an entity for an income year is the amount by which those debt deductions (to the extent that they are not attributable to an *overseas permanent establishment of the entity) exceed the entity's *third party earnings limit for the income year (see section 820‑427A).
Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54.
 (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) If subparagraph 820‑85(1A)(b)(ii) applies, the amount of a *debt deduction of an entity for an income year disallowed under subsection 820‑85(1) is worked out using the following formula:
where:
average debt means the sum of:
 (a) the average value, for the income year, of the entity's *debt capital that is covered by step 1 of the method statement in subsection 820‑85(3); and
 (b) the average value, for that year, of the entity's *cost‑free debt capital that is covered by step 5 of that method statement;
(disregarding any amount that is attributable to the entity's *overseas permanent establishments in working out the average values).
debt deduction means each *debt deduction covered by subsection 820‑85(1).
excess debt means the amount by which the entity's *adjusted average debt for that year (see subsection 820‑85(3)) exceeds its *maximum allowable debt for that year.
Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54.

820‑120  Application to part year periods
 (1) This subsection disallows all or a part of each *debt deduction of an entity for an income year