Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 1/8)
Character Range: 7083698–7086576

2                                             (a) the entity (the relevant entity) is an *Australian entity throughout a period that is all or a part of an income year; and                                                               the relevant entity is a *financial entity throughout that period  the relevant entity is an outward investing financial entity (non‑ADI) for that period
                                              (b) throughout that period, the relevant entity is an *associate entity of another Australian entity; and
                                              (c) that other Australian entity is an *outward investing financial entity (non‑ADI) or an *outward investing entity (ADI) for that period

Note: To determine whether an entity is an Australian controller of an Australian controlled foreign entity, see Subdivision 820‑H.
 (2A) However, the entity is not an outward investing financial entity (non‑ADI) for a period that is all or a part of an income year if it is a *general class investor for that year.
 (2B) Subsection (2A) does not apply for the purposes of subsection 820‑46(2) (definition of general class investor).
 (2BA) For the purposes of item 2 of the table in subsection (2) of this section, assume that the other *Australian entity is a *financial entity for all of the income year.
 (2C) An entity that is an *outward investing financial entity (non‑ADI) for a period that is all or part of an income year may make a choice under this subsection to apply the third party debt test in relation to that income year.
 (2D) Section 820‑47 applies in relation to a choice under subsection (2C) in the same way that it applies in relation to a choice under subsection 820‑46(3) or (4).

Adjusted average debt
 (3) The entity's adjusted average debt for an income year is the result of applying the method statement in this subsection. In applying the method statement, disregard any amount that is attributable to the entity's *overseas permanent establishments.

      Method statement
           Step 1. Work out the average value, for that year (the relevant year), of all the *debt capital of the entity that gives rise to *debt deductions of the entity for that or any other income year.
           Step 2. Reduce the result of step 1 by the average value, for the relevant year, of all the *associate entity debt of the entity.
           Step 3. Reduce the result of step 2 by the average value, for the relevant year, of all the *controlled foreign entity debt of the entity.
           Step 4. If the entity is a *financial entity throughout the relevant year, add to the result of step 3 the average value, for the relevant year, of the entity's *borrowed securities amount.
           Step 5. Add to the result of step 4 the average value, for the relevant year, of the *cost‑free debt capital of the entity. The result