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 1/2)
Character Range: 7104131–7107389

3                                            Section 820‑115             adjusted average debt is taken to have the meaning given by subsection (2) of this section
                                                                         average debt is taken to be the sum of:
                                                                         (a) the average value, for that period, of the entity's *debt capital that is covered by step 1 of the method statement in subsection (2) of this section; and
                                                                         (b) the average value, for that period, 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).

Subdivision 820‑C—Thin capitalisation rules for inward investing financial entities (non‑ADI)

Guide to Subdivision 820‑C

820‑180  What this Subdivision is about

      This Subdivision sets out the thin capitalisation rules that apply to an entity that is an inward investing financial entity (non‑ADI) for all of an income year (but not an outward investing financial entity (non‑ADI) for all or any part of that year). These rules deal with the following matters:
         • how to work out the entity's maximum allowable debt for an income year;
         • how all or a part of the debt deductions claimed by the entity may be disallowed if the maximum allowable debt is exceeded;
         • how to apply these rules to a period that is less than an income year.

Table of sections

Operative provisions
820‑185 Thin capitalisation rule for inward investing financial entities (non‑ADI)
820‑190 Maximum allowable debt
820‑200 Safe harbour debt amount—inward investment vehicle (financial)
820‑210 Safe harbour debt amount—inward investor (financial)
820‑217 Worldwide gearing debt amount—inward investment vehicle (financial)
820‑219 Worldwide gearing debt amount—inward investor (financial)
820‑220 Amount of debt deduction disallowed
820‑225 Application to part year periods

Operative provisions

820‑185  Thin capitalisation rule for inward investing financial entities (non‑ADI)

Thin capitalisation rule
 (1A) Subsection (1) applies if:
 (a) an entity is an *inward investing financial entity (non‑ADI) (see subsection (2)) for all of an income year, but is not also an *outward investing financial entity (non‑ADI) (see section 820‑85) for all or any part of that 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 820‑190) 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; or
 (b) if paragraph (1A)(b)(ii) applies—all or a part of each debt