Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p2
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 2/10)
Character Range: 7111565–7114303

debt does not exceed its *maximum allowable debt if the adjusted average debt is nil or a negative amount.

820‑190  Maximum allowable debt
 (1) The entity's maximum allowable debt for an income year is the greatest of the following amounts:
 (a) the *safe harbour debt amount;
 (c) unless subsection (2) applies to the entity—the *worldwide gearing debt amount.

Entities that are not eligible for the worldwide gearing debt amount
 (2) This subsection applies to an entity, if:
 (a) the entity has *statement worldwide equity, or *statement worldwide assets, of nil or a negative amount; or
 (b) *audited consolidated financial statements for the entity for the income year do not exist; or
 (c) the result of applying the following formula is greater than 0.5:

where:
average Australian assets:
 (a) of an *Australian entity—is the average value, for the statement period mentioned in subsection (3), of all the assets of the entity, other than:
 (i) any *debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity debt of the entity; or
 (ii) any *equity interests or debt interests held by the entity, to the extent to which any value of the interests is all or a part of the *controlled foreign entity equity of the entity; and
 (b) of a *foreign entity—is the average value, for the statement period mentioned in subsection (3), of all the assets of the entity that are:
 (i) located in Australia; or
 (ii) attributable to the entity's *Australian permanent establishments; or
 (iii) debt interests held by the entity, that were *issued by an *Australian entity and are *on issue;
 (iv) equity interests held by the entity in an *Australian entity.
 (3) For the purposes of the definition of average Australian assets in subsection (2) the statement period is the period for which the *audited consolidated financial statements for the entity for the income year have been prepared.
 (4) For the purposes of the formula in paragraph (2)(c), if:
 (a) an amount is included in *statement worldwide assets in respect of an asset; and
 (b) the asset was acquired, held or otherwise dealt with by an entity for a purpose (other than an incidental purpose) that included ensuring that subsection (2) does not apply to an entity; and
 (c) as a result of the acquisition, holding or dealing with of the asset, the amount included in statement worldwide assets exceeds the amount (including nil) that would otherwise be so included;
apply the amount of the excess to reduce statement worldwide assets (or statement worldwide assets as reduced by a previous application of this subsection).

820‑200  Safe harbour debt amount—inward investment vehicle (financial)