Document ID: chunk:federal_register_of_legislation:C2004A00897:clause:1_9:p3
Version: federal_register_of_legislation:C2004A00897
Segment Type: clause
Provision Reference: sch 1 cl 9 (pt 3/4)
Character Range: 11217–14187

investing entities (non‑ADI)

Guide to Subdivision 820‑B

820‑65  What this Subdivision is about

      This Subdivision sets out the thin capitalisation rules that apply to an Australian entity that has certain types of overseas investments and is not an authorised deposit‑taking institution (an ADI). 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

820‑85 Thin capitalisation rule for outward investing entities (non‑ADI)
820‑90 Maximum allowable debt
820‑95 Safe harbour debt amount—outward investor (general)
820‑100 Safe harbour debt amount—outward investor (financial)
820‑105 Arm's length debt amount
820‑110 Worldwide gearing debt amount
820‑115 Amount of debt deduction disallowed
820‑120 Application to part year periods

[This is the end of the Guide.]

Operative provisions

820‑85  Thin capitalisation rule for outward investing entities (non‑ADI)

Thin capitalisation rule

 (1) This subsection disallows all or a part of each *debt deduction of an entity for an income year (to the extent that it is not attributable to an *overseas permanent establishment of the entity) if, for that year:
 (a) the entity is an *outward investing entity (non‑ADI) (see subsection (2)); and
 (b) the entity's *adjusted average debt (see subsection (3)) exceeds its *maximum allowable debt (see section 820‑90).

Note 1: This Subdivision does not apply if the total debt deductions of that entity and all its associate entities for that year are $250,000 or less, see section 820‑35.

Note 2: To work out the amount to be disallowed, see section 820‑115.

Note 3: For the rules that apply to an entity that is an outward investing entity (non‑ADI) for only a part of an income year, see section 820‑120 in conjunction with subsection (2) of this section.

Note 4: A resident TC group may be an outward investing entity (non‑ADI) to which this Subdivision applies, see Subdivision 820‑F.

Outward investing entity (non‑ADI)

 (2) The entity is an outward investing entity (non‑ADI) for a period that is all or a part of an income year if, and only if, it is:
 (a) an *outward investor (general) for that period (as set out in items 1 and 3 of the following table); or
 (b) an *outward investor (financial) for that period (as set out in items 2 and 4 of that table).

Outward investing entity (non‑ADI)
Item                                If:                                                                                                                                                                                          and:                                                                                         then: