Document ID: chunk:federal_register_of_legislation:C2004A00897:clause:1_4:p10
Version: federal_register_of_legislation:C2004A00897
Segment Type: clause
Provision Reference: sch 1 cl 4 (pt 10/11)
Character Range: 69367–72180

entity for that year.

excess debt means the amount by which the *adjusted average debt (see subsection 820‑185(3)) exceeds the entity's *maximum allowable debt for that year.

820‑225  Application to part year periods

 (1) This subsection disallows all or a part of each *debt deduction of an entity for an income year that is an amount incurred by the entity during a period that is a part of that year, if:
 (a) the entity is an *inward investing entity (non‑ADI) for that period, but is not also an *outward investing entity (non‑ADI) for all or any part of that period; and
 (b) the entity's *adjusted average debt for that period exceeds the entity's *maximum allowable debt for that period.

Note: To determine whether an entity is an inward investing entity (non‑ADI) for a period, see subsection 820‑185(2).

 (2) The entity's adjusted average debt for that period is the result of applying the method statement in this subsection.

      Method statement
           Step 1. Work out the average value, for that period, 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 that period, of:

                (a) if the entity is an *inward investment vehicle (general) or an *inward investment vehicle (financial) for that period—all the *associate entity debt of the entity; or
                (b) if the entity is an *inward investor (general) or an *inward investor (financial) for that period—all the associate entity debt of the entity, to the extent that it is attributable to the entity's *Australian permanent establishments.

           Step 3. If the entity is a *financial entity throughout that period, add to the result of step 2 the average value, for that period, of the entity's *zero‑capital amount, to the extent that:

                (a) the zero‑capital amount is attributable to the securities loan arrangements mentioned in step 1 of the method statement in subsection 820‑942(1); and
                (b) the securities loan arrangements are not *debt interests.

           Step 4. Add to the result of step 3 the average value, for that period (the relevant period), of any *debt capital of the entity that does not give rise to any *debt deductions of the entity for that or any other income year, if:

                (a) the debt capital is comprised of *debt interests issued to another entity that remain *on issue; and
                (b) that other entity is an *outward investing entity (non‑ADI) or *inward investing entity (non‑ADI) for a period that is, or includes, all or a part of the relevant period; and
                (c) for the purposes of the application of this Division to the entities, and in relation to