Document ID: chunk:federal_register_of_legislation:C2004A00897:clause:1_4:p2
Version: federal_register_of_legislation:C2004A00897
Segment Type: clause
Provision Reference: sch 1 cl 4 (pt 2/11)
Character Range: 49226–51984

relation to only that part of the relevant year that falls within that period, the entities do not use the same *valuation days and the same number of valuation days to calculate the average value of their respective debt capital.

            The result of this step is the adjusted average debt.

Note: To calculate an average value for the purposes of this Division, see Subdivision 820‑G.

 (4) The entity's *adjusted average debt does not exceed its *maximum allowable debt if the adjusted average debt is nil or a negative amount.

820‑190  Maximum allowable debt

  The entity's maximum allowable debt for an income year is the greater of the following amounts:
 (a) the *safe harbour debt amount;
 (b) the *arm's length debt amount.

Note: The safe harbour debt amount differs depending on whether the entity is an inward investment vehicle (general), inward investment vehicle (financial), inward investor (general) or inward investor (financial), see sections 820‑195 to 820‑215.

820‑195  Safe harbour debt amount—inward investment vehicle (general)

  If the entity is an *inward investment vehicle (general) for the income year, the safe harbour debt amount is the result of applying the method statement in this section.

      Method statement
           Step 1. Work out the average value, for the income year, of all the assets of the entity.
           Step 2. Reduce the result of step 1 by the average value, for that year, of all the *associate entity debt of the entity.
           Step 3. Reduce the result of step 2 by the average value, for that year, of all the *associate entity equity of the entity.
           Step 4. Reduce the result of step 3 by the average value, for that year, of all the *non‑debt liabilities of the entity. If the result of this step is a negative amount, it is taken to be nil.
           Step 5. Multiply the result of step 4 by 3/4.
           Step 6. Add to the result of step 5 the average value, for that year, of the entity's *associate entity excess amount. The result of this step is the safe harbour debt amount.
Example: ALWZ Ltd, a company that is an Australian entity, has an average value of assets of $100 million.

 The average values of its associate entity debt, associate entity equity and non‑debt liabilities are $10 million, $5 million and $5 million respectively. Deducting these amounts from the result of step 1 (through applying steps 2 to 4) leaves $80 million. Multiplying $80 million by 3/4 results in $60 million. As the average value of the company's associate entity excess amount is $2 million, the safe harbour debt amount is therefore $62 million.

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

 (1) If the entity is an *inward investment