Document ID: chunk:federal_register_of_legislation:C2004A00897:clause:1_4:p7
Version: federal_register_of_legislation:C2004A00897
Segment Type: clause
Provision Reference: sch 1 cl 4 (pt 7/11)
Character Range: 61761–64419

arisen because of the Australian investments.
           Step 4. Reduce the result of step 3 by the amount (the average on‑lent amount) which is the average value, for that year, of the *on‑lent amount of the entity (to the extent that it is the value of all or a part of the Australian investments). 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 on‑lent amount.
           Step 7. Reduce the result of step 6 by the average value, for that year, of all the *associate entity debt of the entity that has arisen because of the Australian investments. If the result of this step is a negative amount, it is taken to be nil.
           Step 8. Add to the result of step 7 the average value, for that year, of the entity's *associate entity excess amount. The result of this step is the adjusted on‑lent amount.
Example: FXS Financial SA is a company that is not an Australian entity. The average value of its Australian investments is $120 million.

 The average value of its relevant associate entity equity, non‑debt liabilities and on‑lent amount are $2 million, $3 million and $35 million respectively. Deducting those 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. Adding the average on‑lent amount of $35 million results in $95 million. Reducing the result of step 6 by the associate entity debt amount of $5 million results in $90 million. As the company does not have any associate entity excess amount, the adjusted on‑lent amount is therefore $90 million.

820‑215  Arm's length debt amount

 (1) The arm's length debt amount is a notional amount that, having regard to the factual assumptions set out in subsection (2) and the relevant factors mentioned in subsection (3), would satisfy both paragraphs (a) and (b):
 (a) the amount represents a notional amount of *debt capital that:
 (i) the entity would reasonably be expected to have throughout the income year; and
 (ii) would give rise to an amount of *debt deductions of the entity for that or any other income year; and
 (iii) would be attributable to the entity's Australian business as mentioned in subsection (2);
 (b) commercial lending institutions that were not *associates of the entity (the notional lenders) would reasonably be expected to have entered into *schemes that would:
 (i) give rise to *debt interests that constituted that notional amount of debt capital of the entity; and
 (ii) provide for terms and conditions for the debt interests