Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 1/7)
Character Range: 7132536–7135581

3                                             Section 820‑220              adjusted average debt is taken to have the meaning given by subsection (2) of this section
                                                                           average debt is taken to be the sum of:
                                                                           (a) the average value, for that period, of the entity's *debt capital that is covered by step 1 of the method statement in subsection (2) of this section; and
                                                                           (b) the average value, for that period, of the entity's *cost‑free debt capital that is covered by step 4 of that method statement.

Subdivision 820‑D—Thin capitalisation rules for outward investing entities (ADI)

Guide to Subdivision 820‑D

820‑295  What this Subdivision is about

      This Subdivision sets out the thin capitalisation rules that apply to an entity that is both an authorised deposit‑taking institution (an ADI) and an Australian entity that has certain types of overseas investments. These rules deal with the following matters:
         • how to work out the entity's minimum capital amount for an income year;
         • how all or a part of the debt deductions claimed by the entity may be disallowed if the minimum capital amount is not reached;
         • how to apply these rules to a period that is less than an income year.

Table of sections

Operative provisions
820‑300 Thin capitalisation rule for outward investing entities (ADI)
820‑305 Minimum capital amount
820‑310 Safe harbour capital amount
820‑315 Arm's length capital amount
820‑320 Worldwide capital amount
820‑325 Amount of debt deduction disallowed
820‑330 Application to part year periods

Operative provisions

820‑300  Thin capitalisation rule for outward investing entities (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 (ADI) (see subsection (2)); and
 (b) the entity's *adjusted average equity capital (see subsection (3)) is less than the entity's *minimum capital amount (see section 820‑305).
Note 1: This Subdivision does not apply if the total debt deductions of that entity and all its associate entities for that year are $2 million or less, see section 820‑35.
Note 2: To work out the amount to be disallowed, see section 820‑325.
Note 3: For the rules that apply to an entity that is an outward investing entity (ADI) for only part of an income year, see section 820‑330 in conjunction with subsection (2) of this section.
Note 4: A consolidated group or MEC group may be an outward investing entity (ADI) to which this Subdivision applies: see Subdivisions 820‑FA and 820‑FB.

Outward investing entity (ADI)
 (2) The entity is an outward investing entity (ADI) for a period that is all or a