Document ID: chunk:federal_register_of_legislation:C2024A00023:clause:2_29:p5
Version: federal_register_of_legislation:C2024A00023
Segment Type: clause
Provision Reference: sch 2 cl 29 (pt 5/15)
Character Range: 27653–30290

subsection 820‑46(3) or (4) in relation to the income year (fixed ratio test applies)—the amount by which the entity's *net debt deductions for the income year exceed the entity's *fixed ratio earnings limit for the income year (see section 820‑51); or
 (b) if the entity has made a choice under subsection 820‑46(3) in relation to the income year (group ratio test applies)—the amount by which the entity's net debt deductions for the income year exceed the entity's *group ratio earnings limit for the income year (see section 820‑51); or
 (c) if the entity has made a choice under subsection 820‑46(4) in relation to the income year (third party debt test applies)—the amount by which the entity's debt deductions for the income year exceed the entity's *third party earnings limit for the income year (see section 820‑427A).
Note 1: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54.
Note 2: The entity's net debt deductions for the income year can be a negative amount.
 (2) The amount by which a particular *debt deduction is disallowed as a result of subsection (1) is worked out as follows:
 (a) first, divide the total disallowed amount by the *debt deductions of the entity for the income year;
 (b) next, multiply the amount of the particular debt deduction by the result of paragraph (a).
 (3) An entity's net debt deductions for an income year is worked out as follows:
 (a) first, work out the sum of the entity's *debt deductions (disregarding this Division other than Subdivision 820‑EAA) for the income year;
 (b) next, work out the sum of each amount included in the entity's assessable income for that year that is:
 (i) interest, an amount in the nature of interest, or any other amount that is economically equivalent to interest; or
 (ii) any amount directly incurred by another entity in obtaining or maintaining the financial benefits received, or to be received, by the other entity under a *scheme giving rise to a *debt interest; or
 (iii) any other expense that is incurred by another entity and that is specified in the regulations made for the purposes of this subparagraph;
 (c) next, subtract the result of paragraph (b) from the result of paragraph (a).
 (4) To avoid doubt, an entity's net debt deductions for an income year can be a negative amount.

820‑51  Meaning of fixed ratio earnings limit and group ratio earnings limit
 (1) An entity's fixed ratio earnings limit for an income year is 30% of its *tax EBITDA for the income year.
 (2) An entity's group ratio earnings limit for an income year is its *group ratio for the income year multiplied by