Document ID: chunk:federal_register_of_legislation:C2025C00029:section:9:p6
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 9 (pt 6/19)
Character Range: 7042957–7045524

class investors

Thin capitalisation rule
 (1) This subsection disallows all or part of an entity's *debt deductions for an income year if, for that year:
 (a) the entity is a *general class investor (see subsection (2)); and
 (b) the entity:
 (i) has not made a choice under subsection (3) or (4) (fixed ratio test applies); or
 (ii) has made a choice under subsection (3) (group ratio test applies); or
 (iii) has made a choice under subsection (4) (third party debt test applies).
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 820‑50.
Note 3: A consolidated group or MEC group may be a general class investor to which this Subdivision applies: see Subdivisions 820‑FA and 820‑FB.

General class investor
 (2) The entity is a general class investor for an income year if, and only if:
 (a) for a period that is all or part of the income year, the entity is not any of the following:
 (i) an *outward investing financial entity (non‑ADI);
 (ii) an *inward investing financial entity (non‑ADI);
 (iii) an *outward investing entity (ADI);
 (iv) an *inward investing entity (ADI); and
 (b) assuming that the entity were a *financial entity for all of the income year, it would be, for the income year, any of the following:
 (i) an outward investing financial entity (non‑ADI);
 (ii) an inward investing financial entity (non‑ADI).
 (3) An entity that is a *general class investor for an income year may make a choice under this subsection to apply the group ratio test in relation to that income year if:
  (a) the entity is a *GR group member for the period corresponding to the income year of a *GR group for the period; and
 (b) the *GR group EBITDA for the period of the GR group is greater than zero.
 (4) An entity that is a *general class investor for an income year may make a choice under this subsection to apply the third party debt test in relation to that income year.
 (5) An entity that is a *general class investor for an income year is taken to have made a choice under subsection (4) in relation to that income year if section 820‑48 applies to the entity in relation to that income year.
 (6) Subsection (5) applies despite subsection 820‑47(1).

820‑47  Choices under subsection 820‑46(3) or (4)
 (1) A choice under subsection 820‑46(3) or (4) can only be made in the *approved form.
 (2) A choice under subsection 820‑46(3) or (4) can only be made:
 (a) on or