Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 1/10)
Character Range: 7109051–7111806

2                                            *foreign entity throughout a period that is all or a part of an income year                        is a *financial entity throughout that period  inward investor (financial) for that period

Note 1: To determine whether an entity is a foreign controlled Australian entity, see Subdivision 820‑H.
Note 2: An entity covered by item 2 of the table may be required to keep certain records, see Subdivision 820‑L.
 (2A) However, the entity is not an inward investing financial entity (non‑ADI) for a period that is all or a part of an income year if it is a *general class investor for that year.
 (2B) Subsection (2A) does not apply for the purposes of subsection 820‑46(2) (definition of general class investor).
 (2C) An entity that is an *inward investing financial entity (non‑ADI) for a period that is all or part of an income year may make a choice under this subsection to apply the third party debt test in relation to that income year.
 (2D) Section 820‑47 applies in relation to a choice under subsection (2C) in the same way that it applies in relation to a choice under subsection 820‑46(3) or (4).

Adjusted average debt
 (3) The entity's adjusted average debt for an income year is the result of applying the method statement in this subsection.

      Method statement
           Step 1. Work out the average value, for that year (the relevant year), of all the *debt capital of the entity that gives rise to *debt deductions of the entity for that or any other income year.
           Step 2. Reduce the result of step 1 by the average value, for the relevant year, of:

                (a) if the entity is an *inward investment vehicle (financial) for that year—all the *associate entity debt of the entity; or
                (b) if the entity is an *inward investor (financial) for that year—all the associate entity debt of the entity, to the extent that it is attributable to the entity's *Australian permanent establishments.

           Step 3. If the entity is a *financial entity throughout the relevant year, add to the result of step 2 the average value, for the relevant year, of the entity's *borrowed securities amount.
           Step 4. Add to the result of step 3 the average value, for the relevant year, of the *cost‑free debt capital of the entity. 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
 (1) The entity's maximum allowable debt for an income year is the greatest of the following amounts: