Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) If the entity is an * outward investor (financial) for the income year, the safe harbour debt amount is the lesser of the following amounts:
(a) the * total debt amount (worked out under subsection (2));
(b) the * adjusted on - lent amount (worked out under subsection (3)).
However, if the 2 amounts are equal, it is the total debt amount.
(2) The total debt amount is the result of applying the method statement in this subsection. In applying the method statement, disregard any amount that is attributable to the entity's * overseas permanent establishments.
Method statement
Step 1. Work out the average value, for the income year, of all the assets of the entity.
Step 1A. Reduce the result of step 1 by the average value, for that year, of all the * excluded equity interests in the entity.
Step 2. Reduce the result of step 1A by the average value, for that year, of all the * associate entity debt of the entity.
Step 3. Reduce the result of step 2 by the average value, for that year, of all the * associate entity equity of the entity.
Step 4. Reduce the result of step 3 by the average value, for that year, of all the * controlled foreign entity debt of the entity.
Step 5. Reduce the result of step 4 by the average value, for that year, of all the * controlled foreign entity equity of the entity.
Step 6. Reduce the result of step 5 by the average value, for that year, of all the * non - debt liabilities of the entity.
Step 7. Reduce the result of step 6 by the average value, for that year, of the entity's * zero - capital amount. If the result of this step is a negative amount, it is taken to be nil.
Step 8. Multiply the result of step 7 by 15 / 16 .
Step 9. Add to the result of step 8 the average value, for that year, of the entity's * zero - capital amount.
Step 10. Add to the result of step 9 the average value, for that year, of the entity's * associate entity excess amount. The result of this step is the total debt amount .
Example: GLM Limited, a company that is an Australian entity, has an average value of assets (other than assets attributable to its overseas permanent establishments) of $160 million.
The average values of its relevant excluded equity interests, associate entity debt, associate entity equity, controlled foreign entity debt, controlled foreign entity equity, non - debt liabilities and zero - capital amount are $5 million, $5 million, $5 million, $9 million, $6 million, $5 million and $4 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 7) leaves $121 million. Multiplying $121 million by 15 / 16 results in $113.4375 million. Adding the average zero - capital amount of $4 million results in $117.4375 million. As the company does not have any associate entity excess amount, the total debt amount is therefore $117.4375 million.
(3) The adjusted on - lent amount is the result of applying the method statement in this subsection. In applying the method statement, disregard any amount that is attributable to the entity's * overseas permanent establishments.
Method statement
Step 1. Work out the average value, for the income year, of all the assets of the entity.
Step 1A. Reduce the result of step 1 by the average value, for that year, of all the * excluded equity interests in the entity.
Step 2. Reduce the result of step 1A by the average value, for that year, of all the * associate entity equity of the entity.
Step 3. Reduce the result of step 2 by the average value, for that year, of all the * controlled foreign entity debt of the entity.
Step 4. Reduce the result of step 3 by the average value, for that year, of all the * controlled foreign entity equity of the entity.
Step 5. Reduce the result of step 4 by the average value, for that year, of all the * non - debt liabilities of the entity.
Step 6. Reduce the result of step 5 by the amount (the average on - lent amount ) which is the average value, for that year, of the entity's * on - lent amount (other than * controlled foreign entity debt of the entity). If the result of this step is a negative amount, it is taken to be nil.
Step 7. Multiply the result of step 6 by 3 / 5 .
Step 8. Add to the result of step 7 the average on - lent amount.
Step 9. Reduce the result of step 8 by the average value, for that year, of all the * associate entity debt of the entity.
Step 10. Add to the result of step 9 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: GLM Limited, a company that is an Australian entity, has an average value of assets (other than assets attributable to its overseas permanent establishments) of $160 million.
The average values of its relevant excluded equity interests, associate
entity equity, controlled foreign entity debt, controlled foreign entity
equity, non - debt liabilities and on - lent amount are $5 million, $5
million, $9 million, $6 million, $5 million and $35 million respectively.
Deducting these amounts from the result of step 1 (through applying steps 1A
to 6) leaves $95 million. Multiplying $95 million by 3 / 5 results in $57
million. Adding the average on - lent amount of $35 million results in $92
million. Reducing the result of step 8 by the associate entity debt amount of
$5 million equals $87 million. As the company does not have any associate
entity excess amount, the adjusted on - lent amount is therefore $87 million.