The amount of * debt deduction disallowed under subsection 820 - 85(1) is worked out using the following formula:
where:
"average debt" means the sum of:
(a) the average value, for the income year, of the entity's * debt capital that is covered by step 1 of the method statement in subsection 820 - 85(3); and
(b) the average value, for that year, of the entity's * cost - free debt capital that is covered by step 5 of that method statement;
(disregarding any amount that is attributable to the entity's * overseas permanent establishments in working out the average values).
"debt deduction" means each * debt deduction covered by subsection 820 - 85(1).
"excess debt" means the amount by which the entity's * adjusted average debt for that year (see subsection 820 - 85(3)) exceeds its * maximum allowable debt for that year.
Note: The disallowed amount also does not form part of the cost base of
a CGT asset. See section 110 - 54.