Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 820.218

Worldwide gearing debt amount--inward investor (general)

                   If the entity is an * inward investor (general) for the income year, the worldwide gearing debt amount is the result of applying the method statement in this section.

Method statement

Step 1.   Divide the entity's * statement worldwide debt for the income year by the entity's * statement worldwide equity for that year.

Step 2.   Add 1 to the result of step 1.

Step 3.   Divide the result of step 1 by the result of step 2.

Step 4.   Multiply the result of step 3 in this method statement by the result of step 4 in the method statement in section 820- 205.

Step 5.   Add to the result of step 4 the average value, for that year, of the entity's * associate entity excess amount. The result of this step is the worldwide gearing debt amount .

Example:    MLO Limited, a company that is not an Australian entity, has investments in Australia. MLO Limited has statement worldwide debt of $120 million and statement worldwide equity of $40 million.

                   The result of applying step 1 is therefore 3. Dividing 3 by 4 (through applying steps 2 and 3) and multiplying the result by $75 million (which is the result of step 4 of the method statement in section 820- 205) equals $56.25 million. As the average value of the company's associate entity excess amount is $4 million, the worldwide gearing debt amount is therefore $60.25 million.



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