Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) If subparagraph 820 - 185(1A)(b)(i) applies, the amount (the total disallowed amount ) disallowed under subsection 820 - 185(1) of the * debt deductions of an entity for an income year is the amount by which those debt deductions exceed the entity's * third party earnings limit for the income year (see section 820 - 427A).
Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110 - 54.
(2) The amount by which a particular * debt deduction is disallowed as a result of subsection (1) is worked out as follows:
(a) first, divide the total disallowed amount by the * debt deductions of the entity for the income year;
(b) next, multiply the amount of the particular debt deduction by the result of paragraph (a).
(3) If subparagraph 820 - 185(1A)(b)(ii) applies, the amount of a * debt deduction of an entity for an income year disallowed under subsection 820 - 185(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 - 185(3); and
(b) the average value, for that year, of the entity's * cost - free debt capital that is covered by step 4 of that method statement.
"debt deduction" means each * debt deduction of the entity for that year.
"excess debt" means the amount by which the * adjusted average debt (see subsection 820 - 185(3)) exceeds the entity's * 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.