Commonwealth Numbered Acts

TAX AND SUPERANNUATION LAWS AMENDMENT (2014 MEASURES NO. 4) ACT 2014 (NO. 110, 2014) - SCHEDULE 1

Part 1 -- Safe harbour debt amount

Income Tax Assessment Act 1997

1  Section 820-95 (method statement, step 7)

Omit " 3 / 4 ", substitute " 3 / 5 ".

2  Subsection 820-100(2) (method statement, step 8)

Omit " 20 / 21 ", substitute " 15 / 16 ".

3  Section 820-195 (method statement, step 5)

Omit " 3 / 4 ", substitute " 3 / 5 ".

4  Subsection 820-200(2) (method statement, step 6)

Omit " 20 / 21 ", substitute " 15 / 16 ".

5  Section 820-205 (method statement, step 5)

Omit " 3 / 4 ", substitute " 3 / 5 ".

6  Subsection 820-210(2) (method statement, step 6)

Omit " 20 / 21 ", substitute " 15 / 16 ".

Part 2 -- Worldwide gearing debt amount for outward investing entities (non-ADI)

Income Tax Assessment Act 1997

7  Paragraph 820-90(1)(c)

Before "a negative amount", insert "nil or".

8  Subsection 820-90(1) (note)

Repeal the note, substitute:

Note 1:       The safe harbour debt amount differs depending on whether the entity is an outward investor (general) or an outward investor (financial), see sections 820-95 and 820-100.

Note 2:       The worldwide gearing debt amount for an entity that is not also an inward investment vehicle (general) or an inward investment vehicle (financial) differs depending on whether the entity is an outward investor (general) or an outward investor (financial), see section 820-110.

9  Subsection 820-90(2)

Repeal the subsection, substitute:

Entity is also an inward investment vehicle (general) or inward investment vehicle (financial)

             (2)  The entity's maximum allowable debt for an income year is the greatest of the following amounts if the entity is also an * inward investment vehicle (general) or an * inward investment vehicle (financial) for all or any part of that year:

                     (a)  the * safe harbour debt amount;

                     (b)  the * arm's length debt amount;

                     (c)  unless subsection (3) applies to the entity--the * worldwide gearing debt amount.

Note 1:       The safe harbour debt amount differs depending on whether the entity is an outward investor (general) or an outward investor (financial), see sections 820-95 and 820-100.

Note 2:       The worldwide gearing debt amount for an entity that is also an inward investment vehicle (general) or an inward investment vehicle (financial) differs depending on whether the entity is an outward investor (general) or an outward investor (financial), see section 820-111.

Inward investment vehicles that are not eligible for the worldwide gearing debt amount

             (3)  This subsection applies to an entity, if:

                     (a)  the entity has * statement worldwide equity, or * statement worldwide assets, of nil or a negative amount; or

                     (b)  * audited consolidated financial statements for the entity for the income year do not exist; or

                     (c)  the result of applying the following formula is greater than 0.5:

where:

"average Australian assets" of an entity is the average value, for the statement period mentioned in subsection (4), of all the assets of the entity, other than:

                     (a)  any assets attributable to the entity's * overseas permanent establishments; or

                     (b)  any * debt interests held by the entity, to the extent to which any value of the interests is all or a part of the * controlled foreign entity debt of the entity; or

                     (c)  any * equity interests or debt interests held by the entity, to the extent to which any value of the interests is all or a part of the * controlled foreign entity equity of the entity.

             (4)  For the purposes of the definition of average Australian assets in subsection (3) the statement period is the period for which the * audited consolidated financial statements for the entity for the income year have been prepared.

             (5)  For the purposes of the formula in paragraph (3)(c), if:

                     (a)  an amount is included in * statement worldwide assets in respect of an asset; and

                     (b)  the asset was acquired, held or otherwise dealt with by an entity for a purpose (other than an incidental purpose) that included ensuring that subsection (3) does not apply to an entity; and

                     (c)  as a result of the acquisition, holding or dealing with of the asset, the amount included in statement worldwide assets exceeds the amount (including nil) that would otherwise be so included;

apply the amount of the excess to reduce statement worldwide assets (or statement worldwide assets as reduced by a previous application of this subsection).

10  Section 820-110 (heading)

Repeal the heading, substitute:

820-110   Worldwide gearing debt amount--outward investor that is not also an inward investment vehicle

11  Subsection 820-110(1) (method statement, steps 2, 3 and 4)

Repeal the steps, substitute:

12  Subsection 820-110(2) (method statement, steps 2, 3 and 4)

Repeal the steps, substitute:

13  After section 820-110

Insert:

820-111   Worldwide gearing debt amount--outward investor that is also an inward investment vehicle

Outward investor (general)

             (1)  If the entity is an * outward investor (general) for the income year, and is also an * inward investment vehicle (general) for all or any part of that year, the worldwide gearing debt amount is the result of applying the method statement in this subsection.

Example:    RKR Limited, a company that is an Australian entity, has a worldwide parent entity in Canada. RKR Limited also has permanent establishments in Singapore. RKR 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 6 of the method statement in section 820-95) 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.

Outward investor (financial)

             (2)  If the entity is an * outward investor (financial) for the income year, and is also an * inward investment vehicle (financial) for all or any part of that year, the worldwide gearing debt amount is the result of applying the method statement in this subsection.

Example:    TRR Limited, a company that is an Australian entity, has a worldwide parent entity in the United States of America. TRR Limited also has permanent establishments in Malaysia. TRR Limited has statement worldwide debt of $90 million and statement worldwide equity of $30 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 $100 million (which is the result of step 7 of the method statement in subsection 820-100(2)) equals $75 million. The zero capital amount is $5 million. Adding that amount to $75 million results in $80 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $80 million.

Part 3 -- Worldwide capital amount

Income Tax Assessment Act 1997

14  Subsection 820-320(2) (method statement, steps 2 and 3)

Repeal the steps, substitute:

Part 4 -- Safe harbour capital amount

Income Tax Assessment Act 1997

15  Subsection 820-310(1) (method statement, step 2)

Omit "4%", substitute "6%".

16  Section 820-405 (method statement, step 2)

Omit "4%", substitute "6%".

17  Subsection 820-615(3) (method statement, step 2)

Omit "4%", substitute "6%".

Part 5 -- De minimis threshold

Income Tax Assessment Act 1997

18  Section 820-35

Repeal the section, substitute:

820-35   Application--$2 million threshold

                   Subdivision 820-B, 820-C, 820-D or 820-E does not apply to disallow any * debt deduction of an entity for an income year if the total debt deductions of that entity and all its * associate entities for that year are $2 million or less.

Part 6 -- Worldwide gearing debt amount for inward investing entities (non-ADI)

Income Tax Assessment Act 1997

19  Section 820-190

Repeal the section, substitute:

820-190   Maximum allowable debt

             (1)  The entity's maximum allowable debt for an income year is the greatest of the following amounts:

                     (a)  the * safe harbour debt amount;

                     (b)  the * arm's length debt amount;

                     (c)  unless subsection (2) applies to the entity--the * worldwide gearing debt amount.

Note 1:       The safe harbour debt amount differs depending on whether the entity is an inward investment vehicle (general), inward investment vehicle (financial), inward investor (general) or inward investor (financial), see sections 820-195 to 820-215.

Note 2:       The worldwide gearing debt amount differs depending on whether the entity is an inward investment vehicle (general), inward investment vehicle (financial), inward investor (general) or an inward investor (financial), see sections 820-216 to 820-219.

Entities that are not eligible for the worldwide gearing debt amount

             (2)  This subsection applies to an entity, if:

                     (a)  the entity has * statement worldwide equity, or * statement worldwide assets, of nil or a negative amount; or

                     (b)  * audited consolidated financial statements for the entity for the income year do not exist; or

                     (c)  the result of applying the following formula is greater than 0.5:

where:

"average Australian assets" :

                     (a)  of an * Australian entity--is the average value, for the statement period mentioned in subsection (3), of all the assets of the entity, other than:

                              (i)  any * debt interests held by the entity, to the extent to which any value of the interests is all or a part of the * controlled foreign entity debt of the entity; or

                             (ii)  any * equity interests or debt interests held by the entity, to the extent to which any value of the interests is all or a part of the * controlled foreign entity equity of the entity; and

                     (b)  of a * foreign entity--is the average value, for the statement period mentioned in subsection (3), of all the assets of the entity that are:

                              (i)  located in Australia; or

                             (ii)  attributable to the entity's * Australian permanent establishments; or

                            (iii)  debt interests held by the entity, that were * issued by an * Australian entity and are * on issue;

                            (iv)  equity interests held by the entity in an * Australian entity.

             (3)  For the purposes of the definition of average Australian assets in subsection (2) the statement period is the period for which the * audited consolidated financial statements for the entity for the income year have been prepared.

             (4)  For the purposes of the formula in paragraph (2)(c), if:

                     (a)  an amount is included in * statement worldwide assets in respect of an asset; and

                     (b)  the asset was acquired, held or otherwise dealt with by an entity for a purpose (other than an incidental purpose) that included ensuring that subsection (2) does not apply to an entity; and

                     (c)  as a result of the acquisition, holding or dealing with of the asset, the amount included in statement worldwide assets exceeds the amount (including nil) that would otherwise be so included;

apply the amount of the excess to reduce statement worldwide assets (or statement worldwide assets as reduced by a previous application of this subsection).

20  After section 820-215

Insert:

820-216   Worldwide gearing debt amount--inward investment vehicle (general)

                   If the entity is an * inward investment vehicle (general) for the income year, and is not also an * outward investor (general) for all or any part of that year, the worldwide gearing debt amount is the result of applying the method statement in this section.

Example:    SJP Limited, a company that is an Australian entity, has a worldwide parent entity in Japan. SJP 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 820-195) 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.

820-217   Worldwide gearing debt amount--inward investment vehicle (financial)

                   If the entity is an * inward investment vehicle (financial) for the income year, and is not also an * outward investor (financial) for all or any part of that year, the worldwide gearing debt amount is the result of applying the method statement in this section.

Example:    RGR Limited, a company that is an Australian entity, has a worldwide parent entity in France. RGR Limited has statement worldwide debt of $90 million and statement worldwide equity of $30 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 $100 million (which is the result of step 5 of the method statement in subsection 820-200(2)) equals $75 million. The zero capital amount is $5 million. Adding that amount to $75 million results in $80 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $80 million.

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.

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.

820-219   Worldwide gearing debt amount--inward investor (financial)

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

Example:    MSR Limited, a company that is not an Australian entity, has investments in Australia. MSR Limited has statement worldwide debt of $90 million and statement worldwide equity of $30 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 $100 million (which is the result of step 5 of the method statement in subsection 820-210(2)) equals $75 million. The zero-capital amount is $5 million. Adding that amount to $75 million results in $80 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $80 million.

21  After Subdivision 820-J

Insert:

Subdivision 820-JA -- Worldwide debt and equity concepts

Guide to Subdivision 820-JA

820-931   What this Subdivision is about

Table of sections

Operative provisions

820-932    Worldwide debt and worldwide equity

820-933    Statement worldwide debt, statement worldwide equity and statement worldwide assets

820-935    Requirements for audited consolidated financial statements

Operative provisions

820-932   Worldwide debt and worldwide equity

Worldwide debt

             (1)  An entity's worldwide debt at a particular time, means the total of the following amounts:

                     (a)  all the * debt interests issued by the entity:

                              (i)  to entities other than any * Australian controlled foreign entities (the controlled entities ) of which the entity is an * Australian controller at that time; and

                             (ii)  that are still * on issue at that time;

                     (b)  all the debt interests issued by the controlled entities:

                              (i)  to entities other than the entity or other controlled entities; and

                             (ii)  that are still on issue at that time.

Worldwide equity

             (2)  An entity's worldwide equity at a particular time, means the total of the following amounts:

                     (a)  all the * equity capital of the entity as at that time, but worked out disregarding * equity interests in the entity held at that time by * Australian controlled foreign entities (the controlled entities ) of which the entity is an * Australian controller at that time;

                     (b)  all the equity capital of the controlled entities as at that time, but worked out disregarding equity interests in the controlled entities held at that time by:

                              (i)  the entity; or

                             (ii)  other controlled entities.

820-933   Statement worldwide debt, statement worldwide equity and statement worldwide assets

Statement worldwide debt

             (1)  An entity's statement worldwide debt for a period is the amount (see subsection (4)) of liabilities for the entity for the period, reduced (but not below zero) by the sum of the following amounts (see subsection (4)) for the entity for the period:

                     (a)  provisions;

                     (b)  liabilities in relation to distributions to equity participants;

                     (c)  trade payables;

                     (d)  deferred tax liabilities;

                     (e)  liabilities relating to employee benefits;

                      (f)  current tax liabilities;

                     (g)  deferred revenue;

                     (h)  liabilities relating to insurance;

                      (i)  any other amount specified in a legislative instrument under subsection (5).

Statement worldwide equity

             (2)  An entity's statement worldwide equity for a period means the amount (see subsection (4)) of net assets for the entity for the period.

Statement worldwide assets

             (3)  An entity's statement worldwide assets for a period means the amount (see subsection (4)) of assets for the entity for the period.

Amounts from audited consolidated financial statements to be used

             (4)  For the purposes of this section:

                     (a)  an amount for an entity for a period is taken to be that amount as shown in the * audited consolidated financial statements for the entity for the period; and

                     (b)  sections 820-680, 820-682, 820-683 and 820-684 do not apply.

Other amounts

             (5)  The Minister may, by legislative instrument, specify one or more amounts for the purposes of paragraph (1)(i).

820-935   Meaning of audited consolidated financial statements

             (1)  Audited consolidated financial statements for an entity for a period are:

                     (a)  the financial statements that meet the requirements in subsection (2) for the entity for the period; or

                     (b)  if more than one set of financial statements meet the requirements in subsection (2) for the entity for the period--whichever of those sets of financial statements the entity chooses.

             (2)  Financial statements meet the requirements in this subsection for an entity for a period (the relevant period ) if:

                     (a)  the statements have been prepared on a consolidated basis in relation to the entity and one or more other entities in accordance with standards covered by subsection (3) or (4) (the recognised overseas accounting standards ); and

                     (b)  one of the entities is a worldwide parent entity mentioned in subsection (6); and

                     (c)  the statements show the amounts mentioned in subsections 820-933(1), (2) and (3) (however described) on that consolidated basis and in accordance with those standards; and

                     (d)  the statements have been audited (and the auditor's report is unqualified) in accordance with a requirement in the law of:

                              (i)  a foreign jurisdiction mentioned in subsection (3) of this section; or

                             (ii)  another jurisdiction that has adopted the standards mentioned in subsection (4); and

                     (e)  the statements are for the most recent period ending:

                              (i)  no later than the end of the relevant period; and

                             (ii)  no earlier than 12 months before the start of the relevant period.

Recognised overseas accounting standards

             (3)  This subsection covers the standards (however described) that apply to the preparation of financial statements and are made, or adopted, by the responsible body in any of the following (a foreign jurisdiction ):

                     (a)  the European Union;

                     (b)  the United States of America;

                     (c)  Canada;

                     (d)  Japan;

                     (e)  New Zealand;

                      (f)  a jurisdiction specified in an instrument under subsection (5).

             (4)  This subsection covers the international financial reporting standards that are made or adopted by the International Accounting Standards Board.

             (5)  The Minister may, by legislative instrument, specify one or more jurisdictions for the purposes of paragraph (3)(f).

Worldwide parent entity

             (6)  For the purposes of paragraph (2)(b), an entity in relation to which financial statements have been prepared is a worldwide parent entity if, for the purposes of the standards in accordance with which the statements were prepared, the entity is not controlled by another entity.

Part 7 -- Consequential amendments

Income Tax Assessment Act 1997

22  Section 820-10 (after table item 7)

Insert:

23  Subsection 820-85 (note 1)

Omit "$250,000", substitute "$2 million".

24  Section 820-95 (example)

Repeal the example, substitute:

Example:    AK Pty Ltd, a company that is an Australian entity, has an average value of assets (other than assets attributable to its overseas permanent establishments) of $100 million.

                   The average values of its excluded equity interests, associate entity debt, associate entity equity, controlled foreign entity debt, controlled foreign entity equity and non-debt liabilities are $5 million, $10 million, $8 million, $5 million, $2 million and $5 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 6) leaves $65 million. Multiplying $65 million by 3 / 5 results in $39 million. As the average value of the company's associate entity excess amount is $4.5 million, the safe harbour debt amount is therefore $43.5 million.

25  Subsection 820-100(2) (example)

Repeal the example, substitute:

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.

26  Subsection 820-100(3) (method statement, step 7)

Omit " 3 / 4 ", substitute " 3 / 5 ".

27  Subsection 820-100(3) (example)

Repeal the example, substitute:

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.

28  Subsection 820-110(1) (heading)

Repeal the heading, substitute:

Outward investor (general) that is not also an inward investment vehicle (general)

29  Subsection 820-110(1)

After "the income year,", insert "and not also an * inward investment vehicle (general) for all or any part of that year,".

30  Subsection 820-110(1) (example)

Repeal the example, substitute:

Example:    AK Pty Ltd, a company that is an Australian entity, has an average value of worldwide debt of $90 million and an average value of worldwide equity of $30 million. The result of applying step 1 is therefore 3. Dividing 3 by 4 (through applying steps 3 and 4) and multiplying the result by $65 million (which is the result of step 6 in the method statement in section 820-95) equals $48.75 million. As the average value of the company's associate entity excess amount is $4.5 million, the worldwide gearing debt amount is therefore $53.25 million.

31  Subsection 820-110(2) (heading)

Repeal the heading, substitute:

Outward investor (financial) that is not also an inward investment vehicle (financial)

32  Subsection 820-110(2)

After "that year,", insert "and not also an * inward investment vehicle (financial) for all or any part of that year,".

33  Subsection 820-110(2) (example)

Repeal the example, substitute:

Example:    GLM Limited, a company that is an Australian entity, has an average value of worldwide debt of $120 million and an average value of worldwide equity of $40 million. The result of applying step 1 is therefore 3. Dividing 3 by 4 (through applying steps 3 and 4) and multiplying the result by $121 million (which is the result of step 7 of the method statement in subsection 820-100(2)) equals $90.75 million. The average value of zero-capital amount (see step 7 of the method statement in subsection 820-100(2)) is $4 million. Adding that amount to $90.75 million results in $94.75 million. As the company does not have any associate entity excess amount, the worldwide gearing debt amount is therefore $94.75 million.

34  Subsection 820-185 (note 1)

Omit "$250,000", substitute "$2 million".

35  Section 820-195 (example)

Repeal the example, substitute:

Example:    ALWZ Ltd, a company that is an Australian entity, has an average value of assets of $100 million.

                   The average values of its excluded equity interests, associate entity debt, associate entity equity and non-debt liabilities are $5 million, $10 million, $5 million and $5 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 4) leaves $75 million. Multiplying $75 million by 3 / 5 results in $45 million. As the average value of the company's associate entity excess amount is $2 million, the safe harbour debt amount is therefore $47 million.

36  Subsection 820-200(2) (example)

Repeal the example, substitute:

Example:    KJW Finance Pty Ltd, a company that is an Australian entity, has an average value of assets of $120 million.

                   The average values of its excluded equity interests, associate entity debt, associate entity equity, its non-debt liabilities and its zero-capital amount are $5 million, $5 million, $3 million, $2 million and $5 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 5) leaves $100 million. Multiplying $100 million by 15 / 16 results in $93.75 million. Adding the zero-capital amount of $5 million to $93.75 million results in $98.75 million. As the company does not have any associate entity excess amount, the total debt amount is therefore $98.75 million.

37  Subsection 820-200(3) (method statement, step 5)

Omit " 3 / 4 ", substitute " 3 / 5 ".

38  Subsection 820-200(3) (example)

Repeal the example, substitute:

Example:    KJW Finance Pty Ltd, a company that is an Australian entity, has an average value of assets of $120 million.

                   The average values of its excluded equity interests, associate entity equity, non-debt liabilities and on-lent amount are $5 million, $3 million, $2 million and $35 million respectively. Deducting these amounts from the result of step 1 (through applying steps 1A to 4) leaves $75 million. Multiplying $75 million by 3 / 5 results in $45 million. Adding the average on-lent amount of $35 million results in $80 million. Reducing $80 million by the associate entity debt amount of $5 million results in $75 million. As the company does not have any associate entity excess amount, the adjusted on-lent amount is therefore $75 million.

39  Section 820-205 (example)

Repeal the example, substitute:

Example:    RJ Corporation is a company that is not an Australian entity. The average value of its Australian investments is $100 million.

                   The average value of its relevant excluded equity interests, associate entity debt, associate entity equity and non-debt liabilities is $5 million, $10 million, $5 million and $5 million respectively. Deducting those amounts from the result of step 1 leaves $75 million. Multiplying $75 million by 3 / 5 results in $45 million. As the company does not have any associate entity excess amount, the safe harbour debt amount is therefore $45 million.

40  Subsection 820-210(2) (example)

Repeal the example, substitute:

Example:    FXS Financial SA is a company that is not an Australian entity. The average value of its Australian investments is $120 million.

                   The average value of its relevant excluded equity interests, associate entity debt, associate entity equity, non-debt liabilities and zero-capital amount are $5 million, $5 million, $2 million, $3 million and $5 million respectively. Deducting those amounts from the result of step 1 (through applying steps 1A to 5) leaves $100 million. Multiplying $100 million by 15 / 16 results in $93.75 million. Adding the average zero-capital amount of $5 million results in $98.75 million. As the company does not have any associate entity excess amount, the total debt amount is therefore $98.75 million.

41  Subsection 820-210(3) (method statement, step 5)

Omit " 3 / 4 ", substitute " 3 / 5 ".

42  Subsection 820-210(3) (example)

Repeal the example, substitute:

Example:    FXS Financial SA is a company that is not an Australian entity. The average value of its Australian investments is $120 million.

                   The average value of its relevant excluded equity interests, associate entity equity, non-debt liabilities and on-lent amount are $5 million, $2 million, $3 million and $35 million respectively. Deducting those amounts from the result of step 1 (through applying steps 1A to 4) leaves $75 million. Multiplying $75 million by 3 / 5 results in $45 million. Adding the average on-lent amount of $35 million results in $80 million. Reducing the result of step 6 by the associate entity debt amount of $5 million results in $75 million. As the company does not have any associate entity excess amount, the adjusted on-lent amount is therefore $75 million.

43  Subsection 820-300(1) (note 1)

Omit "$250,000", substitute "$2 million".

44  Subsection 820-310(1) (example)

Repeal the example, substitute:

Example:    The Southern Cross Bank is an Australian bank that carries on its banking business through its overseas permanent establishments and through foreign entities that it controls. For the income year, its average value of risk-weighted assets and intangible assets comprising capitalised software expenses is $150 million (having discounted those assets that are excluded by step 1) and the average value of its relevant tier 1 prudential capital deductions is $2 million. Multiplying $150 million by 6% equals $9 million, which is the result of step 2. Adding $2 million to $9 million equals $11 million, which is the safe harbour capital amount.

45  Subsection 820-320(2) (example)

Repeal the example, substitute:

Example:    Southern Cross Bank has an average value of risk-weighted assets of $150 million (having discounted those risk-weighted assets that are excluded by step 1) and the average value of its relevant tier 1 prudential capital deductions is $2 million. The entity's worldwide group capital ratio is 0.0875. Multiplying $150 million by 0.0875 equals $13.125 million, which is the result of step 3. Adding that amount to the average value of the relevant tier 1 prudential capital deductions equals $15.125 million, which is the worldwide capital amount.

46  Subsection 820-395(1) (note 1)

Omit "$250,000", substitute "$2 million".

47  Section 820-405 (example)

Repeal the example, substitute:

Example:    The Global Bank is a foreign bank that carries on its banking business in Australia through a permanent establishment. The average value of its relevant risk-weighted assets is $140 million. Multiplying that amount by 6% results in $8.4 million, which is the safe harbour capital amount.

48  Paragraph 820-910(2)(b)

Omit "$250,000", substitute "$2 million".

49  Subsection 820-920(3) (method statement, step 4, paragraph (a))

Omit " 20 / 21 ", substitute " 15 / 16 ".

50  Subsection 820-920(3) (method statement, step 4, paragraphs (b) and (c))

Omit " 3 / 4 ", substitute " 3 / 5 ".

51  Paragraph 820-946(1)(c)

Omit "$250,000", substitute "$2 million".

52  Subsection 995-1(1)

Insert:

"audited consolidated financial statements" for an entity for a period has the meaning given by section 820-935.

"statement worldwide assets" of an entity for a period has the meaning given by subsection 820-933(3).

"statement worldwide debt" of an entity for a period has the meaning given by subsection 820-933(1).

"statement worldwide equity" of an entity for a period has the meaning given by subsection 820-933(2).

53  Subsection 995-1(1) (definition of worldwide debt )

Repeal the definition, substitute:

"worldwide debt" of an entity and at a particular time has the meaning given by subsection 820-932(1).

54  Subsection 995-1(1) (definition of worldwide equity )

Repeal the definition, substitute:

"worldwide equity" of an entity and at a particular time has the meaning given by subsection 820-932(2).

55  Subsection 995-1(1) (definition of worldwide gearing debt amount )

Repeal the definition, substitute:

"worldwide gearing debt amount" :

                     (a)  for an * outward investing entity (non-ADI)--has the meaning given by sections 820-110 and 820-111; and

                     (b)  for an inward investment vehicle (general)--has the meaning given by section 820-216; and

                     (c)  for an inward investment vehicle (financial)--has the meaning given by section 820-217; and

                     (d)  for an * inward investor (general)--has the meaning given by section 820-218; and

                     (e)  for an * inward investor (financial)--has the meaning given by section 820-219.

Part 8 -- Application

56  Application

The amendments made by this Schedule apply to assessments for income years starting on or after 1 July 2014.