The rules designed to facilitate efficient use of interest allowance and debt cap can seem complicated.

Below is a summary of the key terms used in the legislation that is relevant to calculation of the carry-forward of interest allowance.

Basic Interest allowance

If the fixed ratio method is applied, this is the lower of

The fixed ratio percentage (30%) of aggregate tax-EBITDA (S397); or

The fixed ratio debt cap (S400(1)).

If the group ratio method is applied, this is the lower of:

The group ratio percentage of aggregate tax-EBITDA (S398); or

The group ratio debt cap (S400(2)).

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