• Interaction with associate entity debt and associate entity equity rules

    For a holder of a debt interest to hold associate entity debt, the issuer must be a non-ADI entity – see Terms we use. For the purposes of determining whether a debt interest is associate entity debt, the choice made by the borrowing financial entity is disregarded. That is, the debt interest will still be treated as associate entity debt even though the borrowing financial entity has elected to apply the ADI rules to itself.

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    Similarly, an equity investment in a financial entity electing to apply the ADI rules that is an associate entity of a non-ADI investing entity, will still be associate entity equity providing it meets the relevant conditions – see Terms we use. However, because the financial entity has elected to apply the ADI rules, the investing entity will not be able to utilise the associate entity excess provisions to increase its safe harbour debt amount or worldwide gearing debt amount.

    Last modified: 09 Mar 2016QC 48225