For a holder of a debt interest to hold associate entity debt, the issuer must be a financial entity (non-ADI). 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. For more information, see subsection 820-430(4) of the ITAA 1997.
Similarly, an equity investment in a financial entity (non-ADI) electing to apply the ADI rules that is an associate entity of a investing financial entity (non-ADI), will still be associate entity equity providing it meets the relevant conditions – see Terms we use. However, because the financial entity (non-ADI) 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.