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Financial entity

How the rules work for financial entities (non-ADI).

Last updated 23 July 2024

A financial entity is an entity other than an ADI that is any of the following:

  • a registered corporation under the Financial Sector (Collection of Data) Act 2001 that carries on a business of providing finance (but not to or on behalf of its associates) and derives all or substantially all its profits from that business
  • a financial services licensee under the Corporations Act 2001 (or an entity that is exempt from the requirement to hold an Australian financial services license for relevant dealings) that carries on a business of dealing in securities or derivatives (but not with or on behalf of its associates)
  • a securitisation vehicle.

Examples of financial entities include finance companies and securities dealers.

Choice of tests

For income years commencing on or after 1 July 2023, eligible financial entities may:

The rules for financial entities recognise that these entities are primarily engaged in lending as a business and have different requirements for debt funding. For example, for financial entities, the 1.5:1 safe harbour ratio applies to their non-lending business while their lending and certain other financial businesses are allowed higher gearing levels.

The safe harbour debt limit for financial entities (non-ADI) is 15:1 on a debt-equity basis.

Certain financial entities can elect to apply the ADI rules. For more information on this election, see Electing to use the ADI rules.

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