Income Tax Assessment Act 1997
The safe harbour capital amount is the result of applying the method statement in this section. Method statement
Work out the average value, for the income year, of all the entity ' s:
that are attributable to none of the following:
Multiply the result of step 1 by 6%.
Add to the result of step 2 the average value, for that year, of all the *tier 1 prudential capital deductions for the entity, to the extent that they are not attributable to:
Paragraph 5.3 of that accounting standard applies to any excess of the net market values of an interest in a subsidiary over the net amount of that subsidiary ' s assets and liabilities.
The result of this step is the safe harbour capital amount .
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.
VBIF is the value of business in force at the time of acquisition of the relevant subsidiary (within the meaning of paragraph 5.3 of *accounting standard AASB 1038, as issued on 17 November 1998) of the entity.
*VBIF is taken to be nil at all times unless the value of VBIF at the time of acquisition of the relevant subsidiary was worked out by an *actuary according to Australian actuarial practice.