Document ID: chunk:federal_register_of_legislation:C2004A00897:clause:1_3:p2
Version: federal_register_of_legislation:C2004A00897
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 2/5)
Character Range: 92103–94933

a period that is all or a part of an income year if, and only if, throughout that period, the entity is a *foreign bank that carries on its banking business in Australia at or through one or more of its *Australian permanent establishments.

Note: The entity is required to keep certain records, see Subdivision 820‑L.

Average equity capital

 (3) The entity's average equity capital for an income year is the sum of the following:
 (a) the average value, for that year, of the *equity capital of the entity that:
 (i) is attributable to the *Australian permanent establishments at or through which it carries on its banking business in Australia; but
 (ii) has not been allocated to the *OB activities of the Australian permanent establishments;
 (b) the average value, for that year, of the total amounts that:
 (i) are made available by the entity to the Australian permanent establishments of the entity as loans to the Australian permanent establishments; and
 (ii) do not give rise to any *debt deductions of the entity for that or any other income year.

Note: To calculate an average value for the purposes of this Division, see Subdivision 820‑G.

820‑400  Minimum capital amount

  The entity's minimum capital amount for an income year is the lesser of the following amounts:
 (a) the *safe harbour capital amount;
 (b) the *arm's length capital amount.

820‑405  Safe harbour capital amount

  The entity's safe harbour capital amount for the income year is the result of applying the method statement in this section.

      Method statement
           Step 1. Work out the average value, for the income year, of that part of the *risk‑weighted assets of the entity that:

                (a) is attributable to the *Australian permanent establishments at or through which it carries on its banking business in Australia; but
                (b) is not attributable to the *OB activities of the Australian permanent establishments.

           Step 2. Multiply the result of step 1 by 4%. The result of this step is the safe harbour capital amount.

Example: The Global Bank is a foreign bank that carries on its banking business in Australia through a permanent establishment. The average value of its relevant risk‑weighted assets is $140 million. Multiplying that amount by 4% results in $5.6 million, which is the safe harbour capital amount.

820‑410  Arm's length capital amount

 (1) The arm's length capital amount is a notional amount that, having regard to:
 (a) the factual assumptions set out in subsection (2); and
 (b) the relevant factors mentioned in subsection (3);
would represent the minimum amount of *equity capital that the entity would reasonably be expected to have in carrying on the Australian business mentioned in subsection (2) throughout the income year if, throughout that year: