Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p4
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 4/7)
Character Range: 7140780–7143523

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.
 (2) 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.
 (3) *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.

820‑315  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:
 (c) the part of the entity carrying on that business had operated as if it were a separate entity; and
 (d) that separate entity had been dealing at *arm's length with:
 (i) the other part of the entity; and
 (ii) all the *Australian controlled foreign entities of which the entity is an *Australian controller.
Note: The entity must keep records in accordance with section 820‑980 if the entity works out an amount under this section.

Factual assumptions
 (2) Irrespective of what actually happened during that year, the following assumptions must be made in working out that minimum amount:
 (a) the entity's commercial activities in connection with Australia (the Australian business) during that year do not include:
 (i) any *business carried on by the entity at or through its *overseas permanent establishments; or
 (ii) the holding of any *controlled foreign entity equity;
 (b) the entity had carried on the Australian business that it actually carried on during that year;
 (c) the nature of the entity's assets and liabilities (to the extent that they are attributable to the Australian business) had been as they were during that year;
 (d) except as mentioned in subsection (1), the entity had carried on the Australian business in the same circumstances as what actually existed during that year.

Relevant factors
 (3) On the basis of the factual assumptions set out in subsection (2), the following factors must be taken into account in determining that minimum amount:
 (a) the functions performed, the assets used, and the risks assumed, throughout