Document ID: chunk:federal_register_of_legislation:F2024L00884:body:0:p16
Version: federal_register_of_legislation:F2024L00884
Segment Type: other
Provision Reference: 
Character Range: 39437–42349

for assets with values linked to the value of liabilities
6.             If policy benefits can be reduced in response to a fall in the value of an asset listed in this Attachment, the asset does not have to be deducted. However, the asset will be subject to a 100 per cent capital charge when applying the default risk stress under Prudential Standard LPS 114 Capital Adequacy: Asset Risk Charge. This treatment can only be applied if:
(a)          the benefits under the policy are contractually linked to the performance of the asset;
(b)          the extent of the exposure to the asset is consistent with the stated investment objectives; and
(c)          there has been appropriate disclosure to policy owners of the risks to which they are exposed.

Holdings of own capital instruments
7.             Unless otherwise indicated, a life company must deduct from the corresponding category of capital holdings of the life company's own capital instruments, whether held directly or indirectly[15], unless otherwise exempted in writing by APRA or unless eliminated under Australian Accounting Standards from the relevant category of capital. This deduction must include any capital instruments that the life company could be contractually obliged to purchase and also all of the unused portion of any limit agreed with APRA under paragraph 27 of this Prudential Standard;

 Regulatory adjustments to Common Equity Tier 1 Capital
8.             A life company must make the following deductions to determine Common Equity Tier 1 Capital.

Deferred tax assets and deferred tax liabilities
9.             Subject to paragraphs 10, 11 and 12 of this Attachment, a life company must deduct deferred tax assets net of deferred tax liabilities.[16]
10.         The netting of these items must be on a consistent basis. Where deferred tax liabilities exceed deferred tax assets, the excess of deferred tax liabilities cannot be added to Common Equity Tier 1 Capital (i.e. the net deduction is zero).  Deferred tax assets and liabilities include any tax effects that would result from the liability adjustment calculated in accordance with paragraph 25 of this Attachment.
11.         The netting of deferred tax assets and deferred tax liabilities must only be applied where the life company has a legally enforceable right to set-off current tax assets against current tax liabilities where they relate to income taxes levied by the same taxation authority and the taxation authority permits the life company to make or receive a single net payment.
12.         The deferred tax liabilities and deferred tax assets that may be netted must exclude amounts that have been used to adjust:
(a)          goodwill and intangible assets; and
(b)          defined benefit superannuation assets.
13.         In order to apply the treatment in paragraph 9 of this Attachment, a life company must:
(a)          have procedures