VH-OGI, a Boeing 767, was tracking for left base runway 19 at Brisbane when the TCAS (Traffic Alert and Collision-avoidance System) alerted the crew of the presence of another aircraft. The Boeing 767 was on descent to 1,500ft and passing 2,000ft when the TCAS Traffic Alert indicated the unknown aircraft was 900ft below and ahead. The crew levelled the Boeing 767 and notified the Approach Controller who was monitoring the airspace by radar. A short time later, the Boeing crew saw a high-winged light aircraft about half a mile left and indicating 600ft low on their TCAS which gave a TCAS Resolution Advisory at the same time. They took no further avoiding action because they had sighted the light aircraft in question. The area of the reported confliction consists of a control area step which commences at 1,000ft, with uncontrolled airspace below. The applicable separation standard is 500ft vertically, and with the jet being cleared down to 1,500ft other traffic could be operating quite legitimately up to 1,000ft. This was the case in this instance. There was no breakdown in the separation standards. The incident was initially reported as a confliction due to the alleged penetration of the control area by the light aircraft. The Approach Controller at Brisbane did not have a height readout capability on his radar equipment. However, his colleague at Coolangatta does and was asked for an altitude readout on the light aircraft. The Mode C label attached to the light aircraft read 1,600ft. Later, it became evident that this was incorrect. A system limitation is that when two aircraft are in close proximity, typically less than one nautical mile, the Mode C information from the two aircraft can be corrupted or switch altitude labels between aircraft. This apparently occurred on this occasion. The TCAS operated effectively and within its parameters. The jet was in a descent, virtually pointing at the light aircraft at a lower altitude. The system could not predict that the crew were about to level off at an altitude which would have given an adequate separation from the lower traffic.