Preheat Oven & Prep Pans: Preheat your oven to 350°F (175°C). Grease and flour two 9-inch round cake pans.
Mix Dry Ingredients: Sift together the cake flour, baking powder, and salt. Set aside.
Cream Butter and Sugar: In a large bowl, beat the butter and sugar until light and fluffy. Add eggs one at a time, then stir in vanilla extract.
Combine with Dry Ingredients: Alternately add dry ingredients and coconut milk to the butter mixture, starting and ending with the dry ingredients. Mix until just combined.
Bake: Divide the batter evenly between the prepared pans. Bake for 25-30 minutes, or until a toothpick inserted into the center comes out clean. Cool in pans for 10 minutes, then transfer to a wire rack to cool completely.
Make Frosting: Beat cream cheese and butter until smooth. Gradually add powdered sugar, then vanilla extract and coconut milk. Beat until creamy.
Assemble Cake: Place one cake layer on a serving plate. Spread frosting over the top. Add the second layer and cover the top and sides with the remaining frosting. Press toasted coconut flakes onto the sides and top.
Chill and Serve: Chill the cake for at least 1 hour before serving to set the frosting.