annual report 2011

IOOF | annual report 2011
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognised for the
following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable
profit or loss, and differences relating to investments in
subsidiaries and associates to the extent that it is probable
that they will not reverse in the foreseeable future. In
addition, deferred tax is not recognised for taxable temporary
differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, based
on the laws that have been enacted or substantively enacted
by the reporting date.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when deferred tax balances relate to the same
taxation authority. Current tax assets and liabilities are offset
where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
(i)
Tax consolidation
IOOF Holdings Ltd and its wholly owned Australian resident
entities (including IOOF Ltd benefit funds) are part of a
tax-consolidated group under Australian taxation law. As a
consequence, all members of the tax-consolidated group are
taxed as a single entity.
Tax expense/income, deferred tax liabilities and deferred tax
assets arising from temporary differences of the members of
the tax-consolidated group are recognised in the separate
financial statements of the members of the tax-consolidated
group using the ‘separate taxpayer within group’ approach
by reference to the carrying amounts in the separate financial
statements of each entity and the tax values applying under
tax consolidation. Current tax liabilities and assets and deferred
tax assets arising from unused tax losses and relevant tax
credits of the members of the tax-consolidated group are
recognised by the Company (as head entity in the taxconsolidated
group).
Due to the existence of a tax funding arrangement between
the entities in the tax-consolidated group, amounts are
recognised as payable to or receivable by the company and
each member of the group in relation to the tax contribution
amounts paid or payable between the parent entity and the
other members of the tax-consolidated group in accordance
with the arrangement.
Further information about the tax funding arrangement is
detailed in note 11 to the financial statements.
Where the tax contribution amount recognised by each
member of the tax-consolidated group for a particular period
is different to the aggregate of the current tax liability or asset
and any deferred tax asset arising from unused tax losses
and tax credits in respect of that period, the difference is
recognised as a contribution from (or distribution to) equity
participants.
(ii)
Uncertain Tax Position
Tax Laws Amendment (2010 Measures No. 1) Bill 2010, received
Royal Assent on 3 June 2010. The Act contains a number of
amendments to the tax consolidation regime that deal with
the recognition of tax cost setting amounts in the income
tax law. A new section ( s 716-405) may provide a specific
tax deduction for the tax cost setting amount on assets that
qualify as rights to future income assets acquired upon an
entity joining a tax consolidated group. The Company has
analysed customer related intangibles, acquired as part of
various acquistions the Company or its subsidiaries have made
since 2005, with a view to applying the new provisions. The
Company has sought a private ruling to confirm its entitlement
to these tax deductions.
On 30 March 2011, the Board of Taxation was requested
to undertake a review of these provisions and provide
recommendations that may limit the use and scope
these provisions . Such recommendations may have
restrospective application. To date these recomendations
have not been made public and it is uncertain as to how any
recommendations will be legislated and applied.
Until receipt of the private ruling and actionable
recommendations from the Board of Taxation the tax effect
of Tax Laws Amendment (2010 Measures No. 1) Bill 2010 is
considered uncertain.
(p) Goods and service tax (GST)
Revenues, expenses and assets (excluding receivables) are
recorded net of GST. GST input tax credits are initially recorded
as an asset and GST collected as a liability. These balances
are offset as at the reporting date and recognised as either
an amount receivable or payable to the Australian Taxation
Office. The GST portion relating to financial supplies and nondeductible
expenditure, for which an input tax credit cannot
be claimed, is expensed or is recognised as part of the cost of
acquisition of an asset.
Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the Australian Taxation Office is included
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