Telstra 2015 Annual Report Download - page 105

Telstra Corporation Limited and controlled entities 103
Notes to the Financial Statements (continued)
NOTE 9. INCOME TAXES (continued)
_Telstra Financial Report 2015
(a) The effective income tax rate is calculated as income tax
expense divided by profit before income tax expense from
continuing and discontinued operations.
(b) Non assessable and non deductible items in the current period
include non assessable capital distributions, franked dividends
received, estimated research and development tax offset, tax
losses not recognised and various other items.
Non assessable and non deductible items in the prior period
included a non assessable gain on disposal of the CSL Group, a
non deductible goodwill impairment loss on disposal of the Sensis
Group, a non deductible write off of Octave foreign currency
translation reserve and various other items.
(c) Our net deferred tax liability on our net defined benefit asset for
the Telstra Group is $89 million (2014: $15 million).
(d) When the underlying transactions to which our deferred tax
relates are recognised directly in other comprehensive income or
equity, the temporary differences associated with these
adjustments are also recognised directly in other comprehensive
income or equity.
(e) Our deferred tax assets not recognised in the statement of
financial position may be used in future years if the following
criteria are met:
• our controlled entities have sufficient future taxable profit to
enable the income tax losses and temporary differences to be
offset against that taxable profit
• we have sufficient future capital gains to be offset against the
above capital losses
• we continue to satisfy the conditions required by tax legislation
to be able to use the tax losses
• there are no future changes in tax legislation that will adversely
affect us in using the benefit of the tax losses.
As at 30 June 2014 and 30 June 2015, our deferred tax assets not
recognised in the statement of financial position include an
estimate of the capital loss on disposal of the Sensis Group in
February 2014, and impact of acquisitions and divestments of
other controlled entities.
9.1 Tax consolidation
The Telstra Entity and its Australian resident wholly owned
entities previously elected to form a tax consolidated group. As a
consequence of the election to enter tax consolidation, the tax
consolidated group is treated as a single entity for income tax
purposes.
The Telstra Entity, as the head entity in the tax consolidated group,
recognises, in addition to its own transactions, the current tax
liabilities and the deferred tax assets arising from unused tax
losses and tax credits for all entities in the group. However, the
Telstra Entity and its Australian resident wholly owned entities
account for their own current tax expense and deferred tax
amounts.
Current tax expense includes an estimate of the tax payable on
2015 taxable income for the Australian tax consolidated group of
$1,711 million (2014: $1,763 million).
Upon tax consolidation, the entities within the tax consolidated
group entered into a tax sharing agreement. The terms of this
agreement specified the methods of allocating any tax liability in
the event of default by the Telstra Entity on its group payment
obligations and the treatment where a subsidiary member exits
the group. The tax liability of the group otherwise remains with the
Telstra Entity for tax purposes.
For entities within the tax consolidated group, a tax funding
arrangement is also in place under which:
• the Telstra Entity compensates its Australian resident wholly
owned controlled entities for any current tax receivable
assumed
• the Telstra Entity compensates its Australian resident wholly
owned controlled entities for any deferred tax assets relating to
unused tax losses and tax credits
• Australian resident wholly owned entities compensate the
Telstra Entity for any current tax payable assumed.
The funding amounts are based on the amounts recorded in the
financial statements of the wholly owned entities.
Amounts receivable by the Telstra Entity of $41 million (2014: $35
million) and amounts payable by the Telstra Entity of $73 million
(2014: $74 million) under the tax funding arrangements are due in
the next financial year upon final settlement of the current tax
payable for the tax consolidated group.
Telstra Group
As at 30 June
2015 2014
$m $m
Deferred tax assets not recognised (e)
Income tax losses 316 48
Capital tax losses 549 349
Deductible temporary differences 311 306
1,176 703