BY MONASH @ BUSINESS SCHOOL 1. What is the benefit of having the current and deferred tax statements? P.238 Refer to Coopersiitd exi n page 239: fi have a TV licence valued at $900 000 and $20 000in the bank and a current tax liability of $10.000 and | then borrow $700 000 from the bank should the bank be concerned abaut repayment? of current and deferred tax? Refer to page 239 2. What are the general princip determined according to Australian income T: 3. Describe how taxable profit is gene legislation and explain how it differs from accounting profit. Refer to.page 244 af deferred tax assets and liabilities and how these 4. Describe the criteria for the recogn balances may feverse aver time. Refer to the following statement to guide your thought and. discussion and Refer to page 261 [A depreciable non-current asset, with differing depreciation rates for accounting and tax, can lead to the recognition of either a Deferred Tax Asset or a Deferred Tax Liability. In the early years of on asset's life, if the tax depreciation rate is higher than the accounting depreciation rate, then this creates a temporary difference. In this case, our tax deductions in the early years exceed that for accounting depreciation. This reduces taxable profits in.the early/current year, in future yeors, we have fewer deductions for tax purposes. This gives rise to higher taxable profits in future which fs 0 taxable temporory difference and more tax payable in future i.e. DTL. The DTL is then'eyersed over the life of the asset. If, however, the tax depreciation rate is lower than the accaunting depreciation rate, our tax deductions in the early/current year are lower than that recorded far accounting. In future years, we have greater deductions for tax purposes. This leads to lower taxable profits inin future |.e. OTA, The future which is o deductible temporory difference, and less tax payable DIA is then reversed over the life of the asset. 5 of the statements do you stually difficult to follow? Identify and ts, Refer to the text for Carefully read and dissect the above statements. Which parts understand? Which parts of the above statement are concept bring this to the discussion, Discuss the meaning of the above statement greater understanding, ate this to your by temporary differences? Can you explain/t For example: What is meant ple below classmates? Consider the e Jed a small cargo plane on 1 July 2015 cargo plane had a useful life of 4 years and the depreciation rate for this type and purcha Move With Us Ltd commenced ope The cost of the cargo plane was $120 000. Th company adopts the straight-line basis of depreciation. The ta of asset is 50% p.a. The tax rate is 30% ul life (2016, 2017, 2018), calcula e cargo plane's usefu eferred tax entry in relation to For the first three years o| carrying amount and tax base of the asset, and prepare the de the asset. Explain your answer 2016 2017 2018 7019 = | Recount | Yan | Account | Tex | Account | Tax | Account | Tax | } Plane -cost 1 370000 | 120000 | 120000 | 120000 | 120000 | 120000 Acc Depn. | 30000 60000 | 120000| 90000 | 120000 | 120000 | 120000 a 90000 | 60 000 30.000 i oT e 60.000 0 o 0 4 4 ™ 30000 Ti. (30%) 9.000 30 June 2016 Income Tax Expense Deferred Tax Liability 30June 2017 Income Tax Expense Deferred Tax Liability30 June 2018 Deferred Tax Liability Income Tax Income 30 June 2019