<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.
                          AMENDMENT NO. 2 TO FORM 20-F
                                   (Mark One)

      [ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
            SECURITIES EXCHANGE ACT OF 1934

                                       OR

      [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2003

                                       OR

      [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
            AND EXCHANGE ACT OF 1934

                        Commission file number: 1-14722

                           TELSTRA CORPORATION LIMITED
             (Exact name of Registrant as specified in its charter)

                     AUSTRALIAN CAPITAL TERRITORY, AUSTRALIA
                 (Jurisdiction of incorporation or organization)

            242 EXHIBITION STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA
                    (Address of principal executive offices)

                    Securities registered or to be registered
                     pursuant to section 12 (b) of the Act.

Title of each Class                         Name of Exchange on which Registered
----------------------------                ------------------------------------
Ordinary Shares(1)                                 New York Stock Exchange
American Depositary Shares(2)                      New York Stock Exchange

--------------------------------------------------------------------------------

Securities registered or to be registered pursuant to Section 12(g) of the Act.
--------------------------------------------------------------------------------
                                      None

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act.
--------------------------------------------------------------------------------
                                      None

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

            Ordinary Shares                           12,866,600,200

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes X      No __

Indicate by check mark which financial statement item the registrant has elected
to follow.

                             Item 17 __     Item 18 X

(1) Not for trading but only in connection with the listing of the American
Depositary Shares.

(2) Evidenced by American Depositary Receipts, each American Depositary Share
representing five Ordinary Shares.

                                       1
<PAGE>
                                EXPLANATORY NOTE

      The undersigned registrant hereby amends Item 15, Item 18 and Item 19 of
the Annual Report on Form 20-F for the above-noted fiscal year which was filed
with the Securities and Exchange Commission on December 30, 2003 by replacing
each of the aforementioned items in its entirety.


                                       2
<PAGE>
ITEM 15. CONTROLS AND PROCEDURES

REFER TO FOLLOWING PAGE

                                       3
<PAGE>
Telstra Corporation Limited and controlled entities

Evaluation of Disclosure Controls and Procedures

Our management, including our CEO and CFO, have reviewed and evaluated the
effectiveness of our disclosure controls and procedures as of the end of fiscal
2003. Based on that review and evaluation, the CEO and CFO have concluded that
our disclosure controls and procedures are effective in providing them with all
material information required to be disclosed in this annual report on a timely
basis.

<PAGE>
ITEM 18. FINANCIAL STATEMENTS.

REFER TO FOLLOWING PAGES

                                       4
<PAGE>
Telstra Corporation Limited and controlled entities

Statement of Financial Performance
--------------------------------------------------------------------------------
for the year ended 30 June 2003

<TABLE>
<CAPTION>
                                                                         Telstra Group              Telstra Entity
-----------------------------------------------------------------------------------------------   ------------------
                                                                      Year ended 30 June          Year ended 30 June
                                                               2003      2003     2002     2001      2003       2002
                                                      Note       $m      US$m       $m       $m        $m         $m
-----------------------------------------------------------------------------------------------   ------------------
<S>                                                   <C>    <C>      <C>       <C>      <C>       <C>        <C>
Ordinary activities
Revenue

Sales revenue..........................................2,3   20,495    13,732   20,196   18,679    18,628     18,217
Other revenue (excluding interest revenue).............2,3    1,121       751      606    4,304       952        487
                                                             ----------------------------------   ------------------
                                                             21,616    14,483   20,802   22,983    19,580     18,704
                                                             ----------------------------------   ------------------
Expenses

Labour...................................................3    3,204     2,147    3,240    3,122     2,681      2,575
Goods and services purchased (1.27)......................3    3,615     2,422    3,933    3,083     2,730      2,971
Other expenses...........................................3    4,602     3,083    4,065    6,761     6,634      5,088
                                                             ----------------------------------   ------------------
                                                             11,421     7,652   11,238   12,966    12,045     10,634
Share of net losses of associates and joint venture
entities................................................24    1,025       687       81      183        --         --
Depreciation and amortisation............................3    3,447     2,309    3,267    2,871     2,993      2,782
Interest revenue.........................................2       84        56      126      103       202        183
Borrowing costs..........................................3      879       589      896      769       935        913
                                                             ----------------------------------   ------------------
Net borrowing costs.......................................      795       533      770      666       733        730
                                                             ----------------------------------   ------------------
Profit before income tax expense..........................    4,928     3,302    5,446    6,297     3,809      4,558
                                                             ----------------------------------   ------------------
Income tax expense.......................................4    1,534     1,028    1,796    2,292     1,558      1,833
Effect of decrease in tax rates on deferred tax
balances.................................................4       --        --       --      (56)       --         --
                                                             ----------------------------------   ------------------
Total income tax expense..................................    1,534     1,028    1,796    2,236     1,558      1,833
                                                             ----------------------------------   ------------------
Net profit................................................    3,394     2,274    3,650    4,061     2,251      2,725
Outside equity interests in net (profit)/loss.............       35        23       11       (3)       --         --
                                                             ----------------------------------   ------------------
Net profit available to Telstra Entity shareholders.......    3,429     2,297    3,661    4,058     2,251      2,725
                                                             ----------------------------------   ------------------
Other valuation adjustments to equity
Net exchange differences on translation of non-
Australian controlled entities' financial statements......     (161)     (108)     (87)      61        --         --
Reserves recognised on equity accounting our interest
in joint ventures and associates..........................      (18)      (12)      41      (33)       --         --
Fair value reserve recognised on acquisition of
controlling interest in joint venture entity..............       --        --       54       --        --         --
Adjustment to opening retained profits due to a change
in an accounting standard (1.2)...........................    1,415       948       --       --        --         --
                                                             ----------------------------------   ------------------
Valuation adjustments available to Telstra Entity
shareholders and recognised directly in equity............    1,236       828        8       28        --         --
                                                             ----------------------------------   ------------------
Total changes in equity other than those resulting from
transactions with Telstra Entity shareholders as owners...    4,665     3,125    3,669    4,086     2,251      2,725
                                                             ==================================   ==================
                                                              CENTS   USCENTS    CENTS    CENTS
                                                             ----------------------------------
Basic and diluted earnings per share (cents per share)...6     26.6      18.0     28.5     31.5
                                                             ----------------------------------
Total ordinary dividends per share (cents per share)..7,28     27.0      18.0     22.0     19.0
                                                             ----------------------------------
</TABLE>

The notes following the financial statements form part of the financial report.


176
<PAGE>
                             Telstra Corporation Limited and controlled entities

Statement of Financial Position
--------------------------------------------------------------------------------
as at 30 June 2003

<TABLE>
<CAPTION>
                                                                   Telstra Group        Telstra Entity
-------------------------------------------------------------------------------------   ---------------
                                                                   As at 30 June         As at 30 June
                                                               2003     2003     2002     2003     2002
                                                     Note        $m     US$m       $m       $m       $m
-------------------------------------------------------------------------------------   ---------------
<S>                                                  <C>     <C>      <C>      <C>      <C>      <C>
Current assets
Cash assets..............................................8    1,300      871    1,070    1,152      489
Receivables..............................................9    3,619    2,425    4,063    3,374    5,522
Inventories.............................................10      260      174      204      225      160
Other assets............................................14      578      387    1,038      466      947
                                                             ------------------------   ---------------
Total current assets......................................    5,757    3,857    6,375    5,217    7,118
                                                             ------------------------   ---------------
Non current assets

Receivables..............................................9      877      587    1,005    1,319    1,121
Inventories.............................................10       14        9       20       14        7
Investments - accounted for using the equity method.....11      159      106    1,197       10       34
Investments - other.....................................11       96       64      105    4,204    4,762
Property, plant and equipment...........................12   23,012   15,418   23,421   21,794   21,852
Future income tax benefit................................4       --       --      132       --       --
Intangibles - goodwill..................................13    2,018    1,352    2,063        4        5
Intangibles - other.....................................13    1,146      768    1,358      236      269
Other assets............................................14    2,520    1,688    2,543    2,371    2,399
                                                             ------------------------   ---------------
Total non current assets..................................   29,842   19,992   31,844   29,952   30,449
                                                             ------------------------   ---------------
Total assets..............................................   35,599   23,849   38,219   35,169   37,567
                                                             ------------------------   ---------------
Current liabilities

Payables................................................15    2,525    1,692    2,762    2,030    2,202
Interest-bearing liabilities............................16    1,323      886    1,896    3,327    3,068
Income tax payable.......................................4      660      442      632      614      572
Provisions..............................................17      353      236    1,903      284    1,723
Revenue received in advance...............................      973      652    1,037      798      859
                                                             ------------------------   ---------------
Total current liabilities.................................    5,834    3,908    8,230    7,053    8,424
                                                             ------------------------   ---------------
Non current liabilities

Payables................................................15       51       34      129       48       68
Interest-bearing liabilities............................16   11,232    7,525   12,481   11,232   12,450
Provision for deferred income tax.........................    1,814    1,215    1,987    1,753    1,831
Provisions..............................................17      814      545      848      727      757
Revenue received in advance...............................      432      289      438      418      420
                                                             ------------------------   ---------------
Total non current liabilities.............................   14,343    9,608   15,883   14,178   15,526
                                                             ------------------------   ---------------
Total liabilities.........................................   20,177   13,516   24,113   21,231   23,950
                                                             ------------------------   ---------------
Net assets................................................   15,422   10,333   14,106   13,938   13,617
                                                             ========================   ===============
Shareholders' equity
Telstra Entity

Contributed equity......................................18    6,433    4,310    6,433    6,433    6,433
Reserves..................................................     (150)    (101)      14      277      277
Retained profits..........................................    9,137    6,122    7,661    7,228    6,907
                                                             ------------------------   ---------------
Shareholders' equity available to Telstra Entity
shareholders..............................................   15,420   10,331   14,108   13,938   13,617
Outside equity interests
Contributed equity........................................        1        1      212       --       --
Reserves..................................................       --       --       34       --       --
Retained profits/(accumulated losses).....................        1        1     (248)      --       --
                                                             ------------------------   ---------------
Total outside equity interests............................        2        2       (2)      --       --
                                                             ------------------------   ---------------
Total shareholders' equity................................   15,422   10,333   14,106   13,938   13,617
                                                             ========================   ===============
Expenditure commitments, contingent liabilities
and assets...........................................20,21
</TABLE>

The notes following the financial statements form part of the financial report.


                                                                             177
<PAGE>
Telstra Corporation Limited and controlled entities

Statement of Cash Flows
--------------------------------------------------------------------------------
for the year ended 30 June 2003

<TABLE>
<CAPTION>
                                                                          Telstra Group                  Telstra Entity
----------------------------------------------------------------------------------------------------    ------------------
                                                                       Year ended 30 June               Year ended 30 June
                                                                  2003      2003      2002      2001       2003       2002
                                                         Note       $m      US$m        $m        $m         $m         $m
----------------------------------------------------------------------------------------------------    ------------------
<S>                                                      <C>   <C>        <C>      <C>       <C>        <C>        <C>
Cash flows from operating activities
Receipts from trade and other receivables (inclusive
of goods and services tax (GST)) (c) (1.21)..................   22,511    15,082    22,291    20,912     20,327     20,034
Payments of accounts payable and to employees
(inclusive of GST) (c) (1.21)................................  (11,920)   (7,985)  (11,837)  (11,136)    (9,841)    (9,715)
Interest received............................................       70        47        52        70        140         92
Borrowing costs paid.........................................     (999)     (669)     (897)     (813)    (1,060)      (943)
Dividends received...........................................        7         5        10        16          2          1
Income taxes paid............................................   (1,536)   (1,029)   (1,503)   (1,455)    (1,487)    (1,479)
GST remitted to the Australian Taxation Office (ATO).........   (1,076)     (721)   (1,018)     (995)    (1,019)      (945)
                                                               -------------------------------------    ------------------
Net cash provided by operating activities (a)................    7,057     4,730     7,098     6,599      7,062      7,045
                                                               -------------------------------------    ------------------
Cash flows from investing activities (Payments)/receipts for:

- property, plant and equipment..............................   (2,704)   (1,812)   (2,958)   (3,259)    (2,662)    (2,778)
- internal use software assets...............................     (555)     (372)     (527)     (706)      (606)      (536)
- patents, trademarks and licences...........................       (2)       (1)       --      (332)        --         --
- deferred expenditure.......................................       --        --        (6)      (71)        --         (3)
                                                               -------------------------------------    ------------------
Capital expenditure (before investments).....................   (3,261)   (2,185)   (3,491)   (4,368)    (3,268)    (3,317)
                                                               -------------------------------------    ------------------
- shares in controlled entities..............................      (25)      (17)      (50)   (3,056)       (25)      (118)
- investment in joint venture and associated
entities.....................................................      (45)      (30)     (107)     (142)         5         --
- shares in listed securities and other investments..........       (1)       (1)      (14)      (38)        --        (13)
                                                               -------------------------------------    ------------------
Investment expenditure.......................................      (71)      (48)     (171)   (3,236)       (20)      (131)
                                                               -------------------------------------    ------------------
Total capital expenditure...................................5   (3,332)   (2,233)   (3,662)   (7,604)    (3,288)    (3,448)
Proceeds from:
- sale of property, plant and equipment......................      797       534       194       288        794        189
- sale of patents, trademarks and licences...................       --        --         1        14         --         --
- sale of shares in controlled entities......................       12         8        --         4         --         --
- sale of joint venture entities and operations..............        3         2        --         3         --         --
- sale of associated entities................................       17        11        --        --          1         --
- sale of listed securities and other investments............        7         5       176       397         --          5
- sale of business...........................................        4         3        33       528          2         29
                                                               -------------------------------------    ------------------
Net cash used in investing activities........................   (2,492)   (1,670)   (3,258)   (6,370)    (2,491)    (3,225)
                                                               -------------------------------------    ------------------
Cash flows from financing activities Proceeds from:

- borrowings.................................................    5,914     3,962    13,487    23,521      6,521     13,667
- Telstra bonds..............................................       --        --       987        --         --        987
Repayment of:
- borrowings.................................................   (6,315)   (4,231)  (15,441)  (19,193)    (6,527)   (15,941)
- Telstra bonds..............................................     (582)     (390)      (41)     (565)      (582)       (41)
- finance leases principal amount............................      (22)      (15)      (18)      (14)        (8)        (7)
Payments for convertible note................................       --        --        --    (1,366)        --         --
Employee share loans (net)...................................       33        22        40        27         33         40
Dividends paid..............................................7   (3,345)   (2,241)   (2,831)   (2,316)    (3,345)    (2,831)
                                                               -------------------------------------    ------------------
Net cash (used in)/provided by financing activities..........   (4,317)   (2,893)   (3,817)       94     (3,908)    (4,126)
                                                               -------------------------------------    ------------------
Net increase/(decrease) in cash..............................      248       167        23       323        663       (306)
Foreign currency conversion..................................      (18)      (12)      (20)       --         --         --
Cash at the beginning of the year............................    1,070       716     1,067       744        489        795
                                                               -------------------------------------    ------------------
Cash at the end of the year (b)..............................    1,300       871     1,070     1,067      1,152        489
                                                               =====================================    ==================
</TABLE>

The notes following the financial statements form part of the financial report.


178
<PAGE>
                             Telstra Corporation Limited and controlled entities

Statement of Cash Flows (continued)
--------------------------------------------------------------------------------
for the year ended 30 June 2003

<TABLE>
<CAPTION>
                                                                         Telstra Group                Telstra Entity
-------------------------------------------------------------------------------------------------   ------------------
                                                                       Year ended 30 June           Year ended 30 June
                                                                  2003      2003    2002     2001       2003      2002
                                                         Note       $m      US$m      $m       $m         $m        $m
-------------------------------------------------------------------------------------------------   ------------------
<S>                                                      <C>     <C>     <C>       <C>      <C>     <C>          <C>
Cash flow notes

(a) Reconciliation of net profit to net
cash provided by operating activities

Net profit...................................................    3,394     2,274   3,650    4,061      2,251     2,725
Add/(subtract) the following transactions
Depreciation and amortisation...............................3    3,447     2,309   3,267    2,871      2,993     2,782
Accrued interest on notes issued by PCCW.....................      (15)      (10)    (85)     (29)       (15)      (85)
Dividends received from associated entities................24        6         4       9        1         --        --
(Profit)/loss on sale of property, plant and equipment......3     (173)     (115)      4       (7)      (160)        4
(Profit) on sale of patents, trademarks and licences........3       --        --      (1)      (8)        --        --
(Profit)/loss on sale of controlled entities............... 3       (5)       (3)     (3)      (4)        --        --
(Profit)/loss on sale of joint venture and
associated entities.........................................3      (12)       (8)     --       (2)         1        --
(Profit)/loss on sale of listed securities and other
corporations................................................3        2         1       5     (266)        --        (1)
(Profit) on sale of business................................3      (10)       (7)     --     (852)        (8)       --
Borrowing costs included in the cost
of constructed assets.......................................3     (105)      (70)   (115)    (108)      (105)     (115)
Share of joint venture entities' net losses................24    1,015       681      79      128         --        --
Share of associated entities' net losses...................24       10         7       2       55         --        --
Provision for reduction in value of investments.............3       26        17      26    1,065      3,056       445
Provision for reduction in value of convertible note........3       --        --      96       --         --        96
Provision for reduction in value of controlled entity
receivables.................................................3       --        --      --       --       (587)      830
Reduction in value of capitalised software..................3        2         1      --       31          2        --
Net foreign currency conversion differences..................      (37)      (25)    (14)      14         --        --
Writeback of TSS additional contributions...................2       --        --      --     (725)        --        --
(Increase)/decrease in non cash revenue received
in advance...................................................       --        --     225      779         --       (62)
Increase/(decrease) in non cash operating deferred
expenditure..................................................       (8)       (5)     (7)    (560)       (11)       29
Other........................................................       53        35      31       --        (26)        2
Movements in operating assets and liabilities
(Increase)/decrease in trade debtors and other debtors.......        4         3     233     (464)       (99)       67
(Increase)/decrease in inventories...........................      (52)      (35)     94       25        (71)       37
(Increase)/decrease in deferred expenditure and
prepayments..................................................       48        32     (45)       7         77       (15)
(Increase)/decrease in deferred mobile phone handset
subsidies....................................................      (42)      (28)     52      (79)       (42)       52
Increase/(decrease) in accounts payable
and other creditors..........................................     (271)     (181)   (219)     457       (156)       70
Increase/(decrease) in revenue received in advance...........      (66)      (44)   (338)     (15)       (50)        4
Increase in net taxes payable................................        9         6     293      781         70       354
Increase/(decrease) in provisions............................     (161)     (108)   (176)    (583)       (58)     (174)
Movement in foreign currency conversion reserve..............       (2)       (1)     35       26         --        --
                                                                 --------------------------------   ------------------
Net cash provided by operating activities....................    7,057     4,730   7,098    6,599      7,062     7,045
                                                                 ================================   ==================
(b) Reconciliation of cash
Cash at the end of the year as shown in the statement of
cash flows agrees to the net amount of the following
items in the notes to the financial statements:

Cash assets.................................................8    1,300       871   1,070    1,077      1,152       489
Bank overdraft...............................................       --        --      --      (10)        --        --
                                                                 --------------------------------   ------------------
                                                                 1,300       871   1,070    1,067      1,152       489
                                                                 ================================   ==================
</TABLE>


                                                                             179
<PAGE>
Telstra Corporation Limited and controlled entities

Statement of Cash Flows (continued)
--------------------------------------------------------------------------------
for the year ended 30 June 2003

Cash flow notes (continued)

(c) Goods and Services Tax (GST)

Our receipts from trade and other receivables includes estimated GST of $2,072
million (2002: $1,975 million; 2001: $1,888 million) collected by us as agent
for the ATO. Our payments of accounts payable and to employees include estimated
GST payments made by us for goods and services obtained in undertaking both
operating and investing activities. GST paid associated with operating
activities amounted to $639 million (2002: $615 million; 2001: $553 million) and
GST paid relating to investing activities amounted to $356 million (2002: $342
million; 2001: $340 million).

(d) Significant financing and investing activities that involve components of
non cash

Property, plant and equipment

Our property, plant and equipment includes borrowing costs of $77 million (2002:
$83 million; 2001: $77 million) which have been included in the cost of
constructed assets. These amounts are included in borrowing costs paid in our
statement of cash flows.

We acquired plant and equipment with a fair value of $2 million using finance
leases during fiscal 2003 (2002: $9 million; 2001: $14 million). As these
acquisitions did not involve cash, they are not reported in the statement of
cash flows. Our finance lease liability also includes $nil (2002: $1 million;
2001: $3 million) relating to non cash, foreign currency revaluations.

Sale and leaseback transactions

During fiscal 2003, we entered into a sale and leaseback on a portfolio of seven
office properties for $570 million. We entered into operating leases totalling
$518 million in relation to these properties on normal commercial terms of
between five and twelve years. The profit on the sale of this property, plant
and equipment was $131 million before tax. The cash inflow from this sale is
recognised in our proceeds from the sale of property, plant and equipment (refer
note 3 for further information).

There were no significant sale and leaseback transactions entered into during
fiscal 2002.

During fiscal 2001, we entered into a sale and leaseback of non communications
plant, server and mid range IT equipment totalling $110 million. The leaseback
entered into is classified as an operating lease, and the revenue received from
the sale directly offset the retirement expense. The cash inflow from this sale
was recognised in our proceeds from the sale of property, plant and equipment.
During fiscal 2002, there was an additional $23 million sale and leaseback
recognised relating to this same transaction.

Software assets (internal use software assets)

Our software assets include borrowing costs of $28 million (2002: $32 million;
2001: $31 million) which have been included in the cost of constructed assets.
These amounts are included in borrowing costs paid in our statement of cash
flows.

(e) Financing facilities

Details of credit standby arrangements and loan facilities are shown in note 16.

(f) Acquisitions

On 9 April 2003, we acquired an additional 41.6% interest in TelstraClear
Limited (TelstraClear) giving us 100% ownership of this company and its
controlled entities.

Cash consideration for this additional acquisition was $25 million (NZD$26.9
million). As we controlled TelstraClear prior to this transaction, we were
already consolidating their results, financial position and cash flows in to the
Telstra Group.

(g) Disposals and entities deconsolidated

There were no significant disposals of investments during fiscal 2003.

During fiscal 2002 and fiscal 2001 we had the following significant acquisitions
and disposals of businesses:

(h) Acquisition of TelstraClear, CitySearch and the Telstra CSL Group (formerly
known as RWC)

On 12 December 2001, we increased our holding in our joint venture entity
TelstraClear Limited (TelstraClear) by 8.4% to 58.4%. We consequently ceased
equity accounting and consolidated the financial position, financial performance
and cash flows of the TelstraClear Group from 1 December 2001.

Cash consideration for this acquisition was $40 million (NZD$50 million) for
which we received an additional 52,500,000 shares in TelstraClear.

On 23 May 2002, we acquired 100% of the share capital in CitySearch Australia
Pty Ltd (CitySearch). Cash consideration for this acquisition was $17 million.


180
<PAGE>
                             Telstra Corporation Limited and controlled entities

Statement of Cash Flows (continued)
--------------------------------------------------------------------------------
for the year ended 30 June 2003

Cash flow notes (continued)

(h) Acquisition of TelstraClear, CitySearch and the Telstra CSL Group (formerly
known as RWC) (continued)

The amount of cash, other assets and liabilities acquired as a result of
obtaining our increased interest in TelstraClear and our shareholding in
CitySearch was as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                                            Year ended
                                                             30 June
                                                              2002
        Acquisition of controlled entities                     $m
----------------------------------------------------------------------
<S>                                                         <C>
Consideration for acquisitions
Cash.....................................................           56
Costs of acquisition.....................................            1
                                                            ----------
                                                                    57
                                                            ==========
Fair value of assets and liabilities
acquired by major class
Net overdraft held on acquiring control..................           (5)
Receivables..............................................           64
Inventories..............................................           17
Property, plant and equipment............................          777
Identifiable intangible assets...........................          249
Other assets.............................................            8
Payables.................................................          (55)
Borrowings...............................................         (406)
Amounts owed to Telstra Corporation Ltd (a)..............         (367)
Provisions...............................................          (72)
Finance lease liability..................................          (10)
Other liabilities........................................          (80)
                                                            ----------
Fair value of net assets on gaining control..............          120
Outside equity interest relating to TelstraClear.........          (47)
Original 50% interest in fair value of TelstraClear's
net assets prior to obtaining increased shareholding.....          (56)
                                                            ----------
Net assets acquired......................................           17
Goodwill on acquisition (b)..............................           40
                                                            ----------
                                                                    57
                                                            ==========
Outflow of cash on acquisitions
Consideration for acquisition............................          (56)
Net overdraft held by TelstraClear on gaining control....           (5)
Costs of acquisition.....................................           (1)
                                                            ----------
                                                                   (62)
                                                            ==========
</TABLE>

(a) Included in our repayment of borrowings line in the statement of cash flows
is a $367 million loan provided to TelstraClear. This funding was used to
facilitate the purchase of the Clear Communications Limited Group.

(b) Included in our goodwill on acquisition is $31 million relating to
TelstraClear. Goodwill recognised from the original acquisition of our 50%
interest in TelstraClear was $49 million as at 1 December 2001. Upon acquisition
of our additional 8.4% controlling interest, the total goodwill relating to
TelstraClear was $80 million.

Telstra CSL Group

On 28 June 2002, we acquired an additional 40% interest in the Telstra CSL Group
giving us 100% ownership of this company and its controlled entities. As
consideration for this acquisition, PCCW Limited (PCCW) redeemed the US$750
million convertible note and issued a new US$190 million mandatorily converting
note. The fair value of consideration for this acquisition amounted to $992
million. As no cash was involved, this transaction is not reflected in our
statement of cash flows. In addition, as we controlled the Telstra CSL Group
prior to this transaction, we were already consolidating their results,
financial position and cash flows in to the Telstra Group. Refer to section (j)
for information on the acquisition of our original 60% interest in the Telstra
CSL Group in fiscal 2001.


                                                                             181
<PAGE>
Telstra Corporation Limited and controlled entities

Statement of Cash Flows (continued)
--------------------------------------------------------------------------------
for the year ended 30 June 2003

Cash flow notes (continued)

(i) Disposals and entities deconsolidated

During fiscal 2002, we deconsolidated our interests in Keycorp Limited (Keycorp)
and Telstra Vishesh Communications Private Limited (Telstra VComm).

We signed a deed poll effective 28 June 2002, which gave up our rights to
appoint a majority of the directors to the board of Keycorp. As a result, we no
longer have the capacity to control the company and have deconsolidated its
statement of financial position as at that date. Refer to section (k) for
information on the original acquisition of our interest in Keycorp.

On 13 May 2002, we sold our ordinary shareholding in Telstra VComm and acquired
non voting preference shares for $11 million on the same date. As a result of
this transaction, we no longer control this company and have deconsolidated its
statement of financial position.

The cash, other assets and liabilities deconsolidated as a result of these
transactions were as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                                            Year ended
                                                             30 June
Assets and liabilities                                        2002
deconsolidated by major class                                  $m
----------------------------------------------------------------------
<S>                                                         <C>
Carrying amounts of assets and liabilities
deconsolidated by major class
Net overdrafts held on deconsolidation...................          (12)
Receivables..............................................           17
Inventories..............................................           24
Property, plant and equipment............................           11
Intangible assets........................................           18
Other assets.............................................            1
Payables.................................................          (27)
Borrowings...............................................          (47)
Provisions...............................................           (3)
                                                            ----------
Net assets deconsolidated................................          (18)
                                                            ==========
Inflow of cash on deconsolidation
Net overdrafts held......................................          (12)
                                                            ==========
</TABLE>

The inflow of cash relating to overdrafts held on deconsolidation has been
offset against our payments for shares in controlled entities in the statement
of cash flows.

(j) Telstra's Asian Ventures

In fiscal 2001, we completed our strategic alliance with PCCW. Under these
arrangements, the following acquisitions and disposals took place with effect
from 1 February 2001:

- Reach Ltd

Reach Ltd (REACH) was formed through the combination of our international
wholesale businesses and certain wholesale assets, together with certain PCCW
assets. In return for the businesses and assets we contributed, we received net
cash of $680 million and a 50% equity interest initially recognised at $1,727
million, including capitalised acquisition costs. REACH operates as a provider
of voice, data and internet connectivity services in the Asia Pacific region.

The businesses we contributed included the global wholesale division of Telstra
Corporation Limited and a number of controlled entities as listed below:

Global wholesale divisions

- Global Connect (part thereof)

- Global Wholesale - Australian Point of Presence (PoP)

- Telstra Inc. (part thereof)

Controlled entities

- Telstra Global Networks Limited

- Telstra Japan KK

- Telstra Korea Limited

- Telstra Germany GmbH

- Telstra France SA

- Telstra Singapore Pte Ltd

- Telstra International (HK) Holdings Limited

- Telstra Wholesale Trading Inc.

- Telstra (UK) Limited

- Telstra Global Wholesale (NZ) Limited

- Telstra (Malaysia Holdings) Sdn. Bhd.

- Australian Network Company Pty Ltd


182
<PAGE>
                             Telstra Corporation Limited and controlled entities

Statement of Cash Flows (continued)
--------------------------------------------------------------------------------
for the year ended 30 June 2003

Cash flow notes (continued)

(j) Telstra's Asian Ventures (continued)

The carrying amounts of cash, other assets and liabilities contributed is
presented in the following table:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                                            Year ended
                                                             30 June
       Assets and liabilities contributed by                  2001
                 major class                                   $m
----------------------------------------------------------------------
<S>                                                         <C>
Proceeds on disposal
Cash.....................................................          680
Issue of shares (excluding associated costs).............        1,692
                                                            ----------
                                                                 2,372
Cash.....................................................           64
Receivables..............................................          142
Property, plant and equipment............................          647
Other assets.............................................           87
Payables.................................................         (403)
Borrowings...............................................          (16)
                                                            ----------
Carrying amount of assets contributed                              521
Other items..............................................           47
Other associated costs (including stamp duty)............          100
                                                            ----------
Book value of businesses and controlled entities
contributed to REACH and associated costs (note 3).......          668
                                                            ----------
Net outflow of cash on contribution......................          (64)
Net inflow of cash as consideration......................          680
                                                            ----------
                                                                   616
                                                            ==========
</TABLE>

Refer note 24 for further details on our investment in REACH.

- Telstra CSL Group

We acquired a 60% controlling interest in the Telstra CSL Group. Consideration
for this acquisition totalled $3,085 million (including capitalised acquisition
costs). The Telstra CSL Group operates as a provider of wireless connectivity
services in the Asia Pacific region.

The fair value of cash, other assets and liabilities consolidated as a result of
the acquisition is presented in the following table:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                                            Year ended
                                                             30 June
           Assets and liabilities acquired by                 2001
                      major class                              $m
----------------------------------------------------------------------
<S>                                                         <C>
Cash.....................................................           40
Receivables..............................................           50
Inventories..............................................           14
Property, plant and equipment............................          430
Identifiable intangible assets...........................          759
Other assets.............................................           49
Payables.................................................         (198)
Provisions...............................................         (103)
                                                            ----------
Fair value of net assets acquired........................        1,041
Telstra share of fair value of net assets acquired.......          625
Goodwill on acquisition..................................        1,461
Write off of acquisition costs...........................          999
                                                            ----------
                                                                 3,085
                                                            ==========
Inflow of cash on acquisition............................           40
Outflow of cash on acquisition...........................        3,085
                                                            ==========
</TABLE>

Refer note 23 for further details on our investment in the Telstra CSL Group.

(k) Other acquisitions of businesses

During fiscal 2001, we acquired a 50.9% controlling interest in Keycorp Limited
(Keycorp). As consideration, we sold our EFTPOS payments carriage, installation
and maintenance business to Keycorp for $426 million.


                                                                             183
<PAGE>
Telstra Corporation Limited and controlled entities

Statement of Cash Flows (continued)
--------------------------------------------------------------------------------
for the year ended 30 June 2003

Cash flow notes (continued)

(k) Other acquisitions of businesses (continued)

The amount of cash, other assets and liabilities we acquired as a result of
obtaining our interest in Keycorp is presented in the following table:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                                            Year ended
                                                             30 June
          Acquisition of controlled entities and              2001
                        businesses                             $m
----------------------------------------------------------------------
<S>                                                         <C>
Consideration for acquisition
Sale of EFTPOS payments carriage, installation
and maintenance business.................................          426
Costs of acquisition.....................................           12
                                                            ----------
                                                                   438

Less elimination of goodwill (intercompany transaction)..          426
                                                            ----------
                                                                    12

Outside equity interest (49.1%)..........................           17
                                                            ----------
                                                                    29
                                                            ==========
Fair value of assets and liabilities acquired
by major class
Cash.....................................................            1
Receivables..............................................           40
Inventories..............................................           29
Investments..............................................           20
Property, plant and equipment............................            5
Identifiable intangible assets...........................           19
Other assets.............................................            7
Payables.................................................          (37)
Borrowings...............................................          (47)
Provisions...............................................           (3)
                                                            ----------
Fair value of net assets acquired........................           34
Less discount on acquisition.............................           (5)
                                                            ----------
                                                                    29
                                                            ==========
Inflow of cash on acquisition
Cash held by Keycorp on acquisition......................            1
                                                            ==========
</TABLE>


184
<PAGE>
                             Telstra Corporation Limited and controlled entities

Statement of Changes in Shareholders' Equity
--------------------------------------------------------------------------------
for the year ended 30 June 2003

Telstra Group
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Reserves
                                                   ---------------------------------------------
                                                                  Foreign             Consolid-
                                      Contributed     Asset       currency              ation                Outside
                                        equity     revaluation  translation  General  fair value  Retained   equity
                                          (i)         (ii)         (iii)      (iv)       (v)      profits   interests  Total
                                          $m           $m           $m         $m         $m         $m        $m        $m
                                      ---------------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>          <C>      <C>         <C>       <C>        <C>
Balance at 30 June 2000.............        6,433           32          (41)       1          --     5,170          7  11,602
- change in outside equity
interests capital, reserves and
accumulated losses (apart from
interests in net profits)...........           --           --           --       --          --        --        473     473
- net profit........................           --           --           --       --          --     4,058          3   4,061
- reserves recognised on equity
accounting our interest in joint
venture entities and
associates..........................           --           --          (33)       3          --        --         --     (30)
- adjustment on translation of
non-Australian controlled
entities' financial
statements..........................           --           --           61       --          --        --         --      61
- transfer of foreign currency
translation reserve on sale of
controlled entities.................           --           --          (12)      --          --        12         --      --
- dividends (note 7)................           --           --           --       --          --    (2,445)        --  (2,445)
                                      ---------------------------------------------------------------------------------------
Balance at 30 June 2001.............        6,433           32          (25)       4          --     6,795        483  13,722
- change in outside equity
interests capital, reserves and
accumulated losses (apart from
interests in net profit)............           --           --           --       --          --        --       (445)   (445)
- net profit/(loss).................           --           --           --       --          --     3,661        (11)  3,650
- reserves recognised on equity
accounting our interest in joint
venture entities and
associates..........................           --           --           62      (21)         --        --         --      41
- adjustment on conversion of
non-Australian controlled
entities' financial
statements..........................           --           --          (87)      --          --        --         --     (87)
- dilution of outside equity
interest on acquisition of
controlled entity through
additional share issue..............           --           --           --       --          --        29        (29)     --
- fair value adjustment on
acquisition of controlling
interest in joint venture entity               --           --           --       --          54         1         --      55
- transfer of foreign currency
translation reserve on sale of
controlled entities.................           --           --           (5)      --          --         5         --      --
- dividends (note 7)................           --           --           --       --          --    (2,830)        --  (2,830)
                                      ---------------------------------------------------------------------------------------
Balance at 30 June 2002.............        6,433           32          (55)     (17)         54     7,661         (2) 14,106
</TABLE>

(continued over page)

The notes following the financial statements form part of the financial report.


                                                                             185
<PAGE>
Telstra Corporation Limited and controlled entities

Statement of Changes in Shareholders' Equity (continued)
--------------------------------------------------------------------------------

Telstra Group
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Reserves
                                                   ---------------------------------------------
                                                                  Foreign             Consolid-
                                      Contributed     Asset       currency              ation                Outside
                                        equity     revaluation  translation  General  fair value  Retained   equity
                                          (i)         (ii)         (iii)      (iv)       (v)      profits   interests  Total
                                          $m           $m           $m         $m         $m         $m        $m        $m
                                      ---------------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>          <C>      <C>         <C>       <C>        <C>
Balance at 30 June 2002.............        6,433           32          (55)     (17)         54     7,661         (2) 14,106
- adjustment to opening retained
profits due to change in
accounting standards (vi)...........           --           --           --       --         --      1,415         --   1,415
- change in outside equity
interests capital, reserves
and accumulated losses (apart
from interests in net profit).......           --           --           --       --         --         (8)        39      31
- net profit/(loss).................           --           --           --       --         --      3,429        (35)  3,394
- reserves recognised on equity
accounting our interest in joint
venture entities and
associates..........................           --           --          (21)       3         --         --         --     (18)
- adjustment on conversion of
non-Australian controlled
entities' financial
statements..........................           --           --         (161)      --         --         --         --    (161)
- fair value adjustment on
acquisition of controlling
interest in joint venture entity               --           --           --       --         (4)         4         --      --
- transfer of foreign currency
translation reserve and general
reserve on sale of controlled
entities and associates.............           --           --           (3)      22          --       (19)        --      --
- dividends (note 7)................           --           --           --       --          --    (3,345)        --  (3,345)
                                      ---------------------------------------------------------------------------------------
Balance at 30 June 2003.............        6,433           32         (240)       8          50     9,137          2  15,422
                                      =======================================================================================
Balance at 30 June 2003 US$m........        4,310           21         (161)       5          34     6,122          2  10,333
                                      =======================================================================================
</TABLE>

(i) Refer to note 18 for details of the Telstra Group's contributed equity.

(ii) The asset revaluation reserve was previously used to record revaluations in
the value of non current assets. From 1 July 2000, as allowed under AASB 1041:
"Revaluation of Non-Current Assets", we have deemed the carrying value of our
property, plant and equipment assets (refer to note 12) to be cost. As a result,
the asset revaluation reserve may no longer be used to record the writedowns of
these assets to recoverable amount. Any writedowns of these assets to
recoverable amount from 1 July 2000 must be made through the statement of
financial performance (refer note 1.12).

As a consequence of implementing AASB 1041, we have also discontinued our policy
of revaluing property, plant and equipment upwards. The asset revaluation
reserve is no longer able to be used for distribution to shareholders or for
offsetting revaluation decrements due to legal and accounting restrictions.

(iii) The foreign currency translation reserve is used to record exchange
differences arising from the conversion of our self sustaining non-Australian
operations' financial statements into Australian dollars. Conversion of
operations where entities operate on their own are taken to the foreign currency
translation reserve, while conversion for those entities that operate with us
are taken to the statement of financial performance (refer note 1.5).

This reserve is also used to record our percentage share of exchange differences
arising from equity accounting our non-Australian investments in associates and
joint venture entities. The foreign currency translation reserve applicable to
joint venture entities and associated entities is shown in note 24.

(iv) The general reserve represents our share of the capital reserve of joint
venture entities and associated entities as a result of equity accounting. The
amount of reserves applicable to these investments is shown in note 24.

(v) The consolidation fair value reserve represents our share of the fair value
adjustments to TelstraClear Limited net assets upon acquisition of a controlling
interest. The reserve balance is amortised over the useful life of the
underlying revalued assets (average 18 years).

(vi) Due to the first time application of accounting standard AASB 1044:
"Provisions, Contingent Liabilities and Contingent Assets", we have adjusted the
opening balance of retained profits by the amount of the dividend provided at 30
June 2002. Refer to note 1.2 for additional information on this change.


186
<PAGE>
                             Telstra Corporation Limited and controlled entities

Statement of Changes in Shareholders' Equity (continued)
----------------------------------------------------------------------------
for the year ended 30 June 2003

Telstra Entity
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                Reserves
                                               -----------
                                                  Asset
                                  Contributed  revaluation  Retained
                                   equity (i)     (ii)      profits   Total
                                      $m           $m          $m       $m
----------------------------------------------------------------------------
<S>                               <C>          <C>          <C>       <C>
Balance at 30 June 2000..........       6,433          277     4,886  11,596
- net profit.....................          --           --     4,571   4,571
- dividends (note 7).............          --           --    (2,445) (2,445)
                                  ------------------------------------------
Balance at 30 June 2001..........       6,433          277     7,012  13,722
- net profit.....................          --           --     2,725   2,725
- dividends (note 7).............          --           --    (2,830) (2,830)
                                  ------------------------------------------
Balance at 30 June 2002..........       6,433          277     6,907  13,617
- adjustment to opening
retained profits due to change
in accounting standards (iii)....          --           --     1,415   1,415
- net profit.....................          --           --     2,251   2,251
- dividends (note 7).............          --           --    (3,345) (3,345)
                                  ------------------------------------------
Balance at 30 June 2003..........       6,433          277     7,228  13,938
                                  ==========================================
</TABLE>

(i) Refer to note 18 for details of the Telstra Entity's contributed equity.

(ii) The asset revaluation reserve was previously used to record revaluations in
the value of non current assets. From 1 July 2000, as allowed under AASB 1041:
"Revaluation of Non-Current Assets", we have deemed the carrying value of our
property, plant and equipment assets (refer to note 12) to be cost. As a result,
the asset revaluation reserve may no longer be used to record the writedowns of
these assets to recoverable amount. Any writedowns of these assets to
recoverable amount from 1 July 2000 must be made through the statement of
financial performance (refer note 1.12).

As a consequence of implementing AASB 1041, we have also discontinued our policy
of revaluing property, plant and equipment upwards. The asset revaluation
reserve is no longer able to be used for distribution to shareholders or for
offsetting revaluation decrements due to legal and accounting restrictions.

(iii) Due to the first time application of accounting standard AASB 1044:
"Provisions, Contingent Liabilities and Contingent Assets", we have adjusted the
opening balance of retained profits by the amount of the dividend provided for
at 30 June 2002. Refer to note 1.2 for additional information on this change.


                                                                             187
<PAGE>
Telstra Corporation Limited and controlled entities

Notes to the Financial Statements
--------------------------------------------------------------------------------

1.   Summary of accounting policies

In this financial report, we, us, our, Telstra and the Telstra Group - all mean
Telstra Corporation Limited, an Australian corporation and its controlled
entities as a whole. Telstra Entity is the legal entity, Telstra Corporation
Limited.

Our financial or fiscal year ends on 30 June. Unless we state differently, the
following applies:

-  year, fiscal year or financial year means the year ended 30 June;

-  balance date means the date 30 June; and

-  2003 means fiscal 2003 and similarly for other fiscal years.

The main accounting policies we used in preparing the financial report of the
Telstra Entity and the Telstra Group are listed below. These are presented to
assist your understanding of the financial reports. These accounting policies
are consistent with those adopted in previous periods, unless a change in
accounting policy has been made and brought to your attention.

1.1  Basis of preparation of the financial report

This financial report is a general purpose financial report prepared in
accordance with:

-  the Australian Corporations Act 2001;

-  Accounting Standards applicable in Australia;

-  other authoritative pronouncements of the Australian Accounting Standards
   Board;

-  Urgent Issues Group Consensus Views; and

-  Australian generally accepted accounting principles (AGAAP).

This financial report is prepared in accordance with historical cost, except for
some categories of investments that are equity accounted. Cost is the fair value
of the consideration given in exchange for net assets acquired.

In preparing this financial report, we have been required to make estimates and
assumptions that affect:

-  the reported amounts of assets and liabilities;

-  the disclosure of contingent assets and liabilities; and

-  revenues and expenses for the period.

Actual results could differ from those estimates.

Note 30 contains a reconciliation of the major differences between our financial
report prepared under Australian generally accepted accounting principles
(AGAAP) and those applicable under United States generally accepted accounting
principles (USGAAP).

United States dollar conversions

This financial report has been prepared using Australian dollars (A$). For the
convenience of readers outside Australia we have converted our statement of
financial performance, statement of financial position, statement of cash flows
and USGAAP disclosures from A$ to US$ for fiscal 2003.

These conversions appear under columns headed "US$m" and represent rounded
millions of US dollars. The conversion has been made using the noon buying rate
in New York City for cable transfers in non-US currencies. This rate is
certified for custom purposes by the Federal Reserve Bank of New York. The rate
on 30 June 2003 was A$1.00 = US$0.67.

These conversions are indicative only and do not mean that the A$ amounts could
be converted to US$ at the rate indicated.

1.2  Change in accounting policies

The following accounting policy changes occurred during fiscal 2003.

Provision for dividends

In previous financial years, our accounting policy was to provide for dividends
in the statement of financial position when that dividend was declared after
reporting date but before the completion of the financial report. Due to the
first time application of accounting standard AASB 1044: "Provisions, Contingent
Liabilities and Contingent Assets", a provision can no longer be raised at
balance date if the dividend is declared after that date.

As a result, we have changed our accounting policy to reflect this position and
we now provide for a dividend in the period in which it is declared. When the
declaration date is after balance date but before completion of the financial
report, we disclose the dividend as an event occurring after balance date.

The transitional provisions of this standard require a write-back of the
provision raised as at 30 June 2002 to opening retained profits in the current
financial year. The effect of the revised policy has been to increase
consolidated retained profits and decrease provisions at the beginning of the
year by $1,415 million. No adjustment has been made to the prior year statement
of financial performance, statement of financial position or cash flows.


188
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.   Summary of accounting policies (continued)

1.2  Change in accounting policies (continued)

Provision for dividends (continued)

The restatement of our retained profits and provisions is disclosed as follows
to show the information as if the new accounting policy had always been applied:

<TABLE>
<CAPTION>
                                      Telstra Group      Telstra Entity
-------------------------------------------------------------------------
                                      As at 30 June      As at 30 June
                                        (Restated)         (Restated)
                                       2003      2002      2003      2002
                                         $m        $m        $m        $m
-------------------------------------------------------------------------
<S>                                   <C>       <C>      <C>        <C>
Restatement of retained profits
Previously reported retained
profits at beginning of year.....     7,661     6,795     6,907     7,012
Reversal of prior year
dividend provided for............     1,415     1,416     1,415     1,416
Profit after income tax
expense..........................     3,429     3,661     2,251     2,725
Other movements in retained
profits..........................       (23)       35        --        --
Dividends - interim
dividend and prior year
final ordinary dividend
paid (refer note 7)..............    (3,345)   (2,831)   (3,345)   (2,831)
                                    -------------------------------------
Restated retained profits
at end of year...................     9,137     9,076     7,228     8,322
                                    =====================================
Restatement of current provisions
Current provisions at end of
year (refer note 17).............       353     1,903       284     1,723
Adjustment for change in
accounting policy................        --    (1,415)       --    (1,415)
                                    -------------------------------------
Restated current provisions
at end of year...................       353       488       284       308
                                    =====================================
</TABLE>

Cross currency swaps

In accordance with AASB 1012: "Foreign Currency Translation" we revalue the
principal of our cross currency swaps to take into account movements in foreign
currency. As these cross currency swaps are designated as hedges, we had
previously included the swap balances with the underlying borrowings in the
statement of financial position.

To give affect to a change to AASB 1012 in relation to the disclosure of our
financial instruments, we have now separated these foreign currency swaps and
recorded them as separate financial assets and liabilities.

This reflects the fact that the swap contracts, although specifically hedging
our borrowings, are made with different counterparties and as such are separate
financial assets and liabilities in their own right.

On a similar basis, we have reviewed the treatment of our interest rate swaps to
ensure that interest receivable and payable are set off only where our dealings
are with the same counterparty and we have a legally recognised right to do so.
Adjustments required for our interest rate swaps have not had a significant
effect on our statement of financial position.

To appropriately assess our price risk from foreign currency borrowings, hedge
receivables and hedge payables arising from cross currency swaps and accruals
arising from interest rate swaps should continue to be viewed in the context of
movements in the underlying borrowings being hedged.

This change in accounting policy has had no impact on our statement of financial
performance or our net assets in the statement of financial position. It has
however resulted in an increase to both total assets and total liabilities. We
have restated our comparative figures to reflect the disclosure in the current
year. Refer note 29 for additional details on our financial instruments
(including derivatives).

The balances relating to cross currency swaps in our asset and liability classes
are as follows:

<TABLE>
<CAPTION>
                                               Telstra Group
---------------------------------------------------------------
                                               As at 30 June
                                                 2003      2002
                                                   $m        $m
---------------------------------------------------------------
<S>                                          <C>          <C>
Receivables - current......................        10        29
Receivables - non current..................       273       622
                                             ------------------
                                                  283       651
                                             ------------------
Interest-bearing liabilities -non current         426       114
                                             ------------------
Net cross currency swaps separated out
from interest-bearing liabilities..........      (143)      537
                                             ==================
</TABLE>

The net position of our other loans after including all cross currency swaps is
included in our note 16 disclosures.

Employee benefits

Revised accounting standard AASB 1028: "Employee Benefits" became applicable
from 1 July 2002. The main changes surrounding this standard were specific
recognition criteria for wages and salaries (including non-monetary benefits),
compensated absences, profit sharing and bonus plans, termination benefits and
some post employment benefits.


                                                                             189
<PAGE>
Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.   Summary of accounting policies (continued)

1.2  Change in accounting policies (continued)

Employee benefits (continued)

Previously, we measured the provision for employee benefits at remuneration
rates current at balance date. From fiscal 2003, we now measure the provision
for employee benefits on the remuneration rates expected to be current when the
liability is settled. We have assessed the changes in this accounting standard
and determined that there has been no significant impact on our statement of
financial performance or statement of financial position. As a result, there has
been no adjustment required to our opening retained earnings.

There were no accounting policy changes made during fiscal 2002.

The following accounting policy change occurred during fiscal 2001.

Revenue recognition

It is our policy to prepare our financial statements to satisfy both AGAAP and
USGAAP and, in cases where there is no conflict between the two, we ensure that
we incorporate the more detailed requirements in both AGAAP and USGAAP financial
statements.

The US Securities and Exchange Commission (SEC) Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" (SAB101) had application to
us for our USGAAP accounts from 1 July 2000.

SAB101 gives the SEC staff's interpretation of existing accounting principles on
the timing of recognition of revenues and associated expenses in the financial
statements. As the underlying accounting principles of revenue recognition are
the same for both AGAAP and USGAAP, we have applied the more detailed SAB101
guidance to the timing of revenue recognition to both AGAAP and USGAAP financial
statements. We accounted for the adoption of SAB101 as a change in accounting
principle effective 1 July 2000.

The major revenue and associated expense items impacted were:

-  basic access installation and connection fees for in place and new services;

-  up-front mobile phone connection fees;

-  commission revenue for our printed directories; and

-  on line directories and voice services.

Installation and connection fees

Consistent with industry practice, certain installation and connection fees were
previously recognised on connection of the service. Under SAB101, these
installation and connection fee revenues are deferred and recognised over the
average estimated customer contract life. For basic access installation and
connections this is an average of five years. Incremental costs directly related
to these revenues are also deferred and amortised over the customer contract
life. Any costs in excess of the revenue deferred are recognised immediately.

Commission revenue for printed directories

Previously, commission revenue for printed directories earned for sale of
directory advertising space was recognised on signing of the advertising
agreements with customers, while the balance of the revenue was deferred until
the directories were published and delivered to customers' premises. Under
SAB101 we have deferred the recognition of all revenue earned for a directory
until the directory is published and delivered to customers' premises.

On line directories and voice services

Previously, revenue for our on line directories and voice services was
recognised when agreements for the service were made with the customer. Revenue
for these services is now deferred over the life of the service agreements,
which is on average one year.

Refer to note 3 for details on items recognised in our statement of financial
performance requiring specific disclosure.


190
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.2   Change in accounting policies (continued)

Revenue recognition (continued)

As a result of the change in revenue recognition accounting policy, our net
profit for fiscal 2001 decreased as follows:

<TABLE>
<CAPTION>
                                                                  Telstra Group
-------------------------------------------------------------------------------
                                                                   Year ended
                                                                    30 June
                                                                      2001
                                                                       $m
-------------------------------------------------------------------------------
<S>                                                               <C>
Sales revenue
Cumulative impact of deferring revenue as at 30 June
2000...................................................                     777
Deferral of additional revenues under new policy for
year ended 30 June 2001................................                     410
Part release of cumulative impact for the year ended
30 June 2001...........................................                    (408)
                                                                  -------------
Total impact on sales revenue..........................                     779
                                                                  -------------
Goods and services purchased
Cumulative impact of deferring expenses as at 30
June 2000..............................................                    (573)
Deferral of additional expenses under new policy for
year ended 30 June 2001................................                    (191)
Part release of cumulative impact for the year ended
30 June 2001...........................................                     204
                                                                  -------------
Total impact on goods and services purchased...........                    (560)
                                                                  -------------
Reduction in profit before income tax expense..........                    (219)
Income tax benefit at 34%..............................                      74
                                                                  -------------
Reduction in net profit after tax for the year ended
30 June 2001...........................................                    (145)
                                                                  =============
</TABLE>

1.3   Recently issued accounting standards to be applied in Australia in future
      periods

The following revised Australian accounting standard and the adoption of
international accounting standards will apply in future financial reports. The
impact of this Australian accounting standard has not yet been determined.

AASB 1020: "Income taxes" is applicable for financial years beginning on or
after 1 January 2005. The revised standard introduces a fundamental shift in the
method of accounting for income taxes. The new method is known as the balance
sheet liability method, while the previous method was known as the income
statement liability method.

The balance sheet method places emphasis upon the determination of tax assets
and liabilities with income tax expense a residual of the process. In
implementing the new method the revised standard:

-     introduces new terminology;

-     is formula based;

-     defines tax assets and liabilities as the product of temporary differences
      that arise between the carrying amount and the tax base of items
      recognised in the statement of financial position; and

-     increases the level of disclosures about income taxation.

Adoption of International Financial Reporting Standards

The Australian Financial Reporting Council (FRC) has determined that Australian
entities must adopt International Financial Reporting Standards (IFRS) from 1
January 2005. This will involve completing a first time set of financial
statements under IFRS for the half-year ended 31 December 2005 and for the
financial year ended 30 June 2006.

Comparatives will also be remeasured under IFRS for the half-year ending 31
December 2004 and the financial years ending 30 June 2005 and 30 June 2004.

It is expected that there will be continuing developments in IFRS up to their
application date of 1 January 2005, and consequently there is still uncertainty
about the impact of IFRS. We are currently evaluating the potential impact of
applying IFRS on our statement of financial position and performance.

1.4   Principles of consolidation

Our consolidated financial report includes the assets and liabilities of the
Telstra Entity and its controlled entities as a whole as at the end of the
financial year and the consolidated results and cash flows for the financial
year. The effect of all intergroup transactions and balances are removed in full
from our consolidated financial report.

Our consolidated financial report includes the assets and liabilities of the
Telstra Entity and its controlled entities as a whole as at the end of the
financial year and the consolidated results and cash flows for the financial
year. The effect of all intergroup transactions and balances are removed in full
from our consolidated financial report.

Where we do not control an entity for the whole year, results and cash flows for
those entities are only included from the date on which control commences, or up
until the date on which there is a loss of control.


                                                                             191
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Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.4   Principles of consolidation (continued)

Our consolidated retained profits include controlled entities' retained
profits/accumulated losses from the time they became a controlled entity until
control ceases. Outside equity interests in the results and equity of controlled
entities are shown separately in our consolidated statement of financial
performance and consolidated statement of financial position.

The financial statements of controlled entities are prepared for the same
reporting period as the Telstra Entity, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies.

An entity is considered to be a controlled entity where we are able to dominate
decision making, directly or indirectly, relating to the financial and operating
policies of that entity to enable it to operate with us in achieving our
objectives. Our controlled entities are listed in note 23.

Investments in associated entities and joint ventures are accounted for as set
out in note 1.10.

1.5   Foreign currency translation

(a) Transactions

Foreign currency transactions are converted into Australian currency at market
exchange rates applicable at the date of the transactions. Amounts payable or
receivable in foreign currencies at balance date are converted into Australian
currency at market exchange rates at balance date. Any currency translation
gains and losses that arise are included in our net profit or loss for the year.

Where we enter into a hedge for a specific expenditure commitment or for the
construction of a qualifying asset, currency translation gains and losses and
hedging costs on forward foreign currency contracts are deferred and included
with the expenditure commitment or cost of the asset.

Where we enter into a hedge for general expenditure commitments or for the
construction of a non-qualifying asset, currency translation gains and losses
are recorded in the statement of financial performance in the same period as the
currency translation differences on the underlying transaction being hedged.
Costs on such contracts are amortised over the life of the hedge contract.

Premiums and discounts on forward exchange contracts arising at the time of
entering into the hedge are deferred and amortised over the life of the contract
and included in borrowing costs.

(b) Translation of financial reports of foreign operations

Non-Australian entities that operate with us ("integrated" entities)

Where our non-Australian operations, either directly or indirectly, rely on us
financially and operationally, we translate their financial reports to
Australian dollars using a method known as the temporal method of accounting.

Under this method:

-     monetary statement of financial position items, such as cash and
      receivables, are translated into Australian dollars using market exchange
      rates at balance date;

-     non monetary statement of financial position items (including equity at
      the date of investment) are translated at market exchange rates applicable
      at the date of the transactions (or at the date of revaluation);

-     statements of financial performance are translated into Australian dollars
      at average exchange rates for the year, unless there are significant
      identifiable transactions, which are translated at the exchange rate that
      existed on the date of the transaction; and

-     currency translation gains and losses are recorded in the statement of
      financial performance.

Non-Australian entities that operate on their own ("self-sustaining" entities)

Where our non-Australian operations operate independently of us both financially
and operationally, we translate their financial reports to Australian dollars
using the current rate method of accounting.

Under this method:

-     assets and liabilities are translated into Australian dollars using market
      exchange rates at balance date;

-     shareholders' equity at the date of investment is translated into
      Australian dollars at the exchange rate current at that date. Movements
      post-acquisition (other than retained profits/ accumulated losses) are
      translated at the exchange rates current at the dates of those movements;

-     statements of financial performance are translated into Australian dollars
      at average exchange rates for the year, unless there are significant
      identifiable transactions, which are translated at the exchange rate that
      existed on the date of the transaction; and

-     currency translation gains and losses are recorded in the foreign currency
      translation reserve.


192
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.5   Foreign currency translation (continued)

Non-Australian entities that operate on their own ("self sustaining" entities)
(continued)

Exchange differences relating to foreign currency monetary items forming part of
the net investment in a self sustaining foreign entity, together with hedges of
such monetary items and related tax effects, are eliminated against the foreign
currency translation reserve on consolidation of the foreign entity's financial
report.

Upon disposal or partial disposal of a self sustaining entity, the balance of
the foreign currency translation reserve relating to the entity, or the part
disposed of, is transferred to retained profits.

1.6   Cash and cash equivalents (note 8)

Cash includes cash at bank and on hand, bank deposits, bills of exchange and
commercial paper with an original maturity date not greater than three months.

Bank deposits (including those with an original maturity in excess of three
months, which are classified as receivables) are recorded at amounts to be
received and interest revenue is recognised on an effective yield to maturity
basis.

Bills of exchange and commercial paper (including those with an original
maturity in excess of three months, which are classified as receivables) are
valued at amortised cost with interest revenue recognised on an effective yield
to maturity basis.

Statement of cash flows discloses cash net of outstanding bank overdrafts. At
balance date in 2003 and 2002, there were no bank overdrafts.

1.7   Receivables (note 9)

Trade debtors are recorded at amounts to be received. A provision for doubtful
debts is raised based on a general and specific review of outstanding amounts at
balance date. Bad debts which have been specifically provided for in previous
years are recorded against the provision for doubtful debts (the provision is
reduced). In all other cases, bad debts are written off as an expense directly
in the statement of financial performance.

Employee share loans are carried at the amount advanced to each employee, less
after tax dividend repayments and loan repayments. The outstanding principal on
these loans is mainly interest free. The current portion of the loan receivable
is calculated using estimated loan repayments expected to be received from tax
adjusted dividend payments and estimated loan repayments as a result of staff
exiting the employee share plans described in note 19.

1.8   Inventories (note 10)

Our finished goods include goods available for sale, and material and spare
parts to be used in constructing and maintaining the telecommunications network.
We value inventories at the lower of cost and net realisable value.

We allocate cost to the majority of inventory items on hand at balance date
using the weighted average cost basis. For the remaining quantities on hand,
actual cost is used.

Current inventories are inventory items held for resale or items to be consumed
into the telecommunications network within one year.

Non current inventories are items which will be consumed into the
telecommunications network after one year.

1.9   Construction contracts (note 10)

(a) Valuation

We record construction contracts in progress at cost (net of any provision for
foreseeable losses) less progress billings where profits are yet to be
recognised.

Cost includes:

-     both variable and fixed costs directly related to specific contracts;

-     amounts which can be allocated to contract activity in general and which
      can be allocated to specific contracts on a reasonable basis; and

-     costs expected to be incurred under penalty clauses, warranty provisions
      and other variances.

Where a significant loss is estimated to be made on completion, a provision for
foreseeable losses is brought to account and recorded against the gross amount
of construction work in progress.

(b) Recognition of profit

Profit is recognised on an individual project basis using the percentage of
completion method. The percentage of completion is calculated based on estimated
costs of completion (refer to note 1.19(d)).

Profits are recognised when:

-     the stage of contract completion can be reliably determined;

-     costs to date can be clearly identified; and

-     total contract revenues to be received and costs to complete can be
      reliably estimated.


                                                                             193
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.9   Construction contracts (note 10) (continued)

(c) Disclosure

The construction work in progress balance is recorded in current inventories
after deducting progress billings (refer note 10). Where progress billings
exceed the balance of construction work in progress the net amount is shown as a
current liability within other creditors.

1.10  Investments (note 11)

(a) Controlled entities

Our investments in controlled entities are valued at cost less any amount
provided for permanent reduction in the investment value.

(b) Joint venture entities and associated entities

(i) Joint venture entities

A joint venture entity is a contractual arrangement (in the form of an entity)
whereby two or more parties take on an economic activity which is governed by
joint control. Joint control involves the contractually agreed sharing of
control over an entity where two or more parties must consent to all major
decisions. Our interests in joint venture entities that are:

-     partnerships are accounted for using the equity method of accounting in
      the Telstra Group and Telstra Entity financial statements; and

-     not partnerships are accounted for using the equity method of accounting
      in the Telstra Group financial statements and the cost method in the
      Telstra Entity financial statements.

(ii) Associated entities

Where we hold an interest in the equity of an entity and are able to apply
significant influence to the decisions of the entity, that entity is an
associated entity. Associated entities are accounted for using the equity method
of accounting in the Telstra Group financial statements and the cost method in
the Telstra Entity financial statements.

Under the equity method of accounting we adjust the initial recorded amount of
the investment for our share of:

-     net profits or losses after tax since the date of investment;

-     reserve movements since the date of investment;

-     unrealised profits or losses and adjustments to asset values;

-     notional goodwill amortisation;

-     dividends or distributions received; and

-     deferred profit brought to account.

Our share of all of these items, apart from dividends or distributions received
and reserves, is recorded in the statement of financial performance.

Notional goodwill on acquisition of an interest in a joint venture entity or
associated entity is amortised over the expected period of benefit, limited to a
maximum of 20 years from the date of acquisition. This amortisation is recorded
in the share of net profits or losses of associates and joint venture entities
line in the statement of financial performance.

Where we contribute or sell businesses or assets to a joint venture entity or
associate in which we retain an ownership interest, a portion of the profit
arising on contribution or sale is deferred. The amount deferred is determined
with reference to our ownership percentage in the joint venture entity or
associate. The deferred amount is released to the statement of financial
performance through the equity accounted results over a period consistent with
the utilisation of the underlying assets.

We also assess the recoverable amount of our equity accounted investments and
reduce the equity accounted carrying amount to recoverable amount where the
carrying amount exceeds recoverable amount. Where the equity accounted amount of
an investment has been reduced to recoverable amount, we only reverse reductions
to the extent the new recoverable amount at balance date exceeds the carrying
amount at that date.

Where the equity accounted amount of our investment in an entity falls below
zero, we suspend the equity method of accounting and record the investment at
zero. When this occurs, the equity method of accounting does not start again
until our share of profits and reserves exceeds the cumulative prior year share
of losses and reserve reductions.

(c) Joint venture operations

A joint venture operation means a contractual arrangement (that is not a joint
venture entity) whereby two or more parties undertake an economic activity that
is governed by joint control. This usually involves the shared use of assets.
Joint control involves the contractually agreed sharing of control where two or
more parties must consent to all major decisions. Where the investment is
significant, we record assets and liabilities relating to our share in each
asset and liability used in the joint venture operation. We record expenses
based on our percentage ownership interest in the joint venture. We record
revenue from the sale or use of our share of the output as described in our
revenue policy (refer note 1.19).


194
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                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.10  Investments (note 11) (continued)

(d) Listed securities and investments in other corporations

Listed securities and investments in other corporations are valued at cost less
any amount provided for permanent reduction in their value.

Net fair values of our investments are calculated on the following bases:

-     for listed securities traded in an organised financial market we use the
      current quoted market bid price at balance date; and

-     for investments in unlisted securities not traded in an organised
      financial market, fair value is determined by reference to the net assets
      of the unlisted security.

1.11  Recoverable amount of non current assets

Non current assets measured using the cost basis are written down to recoverable
amount where their carrying value exceeds this recoverable amount.

The recoverable amount of an asset is the net amount expected to be recovered
through the cash inflows and outflows arising from its continued use and
subsequent disposal. Where net cash inflows are derived from a group of assets
working together, recoverable amount is determined on the basis of the relevant
group of assets. Any decrement in the carrying value is recognised as an expense
in the statement of financial performance in the reporting period in which the
recoverable amount write down occurs.

The expected net cash flows included in determining recoverable amounts of non
current assets are discounted to their present values using a market determined,
risk adjusted, discount rate.

1.12  Property, plant and equipment (note 12)

(a) Acquisition

Items of property, plant and equipment are recorded at cost and depreciated as
described in note 1.12(c). The cost of our constructed property, plant and
equipment includes:

-     the cost of material and direct labour;

-     an appropriate proportion of direct and indirect overheads; and

-     borrowing costs up to the date the asset is installed ready for use.

Our weighted average capitalisation interest rate for borrowing costs for fiscal
2003 was 7.5% (2002: 7.2%; 2001: 7.9%). Interest revenue is not deducted in the
calculation of borrowing costs included in the cost of constructed assets when
those borrowings are not for a specific asset.

(b) Revaluation

We obtain valuations of all our land and buildings at least once every three
years, or more frequently if necessary, to accord with the note disclosure
requirements in AASB 1040: "Statement of Financial Position". From 1 July 2000,
we applied AASB 1041: "Revaluation of Non-Current Assets" which has seen us
discontinue our policy of revaluing our property, plant and equipment upwards.
Any notional increase in book value as a result of the triennial valuation will
therefore be disclosed in a note to the financial statements but not booked.

As part of the application of AASB 1041, we have also elected to:

-     apply the cost basis of recording property, plant and equipment in our
      financial statements; and

-     deem all our revalued property, plant and equipment carrying amounts as at
      30 June 2000 to be their cost going forward. This means that the asset
      revaluation reserve of $32 million is fixed as at 1 July 2000 and
      writedowns of previously revalued assets may no longer be made through the
      asset revaluation reserve.

We reduce the value of our property, plant and equipment to its recoverable
amount where our carrying amount is greater than recoverable amount. Any
writedown of this type is charged to the statement of financial performance.

The profit or loss on disposal of assets written down to recoverable amount is
calculated as the difference between the carrying amount of the asset at the
time of disposal, and the revenue received on disposal. This is included in the
statement of financial performance in the year of disposal.

The effect of capital gains tax has not been taken into account in calculating
the revalued amounts of property, plant and equipment.

(c) Depreciation and amortisation

Items of property, plant and equipment, including buildings and leasehold
property, but excluding freehold land, are depreciated or amortised on a
straight line basis over their estimated service lives to us. We start
depreciating or amortising assets when they are installed and ready for use.


                                                                             195
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.12  Property, plant and equipment (note 12) (continued)

(c) Depreciation and amortisation (continued)

The service lives of our significant items of property, plant and equipment are
listed as follows:

<TABLE>
<CAPTION>
                                                            Telstra Group
--------------------------------------------------------------------------------
                                                            As at 30 June
                                                         2003           2002
                                                     ---------------------------
                                                     Service life   Service life
Property, plant and equipment                          (years)        (years)
--------------------------------------------------------------------------------
<S>                                                  <C>            <C>
Buildings - building shell...........                          55             55
          - general purpose..........                      8 - 40         8 - 40
          - fitout...................                     10 - 20        10 - 20
Communication assets
Buildings - building shell...........                          55             55
          - network..................                      8 - 40         8 - 40
          - fitout...................                     10 - 20        10 - 20
Customer premises equipment..........                       3 - 8          3 - 8
Transmission equipment...............                      4 - 20         5 - 16
Switching equipment..................                      2 - 10         3 - 10
Cables...............................                      8 - 25         8 - 25
Ducts and pipes - main cables........                          40             40
                - distribution.......                          30             30
Other communications plant...........                      3 - 16         4 - 18
Other assets
Leasehold plant and equipment........                      7 - 15         7 - 15
Other plant, equipment and motor
vehicles.............................                      3 - 15         3 - 15
--------------------------------------------------------------------------------
</TABLE>

We apply a unit method of accounting to assets where it is practical and
feasible and in line with commercial practice.

A group method of accounting is adopted for certain communication assets. Group
assets are automatically removed from our financial statements on reaching the
group life. Therefore, any individual asset may be physically retired before or
after the group life is attained.

The service lives and residual values (where applicable) of all assets are
reviewed each year.

Our major repairs and maintenance expenses relate to maintaining our exchange
equipment and the customer access network (CAN). We charge the cost of repairs
and maintenance, including the cost of replacing minor items, which are not
substantial improvements, to operating expenses.

1.13  Leased plant and equipment (note 12)

We account for leases in accordance with AASB 1008: "Leases". We distinguish
between finance leases, which effectively transfer substantially all the risks
and benefits incidental to ownership of the leased asset from the lessor to the
lessee, from operating leases under which the lessor effectively retains all
such risks and benefits.

Where we acquire non current assets by using a finance lease, the present value
of future minimum lease payments is disclosed as equipment under finance lease
at the beginning of the lease term. Capitalised lease payments are amortised on
a straight line basis over the shorter of the lease term or the expected useful
life of the assets. A corresponding liability is also established and each lease
payment is allocated between the liability and finance charges.

Operating lease payments are charged to the statement of financial performance
in the periods in which they are incurred. Operating lease rental expense is
disclosed in note 3.

Where we lease properties, costs of improvements to these properties are
capitalised and are disclosed as leasehold improvements and amortised over the
shorter of the useful life of the improvements or the term of the lease.

1.14  Intangible assets (note 13)

Intangible assets are assets that have value but do not have physical
characteristics.

(a) Goodwill

On acquisition of investments, when we pay an amount greater than the fair value
of the net identifiable assets of an entity, this excess is recorded as
goodwill. We calculate the amount of goodwill as at the date of purchasing our
ownership interest in the entity.

When we purchase an entity that we will control, the amount of goodwill is
recorded in intangible assets. Goodwill is amortised on a straight line basis
over the period of expected benefit. This period is subject to a maximum of 20
years from the date of gaining control. The carrying amount of goodwill is
reviewed every six months and adjusted to the extent that future benefits are
not considered probable. The weighted average goodwill amortisation period for
fiscal 2003 was 20 years (2002: 19 years).


196
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                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.14  Intangible assets (note 13) (continued)

(a) Goodwill (continued)

We continually assess whether changes have occurred that would require revision
of the remaining estimated useful life of goodwill, or whether changes will
render the goodwill not recoverable. If such circumstances arise, the
recoverable amount of goodwill is determined based on estimates of the
discounted value of expected future cash flows of the business. Market interest
rates and discount rates are considered when calculating discounted cashflows.

We also calculate goodwill when we acquire joint venture entities and associated
entities. However, for these entities the goodwill amount is included as part of
the cost of the investment and not shown separately as an intangible asset. The
amortisation of this notional goodwill is included in the share of net
profit/(loss) of associates and joint venture entities line in the statement of
financial performance. Refer to note 1.10 for information regarding goodwill for
associates and joint venture entities.

(b) Identifiable intangible assets

Identifiable intangible assets include patents, trademarks and licences
(including network and business software and spectrum licences), brandnames and
customer bases. Where the costs of such assets have a benefit or relationship to
more than one accounting period, these costs are deferred and amortised on a
straight line basis over the period of expected benefit, which averages 15 years
for fiscal 2003 (2002: 13 years). The recoverable amounts of identifiable
intangible assets are reviewed every six months and the carrying amount is
adjusted down where it exceeds recoverable amount. Recoverable amount of
identifiable intangible assets is determined based on estimates of the
discounted value of expected future cash flows to be derived from the use of
those assets.

1.15  Other assets (note 14)

(a) Research and development costs

Research costs are recorded as an expense as incurred. Development costs are
recorded as an expense as incurred, unless future economic benefits are
attainable from the expenditure, in which case they are capitalised (refer to
note 1.15(d) for policy on software assets developed for internal use).

(b) Deferred mobile handset subsidies

Where mobile handsets are sold as part of service contracts lasting two years or
greater, the cost of any associated subsidy is deferred and written off over the
contract term. The provision of any subsidy is contingent upon delivery of the
contracted services and is therefore considered a cost of entering into the
contract with the customer.

As a result, the expense is recognised over the life of the contract, consistent
with the timing of revenue earned.

(c) Deferred expenditure

Deferred expenditure mainly includes upfront payments for basic access
installation and connection fees for in place and new services, and loan
flotation costs.

Significant items of expenditure:

-     are deferred to the extent that they are recoverable from future revenue
      and will contribute to our future earning capacity; and

-     cannot be deferred if they only relate to revenue which has already been
      recorded.

We amortise deferred expenditure over the average period in which the related
benefits are expected to be realised. This period is a weighted average of 5
years for fiscal 2003 (2002: 5 years). Each year we also review expenditure
deferred in previous periods to determine the amount (if any) that is no longer
recoverable. The amount of deferred expenditure that is no longer recoverable is
written off as an expense in the statement of financial performance.

(d) Software assets developed for internal use

We record direct costs associated with the development of network and business
software for internal use as software assets. These amounts are recorded as
software assets where project success is regarded as probable.

Costs included in software assets developed for internal use are:

-     external direct costs of materials and services consumed;

-     payroll and direct payroll-related costs for employees (including
      contractors) directly associated with the project; and

-     borrowing costs incurred while developing the software.

Software assets developed for internal use are amortised on a straight line
basis over their useful lives to us. This period is a weighted average of 6
years for fiscal 2003 (2002: 5 years). Amortisation starts once the software is
ready for use.

The carrying values of these assets are reviewed regularly and at each reporting
date, to ensure they are recoverable. Where such costs are no longer considered
recoverable, they are written off to the statement of financial performance.

1.16  Payables (note 15)

Accounts payable, including accruals, are recorded when we are required to make
future payments as a result of a purchase of assets or services.


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.17  Interest-bearing liabilities (note 16)

Bills of exchange and commercial paper are recorded as borrowings when issued,
at the amount of the net proceeds received. They are carried at amortised cost
until the liabilities are fully settled. Interest is recorded as an expense on a
yield to maturity basis.

Bank loans are carried at cost.

Telstra bonds are carried at cost or adjusted cost. Adjusted cost is the face
value of debt adjusted for any unamortised premium or discount. Interest is
calculated on a yield to maturity basis. Bonds repurchased are cancelled against
the original liability and any gains or losses are recorded in the statement of
financial performance as borrowing costs.

Other loans are carried at cost or adjusted cost. Discounts and premiums are
amortised on a straight line basis over the period to maturity. Interest is
calculated on a yield to maturity basis. Our other loans include both Australian
dollar loans and foreign currency loans. Amounts denominated in foreign currency
are revalued daily. Any exchange gains or losses are taken to the statement of
financial performance.

1.18  Provisions (note 17)

Provisions are recognised when the group has a legal, equitable or constructive
obligation to make a future sacrifice of economic benefits as a result of past
transactions or events, it is probable that a future sacrifice of economic
benefits will arise and a reliable estimate can be made of the amount of the
obligation.

(a) Employee benefits

We accrue liabilities for employee benefits to wages and salaries, annual leave
and other current employee benefits at their nominal amounts. These are
calculated on the remuneration rates expected to be current at the date of
settlement and include related on costs.

Employee benefit on-costs, including payroll tax, are recognised and included in
employee benefit liabilities and costs when the employee benefits to which they
relate are recognised as liabilities.

Telstra Entity employees who have been employed by the Telstra Entity for at
least ten years are entitled to long service leave of three months (or more
depending on the actual length of employment), which is included in other
employee benefits.

We accrue liabilities for other employee benefits not expected to be paid or
settled within twelve months of balance date at the present values of future
amounts expected to be paid. This is based on projected increases in wage and
salary rates over an average of ten years.

We calculate present values using rates based on government guaranteed
securities with similar due dates to our liabilities.

Liabilities for redundancies are recognised when a detailed plan for the
redundancies has been developed and a valid expectation has been created that
the redundancies will be carried out with those employees affected. The
liabilities for redundancies are recognised in payables unless the amount or
timing of the payments in uncertain, in which case they are recognised as
provisions.

(b) Workers' compensation

The Telstra Entity and certain controlled entities self insure their workers'
compensation liabilities. We take up a provision for the present value of these
estimated liabilities, based on an actuarial review of the liability. This
review includes assessing actual accidents and estimating claims incurred but
not reported. Present values are calculated using appropriate rates based on
government guaranteed securities with similar due dates. The majority of our
controlled entities do not self insure, but pay annual premiums to third party
insurance companies for their workers' compensation liabilities.

(c) Restoration Costs

We provide for our future obligations in relation to the fitout of our general
purpose leased buildings when we have a legal, equitable or constructive
responsibility. These costs include our obligations relating to the dismantling,
removal, restoration and other expenditure associated with these fitouts. Our
estimates are based upon a review of lease contracts, legal requirements,
historical information and expected future costs. Any changes to these estimates
are adjusted on a progressive basis as required. Restoration costs associated
with mobile tower communication assets that are situated on land held under
operating leases are expensed in the statement of financial performance when
they become payable as they are insignificant to our financial report.

1.19  Revenue (note 2)

Sales revenue

Our categories of sales revenue listed in note 2 are recorded after deducting
sales returns, trade allowances, duties and taxes. Refer to note 1.2 for details
of changes in our revenue recognition policies in fiscal 2001.

(a) Delivery of services

Revenue from the provision of our telecommunications services includes:

-     telephone calls; and

-     other services and facilities provided such as internet and data.


198
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.19  Revenue (note 2) (continued)

Sales revenue (continued)

(a) Delivery of services (continued)

We record revenue earned from:

-     telephone calls on completion of the call; and

-     other services generally at completion, or over the period of service
      provided.

Installation and connection fee revenues are deferred and recognised over the
average estimated customer contract life. For basic access installation and
connections this is an average of five years. For mobile phone connections, this
is an average of two years. Incremental costs directly related to these revenues
are also deferred and amortised over the customer contract life. Any costs in
excess of the revenue deferred are recognised immediately.

(b) Sale of goods

Our revenue from the sale of goods includes revenue from the sale of customer
equipment and similar goods. This revenue is recorded on delivery of the goods
sold.

(c) Rent of network facilities

We earn rent mainly from access to retail and wholesale fixed and mobile
networks and from the rent of dedicated lines, customer equipment, property,
plant and equipment and other facilities. The revenue of providing access to the
network is recorded on an accrual basis over the rental period.

(d) Construction contracts

We record construction revenue on a percentage of contract completion basis. The
percentage of completion of contracts is calculated based on estimated costs to
complete the contract (refer note 1.9 for further information).

Our construction contracts are classified according to their type. There are
three types of construction contracts, these being material intensive, labour
intensive and short duration. Revenue is recognised on a percentage of
completion basis using the appropriate measures as follows:

-  (actual costs / planned costs) x planned revenue - for material intensive
   projects;

-  (actual labour hours / planned labour hours) x planned revenue - for labour
   intensive projects; and

-  short duration projects are those that are expected to be completed within a
   month and revenues and costs are recognised on completion.

(e) Directory services

All of our Yellow Pages and White Pages directory advertising revenues are
recognised on delivery of the published directories using the delivery method.
We consider our directories delivered when they have been published and
delivered to customers' premises. Revenue from online directories is recognised
over the life of service agreements, which is on average one year. Voice
directory revenues are recognised at the time of providing the service to
customers.

Other revenue

(f) Dividend revenue

We record dividend revenue in the statement of financial performance from the
following entities when declared by them:

-     controlled entities;

-     joint venture entities and associated entities (when received by the
      Telstra Entity); and

-     listed investments and other investments.

We record distributions from trusts when the distribution is receivable.

For our consolidated financial statements, dividends and distributions received
from joint venture entities and associated entities are recorded as a reduction
of the balance in the investment account and not as dividend revenue of the
Telstra Group.

(g) Revenue from the sale of non current assets

Revenue from the sale of our non current assets is recorded when all conditions
required to complete the sale have been settled and finalised.

(h) Interest revenue

We record interest revenue on an accruals basis. For financial assets, interest
revenue is determined by the effective yield on the instrument (total return).

Revenue received in advance

Revenue received in advance consists mainly of revenue from providing access to
the fixed and mobile network and directories advertising revenue. This revenue
is initially recorded as a liability and then transferred to earned revenue in
line with the revenue policies described above.


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.19  Revenue (note 2) (continued)

Accrued revenue

Accrued revenue represents revenue earned that has not been billed to the
customer. This revenue is recorded in accordance with the revenue policies
described.

1.20  Share of net profits/(losses) of associates and joint venture entities
      (note 24)

We record our share of the net profits/(losses) of associates and joint venture
entities by taking the profit/(loss) after tax, multiplied by our ownership
interest after adjusting for:

-     amortisation of notional goodwill;

-     deferral and subsequent amortisation of unrealised profits after tax
      arising from transactions and the sale of assets from us to our
      associates; and

-     deferral and subsequent amortisation of unrealised profits after tax
      arising from trading and the sale of assets from our associates to us.

Refer to note 1.10(b) for information regarding deferral of unrealised profits
and amortisation of notional goodwill in relation to associates and joint
venture entities.

1.21  Taxation (note 4)

Income Tax

We apply tax-effect accounting using the liability method to calculate income
tax. Income tax is calculated on accounting profit after allowing for permanent
differences and is recorded as an expense.

Permanent differences are:

-     items of revenue or expense that are included in taxable income but will
      never be included in accounting profit; or

-     items of revenue and expense that are included in accounting profit but
      will never be included in taxable income.

To the extent timing differences occur between the time items are recognised in
the financial statements and when items are taken into account in determining
taxable income, the net related taxation benefit or liability, calculated at
current rates, is disclosed as a future income tax benefit or a provision for
deferred income tax.

The future income tax benefit relating to tax losses is not carried forward as
an asset unless the benefit is virtually certain of being realised.

During fiscal 2003, the Telstra Entity has elected for its resident wholly owned
controlled entities to join it in a tax consolidation group. The Telstra Entity
will recognise all current and deferred tax amounts in relation to its resident
wholly owned controlled entities in its own financial statements in addition to
its current and deferred tax balances arising from its own transactions and
events (refer note 4 for further information).

Goods and Services Tax (GST) (including other value added taxes)

We record our revenue, expenses and assets net of any applicable goods and
services tax (GST), except where the amount of GST incurred is not recoverable
from the Australian Taxation Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of the
expense item.

Receivables and payables balances include GST where we have either included GST
in our price charged to customers or a supplier has included GST in their price
charged to us. The net amount of GST due, but not paid, to the ATO is included
under payables.

We do not include any estimate for GST in either accrued revenue or accrued
expense balances. Our accruals refer to a combination of items some of which
will be supported by the issue or receipt of a tax invoice at a later time
depending on the nature of the item. In general, no tax invoice has been
received or issued at the time the accrual is recorded.

To accord with Urgent Issues Group Abstract 31 - Accounting for Goods and
Services Tax (GST), which requires cash flows to be determined on a gross basis,
we have completed our cash flow statement in the following manner:

-     we have derived from our accounting records the amounts which we have
      shown in our statement of financial performance and statement of financial
      position, which are on a net GST basis where the GST is recoverable from
      the ATO; and

-     we have estimated the amount of GST that is required to be added to
      various line items in the cash flow statement by reference to our business
      activity statements prepared for the ATO.

Our commitments are recorded net of GST, except where there is non-recoverable
GST (refer note 20).

1.22  Earnings per share (note 6)

Basic earnings per share

Basic earnings per share (EPS) is determined by dividing net profit after income
tax attributable to members of the company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the year.


200
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NOTES TO THE FINANCIAL STATEMENTS(CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.22  Earnings per share (note 6) (continued)

Diluted earnings per share

Where an entity has on issue potential ordinary shares which are dilutive,
diluted EPS must be calculated. As we do not have any ordinary shares which are
considered dilutive, diluted EPS is the same as basic EPS.

1.23  Superannuation (note 22)

Defined benefit funds

For funding purposes actuarial valuations are required to be performed at least
every three years. In prior years, if there has been a shortfall in the net
market value of scheme assets when compared to members' vested entitlements, we
have provided for the amount to the extent that a present obligation exists to
rectify the financial position of the schemes.

Accumulation schemes

Our commitment to accumulation type benefits is limited to making the
contributions specified in the trust deed in accordance with our minimum
statutory requirements.

All superannuation schemes

Contributions to employee superannuation schemes are recorded as an expense in
the statement of financial performance as the contributions become payable.

1.24  Employee share plans (note 19)

We own 100% of the equity of Telstra ESOP Trustee Pty Ltd, the corporate trustee
for the Telstra Employee Share Ownership Plan Trust (TESOP97) and Telstra
Employee Share Ownership Plan Trust II (TESOP99). We do not control or
significantly influence these trusts as beneficial ownership and control remains
with the employees who participate in the share plans administered by the
trustee on their behalf. As a result, we do not consolidate the operations of
the trust into the Telstra Group.

Telstra incurs expenses on behalf of both the TESOP97 and the TESOP99. These
expenses are in relation to administration costs of the trusts and are recorded
in the statement of financial performance as incurred.

Telstra is precluded from issuing options that gives rise to the issue of new
shares by the Telstra Corporation Act 1991 (Cth). The Telstra Growthshare Trust
was established to allocate options, restricted shares, performance rights,
deferred shares, directshares and ownshares. Options, performance rights, and
restricted shares are subject to performance hurdles. Deferred shares are
subject to a specified period of service.

We own 100% of the equity of Telstra Growthshare Pty Ltd, the corporate trustee
for the Telstra Growthshare Trust (Growthshare). We do not control or
significantly influence the trust as beneficial ownership and control remains
with the employees who participate in the share plans administered by the
trustee on their behalf.

An option, restricted share, performance right or deferred share represents a
right to acquire a share in Telstra.

Telstra provides loans to the Growthshare trustee to enable it to purchase
shares on market to underpin options issued. When exercised, the eligible
employee pays for the shares at the exercise price and the loan is repaid to us.
On the basis that the loan is fully repaid by the employee, there is no expense
associated with the allocation of options. Telstra receives interest on the
loans to the trust. From 1 July 2002, the company has suspended its option plan.

Restricted shares, performance rights and deferred shares are recorded as an
expense to Telstra when we provide funding to the trust to purchase the shares.
The expense recorded in the statement of financial performance represents the
market price of the shares at the time of purchase on market.

Directshare enables non-executive directors to receive up to 20% of their fees
in Telstra shares. Ownshare enables eligible employees to be provided part of
their remuneration in Telstra shares. Telstra purchases shares to meet the
requirements of directshare and ownshare and expenses these costs as part of the
participant's remuneration.

We have also provided funding to the trustee to enable it to meet its other
obligations under the trust deed.

1.25  Derivative financial instruments (note 29)

As we only use derivative financial instruments for our hedging activities, the
gains and losses on our derivatives are accounted for on the same basis as the
underlying physical transactions. Therefore, hedge gains and losses are recorded
in the statement of financial performance when the gains or losses arising from
the related physical exposures are recorded in the statement of financial
performance.


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.25  Derivative financial instruments (note 29) (continued)

Foreign exchange gains and losses on the principal value of our cross currency
swaps are recorded in the statement of financial performance and determined
through reference to the change in spot rates over the relevant reporting
period. These foreign exchange gains and losses offset the gains and losses
recorded on the underlying hedged transaction.

We account for our interest rate swaps and cross currency swaps that hedge an
underlying physical exposure using the accrual method of accounting.

Interest receivable and payable under the terms of the interest rate swaps and
cross currency swaps are accrued over the period to which the payments or
receipts relate. The interest receivable and payable under the swaps is also
recorded as part of our borrowing costs. Changes to the underlying market value
of the remaining interest rate swap and cross currency swap payments and
receipts are not recorded in the financial statements.

We do not include the principal amounts of our cross currency swaps and interest
rate swaps in our statement of financial position. Where we have a legally
recognised right to set off the financial asset and financial liability and we
intend to settle on a net basis or simultaneously, we record this position on a
net basis in our statement of financial position. Where we enter into master
netting arrangements relating to a number of financial instruments, have a legal
right of set off, and intend to do so, we also include this position on a net
basis in our statement of financial position.

The net position in relation to our cross currency swaps refers to the revalued
component of our foreign currency receivable or payable under the swap contract.
We record this component as a hedge receivable or hedge payable in our statement
of financial position. We do not offset the hedge receivable or hedge payable
with the underlying financial asset or financial liability being hedged as the
transactions are with different counterparties and are generally not settled on
a net basis.

Forward foreign exchange contracts are accounted for as outlined in note 1.5(a).
Gains and losses on forward foreign exchange contracts intended to hedge
anticipated future transactions are deferred and recognised when the anticipated
future transaction occurs.

Net fair values of interest rate swaps, cross currency swaps and forward
exchange contracts are calculated at prices based on amounts quoted on Reuters
to close out existing contracts (both favourable and unfavourable). Net fair
values of interest rate futures are determined at a price equal to the mid point
between the last bid and the last offer price quoted on the Sydney Futures
Exchange at 30 June.

1.26  Insurance

We specifically carry the following types of insurance:

-     property;

-     travel/personal accident;

-     third party liability;

-     directors' and officers' liability;

-     company reimbursement; and

-     other insurance from time to time.

For risks not covered by insurance, any losses are charged to the statement of
financial performance in the year in which the loss is reported.

The Telstra Entity and certain controlled entities are self insured for workers'
compensation. Further details are provided in note 1.18(b).

1.27  Further clarification of terminology used in our statement of financial
      performance

Under the requirements of AASB 1018: "Statement of Financial Performance" we
must classify all of our expenses (apart from any borrowing costs and shares of
net losses of associates and joint venture entities) according to either the
nature (type) of the expense or the function (activity to which the expense
relates). We have chosen to classify our expenses using the nature
classification as it more accurately reflects the type of operations we
undertake.

Our expense categories represent an aggregation of expenses classified by nature
(type). These categories do not include any indirect or fixed costs and
therefore are not identical to their functional expense category. Specifically
this includes:

-     our goods and services purchased; and

-     our marketing expenses and general and administration expenses included
      within the reconciliation of other expenses (refer note 3).

Earnings before interest, income tax expense, depreciation and amortisation
(EBITDA) reflects our net profit prior to including the effect of interest
revenue, borrowing costs, income taxes, depreciation and amortisation. We
believe that EBITDA is a relevant and useful financial measure used by
management to measure the company's operating profit. Our management uses
EBITDA, in combination with other financial measures, primarily to evaluate the
company's operating performance before financing costs, income tax and non-cash
capital related expenses. In consideration of the capital intensive nature of
our business, EBITDA is a useful supplement to net income in understanding cash
flows generated from operations that are available for income taxes, debt
service and capital expenditure.


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

1.    Summary of accounting policies (continued)

1.27  Further clarification of terminology used in our statement of financial
      performance (continued)

EBITDA is not a USGAAP measure of income or cash flow from operations and should
not be considered as an alternative to net income as an indication of our
financial performance or as an alternative to cash flow from operating
activities as a measure of our liquidity.

In addition, we believe EDITDA is useful to investors because analysts and other
members of the investment community largely view EBITDA as a key and widely
recognised measure of operating performance.

Earnings before interest and income tax expense (EBIT) is a similar measure to
EBITDA, but takes into account the effect of depreciation and amortisation.

When a specific revenue or an expense from ordinary activities is of such a
size, nature or incidence that its disclosure is relevant in explaining our
financial performance for the reporting period, its nature and amount have been
disclosed separately in note 3. For comparative purposes, amounts classified as
unusual in fiscal 2001 have been restated as specific in accordance with the
format of the fiscal 2003 and fiscal 2002 financial statements.

1.28  Rounding

All dollar amounts in this financial report (except where indicated) have been
rounded to the nearest million dollars ($m or A$m) for presentation. This has
been done in accordance with Australian Securities and Investments Commission
(ASIC) Class Order 98/100, dated 10 July 1998 and issued under section 341(1) of
the Corporations Act 2001.

1.29 Comparative figures

Where necessary, we adjust comparative figures to align with changes in
presentation in the current year.

In addition, we have quantified the effect on comparatives of any changes in
accounting policies (refer note 1.2).


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          Telstra Group           Telstra Entity
-----------------------------------------------------------------------------   ------------------
                                                        Year ended 30 June      Year ended 30 June

                                                       2003     2002     2001     2003       2002
                                              Note      $m       $m       $m       $m         $m
-----------------------------------------------------------------------------   ------------------
<S>                                           <C>    <C>      <C>      <C>      <C>        <C>
2. Revenue
Our revenue from ordinary  operating
activities (including  specific items)
is made up of revenue from the
following activities:
Sales revenue
Delivery of services(1.19(a)) (i).............3(c)   12,451   12,725   11,860   11,275      11,436
Sale of goods (1.19(b))...........................      573      441      417      431         262
Rent of network facilities (1.19(c)) (i)..........    6,108    5,667    5,161    6,086       5,683
Construction contracts (1.19(d))..................      201      236      332       42          61
Directory services (1.19(e))......................    1,162    1,127      909      794         775
                                                     ------------------------   ------------------
                                                     20,495   20,196   18,679   18,628      18,217
                                                     ------------------------   ------------------
Other revenue (excluding interest revenue)
Dividend revenue (1.19(f))
- other entities..................................        1        1       16        1           1
                                                     ------------------------   ------------------
                                                          1        1       16        1           1
                                                     ------------------------   ------------------
Revenue from the sale of non current
assets (1.19(g))
- property, plant and equipment...............3(c)      811      246      288      792         241
- investments in controlled entities..........3(c)       17       --      120       --          --
- investments in joint venture entities...........        3       --        5       --          --
- investments in associated entities..............       17       --       --        1          --
- investments in listed securities and
other corporations............................3(c)        7       22      603       --           5
- patents, trademarks and licences................       --        1       14       --          --
- businesses..................................3(c)        4       33    2,273        2          29
                                                     ------------------------   ------------------
                                                        859      302    3,303      795         275
                                                     ------------------------   ------------------
Other sources of revenue
Rent from property and motor vehicles
(1.19(c)).........................................       33       44       39       33          44
Writeback of Telstra Superannuation
Scheme additional contribution liability......3(c)       --       --      725       --          --
Other revenue.....................................      228      259      221      123         167
                                                     ------------------------   ------------------
                                                        261      303      985      156         211
                                                     ------------------------   ------------------
                                                      1,121      606    4,304      952         487
                                                     ------------------------   ------------------
Revenue from ordinary activities
(excluding interest revenue)......................   21,616   20,802   22,983   19,580      18,704
                                                     ------------------------   ------------------
Interest revenue (1.19(h))
- controlled entities...........................27       --       --       --      124         67
- joint ventures and associated
entities........................................27        2        2        2        2          2
- other entities..................................       82      124      101       76        114
                                                     ------------------------   -----------------
                                                         84      126      103      202        183
                                                     ------------------------   -----------------
Total revenue from ordinary activities............   21,700   20,928   23,086   19,782     18,887
                                                     ========================   =================
</TABLE>

(i) A reassessment of the basic access product has resulted in a
reclassification of basic access revenue of $1,496 million (2002: $1,587
million; 2001: $1,740 million) from delivery of services to rent of network
facilities. As a result, we have also reclassified the comparative data
presented to ensure consistency of presentation. This reclassification has not
affected the total revenue recorded.


204
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                         Telstra Group          Telstra Entity
---------------------------------------------------------------------------   ------------------
                                                       Year ended 30 June     Year ended 30 June
                                                       2003    2002    2001     2003        2002
                                               Note      $m      $m      $m       $m          $m
---------------------------------------------------------------------------   ------------------
<S>                                        <C>        <C>     <C>     <C>     <C>          <C>
3. Profit from ordinary activities
(a) Our profit before income tax expense
(including  items requiring  specific
disclosure) has been calculated after
charging/(crediting) the following items:

Labour
Included in our labour expenses are the following:
Ownership based remuneration schemes...............      23       9       5       23           9
Employee redundancy................................     281     289      44      205         130

Goods and services purchased
Included in our goods and services purchased
and relating to sale of goods is:
Cost of goods sold.................................     556     503     510      432         304

Other expenses
Net book value of assets we have sold:
- property, plant and equipment................3(c)     638     250     281      632         246
- investments in controlled entities...........3(c)      12      (3)    116       --          --
- investments in joint venture entities............      --      --       3       --          --
- investments in associates........................       8      --      --        2          --
- investments in listed securities and other
corporations...................................3(c)       9      27     337       --           4
- patents, trademarks and licences.................      --      --       6       --          --
- businesses...................................3(c)      (6)     33   1,421       (6)         29
                                                      ---------------------   ------------------
                                                        661     307   2,164      628         279
                                                      ---------------------   ------------------
Rental expense on operating leases.................     584     597     496      404         440
Bad debts written off - trade debtors..............     172     185     159      154         186
Movement in provisions - increase/(decrease):
- doubtful debts - trade debtors...................      21      28      (9)       2          --
- reduction in value of inventories
(finished goods)...................................       5       1     (21)       5           2
- reduction in value of investments............3(c)      26      26   1,065    3,056         445
- reduction in value of convertible note
issued by PCCW.....................................      --      96      --       --          96
- reduction in value of amounts owed by
controlled entities........................3(c), 27      --      --      --     (587)        830
- reduction in value of capitalised software.......       2      --      31        2          --
Net foreign currency conversion losses/
(gains)(1.5).......................................     (17)     17     (25)     (14)          6
Auditors' fees.................................3(b)       6       5       4        5           4
Service contracts and other agreements.............   1,706   1,400   1,400    1,606       1,406
Marketing..........................................     316     284     308      255         218
General and administration.........................     790     679     742      584         486
Other operating expenses...........................     330     440     447      534         690
                                                      ---------------------   ------------------
                                                      4,602   4,065   6,761    6,634       5,088
                                                      =====================   ==================
</TABLE>


                                                                             205
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          Telstra Group         Telstra Entity
---------------------------------------------------------------------------   ------------------
                                                        Year ended 30 June    Year ended 30 June
                                                       2003    2002    2001     2003        2002
                                               Note      $m      $m      $m       $m          $m
---------------------------------------------------------------------------   ------------------
<S>                                            <C>    <C>     <C>     <C>     <C>          <C>
3. Profit from ordinary activities (continued)

(a) Our profit before income tax expense
(including items requiring specific
disclosure) has been calculated after
charging/(crediting) the following items:

Depreciation and amortisation
Depreciation of:
- general purpose buildings......................12      31      45      41       15          42
- communication assets...........................12   2,518   2,452   2,205    2,364       2,209
- other plant, equipment and motor vehicles......12     154     115     156      106          85
                                                      ---------------------   ------------------
                                                      2,703   2,612   2,402    2,485       2,336
Amortisation of:
- equipment under finance lease..................12       7       2       8        2          --
- leasehold improvements.........................12      44      39      15       42          37
- goodwill.......................................13     116      87      43        1           1
- patents, trademarks and licences.................      38      40      55       32          26
- brandnames.......................................      12      12       5       --          --
- customer bases...................................      82      86      34       --          --
- deferred expenditure.............................       1       1      12        1           1
- software assets..................................     444     388     297      430         381
                                                      ---------------------   ------------------
                                                        744     655     469     508          446
                                                      ---------------------   ------------------
                                                      3,447   3,267   2,871   2,993        2,782
                                                      =====================   ==================
Borrowing costs
- controlled entities............................27      --      --      --       80          58
- other entities...................................     983   1,009     875      960         970
- finance charges relating to finance leases.......       1       2       2       --          --
                                                      ---------------------   ------------------
                                                        984   1,011     877    1,040       1,028
- borrowing costs included in the cost of
constructed assets.................................    (105)   (115)   (108)    (105)       (115)
                                                      ---------------------   ------------------
                                                        879     896     769     935          913
                                                      =====================   ==================
Other disclosures
Research and development expenses (before
crediting any grants) (1.15(a))....................      41      28      29       41          27
                                                      =====================   ==================
Net profit/(loss) on the sale of:
- property, plant and equipment................3(c)     173     (4)       7      160          (4)
- investments in controlled entities...........3(c)       5      3        4       --          --
- investments in joint venture entities............       3      --       2       --          --
- investments in associated entities...............       9      --      --       (1)         --
- investments in listed securities and other
corporations...................................3(c)      (2)     (5)    266       --           1
- patents, trademarks and licences.................      --       1       8       --          --
- businesses...................................3(c)      10      --     852        8          --
                                                      ---------------------   ------------------
                                                        198      (5)  1,139      167          (3)
                                                      =====================   ==================
</TABLE>


206
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------   ------------------
                                                          Telstra Group         Telstra Entity
---------------------------------------------------------------------------   ------------------
                                                        Year ended 30 June    Year ended 30 June
                                                       2003    2002    2001     2003        2002
                                               Note      $m      $m      $m       $m          $m
---------------------------------------------------------------------------   ------------------
<S>                                            <C>    <C>     <C>     <C>      <C>         <C>
3. Profit from ordinary activities (continued)

(b) Auditors' fees

The Australian statutory auditor of the Telstra
Entity has charged the following amounts for:

Auditing and reviewing the financial reports (a)...   4.445   3.753   3.257    3.974       3.207
Other services (a).................................      --      --   0.101       --          --

Auditors other than the Australian  statutory
auditor have charged the following amounts for:

Auditing and reviewing the financial reports.......   1.440   1.553   1.041    0.528       0.591
                                                      ---------------------   ------------------
Total auditors' fees...........................3(a)   5.885   5.306   4.399    4.502       3.798
                                                      =====================   ==================

In addition to auditing and assurance activities,
other services have been provided by Ernst & Young
in their own right as follows:

Other services (b).................................   5.334   5.714   4.820
                                                      =====================
</TABLE>

(a) Our Australian statutory auditor is the Australian National Audit Office
(ANAO). The audit and other services provided by the ANAO have been
subcontracted to Ernst & Young (EY) from fiscal 2000.

(b) We have processes in place to maintain the independence of the external
auditor, including the level of expenditure on other services. Fees earned by EY
for non audit work are capped at a maximum of 1.0 times total audit fees. In
addition to the establishment of this cap, there is a requirement for the Audit
Committee to pre-approve all proposals involving the provision of services by
EY. As part of the approval process, an assessment is made by the Audit
Committee on the appropriateness of the services from an independence stand
point. Monthly meetings are held between EY and the Director of Finance to
monitor the process.

EY also has specific internal processes in place to ensure auditor independence.


                                                                             207
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------   ------------------
                                                          Telstra Group         Telstra Entity
---------------------------------------------------------------------------   ------------------
                                                       Year ended 30 June     Year ended 30 June
                                                      2003     2002    2001     2003        2002
                                               Note     $m       $m      $m       $m          $m
---------------------------------------------------------------------------   ------------------
<S>                                            <C>    <C>      <C>   <C>      <C>           <C>
3. Profit from ordinary activities (continued)

(c) Items requiring specific disclosure

The following items form part of the ordinary
operations of our business and whose disclosure
is relevant in explaining the financial
performance of the group.

Our net profit has been calculated after
charging/(crediting) specific revenue and
expense items from our ordinary activities as
follows:

Items included in revenue:
Sales revenue
- revenue recognition accounting policy
change (1.2).......................................     --       --    (779)      --          --
                                                      ------------------------------------------
                                                        --       --    (779)      --          --
- Other revenue (excluding interest revenue)
- proceeds on sale of properties (i)...............    570       --      --      570          --
- sale of global wholesale business and
controlled entities to Reach Ltd (vii)                  --       --   2,372       --          --
- writeback of Telstra Superannuation Scheme
additional contribution liability (viii)...........     --       --     725       --          --
- sale of our investment in Computershare
Limited (ix).......................................     --       --     546       --          --
                                                      ---------------------   ------------------
                                                       570       --   3,643      570          --
                                                      ---------------------   ------------------
Total specific revenue items.......................    570       --   2,864      570          --
                                                      ---------------------   ------------------
Items included in expenses:
Goods and services purchased
- revenue recognition accounting policy
change (1.2).......................................     --       --     560       --          --
                                                      ------------------------------------------
                                                        --       --     560       --          --
Other expenses
- book value on sale of properties (i).............   (439)      --      --     (439)         --
- book value of our global wholesale business
and controlled entities sold to Reach
Ltd (vii)..........................................     --       --    (668)      --          --
- deferral of unrealised profit arising on
sale of businesses and controlled entities
to Reach Ltd (vii).................................     --       --    (852)      --          --
- book value on sale of our investment in
Computershare Limited (ix).........................     --       --    (301)      --          --
- write off of Telstra CSL Group
acquisition costs (vii)............................     --       --    (999)      --          --
- movement in provision for reduction in
value of our controlled entities (iv)                   --       --      --   (2,981)         --
- movement in provision for amounts owed by
controlled entities (v) (vi)27                          --       --      --      570        (855)
                                                      ---------------------   ------------------
                                                      (439)      --  (2,820)  (2,850)       (855)
                                                      ---------------------   ------------------
 Total specific expense items......................   (439)      --  (2,260)  (2,850)       (855)
                                                      ---------------------   ------------------
In our share of net losses of associates and
joint venture entities is:
- write off of the carrying value of our
investment in Reach Ltd (ii).......................   (965)      --      --       --          --
                                                      ---------------------   ------------------
Net specific items.................................   (834)      --     604   (2,280)       (855)
                                                      ---------------------   ------------------
Income tax expense attributable to those items
requiring specific disclosure                          (41)      --    (209)     (41)         --
Effect of reset tax values on entering tax
consolidation (iii)................................    201       --      --      201          --
                                                      ---------------------   ------------------
Net specific items after income tax expense........   (674)      --     395   (2,120)       (855)
                                                      =====================   ==================
</TABLE>


208
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

3. Profit from ordinary activities (continued)

(c) Items requiring specific disclosure (continued)

During fiscal 2003, we recognised the following transactions as requiring
specific disclosure:

(i) Sale of office properties

On 1 August 2002, we sold a portfolio of seven office properties for $570
million. The carrying value of these properties was $439 million at the time of
sale. We entered into operating leases totalling $518 million in relation to
these properties on normal commercial terms of between five and twelve years,
most of which commenced on 19 August 2002.

The profit on the sale of these properties was $131 million before income tax
expense, as shown in the following table:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                                     Year ended
                                                                       30 June
                                                                        2003
                                                                         $m
-------------------------------------------------------------------------------
<S>                                                                  <C>
Other revenue
Proceeds on sale of office properties.............................          570
Other expenses
Book value on sale of office properties...........................         (439)
                                                                     ----------
                                                                            131
Income tax expense................................................          (41)
                                                                     ----------
                                                                             90
                                                                     ==========
</TABLE>

(ii) Write off of investment in Reach Ltd

We have written off the carrying amount of the investment in our 50% owned joint
venture, Reach Ltd (REACH). The write off occurred due to the depressed
conditions in the global market for international data and internet capacity
resulting in high levels of excess capacity, intense price competition and lower
than expected revenues. This has resulted in a reduction of our investments
accounted for using the equity method in our statement of financial position and
an increase to our share of net losses of associates and joint venture entities
in the statement of financial performance, amounting to $965 million (refer note
24 for further information).

(iii) Effect of reset tax values on entering tax consolidation

During fiscal 2003, legislation was enacted which enables the Telstra Entity and
its Australian resident wholly owned entities to be treated as a single entity
for income tax purposes. The Telstra Entity (or head entity) elected to form a
tax consolidated group from 1 July 2002 (refer to note 4 for further details).

On formation of a tax consolidated group, the head entity has an option to bring
the assets of each subsidiary member into the tax consolidated group by choosing
between two alternative methods, the Allocable Cost Amount (ACA) method or
Transitional Method. We have chosen the ACA method for a number of our
subsidiaries. Under this method, the tax values of a subsidiary's assets are
reset according to certain allocation rules, which consequently impacts future
tax deductions and our deferred tax balances. The once-off benefit of $201
million reflects the increase in future tax deductions arising from these reset
tax values.

(iv) Movement in provision for reduction in value of our controlled entities -
Telstra Entity

Included in our profit before income tax expense for the Telstra Entity was a
movement of $2,981 million relating to a provision for reduction in value of our
investments in two controlled entities. This balance is eliminated on
consolidation for Telstra Group reporting purposes.

(v) Movement in provision for amounts owed by controlled entities - Telstra
Entity

In fiscal 2002, we raised a provision of $855 million in the Telstra Entity for
amounts owed by a controlled entity. During fiscal 2003 the controlled entity
issued additional capital, with the reduction in the amount owed by that entity
representing the consideration. As a result, the $855 million provision was
reversed in the current year statement of financial performance. In addition, we
also raised a provision of $285 million in relation to further funding provided
to this controlled entity.

As a result of the above, the profit before income tax expense of the Telstra
Entity includes a $570 million net gain in relation to the provision for amounts
owed by the controlled entity. This balance is eliminated on consolidation for
Telstra Group reporting purposes (refer note 27 for further information).

During fiscal 2002, we recognised the following transaction as requiring
specific disclosure:

(vi) Provision raised for amounts owed by controlled entities - Telstra Entity

Included in the profit before income tax expense of the Telstra Entity was a
specific charge of $855 million in relation to a provision for amounts owed by a
controlled entity. This balance is eliminated on consolidation for Telstra Group
reporting purposes.


                                                                             209
<PAGE>
Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

3.    Profit from ordinary activities (continued)

(c) Items requiring specific disclosure (continued)

During fiscal 2001, we recognised the following transactions as requiring
specific disclosure:

(vii) Asian Ventures

As detailed in the accompanying notes to our statement of cash flows, on 7
February 2001 we completed our strategic alliance with PCCW. Under these
arrangements, the following items were recognised in the statement of financial
performance:

Reach Ltd (REACH)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                                     Year ended
                                                                      30 June
                                                                        2001
                                                                         $m
-------------------------------------------------------------------------------
<S>                                                                  <C>
Other revenue
Sale of global wholesale business and
controlled entities to REACH......................................        2,372
Other expenses
Book value of businesses and controlled entities
sold to REACH and associated costs................................         (668)
                                                                     ----------
                                                                          1,704
Deferral of unrealised profit before tax..........................         (852)
                                                                     ----------
                                                                            852
                                                                     ==========
</TABLE>

The other revenue and other expense items represent the fair value of the total
consideration received and book value respectively, relating to the divisions
and controlled entities that we have sold to REACH. The book value also includes
any costs associated with undertaking this transaction.

The deferral of unrealised profit arises to the extent that we retain an
ownership interest in REACH. The amount deferred is brought to account in the
statement of financial performance (through the share of net losses of
associates and joint venture entities) on a straight line basis over a period of
20 years. The deferral of unrealised profit is combined with the net book value
of businesses we have sold for the other expenses disclosure in note 3(a).

Telstra CSL Group

The $999 million that was written off the Telstra CSL Group acquisition costs
related to our acquisition of 60% of Telstra CSL Limited. This item was
recognised as at the date of acquisition and formed part of the reduction in
value of investments in note 3(a).

Net effect of entering our Asian Ventures

The net once-off specific item recognised as a result of our Asian ventures was
a $147 million loss before income tax expense.

(viii) On 29 August 2000 the trustee of the Telstra Superannuation Scheme
(Telstra Super) and the Commonwealth (who guaranteed our payments) released us
from our obligation to contribute $121 million per annum to Telstra Super to 30
June 2011. As part of the terms of the release, we agreed to provide such future
employer contributions to Telstra Super as may be required to maintain the
vested benefits index (VBI - the ratio of fund assets to members vested
benefits) in the range of 100-110%.

The removal of our obligation reduced the assets of Telstra Super and resulted
in the VBI of the defined benefit divisions reducing from approximately 167% at
30 June 2000 to approximately 147% as at 30 June 2001.

The Trustee agreed to the release of the obligation based on actuarial advice
that the removal of these additional contributions, coupled with the employer
contribution commitment from us, will maintain the solvency level of Telstra
Super at a satisfactory level.

The net present value of our commitment to Telstra Super was shown as a
liability on our statement of financial position as at 30 June 2000. This
liability was written back to the statement of financial performance in the year
ended 30 June 2001 and increased our result as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                                     Year ended
                                                                      30 June
                                                                        2001
                                                                         $m
-------------------------------------------------------------------------------
<S>                                                                  <C>
Other revenue
Writeback of the Telstra Super additional
contribution liability............................................          725
Tax effect at 34%.................................................         (247)
                                                                     ----------
                                                                            478
                                                                     ==========
</TABLE>


210
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

3. Profit from ordinary activities (continued)

(c) Items requiring specific disclosure (continued)

(ix) During fiscal 2001, we sold our investment in Computershare Limited
(Computershare) in two tranches. On 13 July 2000, our controlled entity, Telstra
CB.Com Limited, sold 53.3 million ordinary shares in Computershare at $7.25 per
share, representing 10% of the issued capital. Revenue received from this sale
was approximately $386 million.

On 26 June 2001, Telstra CB.Com Limited sold the remaining balance of 26.6
million shares at $6 per share resulting in revenue of $160 million.

The profit on the sale of this investment was $245 million before tax, as shown
in the following table:

<Table>
<Caption>
-------------------------------------------------------------------------------
                                                                     Year ended
                                                                      30 June
                                                                        2001
                                                                         $m
-------------------------------------------------------------------------------
<S>                                                                 <C>
Other revenue
Revenue from sale of Computershare................................          546
Other expenses
Book value of investment in Computershare sold....................         (301)
                                                                     ----------
                                                                            245
Tax effect at 34%.................................................          (83)
                                                                     ----------
                                                                            162
                                                                     ==========


                                                                             211
</Table>

<PAGE>
Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          Telstra Group         Telstra Entity
---------------------------------------------------------------------------   ------------------
                                                        Year ended 30 June    Year ended 30 June
                                                       2003    2002    2001      2003      2002
                                                         $m      $m      $m        $m        $m
---------------------------------------------------------------------------   ------------------
<S>                                                   <C>     <C>     <C>      <C>         <C>
4. Income tax expense

Notional income tax expense on profit differs from
actual income tax expense recorded as follows:

Profit before income tax expense...................   4,928   5,446   6,297    3,809       4,558
                                                      =====================   ------------------
Profit/(loss) before income tax expense of
subsidiary companies that form part of the
Telstra Corporation Limited tax consolidation
group(i)...........................................                             (856)        --
                                                                              ------------------
Profit before income tax expense for the tax
consolidated group.................................                            2,953        --
                                                                              ==================
Australian statutory rate of taxation (ii).........      30%     30%     34%      30%         30%
                                                      =====================   ==================
Notional income tax expense on profit calculated
at 30% (2002: 30%, 2001: 34%)......................   1,478   1,634   2,141      886       1,367

Which is adjusted by the tax effect of (iii):
Effect of lower rates of tax on overseas income....     (30)    (13)    (23)      --          --
Research and development concessions...............      (6)     (6)    (12)      (6)         (4)
Share of net losses of associates and joint
venture entities...................................     296       9      49        2          --
(Profit)/loss on sale of non current assets........     (34)     (8)   (355)      52          (8)
Non deductible depreciation and amortisation.......      58      (4)     16       10           2
Reduction in the value of investments and
intercompany receivables...........................      --       4     362      810         390
Rebateable dividends (non taxed dividends).........      (2)     --      --        (2)       --
Assessable foreign source income not included in
accounting profit..................................      43      22      29       43          --
Under/(over) provision of tax in prior years.......     (28)     16       6      (23)         15
Effect of reset tax values on entering tax
consolidation (iv).................................    (201)     --      --     (201)         --
Other adjustments..................................     (40)    142      79      (13)         71
                                                      ---------------------   ------------------
Income tax expense on profit.......................   1,534   1,796   2,292    1,558       1,833
Effect of decrease in tax rates on deferred tax
balances (ii)......................................      --      --     (56)      --          --
                                                      ---------------------   ------------------
Income tax expense.................................   1,534   1,796   2,236    1,558       1,833
                                                      =====================   ==================
Our income tax expense contains the following
items:
Current taxation provision.........................   1,567   1,608   1,475    1,560       1,466
Movement in future income tax benefit..............      16    (240)     (3)      --          --
Movement in deferred income tax liability..........     (21)    412     758       21         352
Under/(over) provision of tax in prior years.......     (28)     16       6      (23)         15
                                                      ---------------------   ------------------
                                                      1,534   1,796   2,236    1,558       1,833
                                                      =====================   ==================

Future income tax benefits as at 30 June not
recorded in the statement of financial position
for:
Income tax losses (v)..............................     187     116       1       --          --
                                                      ---------------------   ------------------
                                                        187     116       1       --          --
                                                      =====================   ==================
</TABLE>

(i) Net of consolidation entries and other applicable adjustments.

(ii) During fiscal 2000, the Commonwealth lowered the income tax rates
applicable to companies from 36% to 30% in two stages. From 1 July 2000, the
income tax rates were lowered from 36% to 34%. From 1 July 2001, the income tax
rate was lowered from 34% to 30%.

As a result we restated our deferred tax balance to the rates applicable when
the timing differences are expected to reverse. This had the effect of lowering
our deferred tax balances by $56 million for the group in fiscal 2001.


212
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

4.    Income tax expense (continued)

(iii) For the Telstra Entity, adjustments include those for the tax
consolidation group.

(iv) On formation of a tax consolidated group (refer below for further details),
the head entity in the group may elect to reset the tax values of a subsidiary
member under certain allocation rules. This once-off benefit reflects the
increase in future tax deductions available from these reset values (refer to
note 3 for further information).

(v) Our benefit for tax losses may be used in future years if the following
criteria are met:

-     our controlled entities have sufficient future assessable income to enable
      the tax losses to be offset against that assessable income;

-     our controlled entities continue to satisfy the conditions required by tax
      legislation to be able to use the tax losses; and

-     there are no future changes in tax legislation that will adversely affect
      us in using the benefit of the tax losses.

Our future income tax benefit in the statement of financial position contains
the following tax losses carried forward:

<TABLE>
<CAPTION>
                                              Telstra Group
--------------------------------------------------------------
                                              As at 30 June
                                            2003   2002   2001
                                              $m     $m     $m
--------------------------------------------------------------
<S>                                         <C>    <C>    <C>
Future income tax benefit balance........     --    132    114
                                            ------------------
Amount of future income tax benefit
related to tax losses carried forward....     --      1      2
                                            ==================
</TABLE>

<TABLE>
<CAPTION>
                                       Telstra       Telstra
                                        Group        Entity
------------------------------------------------   -----------
                                      As at 30        As at
                                        June         30 June
                                     2003   2002   2003   2002
                                       $m     $m     $m     $m
------------------------------------------------   -----------
<S>                                  <C>    <C>    <C>    <C>
Income tax payable

Current Income tax payable (vi)...    660    632    614    572
                                     ===========   ===========
</TABLE>

(vi) Under the Pay-As-You-Go (PAYG) transitional rules, we opted to pay part of
the final instalment of income tax for fiscal 2000 over 10 equal quarterly
instalments. The final instalment was made on 21 April 2003.

Tax consolidation

During fiscal 2003, legislation was enacted which enables the Telstra Entity and
its Australian resident wholly owned entities to be treated as a single entity
for income tax purposes. The Telstra Entity has elected to form a tax
consolidated group from 1 July 2002. As a result, the Telstra Entity, as the
head entity in the tax consolidated group, will recognise tax entries for all
entities in the tax consolidated group in addition to its own.

The entities within the tax consolidated group have entered into a tax sharing
agreement. The terms of this agreement specify 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.

Agreements which formalise the transition of subsidiaries into the tax
consolidated group have also been entered into by group members. These
agreements cover the transfer of deferred tax balances to the Telstra Entity as
at 1 July 2002 and the treatment of any PAYG instalments made in relation to the
current year.

The election to tax consolidate on 1 July 2002 has not had a significant impact
on the assets and liabilities of the Telstra Group, apart from the resetting of
certain tax values (refer to item (iv) above and note 3 for further details
regarding this impact).


                                                                             213
<PAGE>
Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5.    Segment information

We report our segment information on the basis of business segments as our risks
and returns are affected predominantly by differences in the products and
services we provide through those segments.

Business segments
During the year, three pre-existing business units of Telstra Retail, Telstra
Mobile and Telstra Country Wide were restructured. The scope of Telstra Country
Wide was increased as a result of the restructure and two new groups were
formed, namely Telstra Consumer and Marketing and Telstra Business and
Government. A separate group was established which comprises Telstra's broadband
and online activities, as well as Telstra's directories business, Sensis Pty
Ltd, and Telstra's media activities. This business is now known as Bigpond,
Media Services and Sensis. Those segments not impacted by the restructure are
consistent in their structure to previous years.

Due to this extensive restructure of the customer base, it was impracticable to
restate our comparative information to reflect the position as if the new
business segments and segment accounting policies existed in prior years. In
accordance with applicable accounting standards, for both AGAAP and USGAAP, we
have provided comparatives as they were under the previous organisational
structure, as well as restating those lines that could be restated under the new
structure.

The Telstra Group is now organised along the following segments:

-     Telstra Consumer and Marketing is responsible for:

      -     serving consumer customers with fixed, wireless and data products;

      -    management of Telstra brands, advertising and sponsorship; and

      -     implementing our bundling initiatives.

-     Telstra Country Wide is responsible for:

      -     addressing the telecommunication needs of consumer and business
            customers that reside and operate outside the mainland state capital
            cities and in Tasmania and the Northern Territory; and

      -     the specific needs of customers which are not as readily accessible
            as customers in metropolitan areas.

-     Telstra Business and Government is responsible for:

      -     the provision of the full range of products and services to
            corporate, small to medium enterprises and government customers; and

      -     manages our interests in our North American, Japanese and European
            retail operations.

-     Telstra International manages our interests in:

      -     the Asia-Pacific region, including our operations in Hong Kong,
            India, China and New Zealand.

-     Infrastructure Services responsibilities include:

      -     management and delivery of telecommunications infrastructure and
            related services;

      -     operational service and delivery of the entire fixed and mobile
            networks, along with online products and platforms; and

      -     Network, Design and Construction's capability for end-to-end project
            management, planning, design, construction, integration, operations
            and maintenance of communications networks and systems for Telstra
            and other telecommunications companies.

-     Telstra Wholesale is responsible for:

      -     the provision of domestic wholesale products and services to other
            carriers and carriage service providers.

-     Telstra Technology is responsible for:

      -     the overall planning, design and construction management of our
            domestic fixed communication networks and associated systems to
            deliver technology solutions to support our products, services and
            customer support.

..    Bigpond, Media Services and Sensis is responsible for:

     .    management and growth of Telstra's internet products, services and
          content, for both broadband and narrowband delivery;
     .    management of Telstra's broadband cable network;
     .    management of Telstra's interest in the FOXTEL partnership; and
     .    management and growth of the information, advertising and directories
          business, including print, voice and online products and services.

..    Corporate areas include:

     .    Legal & Regulatory - provides legal services and has responsibility
          for regulatory positioning and negotiation;
     .    Corporate Relations - responsible for managing our relationships and
          positioning with key groups such as our customers, the media,
          governments, industry, community groups and staff;
     .    Human Resources - responsibilities include recruitment, learning and
          development, and human resources management; and

214

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

   -  Finance & Administration - encompasses the functions of finance, treasury,
      productivity, risk management and assurance, acquisitions, investments and
      strategic development, investor relations, corporate services, and the
      office of the Telstra Chief Information Officer. It also includes the
      financial management of the majority of the Telstra Entity fixed assets
      (including network assets) through the Asset Accounting Group. Telstra
      Technology manages the annual capital expenditure of these assets on
      behalf of our other business segments.

The Corporate areas, Telstra Technology and Bigpond, Media Services and Sensis
groups are not reportable segments and have been aggregated in the "Other"
segment.

Inter-segment transfers
During the year, all transfer pricing was eliminated and is no longer used
within the group. As such, the current year inter-segment line purely relates to
intercompany revenue.

In the prior year, segment revenues, segment expenses and segment results
included demand driven transfers between business segments. Generally most
internal charges between business segments were made on a direct cost recovery
basis. As the basis for transfers change from year to year depending on the
business structure, we restated our comparatives to reflect the current basis.
Certain regulatory, compliance and strategic functions are not charged to the
reportable segments. We account for all international transactions between
Australian and non-Australian businesses at market value. All internal
telecommunications usage of our own products is also accounted for at market
value.

The Asset Accounting Group does not allocate depreciation expense related to the
use of assets owned at the Corporate level to other business segments.

Segment assets and liabilities
Segment assets and segment liabilities form part of the operating activities of
a segment and can be allocated directly to that segment.

The Asset Accounting Group performs a company wide function in relation to the
financial management of certain assets. These assets are accounted for at the
Corporate level (aggregated in the "Other" segment) and not allocated across
segments.


                                                                             215
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

Telstra Group
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                     Telstra              Telstra    Telstra
                                    Consumer   Telstra   Business &  Interna-  Infrastruc-                                Total
                                    & Market-  Country     Govern-    tional       ture      Telstra   Other   Elimina-    all
                                     ing (a)   Wide (a)   ment (a)     (b)      Services    Wholesale  (c)(d)   tions    segments
                                       $m         $m         $m         $m         $m          $m        $m       $m        $m
---------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>       <C>         <C>       <C>          <C>        <C>     <C>       <C>
Year ended 30 June 2003
Sales revenue from external
customers........................       5,514     5,031       4,520     1,471          256      2,370   1,333        --    20,495
Other revenue from external
customers........................           7       136          33        54           11         --     880        --     1,121
                                    ---------------------------------------------------------------------------------------------
Total revenue from external
customers (excluding
interest revenue)................       5,521     5,167       4,553     1,525          267      2,370   2,213        --    21,616
Less sale of investment/
dividend revenue.................           1        --          19        29           --         --      --        --        49
                                    ---------------------------------------------------------------------------------------------
Segment revenue from
external customers...............       5,520     5,167       4,534     1,496          267      2,370   2,213        --    21,567
Add inter-segment revenue........          --        --          55        33          754        258      86    (1,186)       --
                                    ---------------------------------------------------------------------------------------------
Total segment revenue............       5,520     5,167       4,589     1,529        1,021      2,628   2,299    (1,186)   21,567
                                    =============================================================================================
Segment result under AGAAP              3,093     4,931       3,429        12       (1,220)     1,628  (3,356)   (1,794)    6,723
Less share of equity
accounted net losses/(profits)             (2)       --           6       974           --         --      47        --     1,025
Less net book value of
investments sold.................          --        --           2        22           --         --      --        --        24
Add sale of investment/
dividend revenue.................           1        --          19        29           --         --      --        --        49
                                    ---------------------------------------------------------------------------------------------
Earnings before interest and
income tax expense (EBIT) -
segment result under
USGAAP...........................       3,096     4,931       3,440      (955)      (1,220)     1,628  (3,403)   (1,794)    5,723
                                    =============================================================================================
Earnings has been
calculated after charging/
(crediting) the following:
Depreciation and
amortisation.....................          --        --          19       388           --         --   3,043        (3)    3,447
Non cash expenses excluding
depreciation and
amortisation.....................         (52)       --          11        52           --         --     640        --       651
                                    =============================================================================================
Non current assets acquired
(excluding those acquired on
investment)......................          11        (2)         18       188        1,125         46   1,946        --     3,332
                                    =============================================================================================
As at 30 June 2003
Segment assets (e)...............       2,015       665         877     4,255          641        380  27,920    (1,154)   35,599
Segment assets include:
Investment in joint venture
entities.........................          11        --          --        74           --         --      44        --       129
Investment in associated
entities.........................          --        --           5        25           --         --      --        --        30
Goodwill (net)...................          --        --          43     1,930           --         --      46        (1)    2,018
                                    =============================================================================================
Segment liabilities..............       1,033       213         452       818          974        242  18,976    (2,531)   20,177
                                    =============================================================================================
</TABLE>


216
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

(a) These segment results do not reflect actual segment results achieved due to
the majority of costs of goods and services associated with sales revenues for
all three of these segments being allocated totally to the Telstra Consumer and
Marketing segment. This allocation reflects management's accountability
framework and internal reporting system and accordingly no reasonable basis for
allocation to the three segments exist.

(b) Included in the share of equity accounted net losses/(profits) is the write
off of our investment in our 50% owned joint venture, Reach Ltd. Refer note 3
for further information.

(c) Included in other revenue from external customers is the sale of the seven
office properties for $570 million. Refer note 3 for further information.

(d) Sales revenue for the other segment relates primarily to revenue earned by
our subsidiary Sensis Pty Ltd. Telstra Technology and the Asset Accounting Group
are the main contributors to the segment result for this segment.

(e) Segment assets for the other segment includes Telstra Entity fixed assets
(including network assets) managed through the centralised Asset Accounting
Group.

Prior year comparatives
Due to the extensive restructure of the customer base, it was impracticable to
restate our comparative information as if the new business segments and segment
accounting policies had existed in prior years. In accordance with applicable
accounting standards, both AGAAP and USGAAP, the restatement of those lines that
could be restated under the new structure for both 2002 and 2001 is presented
below.

Telstra Group
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                     Telstra              Telstra
                                    Consumer   Telstra   Business &  Telstra   Infrastruc-                                Total
                                    & Market-  Country    Govern-    Interna-     ture       Telstra           Elimina-    all
                                       ing       Wide      ment       tional    Services    Wholesale   Other   tions    segments
                                       $m        $m         $m          $m         $m           $m       $m       $m       $m
---------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>       <C>         <C>       <C>          <C>        <C>     <C>       <C>
Year ended 30 June
2002
Depreciation and amortisation....          --        --          27       421           --         --   2,823        (4)    3,267
Non cash expenses excluding
depreciation and amortisation....          66        --          36        28           --         --   1,336    (1,018)      448
                                    =============================================================================================
Non current assets acquired
(excluding those acquired on
investment)......................          14         6          15       352          928         50   2,297        --     3,662
                                    =============================================================================================
As at 30 June 2002
Segment assets...................       1,982       613       1,001     6,076          679        414  28,946    (1,492)   38,219
Segment assets include:
Investment in joint venture
entities.........................           9        --          --     1,059           --         --      42        --     1,110
Investment in associated
entities.........................          --        --          26        61           --         --      --        --        87
Goodwill (net)...................          --        --          50     1,963           --         --      50        --     2,063
                                    =============================================================================================
Segment liabilities..............       1,274       174         521     1,648        1,030        250  21,865    (2,649)   24,113
                                    =============================================================================================
</TABLE>


                                                                             217
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

<TABLE>
<CAPTION>
Telstra Group
------------------------------------------------------------------------------------------------------------------------------------
                                         Telstra             Telstra
                                        Consumer   Telstra  Business &  Telstra   Infrastruc-                                Total
                                        & Market-  Country   Govern-    Interna-     ture       Telstra           Elimina-    all
                                           ing      Wide       ment      tional    Services    Wholesale   Other   tions    segments
                                           $m        $m         $m         $m         $m          $m        $m       $m        $m
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>      <C>         <C>       <C>          <C>         <C>    <C>       <C>
Year ended 30 June 2001
Depreciation and amortisation.........          2       --          19       188           --         --   2,666        (4)    2,871
Non cash expenses excluding
depreciation and amortisation.........       (591)      --         361     2,528            3         --     319         1     2,621
                                        ============================================================================================
As at 30 June 2001
Investment in joint venture entities..          5       --          --     1,140           --         --      47        --     1,192
Investment in associated entities.....         --       --          53        14           --         --      --        --        67
Goodwill (net)........................         --       --          75     1,431            1         --      42        (1)    1,548
                                        ============================================================================================
</TABLE>

218
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

Due to the extensive restructure of the customer base, it was impracticable to
restate our comparative information as if the new business segments and segment
accounting policies existed in prior years. Following are the comparatives for
the 2002 and 2001 years under the structure that existed as at 30 June 2002.

<TABLE>
<CAPTION>
Telstra Group
------------------------------------------------------------------------------------------------------------------------------
                                                                 Telstra   Infrastruc-                                 Total
                                               Telstra  Telstra  Interna-     ture       Telstra            Elimina-    all
                                                Retail   Mobile   tional   Services     Wholesale   Other    tions    segments
                                                 (a)                                                 (b)      (c)
                                                  $m       $m       $m         $m          $m        $m       $m        $m
------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>      <C>      <C>       <C>          <C>         <C>     <C>       <C>
Year ended 30 June 2002
Sales revenue from external customers           12,560    3,501     1,497          253      2,334       67       (16)   20,196
Other revenue from external customers              227       --        34           29         11      305        --       606
                                               -------------------------------------------------------------------------------
Total revenue from external customers
(excluding interest revenue)................    12,787    3,501     1,531          282      2,345      372       (16)   20,802
Less sale of investment/dividend revenue            42       --        14           --         --       --        --        56
                                               -------------------------------------------------------------------------------
Segment revenue from external customers.....    12,745    3,501     1,517          282      2,345      372       (16)   20,746
Add inter-segment revenue...................       447       39         1        1,853      1,001      957    (4,298)       --
                                               -------------------------------------------------------------------------------
Total segment revenue.......................    13,192    3,540     1,518        2,135      3,346    1,329    (4,314)   20,746
                                               ===============================================================================
Segment result under AGAAP..................     7,318    1,542       (22)      (1,371)     2,076   (4,267)    1,022     6,298
Less share of equity accounted net losses           42       --        39           --         --       --        --        81
Less net book value of investments sold             40       --         9           --         --        8        --        57
Add sale of investment/dividend revenue             42       --        14           --         --       --        --        56
                                               -------------------------------------------------------------------------------
Earnings before interest and income tax
expense (EBIT) - segment result under
USGAAP......................................     7,278    1,542       (56)      (1,371)     2,076   (4,275)    1,022     6,216
                                               ===============================================================================
Earnings has been calculated after
charging/(crediting) the following:
Depreciation and amortisation...............        85       --       421           --         --    2,765        (4)    3,267
Non cash expenses excluding depreciation
and amortisation............................        36       45        25           --         --    1,360    (1,018)      448
                                               ===============================================================================
Non current assets acquired (excluding
those acquired on investment)...............       335      110       352        2,740         50       75        --     3,662
                                               ===============================================================================
As at 30 June 2002
Segment assets (d)..........................     4,291    1,098     6,095        1,436        414   26,358    (1,473)   38,219
Segment assets include:
Investment in joint venture entities........        51       --     1,059           --         --       --        --     1,110
Investment in associated entities...........        26       --        61           --         --       --        --        87
                                               ===============================================================================
Segment liabilities.........................     2,763      234     1,671        1,530        252   20,313    (2,650)   24,113
                                               ===============================================================================
</TABLE>

(a) Telstra Retail segment revenue from external customers includes $2,406
million relating to Telstra Country Wide.

(b) Included in the other segment result is a specific charge of $855 million
relating to a provision for amounts owed by a controlled entity (refer note 27).

(c) Included in segment result is an elimination for the specific charge of $855
million relating to a provision for amounts owed by a controlled entity (refer
note 27).

(d) Segment assets for the other segment includes Telstra Entity fixed assets
(including network assets) managed through the centralised Asset Accounting
Group.


                                                                             219
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

<TABLE>
<CAPTION>
Telstra Group
------------------------------------------------------------------------------------------------------------------------------
                                                                 Telstra   Infrastruc-                                 Total
                                               Telstra  Telstra  Interna-     ture       Telstra            Elimina-    all
                                                Retail   Mobile   tional   Services     Wholesale   Other    tions    segments
                                               (a)(b)    (c)       (d)                               (e)
                                                 $m       $m        $m         $m          $m        $m       $m        $m
------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>      <C>      <C>       <C>          <C>         <C>     <C>       <C>
Year ended 30 June 2001
Sales revenue from external customers           11,620    3,144     1,208          282      2,410       67       (52)   18,679
Other revenue from external customers              616       13     2,495           51         22    1,108        (1)    4,304
                                               -------------------------------------------------------------------------------
Total revenue from external customers
(excluding interest revenue)................    12,236    3,157     3,703          333      2,432    1,175       (53)   22,983
Less sale of investment/dividend revenue           551       --     2,466           --         --       --        --     3,017
                                               -------------------------------------------------------------------------------
Segment revenue from external customers.....    11,685    3,157     1,237          333      2,432    1,175       (53)   19,966
Add inter-segment revenue...................       328       38       281        2,124        801    1,020    (4,592)       --
                                               -------------------------------------------------------------------------------
Total segment revenue.......................    12,013    3,195     1,518        2,457      3,233    2,195    (4,645)   19,966
                                               ===============================================================================
Segment result under AGAAP..................     6,582    1,329      (773)      (1,205)     2,119   (2,765)      719     6,006
Less share of equity accounted net losses           89       --        94           --         --       --        --       183
Less net book value of investments sold            297       --     1,574            4         --       --         2     1,877
Add sale of investment/dividend revenue            551       --     2,466           --         --       --        --     3,017
                                               -------------------------------------------------------------------------------
Earnings before interest and income tax
expense (EBIT) - segment result under
USGAAP......................................     6,747    1,329        25       (1,209)     2,119   (2,765)      717     6,963
                                               ===============================================================================
Earnings has been calculated after
charging/(crediting) the following:
Depreciation and amortisation...............        84       --       188           19         --    2,584        (4)    2,871
Non cash expenses excluding depreciation
and amortisation............................      (138)     (99)    2,559          144         --      873      (718)    2,621
                                               ===============================================================================
Non current assets acquired (excluding
those acquired on investment)...............       311      150     3,214        3,732         58      139        --     7,604
                                               ===============================================================================
As at 30 June 2001
Segment assets..............................     4,290    1,160     4,437        1,499        479   30,095    (3,957)   38,003
Segment assets include:
Investment in joint venture entities........        52       --     1,140           --         --       --        --     1,192
Investment in associated entities...........        53       --        14           --         --       --        --        67
                                               ===============================================================================
Segment liabilities.........................     2,829      227       567        1,644        247   23,834    (5,067)   24,281
                                               ===============================================================================
</TABLE>

(a) Specific revenue of $546 million from the sale of Computershare Limited
(refer note 3) is included in Telstra Retail revenue. This increased profit by
$245 million.

(b) Telstra Retail segment revenue was reduced by $745 million relating to the
specific SAB101 cumulative adjustment (refer note 3). This specific item
decreased the segment result by $205 million.

(c) Telstra Mobile segment revenue was reduced by $34 million relating to the
specific SAB101 cumulative adjustment (refer note 3). This specific item
decreased the segment result by $14 million.

(d) Telstra International total revenue includes a specific item of $2,372
million from the sale of our global wholesale business to Reach Ltd. Profit
includes specific expenses relating to the book value of our global wholesale
business and controlled entities sold of $1,520 million and the Telstra CSL
Group write off of acquisition costs of $999 million (refer note 3).

(e) Specific revenue of $725 million from the write back of the Telstra
Superannuation Scheme (Telstra Super or TSS) additional contribution liability
(refer note 3) is included in other segment revenue. This increased the other
segment result by $725 million.


220
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS(CONTINUED)
--------------------------------------------------------------------------------

5. Segment information (continued)

<TABLE>
<CAPTION>
                                                          Telstra Group
-----------------------------------------------------------------------------
                                                     Year ended/As at 30 June
                                                         2003    2002    2001
                                               Note        $m      $m      $m
-----------------------------------------------------------------------------
<S>                                                  <C>       <C>     <C>
Total segment revenue.............................     21,567  20,746  19,966
Add sale of investment/dividend revenue...........         49      56   3,017
                                                     ------------------------
Total revenue from external customers (excluding
interest revenue).................................2    21,616  20,802  22,983
Add interest revenue..............................         84     126     103
                                                     ------------------------
Total revenue from ordinary activities............2    21,700  20,928  23,086
                                                     ========================
Earnings before interest and income tax expense
(EBIT)............................................      5,723   6,216   6,963
Add interest revenue..............................         84     126     103
Less borrowing costs..............................        879     896     769
                                                     ------------------------
Profit before income tax expense..................      4,928   5,446   6,297
Less income tax expense...........................      1,534   1,796   2,236
                                                     ------------------------
Net profit........................................      3,394   3,650   4,061
                                                     ========================
Information about our products and services
Sales revenue from
Basic access (i)..................................      3,091   2,880   1,955
Local calls.......................................      1,567   1,643   1,915
PSTN value added services.........................        272     261     263
National long distance calls......................      1,162   1,216   1,267
Fixed to mobile...................................      1,517   1,419   1,287
International direct..............................        307     336     338
Mobile goods and services (i).....................      3,608   3,468   3,119
Data and Internet services........................      2,806   2,693   2,711
Sensis (advertising and directories) (i)..........      1,217   1,135     909
Customer premise equipment........................        202     220     274
Payphone..........................................        148     154     166
Intercarrier services.............................      1,170   1,124   1,132
Inbound calling products..........................        494     562     657
Solutions management..............................        487     477     428
Various controlled entities.......................      1,836   2,001   1,342
Other sales and service...........................        611     607     916
                                                     ------------------------
                                                  2    20,495  20,196  18,679
                                                     ========================
</TABLE>

(i) Sales revenue for year ended 30 June 2001
includes a specifc debit accounting adjustment of
$779 million for SAB101. This adjustment has been
allocated across our sales revenue as follows:
$540 million (basic access), $205 million
(directory services), and $34 million (mobile
goods and services) (refer note 3).
Information about our geographic operations

<TABLE>
<S>                                                  <C>       <C>     <C>
Sales revenue from
Customers in Australia............................     19,024  18,699  17,471
Customers in non Australian countries.............      1,471   1,497   1,208
                                                     ------------------------
                                                  2    20,495  20,196  18,679
                                                     ========================
Carrying amount of segment assets
Customers in Australia............................     32,632  32,124  33,036
Customers in non Australian countries.............      2,967   6,095   4,437
                                                     ------------------------
                                                       35,599  38,219  37,473
                                                     ========================
Non current assets acquired (excluding those
 acquired on investment)
Located in Australia..............................      3,144   3,310   4,390
Located in non Australian countries...............        188     352   3,214
                                                     ------------------------
                                                        3,332   3,662   7,604
                                                     ========================
</TABLE>


                                                                             221
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Telstra Group
---------------------------------------------------------------------------
                                                       Year ended 30 June
                                                       2003    2002    2001
                                                      CENTS   CENTS   CENTS
---------------------------------------------------------------------------
<S>                                                  <C>      <C>     <C>
6. Earnings per share

Basic and diluted earnings per share (cents) (a)       26.6    28.5    31.5
                                                     ----------------------
                                                         $m      $m      $m
                                                     ----------------------
The following reflects the earnings and share
information used in determining our basic and
diluted earnings per share (see note 1.22):

Net profit........................................    3,394   3,650   4,061

Adjustments:
Outside equity interests in net (profit)/loss.....       35      11      (3)
                                                     ----------------------
Earnings used in the calculation of basic and
diluted earnings per share........................    3,429   3,661   4,058
                                                     ======================
</TABLE>

<TABLE>
<CAPTION>
                                                        Number of
                                                          shares
                                                        (millions)
                                                     ----------------------
<S>                                                  <C>     <C>     <C>
Weighted average number of issued ordinary
shares used in the calculation of basic and
diluted earnings per share (b)(c).................   12,867  12,867  12,867
                                                     ======================
</TABLE>

(a) Change in accounting policy

The change in accounting policy for the introduction of SAB101 during fiscal
2001 is described in note 1.2. This change had the effect of decreasing the
earnings per share calculation by 1.1 cents to 31.5 cents in fiscal 2001.

(b) The number of issued and paid up ordinary shares for the last 3 years has
been 12,866,600,200.

(c) There are no potential ordinary shares or dilutive ordinary shares. We are
precluded from issuing instruments that gives rise to the issue of new shares by
the Telstra Corporation Act 1991 (Cth). The Telstra Growthshare Trust was
established to allocate options, restricted shares, performance rights, deferred
shares, directshares and ownshares to executives and employees. The Growthshare
trustee purchases shares on market to underpin the various instruments issued.


222
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                 Telstra Group       Telstra Entity
---------------------------------------------------------------------------------  ------------------
                                                               Year ended 30 June  Year ended 30 June
                                                               2003   2002   2001      2003      2002
                                                    Note         $m     $m     $m        $m        $m
---------------------------------------------------------------------------------  ------------------
<S>                                                           <C>    <C>    <C>       <C>       <C>
7. Dividends

Ordinary shares
Interim dividend paid...................................      1,544  1,415  1,029     1,544     1,415
Interim special dividend paid...........................        386     --     --       386        --
Final ordinary dividend provided for (i)..............17         --  1,415  1,416        --     1,415
                                                           ----------------------  ------------------
Total dividend provided for or paid.....................      1,930  2,830  2,445     1,930     2,830
                                                           ======================  ==================
Dividends per share (cents) provided for or paid              CENTS  CENTS  CENTS
                                                           ----------------------
Interim dividend........................................       12.0   11.0    8.0
Interim special dividend................................        3.0     --     --
Final ordinary dividend (i).............................         --   11.0   11.0
                                                           ----------------------
Total dividend..........................................       15.0   22.0   19.0
                                                           ======================
</TABLE>

Our dividends provided for or paid are fully franked, in aggregate and per
share, to the same amount in the relevant tables above.

(i) Due to the first time application of the new accounting standard AASB 1044:
"Provisions, Contingent Liabilities and Contingent Assets", a difference has
arisen between reporting periods regarding the timing and the recognition of
dividends declared in our statement of financial performance and statement of
financial position. There has been no change in the timing of the dividends
declared by the directors.

Under this new accounting standard, the provision for final ordinary dividend
raised at 30 June 2002 has been reversed to opening retained profits in the
current period statement of financial position (refer to statement of changes in
shareholders equity).

As the final ordinary dividend in fiscal 2003 has not been declared, determined
or publicly recommended as at 30 June 2003, no provision has been raised in the
statement of financial position. The final ordinary dividend is now reported as
an event after balance date (refer note 28) and the provision for final ordinary
dividend is raised at the declaration date.

We have paid dividends as listed in the table below:

<TABLE>
<CAPTION>
                                     Telstra Group
-----------------------------------------------------
                                  Year ended 30 June
                                   2003   2002   2001
                                     $m     $m     $m
-----------------------------------------------------
<S>                               <C>    <C>    <C>
Dividends paid
Previous year final ordinary
dividend paid in the current
year............................  1,415  1,416  1,287
Interim dividend paid...........  1,544  1,415  1,029
Special interim dividend paid...    386     --     --
                                  -------------------
Total dividends paid............  3,345  2,831  2,316
                                  ===================
</TABLE>

Our dividends have been franked as listed in the table below:

<TABLE>
<CAPTION>
                                    Telstra Group
----------------------------------------------------
                                  Year ended 30 June
                                  2003   2002   2001
                                     %      %      %
----------------------------------------------------
<S>                               <C>    <C>    <C>
C class franking credit
percentages
Interim dividend................   100    100    100
Interim special dividend........   100     --     --
Final ordinary dividend (i).....    --    100    100
                                  ==================
</TABLE>

The interim dividend and interim special dividend were franked at a tax rate of
30% (2002: 30%; 2001: 34%). Our final ordinary dividends were franked at a tax
rate of 30% for both fiscal 2002 and fiscal 2001.


                                                                             223
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

7. Dividends (continued)

<TABLE>
<CAPTION>
                                                                       Telstra Group            Telstra Entity
-------------------------------------------------------------------------------------------   ------------------
                                                                    Year ended 30 June        Year ended 30 June
                                                                  2003       2002      2001      2003       2002
                                                                    $m         $m        $m        $m         $m
-------------------------------------------------------------------------------------------   ------------------
<S>                                                              <C>         <C>     <C>      <C>           <C>
The combined amount of exempting and franking credits
available to us for the next fiscal year are:
Combined exempting and franking account balance as at
30 June (i)...............................................         585        530       645       585        457
Franking credits that will arise from the payment
of income tax payable as at 30 June (ii)..................         614        632     1,620       614        572
Franking debits when we pay our final dividend
provided for as at 30 June (iii)..........................          --       (606)   (1,416)       --       (606)
Franking credits and exempting credits that we may be
prevented from distributing in the next fiscal year.......          (1)       (15)     (153)       (1)        --
                                                               ----------------------------   ------------------
                                                                 1,198        541       696     1,198        423
                                                               ============================   ==================
</TABLE>

(i) In fiscal 2002, with the introduction of the Business Tax Reform's
Simplified Imputation System that became effective from 1 July 2002, the Telstra
Entity's and Telstra Group's franking balances as at 30 June 2002 were converted
to reflect the credit balances on a tax paid basis rather than on an after tax
distributable profits basis. The tax paid balances basically represent the
imputation tax credits that are available for distribution.

During fiscal 2003, legislation has been enacted which enables the Telstra
Entity and its Australian resident wholly owned entities to be treated as a
single entity for income tax purposes. The Telstra Entity elected to form a tax
consolidated group from 1 July 2002. On entry into tax consolidation, the
franking credits held in the franking accounts and exempt franking accounts of
the subsidiary members were transferred to the Telstra Entity. Therefore, one
franking account and one exempt franking account is maintained by the Telstra
Entity for the tax consolidated group. We have not restated our comparatives to
reflect this change.

As at 30 June 2003, the Telstra Entity had a combined exempting and franking
account balance of $585 million (2002: $457 million). This balance represents
the tax paid amount and equates to a fully franked distributable dividend of
$1,365 million (2002: $1,067 million).

(ii) Franking credits that arise from the payment of income tax in fiscal 2004
and fiscal 2003 are expressed at the 30% tax rate on a tax paid basis. Franking
credits that arise from the payment of income tax in fiscal 2002 are also
expressed at the 30% tax rate, but on an after tax distributable profit basis.

(iii) The franking debits that arise when we pay our final ordinary dividend
have been expressed as the amount of imputation tax credits that will be
attached to a fully franked distribution.

Due to the first time application of the new accounting standard AASB 1044:
"Provisions, Contingent Liabilities and Contingent Assets", a provision for
dividend can no longer be raised at balance date if the dividend is declared
after that date. As the final ordinary dividend in fiscal 2003 has not been
declared, determined or publicly recommended as at 30 June 2003, no franking
debits arise prior to that date in the franking account. The franking credits
that arose in fiscal 2002 from our final ordinary dividend provided for amounted
to $606 million.

As at 30 June 2003, the Telstra Entity had a surplus in its C class franking
account of $584 million (2002: $457 million; 2001: $466 million) and a surplus
of $0.6 million (2002: $0.1 million; 2001: $0.2 million) in its C class
exempting credit account restated on a tax paid basis.

Additional franking credits will arise when the Telstra Entity pays tax
instalments during fiscal 2004, relating to the fiscal 2003 and 2004 income tax
years.


224
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                            Telstra Group       Telstra Entity
------------------------------------------------------------  ------------------
                                             As at 30 June       As at 30 June
                                              2003      2002      2003      2002
                                                $m        $m        $m        $m
------------------------------------------------------------  ------------------
<S>                                       <C>          <C>    <C>            <C>
8. Cash assets
Cash at bank and on hand................       199       311       102       132
Bank deposits, bills of exchange and
commercial paper (a)....................     1,101       759     1,050       357
                                          ------------------  ------------------
                                             1,300     1,070     1,152       489
                                          ==================  ==================
</TABLE>

(a) Bank deposits are held in the short term money market. The carrying amount
of bank deposits, bills of exchange and commercial paper is approximately equal
to net fair value due to their short term to maturity.


                                                                             225
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       Telstra Group        Telstra Entity
------------------------------------------------------------------------   ----------------
                                                        As at 30 June        As at 30 June
                                                         2003       2002      2003     2002
                                              Note         $m         $m        $m       $m
------------------------------------------------------------------------   ----------------
<S>                                           <C>      <C>        <C>      <C>       <C>
9. Receivables

Current
Trade debtors (a).................................      2,436      2,535     1,849    1,736
Provision for doubtful debts......................       (199)      (221)     (157)    (162)
                                                     -------------------   ----------------
                                                        2,237      2,314     1,692    1,574

Amounts owed by controlled entities (other
than trade debtors).............................27         --         --       689    3,148
Provision for amounts owed by controlled
entities (other than trade debtors).............27         --         --      (285)    (855)
                                                     -------------------   ----------------
                                                           --         --       404    2,293

Accrued revenue...................................      1,068      1,124     1,036    1,059
Bank deposits, bills of exchange and
commercial paper (b)..............................         --        388        --      388
Share loans to employees (c).................19,27         24         25        24       25
Loans to joint venture entities and
associated entities.............................27         33         16        33       16
Cross currency swap hedge receivable (1.2)......29         10         29        10       29
Other receivables.................................        247        167       175      138
                                                     -------------------   ----------------
                                                        3,619      4,063     3,374    5,522
                                                     ===================   ================
Non current
Amounts owed by controlled entities
(other than trade debtors)......................27         --         --       511      202
Provision for amounts owed by controlled
entities (other than trade debtors).............27         --         --       (69)     (86)
                                                     -------------------   ----------------
                                                           --         --       442      116

Share loans to employees (c).................19,27        174        205       174      205
Loans to joint venture entities and
associated entities.............................27         29         46        29       46
Reach capacity prepayment (e).....................        214         --       214       --
Cross currency swap hedge receivable (1.2)......29        273        622       273      622
Other receivables (d).............................        187        132       187      132
                                                     -------------------   ----------------
                                                          877      1,005     1,319    1,121
                                                     ===================   ================
</TABLE>

(a) Our policy requires trade debtors to pay us within 14 days. We have no
significant exposure to any individual customer, geographical location or
industry category. All credit and recovery risk associated with trade debtors
has been provided for in the financial statements.

(b) In fiscal 2002, bank deposits, bills of exchange and commercial paper
included $6 million Japanese yen deposits. These related to our Japanese finance
lease liabilities and were held to satisfy our requirements under the leases
which were payable in July 2002.

(c) Share loans to employees represent amounts receivable from employees under
all employee share plans. Refer to note 19 for details regarding the share
plans. The loan balance is considered fully recoverable over the period of the
employee share schemes.

(d) Included in our other non current receivables is an amount of $88 million
(2002: $115 million) from Telstra Growthshare (the senior executive equity
participation scheme). Refer to note 19 for further information on Telstra
Growthshare.

(e) On 25 April 2003, we entered a capacity prepayment agreement with our 50%
owned joint venture entity, Reach Ltd. Our prepayment amounted to $230 million
(US$143 million) and was funded by the partial redemption of our converting note
in PCCW Limited (PCCW). The prepayment earns compounding interest equivalent to
the 3 month US LIBOR rate plus an additional 2.50%, and provides the right to
receive future carriage and related services capacity equivalent to the amount
of the payment and accrued interest. We have classified the capacity prepayment
as non current as no draw down is expected until fiscal 2007. The prepayment is
considered fully recoverable.


226
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                Telstra Group    Telstra Entity
--------------------------------------------------------------   --------------
                                                As at 30 June     As at 30 June
                                                  2003    2002     2003    2002
                                                    $m      $m       $m      $m
--------------------------------------------------------------   --------------
<S>                                             <C>       <C>    <C>        <C>
10. Inventories

Current
Raw materials and stores recorded at cost....       21       7       21       7
Construction contracts (a) (1.9).............       18      35       --      --

Finished goods recorded at cost..............      235     161      202     135
Finished goods recorded at net realisable
value........................................       12      27       12      22
                                                --------------   --------------
Total finished goods.........................      247     188      214     157
Provision for stock obsolescence.............      (26)    (26)     (10)     (4)
                                                --------------   --------------
                                                   260     204      225     160
                                                ==============   ==============
Non current
Finished goods recorded at cost..............       14      18       14       5
Finished goods recorded at net realisable
value........................................        9      14        9      14
                                                --------------   --------------
                                                    23      32       23      19
Provision for stock obsolescence.............       (9)    (12)      (9)    (12)
                                                --------------   --------------
                                                    14      20       14       7
                                                ==============   ==============
(a) Construction contract disclosures are
shown in the table below.

Gross amount of construction work in
progress.....................................       92     126       --      --
Profits recognised to date...................       18      15       --      --
                                                --------------   --------------
                                                   110     141       --      --
Progress billings and advances received......      (92)   (106)      --      --
                                                --------------   --------------
                                                    18      35       --      --
                                                ==============   ==============
</TABLE>


                                                                             227
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                               Telstra Group   Telstra Entity
------------------------------------------------------------  ----------------
                                               As at 30 June   As at 30 June
                                                2003    2002     2003     2002
                                       Note       $m      $m       $m       $m
------------------------------------------------------------  ----------------
<S>                                           <C>      <C>     <C>      <C>
11. Investments

Investments - accounted for using the
equity method (1.10)
Carrying amount of investments in
joint venture entities....................24     129   1,110        3        3
Investment in associated entities...........      56     101       26       57
Provision for reduction in value............     (26)    (14)     (19)     (26)
                                              --------------  ----------------
Carrying amount of investments in
associated entities (a)...................24      30      87        7       31
                                              --------------  ----------------
                                                 159   1,197       10       34
                                              ==============  ================
Investments - other non current (1.10)
Listed securities
Investment in listed corporations
(at cost)...................................      46      58       41       38
Provision for reduction in value............     (14)    (17)     (14)     (14)
                                              --------------  ----------------
Total listed securities excluding
investments in associated entities.....11(i)      32      41       27       24
Unlisted securities and other
investments
Investment in controlled entities
(at cost).................................23      --      --   12,028    9,553
Provision for reduction in value............      --      --   (7,912)  (4,875)
                                              --------------  ----------------
Total unlisted securities and other
investments.................................      --      --    4,116    4,678
Investment in other corporations
(at cost)...................................      66      79       62       73
Provision for reduction in value............      (2)    (15)      (1)     (13)
                                              --------------  ----------------
Total investment in other
corporations..........................11(ii)      64      64       61       60
                                              --------------  ----------------
                                                  96     105    4,204    4,762
                                              ==============  ================
</TABLE>

(a) During fiscal 2003, we sold our remaining shareholding in our listed
associated entity Solution 6 Holdings Limited. Its equity accounted value at 30
June 2002 was $14 million and was recorded as part of the carrying amount of
investments in associated entities. Its net fair value was $18 million as at 30
June 2002.


228
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

11. Investments (continued)

Listed securities and investments in other corporations are as follows:

<TABLE>
<CAPTION>
                                                                                  Telstra Group's    Telstra Entity's
                                                                                  recorded amount    recorded amount
Name of investment                  Principal activities     Ownership interest  of investment (*)  of investment (*)
-------------------------------------------------------------------------------  -----------------  -----------------
                                                                As at 30 June      As at 30 June      As at 30 June
                                                                 2003      2002      2003     2002     2003     2002
                                                                    %         %        $m       $m       $m       $m
-------------------------------------------------------------------------------  -----------------  -----------------
<S>                             <C>                             <C>       <C>      <C>        <C>     <C>       <C>
(i) Listed securities
                                International
                                communications and
Infonet Services Corporation    computing services                5.3       5.3        11       11       11        11
-----------------------------------------------------------
Commander                       Voice and data transmission
Communications Limited (a)      services                         16.4      16.6        16       16       16        13
-----------------------------------------------------------
                                Provision of satellite
New Skies Satellites, N.V.(b).  capacity                           --       0.8        --        9       --        --
-----------------------------------------------------------
Other listed investments......                                                          5        5       --        --
-----------------------------------------------------------                      -----------------  -----------------
                                                                                       32       41       27        24
                                                                                 =================  =================
(ii) Investments in other
corporations
                                Provision of satellite
Intelsat Limited..............  capacity                          1.7       1.7        60       60       60        60
-----------------------------------------------------------
Other investments.............                                                          4        4        1        --
-----------------------------------------------------------                      -----------------  -----------------
                                                                                       64       64       61        60
                                                                                 =================  =================
</TABLE>

(*) Amounts shown net of provision for reduction in value.

(a) Our investment in Commander Communications Limited has decreased from 16.6%
to 16.4% due to a dilution in our shareholding. Subsequent to 30 June 2003, we
disposed of our investment in this entity for $24 million.

(b) During fiscal 2003, we sold our shareholding in New Skies Satellites N.V.
for $5.9 million.


                                                                             229
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

12. Property, plant and equipment

<TABLE>
<CAPTION>
Telstra Group                                           (a)       (b)       (c)       (d)      (e)      (f)
----------------------------------------------------------------------------------------------------------------------
                                                               Buildings    CA's      CA's    Other    Equip
                                                       Land      (incl     (incl.    under    plant,   under
                                                      & site    l'hold     l'hold   finance  equip &  finance
                                                      imp'mnt   imp'mnt)  imp'mnt)   lease     MV      lease    Total
                                               Note      $m       $m         $m        $m       $m       $m       $m
----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>    <C>      <C>        <C>       <C>      <C>      <C>      <C>
30 June 2003
Carrying amount at cost (1.12)
Balance at 30 June 2002.............................       81        778    37,272      858    1,757       47   40,793
- additions.........................................        1         43     2,486       --       72       --    2,602
- disposals.........................................      (33)      (103)     (286)      --     (232)      --     (654)
- net foreign currency exchange differences on
translation of financial statements of self-
sustaining operations...............................       --         (5)      (72)      --      (10)      --      (87)
- other.............................................       --        (15)       92       --     (138)       5      (56)
                                                      ----------------------------------------------------------------
Balance at 30 June 2003.............................       49        698    39,492      858    1,449       52   42,598
                                                      ----------------------------------------------------------------
Accumulated depreciation/amortisation
Balance at 30 June 2002.............................       --       (265)  (15,786)    (195)  (1,106)     (20) (17,372)
- disposals.........................................       --         42       197       --      188       --      427
- depreciation and amortisation expense (i)........3       --        (75)   (2,436)     (82)    (154)      (7)  (2,754)
- net foreign currency exchange differences on
translation of financial statements of self-
sustaining operations...............................       --          1        58       --        6       --       65
- other.............................................       --         18        (4)      --       47      (13)      48
                                                      ----------------------------------------------------------------
Balance at 30 June 2003.............................       --       (279)  (17,971)    (277)  (1,019)     (40) (19,586)
                                                      ----------------------------------------------------------------
Net book value
                                                      ----------------------------------------------------------------
As at 30 June 2003..................................       49        419    21,521      581      430       12   23,012
                                                      ================================================================
</TABLE>

General purpose land and buildings
(a) Land and site improvements
(b) Buildings (including leasehold improvements)

Communication assets
(c) Communication assets (including leasehold improvements)
(d) Communication assets under finance lease

Other plant and equipment
(e) Other plant, equipment and motor vehicles
(f) Equipment under finance lease

(i) The depreciation and amortisation expense on buildings (including leasehold
improvements) is split between depreciation of general purpose buildings and
amortisation of leasehold improvements in our note 3 disclosures. The
depreciation and amortisation expense of communication assets (including
leasehold improvements) and communication assets under finance lease is
aggregated to depreciation of communication assets in our note 3 disclosures.


230
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                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
12. Property, plant and equipment (continued)

<TABLE>
<CAPTION>
Telstra Group                                           (a)       (b)       (c)       (d)      (e)      (f)
----------------------------------------------------------------------------------------------------------------------
                                                               Buildings    CA's      CA's    Other    Equip
                                                       Land      (incl     (incl.    under    plant,   under
                                                      & site    l'hold     l'hold   finance  equip &  finance
                                                      imp'mnt   imp'mnt)  imp'mnt)   lease     MV      lease    Total
                                               Note     $m        $m         $m       $m       $m       $m       $m
----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>    <C>      <C>        <C>       <C>      <C>      <C>      <C>
30 June 2002

Carrying amount at cost (1.12)

Balance at 30 June 2001............................       160      1,339    34,149      906    1,817       65   38,436
- additions........................................        --         46     2,792       --      128       --    2,966
- disposals........................................       (33)       (32)     (738)      --     (276)     (24)  (1,103)
- acquisitions of businesses.......................         1         17       671       --       82        6      777
- net foreign currency exchange differences on
translation of financial statements of self-
sustaining operations..............................        --         (3)      (19)      --       (1)      --      (23)
- other............................................       (47)      (589)      417      (48)       7       --     (260)
                                                      ----------------------------------------------------------------
Balance at 30 June 2002............................        81        778    37,272      858    1,757       47   40,793
                                                      ----------------------------------------------------------------
Accumulated depreciation/amortisation

Balance at 30 June 2001............................        --       (408)  (13,883)    (164)  (1,140)     (38) (15,633)
- disposals.......................................         --         15       670       --      155       24      864
- depreciation and amortisation expense (i)..3             --        (84)   (2,373)     (79)    (115)      (2)  (2,653)
- net foreign currency exchange differences on
translation of financial statements of self-
sustaining operations..............................        --         --         3       --       --       --        3
- other............................................        --        212      (203)      48       (6)      (4)      47
                                                      ----------------------------------------------------------------
Balance at 30 June 2002............................        --       (265)  (15,786)    (195)  (1,106)     (20) (17,372)
                                                      ----------------------------------------------------------------
Net book value
                                                      ----------------------------------------------------------------
As at 30 June 2002.................................        81        513    21,486      663      651       27   23,421
                                                      ================================================================
</TABLE>

General purpose land and buildings
(a) Land and site improvements
(b) Buildings (including leasehold improvements)

Communication assets
(c) Communication assets (including leasehold improvements)
(d) Communication assets under finance lease

Other plant and equipment
(e) Other plant, equipment and motor vehicles
(f) Equipment under finance lease

(i) The depreciation and amortisation expense on buildings (including leasehold
improvements) is split between depreciation of general purpose buildings and
amortisation of leasehold improvements in our note 3 disclosures. The
depreciation and amortisation expense of communication assets (including
leasehold improvements) and communication assets under finance lease is
aggregated to depreciation of communication assets in our note 3 disclosures.


                                                                             231
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

12. Property, plant and equipment (continued)

<TABLE>
<CAPTION>
Telstra Entity                                          (a)       (b)       (c)       (d)      (e)      (f)
----------------------------------------------------------------------------------------------------------------------
                                                               Buildings    CA's     CA's     Other    Equip
                                                       Land      (incl     (incl.    under    plant,   under
                                                       & site   l'hold     l'hold   finance  equip &  finance
                                                      imp'mnt   imp'mnt)  imp'mnt)  lease      MV      lease    Total
                                               Note     $m        $m         $m       $m       $m        $m       $m
----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>    <C>      <C>        <C>       <C>      <C>      <C>       <C>
30 June 2003

Carrying amount at cost (1.12)

Balance at 30 June 2002............................        80        710    35,635      858    1,296       --   38,579
- additions........................................         1         38     2,525       --       17       --    2,581
- disposals........................................       (33)       (96)     (152)      --     (195)      --     (476)
- acquisition of businesses........................        --         --        --       --       --        9        9
- other............................................        --          1        78       --      (54)      --       25
                                                      ----------------------------------------------------------------
Balance at 30 June 2003............................        48        653    38,086      858    1,064        9   40,718
                                                      ----------------------------------------------------------------
Accumulated depreciation/amortisation

Balance at 30 June 2002............................        --       (247)  (15,365)    (195)    (920)      --  (16,727)
- disposals........................................        --         35        90       --      154       --      279
- depreciation and amortisation
expense (i).......................................3        --        (57)   (2,282)     (82)    (106)      (2)  (2,529)
- other............................................        --          2        (1)      --       52       --       53
                                                      ----------------------------------------------------------------
Balance at 30 June 2003............................        --       (267)  (17,558)    (277)    (820)      (2) (18,924)
                                                      ----------------------------------------------------------------
Net book value
                                                      ----------------------------------------------------------------
As at 30 June 2003.................................        48        386    20,528      581      244        7   21,794
                                                      ================================================================
</TABLE>

General purpose land and buildings
(a) Land and site improvements
(b) Buildings (including leasehold improvements)

Communication assets
(c) Communication assets (including leasehold improvements)
(d) Communication assets under finance lease

Other plant and equipment
(e) Other plant, equipment and motor vehicles
(f) Equipment under finance lease

(i) The depreciation and amortisation expense on buildings (including leasehold
improvements) is split between depreciation of general purpose buildings and
amortisation of leasehold improvements in our note 3 disclosures. The
depreciation and amortisation expense of communication assets (including
leasehold improvements) and communication assets under finance lease is
aggregated to depreciation of communication assets in our note 3 disclosures.


232
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

12. Property, plant and equipment (continued)

<TABLE>
<CAPTION>

Telstra Entity                                          (a)      (b)        (c)       (d)      (e)      (f)
----------------------------------------------------------------------------------------------------------------------
                                                               Buildings    CA's      CA's    Other    Equip
                                                       Land      (incl     (incl.    under    plant,   under
                                                      & site    l'hold     l'hold   finance  equip &  finance
                                                      imp'mnt   imp'mnt)  imp'mnt)   lease     MV      lease    Total
                                               Note     $m        $m         $m       $m       $m       $m       $m
----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>    <C>      <C>        <C>       <C>      <C>      <C>       <C>

30 June 2002

Carrying amount at cost (1.12)

Balance at 30 June 2001............................       160      1,267    33,259      905    1,504       24   37,119
- additions........................................        --         63     2,682       --       37       --    2,782
- disposals........................................       (33)       (32)     (713)      --     (246)     (24)  (1,048)
- other............................................       (47)      (588)      407      (47)       1       --     (274)
                                                      ----------------------------------------------------------------
Balance at 30 June 2002............................        80        710    35,635      858    1,296       --   38,579
                                                      ----------------------------------------------------------------

Accumulated depreciation/amortisation

Balance at 30 June 2001............................        --       (396)  (13,694)    (164)    (974)     (24) (15,252)
- disposals........................................        --         15       650       --      142       24      831
- depreciation and amortisation
expense (i).......................................3        --        (79)   (2,130)     (79)     (85)      --   (2,373)
- other............................................        --        213      (191)      48       (3)      --       67
                                                      ----------------------------------------------------------------
Balance at 30 June 2002............................        --       (247)  (15,365)    (195)    (920)      --  (16,727)
                                                      ----------------------------------------------------------------
Net book value

                                                      ----------------------------------------------------------------
As at 30 June 2002.................................        80        463    20,270      663      376       --   21,852
                                                      ================================================================
</TABLE>

General purpose land and buildings
(a) Land and site improvements
(b) Buildings (including leasehold improvements)

Communication assets
(c) Communication assets (including leasehold improvements)
(d) Communication assets under finance lease

Other plant and equipment
(e) Other plant, equipment and motor vehicles
(f) Equipment under finance lease

(i) The depreciation and amortisation expense on buildings (including leasehold
improvements) is split between depreciation of general purpose buildings and
amortisation of leasehold improvements in our note 3 disclosures. The
depreciation and amortisation expense of communication assets (including
leasehold improvements) and communication assets under finance lease is
aggregated to depreciation of communication assets in our note 3 disclosures.


                                                                             233
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS(CONTINUED)
--------------------------------------------------------------------------------

12. Property, plant and equipment (continued)

Communication assets

Communication assets include certain network land and buildings which are
essential to the operation of communication assets.

Current value of all land and buildings

We obtain valuations of all of our land and buildings at least once every three
years and the current value as at 30 June 2003 is as follows:

-  $2,425 million for the Telstra Group (fiscal 2002: $2,906 million); and
-  $2,425 million for the Telstra Entity (fiscal 2002: $2,866 million).

These current values are not on independent valuation. The following bases are
used in determining the current value of property, plant and equipment:

--------------------------------------------------------------------------------
Property, plant and equipment                               Valuation
category                                                      basis
--------------------------------------------------------------------------------
General purpose land and                                    Market value
buildings

Communication assets and
other plant and equipment
Network land                                                Market value
Network buildings                                   Depreciated replacement cost
--------------------------------------------------------------------------------

These valuations do not include land and buildings held for resale as included
in note 14.

Details of our capital expenditure and finance lease commitments are shown in
note 20 to these financial statements.

Assets pledged as security

Included in our balances of property, plant and equipment are assets which were
pledged as collateral for bank loans entered into by our controlled entity,
TelstraClear Limited. During fiscal 2003, these loans were fully repaid and the
pledge removed (refer note 16 for further information). The property, plant and
equipment and other assets, that were subject to this pledge are detailed in the
table below:

<TABLE>
<CAPTION>
                                                                 Telstra Group
-------------------------------------------------------------------------------
                                                                 As at 30 June
                                                                 2003      2002
                                                                   $m        $m
-------------------------------------------------------------------------------
<S>                                                              <C>      <C>
Property, plant and equipment.................................     --       818
Other assets..................................................     --       415
                                                                 --------------
                                                                   --     1,233
                                                                 ==============
</TABLE>


234
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 Telstra Group   Telstra Entity
--------------------------------------------------------------   --------------
                                                 As at 30 June   As at 30 June
                                                  2003    2002    2003     2002
                                                    $m      $m      $m       $m
--------------------------------------------------------------   --------------
<S>                                              <C>     <C>      <C>      <C>
13. Intangible assets

Intangibles - goodwill (1.14(a))
Goodwill (a) (b)...............................  2,290   2,219       6        6
Accumulated amortisation.......................   (272)   (156)     (2)      (1)
                                                 -------------   --------------
                                                 2,018   2,063       4        5
                                                 =============   ==============
Intangibles - other (1.14(b))..................
Patents, trademarks and licences...............    685     697     339      340
Accumulated amortisation.......................   (121)    (87)   (103)     (71)
                                                 -------------   --------------
                                                   564     610     236      269
                                                 -------------   --------------
Brandnames.....................................    216     247      --       --
Accumulated amortisation.......................    (24)    (16)     --       --
                                                 -------------   --------------
                                                   192     231      --       --
                                                 -------------   --------------
Customer bases.................................    559     629      --       --
Accumulated amortisation.......................   (169)   (112)     --       --
                                                 -------------   --------------
                                                   390     517      --       --
                                                 -------------   --------------
                                                 1,146   1,358     236      269
                                                 =============   ==============
</TABLE>

(a) The movements in the carrying value of our net goodwill balance are
summarised as follows:

<TABLE>
<CAPTION>
                                                                  Telstra Group
--------------------------------------------------------------------------------
                                                                  As at 30 June
                                                                  2003      2002
                                                                    $m        $m
--------------------------------------------------------------------------------
<S>                                                              <C>       <C>
Carrying amount at beginning of year.........................    2,063     1,548
Additional goodwill recognised (i) (ii)......................       71       615
Removal of goodwill on disposal..............................       --       (13)
Amortisation expense.........................................     (116)      (87)
                                                                ----------------
Carrying amount at end of year...............................    2,018     2,063
                                                                ================
</TABLE>

(i) On 9 April 2003, we acquired the remaining 41.6% shareholding of
TelstraClear Limited that we did not hold, resulting in additional goodwill of
$71 million in fiscal 2003 (refer note 23 for further information).

(ii) On 28 June 2002, we acquired the remaining 40% shareholding of Telstra CSL
Limited that we did not hold, resulting in additional goodwill of $522 million
in fiscal 2002 (refer note 23 for further information).

(b) As at 30 June 2003, the net goodwill balance was from investments made in
the following controlled entities:

<TABLE>
<CAPTION>
                                                                   Telstra Group
--------------------------------------------------------------------------------
                                                                  As at 30 June
                                                                  2003      2002
                                                                    $m        $m
--------------------------------------------------------------------------------
<S>                                                              <C>       <C>
Telstra CSL Limited (ii).....................................    1,784     1,884
TelstraClear Limited (i).....................................      145        79
Sensis Pty Ltd (formerly Pacific Access
Pty Ltd).....................................................       39        41
Telstra Enterprise Services Pty Ltd..........................       32        39
InsNet Pty Ltd...............................................       10        11
Other........................................................        8         9
                                                                ----------------
Net goodwill.................................................    2,018     2,063
                                                                ================
</TABLE>


                                                                             235
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                Telstra Group    Telstra Entity
--------------------------------------------------------------   --------------
                                                As at 30 June     As at 30 June
                                                  2003    2002     2003    2002
                                                    $m      $m       $m      $m
--------------------------------------------------------------   --------------
<S>                                             <C>       <C>    <C>       <C>
14. Other assets

Current
Net deferred mobile phone handset
 subsidies (1.15(b))..........................     111     184      111     184
Deferred expenditure (1.15(c))................     249     233      213     197
Prepayments...................................     218     187      142     132
Land and buildings held for resale (i)........      --     434       --     434
                                                --------------   --------------
                                                   578   1,038      466     947
                                                ==============   ==============
Non current
Deferred expenditure (1.15(c))................     392     397      385     396
Accumulated amortisation......................      (5)    (12)      (5)    (12)
                                                -------------------------------
                                                   387     385      380     384
Software assets developed for internal
 use (1.15(d))................................   3,181   2,627    3,016   2,469
Accumulated amortisation......................  (1,180)   (823)  (1,157)   (808)
                                                --------------   --------------
                                                 2,001   1,804    1,859   1,661
Net deferred mobile phone handset
 subsidies (1.15(b))..........................      49      17       49      17
Converting note issued by PCCW (ii)...........      83     337       83     337
                                                --------------   --------------
                                                 2,520   2,543    2,371   2,399
                                                ==============   ==============
</TABLE>

(i) In fiscal 2002, we reclassified $434 million of land and buildings from
property, plant and equipment as these assets were held for sale as at 30 June
2002. On 1 August 2002, we sold this portfolio of seven office properties for
$570 million (refer to note 3 for further details).

(ii) On 7 February 2001, PCCW Limited (PCCW) issued a convertible note to us for
US$750 million (A$1,366 million). The term of the convertible note was 6 years
with an interest coupon compounding quarterly of 5% for the first four years and
7% for the remaining two years.

On 28 June 2002, this convertible note was redeemed in full by PCCW. Under an
agreement, the fair value of the redemption was applied to acquire PCCW's 40%
interest in the Telstra CSL Group and to subscribe for a new US$190 million
(A$337 million) mandatorily converting secured note issued by PCCW. This note
has a three year term and an interest coupon compounding at a rate of 5% per
annum. PCCW's obligations under the note are secured by an equitable mortgage of
shares over its 50% shareholding in Reach Ltd.

On 25 April 2003, this converting note was partially redeemed to fund the
capacity prepayment (refer note 9 for further information). The terms and
conditions of this converting note remain unchanged and the face value after the
partial redemption is US$54 million (A$87 million).


236
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 Telstra Group   Telstra Entity
---------------------------------------------------------------  --------------
                                                 As at 30 June   As at 30 June
                                                   2003    2002    2003    2002
                                         Note        $m      $m      $m      $m
---------------------------------------------------------------  --------------
<S>                                      <C>      <C>     <C>     <C>     <C>
15. Payables
Current
Trade creditors (a)..........................       645     606     475     424
Accrued expenses.............................     1,254   1,328     964     999
Accrued capital expenditure..................       181     194     240     277
Accrued interest.............................       195     208     195     205
Other creditors (a)..........................       250     426     156     172
Amounts owed to controlled entities
(other than trade creditors)...............27        --      --      --     125
                                                 --------------  --------------
                                                  2,525   2,762   2,030   2,202
                                                 ==============  ==============
Non current
Other creditors..............................        51     129      48      68
                                                 ==============  ==============
</TABLE>

(a) We generally pay trade creditors and other creditors within 30 days of the
date of invoice for electronic funds transfer payments, or 30 days from the end
of the month of invoice for other payments. The carrying value of these balances
is approximately equal to net fair value.


                                                                             237
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                               Telstra Group   Telstra Entity
-------------------------------------------------------------  --------------
                                               As at 30 June   As at 30 June
                                                 2003    2002    2003    2002
                                         Note      $m      $m      $m      $m
-------------------------------------------------------------  --------------
<S>                                      <C>   <C>     <C>     <C>     <C>
16. Interest-bearing liabilities

Current
Short term debt
Loan from joint venture entities and
associated entities (a)....................27       1       4       1       4
Bills of exchange and commercial paper (b)...     643     602     643     602
                                               --------------  --------------
                                                  644     606     644     606
                                               --------------  --------------
Long term debt - current portion
Bank loans (c)...............................      --     539      --      20
Loans from controlled entities.............27      --      --   2,015   1,704
Telstra bonds (d)............................     210     582     210     582
Other loans (e)..............................     449     149     449     149
Finance leases (f).........................20      20      20       9       7
                                               --------------  --------------
                                                  679   1,290   2,683   2,462
                                               --------------  --------------
                                                1,323   1,896   3,327   3,068
                                               ==============  ==============
Non current
Long term debt
Bank loans (c)...............................      --   1,074      --   1,063
Telstra bonds (d)............................   2,403   2,605   2,403   2,605
Other loans (e)..............................   8,403   8,667   8,403   8,667
Finance leases (f).........................20      --      21      --       1
Cross currency swap hedge
payable (1.2)..............................29     426     114     426     114
                                               --------------  --------------
                                               11,232  12,481  11,232  12,450
                                               ==============  ==============
Total debt payable
Short term debt
Loan from joint venture entities and
associated entities (a)....................27       1       4       1       4
Bills of exchange and commercial paper (b)...     643     602     643     602
                                               --------------  --------------
                                                  644     606     644     606
Long term debt (including current portion)
Bank loans (c)...............................      --   1,613      --   1,083
Loans from controlled entities.............27      --      --   2,015   1,704
Telstra bonds (d)............................   2,613   3,187   2,613   3,187
Other loans (e)..............................   8,852   8,816   8,852   8,816
Finance leases (f).........................20      20      41       9       8
Cross currency swap hedge
payable (1.2)..............................29     426     114     426     114
                                               --------------  --------------
                                               11,911  13,771  13,915  14,912
                                               --------------  --------------
                                               12,555  14,377  14,559  15,518
                                               ==============  ==============
</TABLE>

Our interest-bearing liabilities are unsecured, except for:
-    finance leases which are secured, as the rights to the leased asset
     transfer to the lessor in the event of a default by us; and
-    bank loans of $nil (2002: $519 million) held by non-Australian controlled
     entities.
Refer to notes (c) and (f) below.


238
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

16. Interest-bearing liabilities (continued)

Our long term debt (excluding cross currency swap hedge payables) is repayable
over the next five years ending 30 June and after as follows:

<TABLE>
<CAPTION>
                                              Telstra Group
-------------------------------------------------------------------------------
                                                                  after
                              2004   2005   2006   2007    2008    2008   Total
                                $m     $m     $m     $m      $m      $m      $m
-------------------------------------------------------------------------------
<S>                           <C>   <C>     <C>    <C>    <C>     <C>    <C>
Long term debt payable......   680  2,318   1,114   392   1,385   5,668  11,557
                              -----------------------------------------
Unamortised discount........                                                (72)
                                                                         ------
                                                                         11,485
                                                                         ======
</TABLE>

(a) Loan from joint venture entities and associated entities

As at 30 June 2003, we owed a joint venture entity $1 million (2002: $4 million)
for an amount deposited with the Telstra Entity. The amount is repayable on
demand and has an interest rate of 4.70% (2002: 4.70%).

(b) Bills of exchange and commercial paper

We have issued bills of exchange and commercial paper of $643 million (2002:
$602 million) to financial institutions with an original maturity of less than
180 days. Some of our commercial paper is issued in foreign currencies and
swapped into Australian dollars.

At 30 June 2003, all $643 million (2002: $602 million) of the commercial paper
matures in less than three months. The weighted average effective interest rate
applicable to this commercial paper (in currency of issue) at 30 June 2003 was
3.22% (2002: 4.41%).

(c) Bank loans

Our non-Australian controlled entities had the following bank loans:

<TABLE>
<CAPTION>
                                     A$ amount  Interest rates
---------------------------------------------------------------
                                        As at      Year ended
                                      30 June        30 June
                                     2003   2002    2003   2002
                                      A$m    A$m       %      %
---------------------------------------------------------------
<S>                                  <C>    <C>     <C>    <C>
Sri Lankan rupees bank loans (i)..     --     11      --   17.0
New Zealand dollar loans (ii).....     --    519      --    6.8
                                    ---------------------------
Total bank loans including current
portion...........................     --    530
                                    ============
</TABLE>

(i)  In fiscal 2002, this loan had not been secured, but a negative pledge had
been given by our controlled entity and we also issued a letter of comfort. On
31 October 2002, we sold our 60% shareholding in the Sri Lankan mobile carrier,
Mobitel (Pvt) Limited (refer note 23 for further information).

(ii) In fiscal 2002, the loans held by TelstraClear Limited were secured against
certain fixed and floating assets of that entity. For further details of the
assets pledged as security, refer note 12. During fiscal 2003, these loans were
fully repaid.


                                                                             239
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

16. Interest-bearing liabilities (continued)

(d) Telstra bonds

During fiscal 2003, $582 million (2002: $39 million) of Telstra bonds matured.
Telstra bonds have been issued to both retail and wholesale investors and in a
range of currencies. They have effective interest rates ranging from 3.50% to
12.67% (2002: 3.50% to 12.67%) and mature up until the year 2020 (2002: 2020).
Our Telstra bonds are repayable over the next five years ending 30 June and
after as follows:

<TABLE>
<CAPTION>
                                                Telstra Group
-------------------------------------------------------------------------------
                                 up to   up to   up to   up to   up to
                                  6.0%    8.0%   10.0%   12.0%   16.0%    Total
Coupon interest rate                $m      $m      $m      $m      $m       $m
-------------------------------------------------------------------------------
<S>                              <C>     <C>     <C>     <C>     <C>      <C>
Due in the year ending June 30
2004..........................     158      45       7      --      --      210
2005..........................      --     250       3      20      --      273
2006..........................      --      --      12     504      --      516
2007..........................      --      --      --      --      --       --
2008..........................      --      --      --      --      --       --
After 2008....................      35   1,510      28      44      32    1,649
                                 ----------------------------------------------
                                   193   1,805      50     568      32    2,648
                                 -------------------------------------
Unamortised discount..........                                              (35)
                                                                         ------
                                                                          2,613
                                                                         ======
</TABLE>

(e) Other loans

Our other loans are repayable over the next five years ending 30 June and after
as follows:

<TABLE>
<CAPTION>
                                               Telstra Group
-------------------------------------------------------------------------------
                           2004   2005   2006   2007   2008  after 2008   Total
                             $m     $m     $m     $m     $m          $m      $m
-------------------------------------------------------------------------------
<S>                        <C>   <C>     <C>    <C>   <C>     <C>         <C>
Other loans..............   449  2,045    598    392  1,385       4,019   8,888
                           --------------------------------------------
Unamortised discount.....                                                   (36)
                                                                         ------
                                                                          8,852
                                                                         ======
</TABLE>


240
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

16. Interest-bearing liabilities (continued)

(e) Other loans (continued)

Details of our other loans including currency of borrowing, interest rates and
maturity dates are presented in the table below:

<TABLE>
<CAPTION>
Telstra Group - Other loans details              A$ amount       Interest rates                  Maturity dates
--------------------------------------------------------------------------------------------------------------------------
                                               As at 30 June   Year ended 30 June                As at 30 June
                                                2003    2002       2003       2002                2003                2002
                                                 A$m     A$m          %          %
--------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>     <C>     <C>        <C>        <C>                 <C>
                                                               4.60% to              between July 2003
Australian dollar loans....................      250      --      7.87%         --     and August 2014                  --
                                                               1.65% to   2.40% to   between July 2003   between July 2003
US dollar loans............................    1,946   2,301      6.50%      6.50%      and April 2012      and April 2012
                                                               2.58% to   5.88% to   between June 2005   between June 2005
Euro eurobond loan.........................    4,261   4,352      6.38%      6.38%       and June 2011       and June 2011
Deutschemark eurobond loan.................      872     891      5.13%      5.13%          April 2008          April 2008
French franc loan..........................      391     399      6.00%      6.00%       December 2006       December 2006
Swiss franc eurobond loan..................      332     357      3.38%      3.38%           June 2005           June 2005
                                                               0.31% to   0.33% to   between July 2007    between Oct 2002
Japanese yen loans.........................      225     415      1.65%      5.58%       and Sept 2010       and Sept 2010
Singapore dollar loans.....................       85     101      3.80%      3.80%          March 2008          March 2008
                                                               4.31% to
British pound sterling loans...............      490      --      6.13%         --         August 2014                  --
                                               ---------------------------------------------------------------------------
Total other loans including current portion    8,852   8,816
                                               =============
</TABLE>

To appropriately assess our foreign currency borrowings included in our other
loans, the hedge receivables and hedge payables arising from our cross currency
swaps entered to hedge this position should also be considered. Our policy on
the use of derivative instruments is included in note 1.25. The following table
shows our other loan position net of our outstanding cross currency swap
contracts:

<TABLE>
<CAPTION>
                                             Telstra Group
-----------------------------------------------------------
                                             As at 30 June
                                               2003    2002
                                                 $m      $m
-----------------------------------------------------------
<S>                                          <C>      <C>
Other loans...............................    8,852   8,816
- less hedge receivable - current.........      (10)    (29)
- less hedge receivable - non current.....     (273)   (622)
- add hedge payable - non current.........      426     114
                                            ---------------
Other loans net of cross currency swaps       8,995   8,279
                                            ===============
</TABLE>


                                                                             241
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

16. Interest-bearing liabilities (continued)

(f) Finance leases

Details of minimum lease payments due under finance leases are presented as
follows:

<TABLE>
<CAPTION>
                                              Telstra Group
-------------------------------------------------------------------------------
                           2004   2005   2006   2007   2008  after 2008   Total
                             $m     $m     $m     $m     $m          $m      $m
-------------------------------------------------------------------------------
<S>                        <C>    <C>    <C>    <C>    <C>   <C>          <C>
Finance leases...........    21     --     --     --     --          --      21
                           --------------------------------------------
Future finance charges...                                                    (1)
                                                                       --------
                                                                             20
                                                                       ========
</TABLE>

(g) Financing arrangements

<TABLE>
<CAPTION>
                                                   Telstra Group  Telstra Entity
----------------------------------------------------------------  --------------
                                                   As at 30 June   As at 30 June
                                                    2003    2002    2003    2002
                                                      $m      $m      $m      $m
----------------------------------------------------------------  --------------
<S>                                                <C>     <C>     <C>     <C>
Our financing arrangements
We have access to the following lines of credit:

Credit standby arrangements
Unsecured committed cash standby facilities
which are subject to annual review..............     894     955     850     815
Amount of credit unused.........................     855     896     850     815
                                                   -------------  --------------
Loan facilities
Unsecured bank term loan facilities.............   2,149   2,313   2,149   2,313
Amount of credit unused.........................   2,149   1,250   2,149   1,250
                                                   -------------  --------------
</TABLE>

We have commercial paper facilities in place with financial institutions under
which we may issue up to $15,058 million (2002: $16,088 million). As at 30 June
2003, we had drawn down $643 million (2002: $602 million) of these commercial
paper facilities. These facilities are not committed or underwritten and we have
no guaranteed access to the funds.

Generally, our facilities are available unless we default on any terms
applicable under the relevant agreements or become insolvent.

242
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Telstra Group      Telstra Entity
------------------------------------------------------------------------  ------------------
                                                         As at 30 June       As at 30 June
                                                          2003      2002      2003      2002
                                                  Note      $m        $m        $m        $m
------------------------------------------------------------------------  ------------------
<S>                                               <C>     <C>      <C>        <C>      <C>
17. Provisions

Current
Dividends payable (b) (c)............................7      --     1,415        --     1,415
Employee benefits (a).................................     279       373       234       253
Workers' compensation (1.18(b)) (b) (c)...............      39        41        36        38
Other provisions (b) (c)..............................      35        74        14        17
                                                        ----------------  ------------------
                                                           353     1,903       284     1,723
                                                        ================  ==================
Non current
Employee benefits (a).................................     572       572       522       517
Workers' compensation (1.18(b)) (b) (c)...............     197       229       184       218
Other provisions (b) (c)..............................      45        47        21        22
                                                        ----------------  ------------------
                                                           814       848       727       757
                                                        ================  ==================
(a) Aggregate employee benefits and related
on-costs liability
Current provision for employee benefits...............     279       373       234       253
Non current provision for employee benefits...........     572       572       522       517
Accrued labour, redundancy and on-costs (i)...........     242       183       236       182
                                                        ----------------  ------------------
                                                         1,093     1,128       992       952
                                                        ================  ==================
</TABLE>

(i) Accrued labour and related on-costs are included within current payables
(refer note 15).

Provision for employee benefits consist of amounts for annual leave, long
service leave and redundancy payments to employees (refer to note 1.18(a)).

The carrying amounts of all employee benefits are approximately equal to their
net fair value.

Non current employee benefits for long service leave are measured at their
present value. The following assumptions were adopted in measuring their present
value:

<TABLE>
<CAPTION>
                                         Telstra Group      Telstra Entity
--------------------------------------------------------  ------------------
                                         As at 30 June       As at 30 June
                                          2003      2002      2003      2002
--------------------------------------------------------  ------------------
<S>                                       <C>       <C>       <C>       <C>
Weighted average projected increase in
employee benefits.....................     4.0%      4.0%      4.0%      4.0%
Weighted average discount rates.......     5.7%      6.0%      5.7%      6.0%
Leave taking rates....................    13.0%      7.3%     13.3%      7.0%
</TABLE>


                                                                             243
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

17. Provisions (continued)

b) Information about our provisions, other than employee benefits:

Dividends Payable

In fiscal 2002, this provision provided for the final ordinary dividend to
shareholders. Due to the first time application of the new accounting standard
AASB 1044: "Provisions, Contingent Liabilities and Contingent Assets", a
difference has arisen between reporting periods regarding the timing and the
recognition of dividends declared in our statement of financial performance and
statement of financial position. There has been no change in the timing of
dividends declared by the directors. As the final ordinary dividend was not
declared, determined or publicly recommended as at 30 June 2003, no provision
for dividend was raised prior to that date in the statement of financial
position (refer note 7 for further information). The final ordinary dividend is
now reported as an event after balance date (refer note 28).

Workers' Compensation

The Telstra Entity and certain controlled entities self insure their workers'
compensation liabilities. The provision is based on a semi annual actuarial
review of our workers' compensation liability.

(c) Movement in provisions, other than employee benefits

Present values are calculated using appropriate rates based on government
guaranteed securities with similar due dates. The majority of our controlled
entities do not self insure, but pay annual premiums to third party insurance
companies for their workers compensation premiums.

Other

Other provisions include provision for restructuring, provision for warranties,
provision for restoration costs and other general provisions. Provision for
restructuring relate to restructuring costs expected on acquisition of
controlled entities and our internal restructures. Provision for warranties
relate to our best estimate of warranty costs expected to meet our products
future repairs and replacement based on current sales level and past historical
information. Provision for restoration costs relate to our future expected
restoration obligations in relation to the fitout of our general purpose leased
buildings. Other general provisions are provided to meet future costs that we
are obligated to make as a result of past transactions entered into.

<TABLE>
<CAPTION>
Telstra Group
------------------------------------------------------------------------------
                                                   Workers
                                       Dividends  Compensa-
                                        Payable      tion      Other    Total
                                           $m         $m        $m        $m
------------------------------------------------------------------------------
<S>                                    <C>        <C>          <C>      <C>
30 June 2003
Balance at 30 June 2002..............      1,415        270       121    1,806
- adjustment due to change in
  accounting policy (i)..............     (1,415)        --        --   (1,415)
- additional provisions..............         --         10        24       34
- amounts used.......................         --         --       (44)     (44)
- reductions due to remeasurements...         --        (44)      (22)     (66)
- other..............................                    --         1        1
                                       ---------------------------------------
Balance at 30 June 2003..............         --        236        80      316
                                       =======================================
30 June 2002
Balance at 30 June 2001..............      1,416        284       151    1,851
- additional provisions..............      1,415         --        76    1,491
- amounts used.......................     (1,416)        (1)      (73)  (1,490)
- reductions due to remeasurements...         --        (15)      (34)     (49)
- other..............................         --          2         1        3
                                       ---------------------------------------
Balance at 30 June 2002..............      1,415        270       121    1,806
                                       =======================================
</TABLE>

(i) Under the new accounting standard AASB 1044: "Provisions, Contingent
Liabilities and Contingent Assets", the provision for final ordinary dividend
raised at 30 June has been reversed to opening retained profits in the current
period statement of financial position (refer to statement of changes in
shareholders equity).


244
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

17. Provisions (continued)

<TABLE>
<CAPTION>
Telstra Entity
------------------------------------------------------------------------------
                                                   Workers
                                       Dividends  Compensa-
                                        Payable      tion      Other    Total
                                           $m         $m        $m        $m
------------------------------------------------------------------------------
<S>                                    <C>        <C>          <C>      <C>
30 June 2003
Balance at 30 June 2002..............      1,415        256        39    1,710
- adjustment due to change in
  accounting policy (i)..............     (1,415)        --        --   (1,415)
- additional provisions..............         --          8         6       14
- amounts used.......................         --         --        (7)      (7)
- reductions due to remeasurements...         --        (44)       (4)     (48)
- other..............................         --         --         1        1
                                       ---------------------------------------
Balance at 30 June 2003..............         --        220        35      255
                                       =======================================
30 June 2002
Balance at 30 June 2001..............      1,416        273       104    1,793
- additional provisions..............      1,415         --       (15)   1,400
- amounts used.......................     (1,416)        (1)      (43)  (1,460)
- reductions due to remeasurements...         --        (15)       (5)     (20)
- other..............................         --         (1)       (2)      (3)
                                       ---------------------------------------
Balance at 30 June 2002..............      1,415        256        39    1,710
                                       =======================================
</TABLE>

(i) Under the new accounting standard AASB 1044: "Provisions, Contingent
Liabilities and Contingent Assets", the provision for final ordinary dividend
raised at 30 June has been reversed to opening retained profits in the current
period statement of financial position (refer to statement of changes in
shareholders equity).

Provision for restructuring on acquisition of TelstraClear Limited

The provision for restructuring on acquisition of TelstraClear Limited
(TelstraClear) is included in our other provisions of the Telstra Group.

On 12 December 2001, we acquired a 8.4% shareholding in TelstraClear giving us a
58.4% controlling interest. In fiscal 2002, we recognised a $44 million
provision based on our best estimate of costs including redundancies directly
attributable to the restructure. In fiscal 2003, we have subsequently acquired
the remaining interest of TelstraClear (refer note 23 for further information).

The movement in the restructuring provision relating to the acquisition of
TelstraClear is detailed in the table below:

<TABLE>
<CAPTION>
                                        Telstra Group
-----------------------------------------------------
                                        As at 30 June
                                         2003    2002
                                           $m      $m
-----------------------------------------------------
<S>                                     <C>      <C>
Balance at beginning of year.........      27      --
- additional provisions..............      --      44
- amounts used.......................     (28)    (13)
- reductions due to remeasurements...      --      (5)
- other..............................       1       1
                                       --------------
Balance at end of year...............      --      27
                                       ==============
</TABLE>


                                                                             245
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                            Telstra Group & Telstra Entity
------------------------------------------------------------------------------
                                                     As at 30 June
                                           2003        2003      2002     2001
                                             $m        US$m        $m       $m
-----------------------------------------------------------  -----------------
<S>                                       <C>         <C>       <C>      <C>
18. Contributed equity

Issued and paid up capital

12,866,600,200 fully paid ordinary
shares (a)..........................      6,433       4,310     6,433    6,433
                                       ====================  =================
</TABLE>

(a) Each of our fully paid ordinary shares carries the right to one vote at a
meeting of the company. Holders of our shares also have the right to receive
dividends as declared, and to participate in the proceeds from sale of all
surplus assets in proportion to the total shares issued in the event of the
company winding up.


246
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans

(a) TESOP99 and TESOP97

As part of the Commonwealth's sale of its shareholding in fiscal 2000 and fiscal
1998 we offered our eligible employees as defined by the employee share plans
the opportunity to buy Telstra shares. The shares were ordinary shares of the
Telstra Entity at the time of the offer.

These share plans were:

-  the Telstra Employee Share Ownership Plan II (TESOP99); and
-  the Telstra Employee Share Ownership Plan (TESOP97).

All eligible employees of the Telstra Entity and of companies that Telstra owned
greater than 50% equity were able to participate in the plans. Certain employees
who were part time, casual, fixed term, on leave without pay or living outside
Australia and contractors were not eligible to participate.

Generally, employees were offered interest free loans by the Telstra Entity to
acquire certain shares and in some cases became entitled to certain extra shares
and loyalty shares as a result of participating in the plans. All shares
acquired under the plans were transferred from the Commonwealth either to the
employees or to the trustee for the benefit of the employees. Telstra ESOP
Trustee Pty Ltd is the trustee for TESOP99 and TESOP97 and holds the shares on
behalf of participants. This company is 100% owned by us.

While a participant remains an employee of the Telstra Entity, a company in
which Telstra owns greater than 50% equity or the company which was their
employer when the shares were acquired, there is no date by which the employee
has to repay the loan. The loan may, however, be repaid in full at any time by
the employee using his or her own funds.

The loan shares, extra shares and in the case of TESOP99, the loyalty shares,
are generally subject to a restriction on the sale of the shares or transfer to
the employee for three years, or until the relevant employment ceases. After
three years, the employee may sell the shares provided the loan is repaid in
full for the loan shares and TESOP97 extra shares. Approximately 80% of the
dividends on the loan shares and TESOP97 extra shares held for the employees
under the plans are used to repay their loans.

If a participating employee leaves the Telstra Entity, a company in which
Telstra owns greater than 50% equity or the company which was their employer
when the shares were acquired, to acquire the relevant shares the employee must
repay their loan within two months of leaving. This is the case except where the
restriction period has ended because of the employee's death or disablement (in
this case the loan must be repaid within 12 months).

If the employee does not repay the loan when required, the trustee can sell the
shares if the sale proceeds cover the amount outstanding on the loan plus
relevant costs. The sale proceeds must then be used to pay the costs of the sale
and any amount outstanding on the loan, after which the balance will be paid to
the employee. The Telstra Entity's recourse under the loan is limited to the
amount recoverable through the sale of the employee's shares.

For TESOP99, the Government guaranteed an allocation of up to 5,000 shares for
employees using their own funds to purchase shares in the public offer. These
shares are directly held by the employees.

Further details on each of the plans are highlighted in the table following in
section (c).

Telstra incurs expenses in relation to the administration of the trusts for
TESOP99 and TESOP97. These are recognised in the statement of financial
performance as incurred. The allocation of shares under these plans did not give
rise to any other expense to be recognised by us.

(b) Telstra Growthshare Trust

The Telstra Growthshare Trust commenced in fiscal 2000. Under the trust, Telstra
operates three different share plans:

-  Telstra Growthshare
-  Directshare; and
-  Ownshare.

The trustee for the trust is Telstra Growthshare Pty Ltd. This company is 100%
owned by us. Allocations are in the form of options, restricted shares,
performance rights, deferred shares, directshares and ownshares under these
plans. Refer to the tables in section (c) below for more information.

(i) Telstra Growthshare

Telstra Growthshare started in fiscal 2000. Its purpose is to align key
executives' rewards with shareholders' interests, and reward performance
improvement supporting business plans and corporate strategies.

The board determines who is invited to participate in Telstra Growthshare.
Allocations are in the form of options, restricted shares, and performance
rights under our long term incentive plan, and deferred shares under our
deferred remuneration plan. Instruments issued represent a right to acquire a
share in Telstra. Generally, the options, restricted shares and performance
rights may only be exercised to acquire Telstra shares if a performance hurdle
is satisfied in the performance period and in the case of options, the exercise
price is paid by the executive. Deferred shares may only be exercised when a
prescribed period of service has been completed.


                                                                             247
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(b) Telstra Growthshare Trust (continued)

(i) Telstra Growthshare (continued)

Performance hurdle for options, restricted shares and performance rights

For allocations of options and performance rights made during fiscal 2003 and
fiscal 2002, the applicable performance hurdle is based on comparing Telstra's
total shareholder return (TSR) with the TSRs of the companies in the S&P/ASX 200
(Industrial) Index (peer group) within the performance period.

The companies in the peer group are anchored at the effective date of
allocation, and this same peer group of companies are then tracked during the
performance period. At the end of each quarter during the performance period,
the 30 day average TSR is calculated for Telstra and the companies in the peer
group for each trading day during that quarter.

The number of options and performance rights exercisable is dependant on
whether, during the performance period, the Telstra 30 day average TSR achieves
or exceeds the 50th percentile ranking when compared to the 30 day average TSR
of the peer group, and the timing of when or if this occurs.

Both the number of options and the number of performance rights potentially
exercisable are based on the following:

-  If in the first quarter of the performance period, Telstra's percentile
   ranking is the 50th percentile or above then:
   (i)  the number of options and performance rights that become exercisable for
        that quarter is scaled proportionately from the 50th percentile (at
        which 50% of the allocation becomes exercisable) to the 75th percentile
        (at which 100% of the allocation becomes exercisable); and
   (ii) in subsequent quarters, the number that become exercisable is based on
        the same proportionate scale, but is reduced by the number of options or
        performance rights that have previously become exercisable. The
        percentile ranking achieved needs to be above that achieved in previous
        quarters for additional options and performance rights to become
        exercisable.

-  If in the first quarter of the performance period, the percentile ranking is
   less than the 50th percentile then:
   (i)  half of the allocation will lapse; and
   (ii) in subsequent quarters, the remaining 50% of the options or performance
        rights will become exercisable if the ranking is the 50th percentile or
        above for that quarter.

-  If Telstra does not achieve or exceed the 50th percentile ranking in any
   quarter of the performance period, all options and performance rights will
   lapse.

For all allocations prior to 30 June 2001, the applicable performance hurdle was
that the average Telstra Accumulation Index must exceed the average S&P/ASX 200
(Industrial) Index (replacing the superseded All Industrials Accumulation Index)
for thirty consecutive days within the performance period. If the performance
hurdle is satisfied for these allocations, all of the relevant options or
restricted shares would become exercisable (i.e. they do not become exercisable
on a proportionate basis).

Options

An executive is not entitled to Telstra shares before the options allocated
under Telstra Growthshare initially vest, and then are exercised. This means
that the executive cannot use options to vote or receive dividends. If the
performance hurdle is satisfied in the performance period, options may be
exercised at any time before the expiry date; otherwise they will lapse. Once
the options are exercised, Telstra shares will be transferred to the executive.

Telstra provides loans to the trustee to enable it to purchase shares on market
to underpin the options. When exercised, the executive pays for the shares at
the exercise price and the loan is repaid to us. We receive interest on the
loans to the trust. On the basis that the executives must pay the exercise price
of the options, which repays the loans made by Telstra, there is no cash expense
incurred by us and included in our statement of financial performance. From 1
July 2002, we have suspended our option plan. Previously issued options remain
outstanding and valid.

Restricted Shares

The executive is not entitled to Telstra shares before the restricted shares
allocated under Telstra Growthshare vest. If the performance hurdle is satisfied
in the performance period, the restricted shares will vest and may be exercised
at any time before the expiry date, otherwise they will lapse. Once the
restricted shares have vested, they become restricted trust shares, which will
generally be held by the trustee for the executive for a certain period. Once
converted into restricted trust shares, the executive has an interest in Telstra
shares and is entitled to dividends, other distributions, and voting rights.

Restricted trust shares are held by the Trustee until the earlier of:

-  the period determined in accordance with the trust deed;
-  the executive finishes employment with Telstra; or
-  a date nominated by the board.

The executive may exercise restricted shares at a cost of $1 in total for the
number of restricted shares exercised on a particular day. These shares are
recorded as an expense to us when we provide funding to the trust to purchase
them on market. In fiscal 2003 and fiscal 2002, there were no restricted shares
allocated and therefore no associated expense.


248
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(b) Telstra Growthshare Trust (continued)

(i) Telstra Growthshare (continued)

Performance Rights

An executive is not entitled to Telstra shares before the performance rights
allocated under Telstra Growthshare vest. If the performance hurdle is satisfied
in the performance period, a specified number of performance rights as
determined in accordance with the trust deed and terms of issue, will become
vested performance rights. The vested performance rights can then be exercised
at any time before the expiry date, otherwise they will lapse. Once the vested
performance rights are exercised, Telstra shares will be transferred to the
executive. Until this time, the executive cannot use the performance rights (or
vested performance rights) to vote or receive dividends.

Telstra shares will be transferred to the executive on exercise of vested
performance rights. The executive may exercise the performance rights at a cost
of $1 in total for the number of performance rights exercised on a particular
day. The issue of performance rights are recorded as an expense to us when we
provide funding to the trust to purchase Telstra shares on market to underpin
them. In fiscal 2003, we recorded an expense of $8.5 million (2002: $6.5
million).

Deferred Shares

An executive is not entitled to Telstra shares before the deferred shares
allocated under Telstra Growthshare vest. Generally, if an executive continues
to be employed by an entity that forms part of the Telstra Group three years
after the commencement date of the instrument, the deferred share will become a
vested deferred share. The vested deferred shares can then be exercised at any
time before the expiry date, otherwise they will lapse. Once exercised, Telstra
shares will be transferred to the executive. Until this time, the executive can
not use the deferred shares or vested deferred shares to vote or receive
dividends or other entitlements.

Telstra shares will be transferred to the executive on exercise of vested
deferred shares. The executive may exercise the deferred shares at a cost of $1
in total for the number of deferred shares exercised on a particular day. The
issue of deferred shares are recorded as an expense to us when we provide
funding to the trust to purchase Telstra shares on market to underpin them. In
fiscal 2003, we recorded an expense of $10.3 million (2002: $nil).

Telstra Growthshare amounts expensed for USGAAP purposes

For the purposes of the United States generally accepted accounting principles
(USGAAP) disclosures, the estimated fair value of the options, restricted
shares, performance rights and deferred shares is made at the date of grant
using an approach consistent with the binomial and Black-Scholes valuation
models.

The additional compensation expense for USGAAP recognised on this basis for
performance rights and deferred shares allocated in fiscal 2003 was $nil (2002:
$41 million for options and performance rights). Refer to note 30 for additional
information.

(ii) Telstra Directshare

Non-executive directors may be provided part of their fees in Telstra shares.
Directors will receive a minimum of 20% of their fees by way of directshares.
Shares are acquired by the trustee from time to time and allocated to the
participating directors on a 6 monthly basis, on dates determined by the trustee
at its discretion. Although the trustee holds the shares in trust, the
participant retains the beneficial interest in the shares (dividends, voting
rights, bonuses and rights issues) until they are transferred at expiration of
the restriction period.

The restriction period continues:

-  for five years from the date of allocation of the shares;
-  until the participating director is no longer a director of, or is employed
   by, a company in the Telstra Group; or
-  until the board of Telstra determines that an 'event' has occurred.

At the end of the restriction period, the directshares will be transferred to
the participating director. The participating director is not able to deal in
the shares until this transfer has taken place. The expense associated with
shares allocated under this plan is included in the disclosure for directors'
fees.

(iii) Telstra Ownshare

Certain eligible employees may be provided part of their remuneration in Telstra
shares. Those employees indicate a preference to be provided Telstra shares as
part of their remuneration. Shares are acquired by the trustee from time to time
and allocated to these employees at the time their application is accepted.
Although the trustee holds the shares in trust, the participant retains the
beneficial interest in the shares (dividends, voting rights, bonuses or rights
issues) until they are transferred at expiration of the restriction period.

The restriction period continues:

-  for three years or five years depending on the elections available to the
   participant at the time of allocation;
-  until the participant ceases employment with the Telstra Group; or
-  until the board of Telstra determines that an 'event' has occurred.

At the end of the restriction period, the ownshares will be transferred to the
participant. The participant is not able to deal in the shares until this
transfer has taken place. The expense associated with shares allocated under
this plan is included in the disclosure for employees remuneration.


                                                                             249
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(c) Share plan information

The table below provides information about our TESOP99 and TESOP97 share plans:

<TABLE>
<CAPTION>
                                                                                       TESOP99                              TESOP97
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                              <C>
Date used to determine number of eligible employees.........                    27 August 1999                    20 September 1997
Date the plan started.......................................                   16 October 1999                     15 November 1997
Number of employees eligible to participate.................                            53,900                               64,309
-----------------------------------------------------------------------------------------------------------------------------------
Price paid by employee - first instalment...................            (16 October 1999)$4.50              (15 November 1997)$1.95
Price paid by employee - second instalment..................            (2 November 2000)$2.90              (17 November 1998)$1.35
                                                               --------------------------------------------------------------------
Total price paid by employee and market price on date of
issue.......................................................                             $7.40                                $3.30
                                                               ====================================================================
Number of shares each eligible employee was able to buy with
interest free loan (loan shares)............................                               400                                2,000
Number of extra shares received by each eligible employee...    one extra share for every four  one extra share for every four loan
                                                                  guaranteed allocation shares            shares or non-loan shares
                                                                purchased up to a limit of 200       purchased up to a limit of 500
-----------------------------------------------------------------------------------------------------------------------------------
The date participating employees have full ownership of the
loan shares and extra shares (i)............................                   16 October 2002                     15 November 2000
Number of employees who purchased loan shares...............                            42,439                               55,748
Total number of loan shares initially purchased.............                        16,939,000                          109,979,100
Total number of extra shares initially acquired relating to
loan shares.................................................                              (ii)                           27,494,775
-----------------------------------------------------------------------------------------------------------------------------------
Number of employees who used their own funds to buy shares
in TESOP and received extra shares..........................                            21,424                                2,282
Number of shares initially purchased under TESOP with
own funds...................................................                             (iii)                            3,776,732
Number of extra shares initially acquired by employees from
using their own funds.......................................                     (ii)3,903,314                              944,183
-----------------------------------------------------------------------------------------------------------------------------------
Total market value of shares at issue date..................    $93,790,413 (first instalment)      $277,279,841 (first instalment)
(including extra shares)....................................    $58,832,889 second instalment)     $181,936,265 (second instalment)
-----------------------------------------------------------------------------------------------------------------------------------
Total initial loan made to employees........................    $76,225,500 (first instalment)      $221,823,872 (first instalment)
                                                                $48,556,440(second instalment)     $144,401,940 (second instalment)
-----------------------------------------------------------------------------------------------------------------------------------
Loan discount paid on behalf of employees ($1 per loan).....                           $42,439                              $55,748
-----------------------------------------------------------------------------------------------------------------------------------
Number of Commonwealth loyalty shares available to each
eligible employee at no additional cost (shares need to be                                         one for every 10 non loan shares
held for 12 months to qualify)..............................           one for every 10 shares  purchased in the public offer up to
                                                                 purchased up to a limit of 80                       a limit of 200
Number of employees who received Commonwealth loyalty shares                        (iv)17,138                               21,761
Number of loyalty shares issued.............................                     (iv)1,243,305                            3,162,222
Market value of Commonwealth loyalty shares issued..........   (iv)$7,696,058($6.19 per share)         $20,363,290($6.46 per share)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(i) In the case of all loan shares, and extra shares acquired under TESOP97, the
loan must be repaid in full before shares may be transferred to the employee.

(ii) For TESOP99, the extra shares were acquired under the Commonwealth
component as a result of employees acquiring guaranteed allocation shares in the
public offer using their own funds.

(iii) Does not include guaranteed allocation shares acquired by employees from
the Commonwealth under the Commonwealth component.

(iv) TESOP99 loyalty shares were issued to eligible employees still holding
their Commonwealth component shares on 2 November 2000 and did not prepay the
final instalment.


250
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(c) Share plan information (continued)

The following information details the number of outstanding equity instruments
and loan balances relevant to the TESOP99 and TESOP97 plans.

<TABLE>
<CAPTION>
                                                     Employee           Employee
                                                  share plans        share plans
                                                As at 30 June      As at 30 June
                                                         2003               2002
--------------------------------------------------------------------------------
<S>                                          <C>                <C>
Market price of Telstra shares.............  $ 4.40 per share   $ 4.66 per share
Employee share loan balance (total
including current and non current,
excluding Growthshare option
loans - note 9)............................  $    198 million   $    230 million
Loan to Telstra Growthshare
(other receivables non current - note 9)...  $     88 million   $    115 million
TESOP99
--------------------------------------------------------------------------------
Remaining employees with loan shares (i)...            37,148             38,140
Remaining number of loan shares............        14,828,600         15,224,500
Remaining number of extra shares (ii)......                --          2,784,590
Remaining number of loyalty shares (ii)....                --          1,081,671
TESOP97
--------------------------------------------------------------------------------
Remaining employees with loan shares.......            21,960             25,665
Remaining number of loan shares............        43,465,700         50,778,700
Remaining number of extra shares...........        10,866,425         12,694,675
</TABLE>

(i) The number of employees with loan shares includes 11,258 (2002: 6,703)
employees that have ceased employment and elected not to repay their loan. The
Telstra ESOP Trustee Pty Ltd continues to hold the shares relating to those
loans until the share price is sufficient to recover the loan amount and
associated costs. The Telstra ESOP Trustee Pty Ltd will then sell the shares. As
at 30 June 2003, there were 4,503,300 held for this purpose (2002: 2,675,100).

(ii) During fiscal 2003, the extra shares and loyalty shares for TESOP99 were
transferred to employees on completion of the restriction period.


                                                                             251
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(c) Share plan information (continued)

We provide the following information about Telstra Growthshare:

(i) Instruments outstanding at the beginning of fiscal 2003

The following options, restricted shares and performance rights had been issued
at the start of fiscal 2003, but were yet to vest with employees.

<TABLE>
<CAPTION>
                                     Number of                                                               Exercise date
                                    instruments   Commencement         Performance           Exercise      (once performance
                                    outstanding       date            hurdle period            price          hurdle met)
----------------------------------------------------------------------------------------------------------------------------
Growthshare 2000 - Sept 1999
allocation
----------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>             <C>                     <C>              <C>
Options..........................     2,125,667   13 Sept 1999     between 13 Sept 2002   $         8.02     any time before
                                                                       and 13 Sept 2004                         13 Sept 2009
Restricted shares................       350,688   13 Sept 1999     between 13 Sept 2002   $ 1 per parcel     any time before
                                                                       and 13 Sept 2004        exercised        13 Sept 2004
Growthshare 2001 - Sept 2000
allocation
----------------------------------------------------------------------------------------------------------------------------
Options..........................     4,020,841    8 Sept 2000      between 8 Sept 2003   $         6.28     any time before
                                                                       and 13 Sept 2005                          8 Sept 2010
Restricted shares................       826,883    8 Sept 2000     between 13 Sept 2003   $ 1 per parcel     any time before
                                                                       and 13 Sept 2005        exercised         8 Sept 2005
Growthshare 2001 - March 2001
allocation
----------------------------------------------------------------------------------------------------------------------------
Options..........................       168,710   16 March 2001   between 16 March 2004   $         6.55     any time before
                                                                      and 16 March 2006                        16 March 2011
Restricted shares................        43,817   16 March 2001   between 16 March 2004   $ 1 per parcel     any time before
                                                                      and 16 March 2006        exercised       16 March 2006
Growthshare 2002 - Sept 2001
allocation
----------------------------------------------------------------------------------------------------------------------------
Options..........................    36,501,695    6 Sept 2001      between 6 Sept 2004   $         4.90     any time before
                                                                        and 6 Sept 2006                          6 Sept 2011
Performance rights...............     3,486,241    6 Sept 2001      between 6 Sept 2004   $ 1 per parcel     any time before
                                                                        and 6 Sept 2006        exercised          8 Dec 2006
Growthshare 2002 - March 2002
allocation
----------------------------------------------------------------------------------------------------------------------------
Options..........................     2,068,000   14 March 2002   between 14 March 2005   $         5.63     any time before
                                                                      and 14 March 2007                        14 March 2012
Performance rights...............       167,200   14 March 2002   between 14 March 2005   $ 1 per parcel     any time before
                                                                      and 14 March 2007        exercised        14 June 2007
</TABLE>


252
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(c) Share plan information (continued)

(i) Instruments outstanding at the beginning of fiscal 2003 (continued)

The following directshares and ownshares had been issued at the start of fiscal
2003 but were held by the trustee for the benefit of the relevant directors or
employees pending expiration of the restriction period.

<TABLE>
<CAPTION>
                                                   Number of
                                                  instruments
                                                  outstanding
-------------------------------------------------------------
<S>                                               <C>
DirectShares
-------------------------------------------------------------
15 September 2000 allocation...................         7,585
19 March 2001 allocation.......................        11,104
14 September 2001 allocation...................        14,453
14 March 2002 allocation.......................        18,117
OwnShares
-------------------------------------------------------------
15 September 2000 allocation...................       312,655
14 September 2001 allocation...................       326,946
2 November 2001 allocation.....................        98,042
-------------------------------------------------------------
</TABLE>

Participants in the directshare and ownshare plans are only able to deal in
these instruments at the end of the restriction period.

(ii) Instruments granted during the financial year

The following instruments were granted in September 2002:

<TABLE>
<CAPTION>
                                                                      Growthshare 2003                  Growthshare 2003
                                                                       deferred shares                performance rights
------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                                <C>
Number of executives who were allocated deferred
shares and performance rights......................                                166                               166
Effective commencement date of deferred shares
and performance rights.............................                   5 September 2002                  5 September 2002
Performance hurdle period - i.e. over what time
period executives have to satisfy the                                                    period between 5 September 2005
performance hurdle for the instruments to vest.....                                (a)              and 5 September 2007
------------------------------------------------------------------------------------------------------------------------
Number of deferred shares and performance rights
(representing a 100% allocation or maximum
entitlement available) issued......................                          2,123,000                         4,246,000
                                                      ------------------------------------------------------------------
Exercise price (once the instruments become
exercisable).......................................                  $ 1 per parcel of                 $ 1 per parcel of
                                                                 instruments exercised             instruments exercised
                                                      ==================================================================
Market price of Telstra shares on commencement
date...............................................                  $  4.87 per share                 $  4.87 per share
Exercise date (once the instruments become
exercisable).......................................   any time before 5 September 2007   any time before 5 December 2007
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) As deferred shares are allocated as annual fixed remuneration, there is no
performance hurdle. Generally, deferred shares will vest if the participating
executive continues to be employed by an entity that forms part of the Telstra
Group for three years after the effective commencement date.

No consideration is required to be provided by the participating executives on
the granting of these deferred shares and performance rights.


                                                                             253
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(ii) Instruments granted during the financial year (continued)

The following instruments were granted in March 2003:

<TABLE>
<CAPTION>
                                                                  Growthshare 2003              Growthshare 2003
                                                                   deferred shares            performance rights
----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                            <C>
Number of executives who were allocated deferred
shares and performance rights......................                              4                             4
Effective commencement date of deferred shares
and performance rights.............................                   7 March 2003                  7 March 2003
Performance hurdle period - i.e. over what time
period executives have to satisfy the                                                period between 7 March 2006
performance hurdle for the instruments to vest.....                            (a)              and 7 March 2008
----------------------------------------------------------------------------------------------------------------
Number of deferred shares and performance rights
(representing a 100% allocation or maximum
entitlement available) issued......................                         22,100                        44,200
                                                      ----------------------------------------------------------
Exercise price (once the instruments become
exercisable).......................................              $ 1 per parcel of             $ 1 per parcel of
                                                             instruments exercised         instruments exercised
                                                      ==========================================================
Market price of Telstra shares on commencement
date...............................................               $ 4.11 per share              $ 4.11 per share
Exercise date (once the instruments become
exercisable).......................................   any time before 7 March 2008   any time before 7 June 2008
----------------------------------------------------------------------------------------------------------------
</TABLE>

(a) As deferred shares are allocated as annual fixed remuneration, there is no
performance hurdle. Deferred shares will vest if the participating executive
continues to be employed by a member of the Telstra Group for three years after
the effective commencement date.

No consideration is required to be provided by the participating executives on
the granting of these deferred shares.

In the prior year, the following instruments were granted during September 2001:

<TABLE>
<CAPTION>
                                                                      Growthshare 2002                  Growthshare 2002
                                                                               options                performance rights
------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                                <C>
Number of executives who were allocated options
and performance rights.............................                                155                               155
Effective commencement date of options and
performance rights.................................                   6 September 2001                  6 September 2001
Performance hurdle period - i.e. over what time
period executives have to satisfy performance          period between 6 September 2004   period between 6 September 2004
hurdle to be eligible for shares...................               and 6 September 2006              and 6 September 2006
------------------------------------------------------------------------------------------------------------------------
Number of options and performance rights issued
(representing a 100% allocation or maximum
entitlement available).............................                         37,034,000                         3,537,100
                                                      ------------------------------------------------------------------
Exercise price (once the instruments become
exercisable).......................................                  $ 4.90 per option                 $ 1 per parcel of
                                                                                                   instruments exercised
                                                      ==================================================================
Market price of shares on commencement date........                  $  4.90 per share                 $  4.90 per share
Exercise date (once the instruments become
exercisable).......................................   any time before 6 September 2011   any time before 6 December 2006
------------------------------------------------------------------------------------------------------------------------
</TABLE>


254
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

19. Employee share plans (continued)

(c) Share plan information (continued)

(ii) Instruments granted during the financial year (continued)

In the prior year, the following instruments were granted during March 2002:

<TABLE>
<CAPTION>
                                                                    Growthshare 2002                  Growthshare 2002
                                                                             options                performance rights
----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                                <C>
Number of executives who were allocated options
and performance rights............................                                 4                                 4
Effective commencement date of options and
performance rights................................                     14 March 2002                     14 March 2002
Performance hurdle period - i.e. over what time
period executives have to satisfy the                   period between 14 March 2005      period between 14 March 2005
performance hurdle for the instruments to vest....                 and 14 March 2007                 and 14 March 2007
----------------------------------------------------------------------------------------------------------------------
Number of options and performance rights issued
(representing a 100% allocation or maximum
entitlement available)............................                         2,068,000                           167,200
                                                      ----------------------------------------------------------------
Exercise price (once the instruments become
exercisable)......................................                 $ 5.63 per option                 $ 1 per parcel of
                                                                                                 instruments exercised
                                                      ================================================================
Market price of shares on commencement date.......                 $  5.63 per share                 $  5.63 per share
Exercise date (once the instruments become
exercisable)......................................     any time before 14 March 2012      any time before 14 June 2007
----------------------------------------------------------------------------------------------------------------------
</TABLE>

The following directshares were granted in September of fiscal 2003 and fiscal
2002:

<TABLE>
<CAPTION>
                                                        DirectShare Equity Plan 2003      DirectShare Equity Plan 2002
----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                               <C>
Number of eligible participants...................                                11                                11
Number of participants in the plan................                                10                                10
Allocation date of shares.........................                  5 September 2002                 14 September 2001
                                                      ----------------------------------------------------------------
Number of shares allocated........................                            19,713                            19,445
Fair value of shares allocated....................                 $  4.87 per share                 $  4.81 per share
Total fair value of shares allocated..............                 $          96,002                 $          93,531
                                                      ----------------------------------------------------------------
</TABLE>

The following directshares were granted in March of fiscal 2003 and fiscal 2002:

<TABLE>
<CAPTION>
                                                        DirectShare Equity Plan 2003      DirectShare Equity Plan 2002
----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                               <C>
Number of eligible non-executive directors........                                11                                11
Number of participants in the plan................                                10                                10
Allocation date of shares.........................                      7 March 2003                     14 March 2002
                                                      ----------------------------------------------------------------
Number of shares allocated........................                            40,709                            18,117
Fair value of shares allocated....................                 $  4.11 per share                  $ 5.63 per share
Total fair value of shares allocated..............                 $         167,314                  $        101,999
                                                      ----------------------------------------------------------------
</TABLE>


                                                                             255
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
19. Employee share plans (continued)

(c) Share plan information (continued)

(ii) Instruments granted during the financial year (continued)

The following ownshares were granted in September of fiscal 2003 and fiscal
2002:

<TABLE>
<CAPTION>
                                          OwnShare Equity      OwnShare Equity
                                             Plan 2003            Plan 2002
--------------------------------------------------------------------------------
<S>                                      <C>                 <C>
Number of eligible participants........               6,788                6,263
Number of participants in the plan.....                 406                  321
Allocation date of shares..............    5 September 2002    14 September 2001
                                         ---------------------------------------
Number of shares allocated.............             574,899              333,911
Fair value of shares allocated.........  $   4.87 per share  $    4.81 per share
Total fair value of shares allocated...  $        2,799,758  $         1,606,112
                                         ---------------------------------------
</TABLE>

The following ownshares were granted in October of fiscal 2003 and fiscal 2002:

<TABLE>
<CAPTION>
                                          OwnShare Equity      OwnShare Equity
                                             Plan 2003            Plan 2002
--------------------------------------------------------------------------------
<S>                                      <C>                 <C>
Number of eligible employees...........              12,216               11,181
Number of participants in the plan.....                 179                   90
Allocation date of shares..............     28 October 2002      2 November 2001
                                         ---------------------------------------
Number of shares allocated.............             166,676               98,042
Fair value of shares allocated.........  $   4.78 per share  $    4.98 per share
Total fair value of shares allocated...  $          796,711  $           488,249
                                         ---------------------------------------
</TABLE>

On an allocation of directshares and ownshares, the participants in the plans
are not required to make any payment to the Telstra Entity. Participants may be
provided a portion of their remuneration in the form of directshares or
ownshares as applicable. The fair value of the instruments issued is determined
by the remuneration foregone by the participant. The number of directshares or
ownshares allocated is based on the weighted average price of a Telstra share in
the week ending on the day before allocation date, in conjunction with the
remuneration foregone.

(iii) Instruments exercised during the financial year

There have been no options, restricted shares or performance rights that have
been exercised during the year and no fully paid shares distributed relating to
these plans as a result.

There were 8,925 deferred shares that were exercised during the year at the
exercise price of $1. These deferred shares were part of the September 2002
allocation and were exercised as part of a redundancy. The fair value at the
date of the transfer of Telstra shares relating to this exercise was $39,359,
based on the closing market price at that date.

There were no instruments exercised and no Telstra shares transferred relating
to the option, restricted share, performance rights and deferred share plans
during fiscal 2002.

Directshares and ownshares are not required to be exercised. The fully paid
shares held by the Telstra Growthshare Trust relating to these instruments are
merely transferred to the participants at the completion of the restriction
period.

The following fully paid shares have been distributed from the Telstra
Growthshare Trust to directors and executives under the directshare and ownshare
plans respectively, due to expiration of the applicable restriction period.

<TABLE>
<CAPTION>
                            No. of
                            shares
                          distributed   Fair value
--------------------------------------------------
<S>                       <C>          <C>
DirectShares............           --           --
OwnShares...............      101,146  $   460,843
--------------------------------------------------
</TABLE>


256
<PAGE>


                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
19. Employee share plans (continued)

(c) Share plan information (continued)

(iii) Instruments exercised during the financial year (continued)

The following fully paid shares relating to the same plans were distributed
during fiscal 2002:

<TABLE>
<CAPTION>
                            No. of
                            shares
                          distributed   Fair value
--------------------------------------------------
<S>                       <C>          <C>
DirectShares............       13,627  $    73,136
OwnShares...............       43,863  $   220,489
--------------------------------------------------
</TABLE>

The fair value of ownshares and directshares distributed is determined through
reference to the closing market price of a Telstra share on the date of
transfer.

(iv) Instruments which have lapsed during the financial year

The following instruments issued to participating employees have lapsed during
the financial year due to cessation of employment or the relevant performance
hurdle not being met:

<TABLE>
<CAPTION>
                       Instruments lapsed
                        during year ended
Allocation                  30 June
                         2003       2002
------------------------------------------
<S>                   <C>          <C>
Options
September 1999......    591,945    137,000
September 2000......    650,181    296,617
March 2001..........     18,710         --
September 2001......  4,084,750    532,305
March 2002..........    214,000         --

Restricted shares
September 1999......     90,410     23,312
September 2000......    128,923     59,058
March 2001..........      3,817         --

Performance rights
September 2001......    388,086     50,859
March 2002..........     18,200         --
September 2002......    211,774         --

Deferred shares
September 2002......     91,577         --
------------------------------------------
</TABLE>

(v) Instruments outstanding at the end of fiscal 2003

After movements in our share plans during the financial year, the following
instruments remain outstanding as at 30 June 2003:

<TABLE>
<CAPTION>
                                             No. of instruments
                                             outstanding as at
                                               30 June 2003
---------------------------------------------------------------
Growthshare 2000
---------------------------------------------------------------
<S>                                          <C>
Options....................................           1,533,722
Restricted shares..........................             260,278

Growthshare 2001 - Sept 2000 allocation
---------------------------------------------------------------
Options....................................           3,370,660
Restricted shares..........................             697,960

Growthshare 2001 - March 2001 allocation
---------------------------------------------------------------
Options....................................             150,000
Restricted shares..........................              40,000

Growthshare 2002 - Sept 2001 allocation
---------------------------------------------------------------
Options....................................          32,416,945
Performance rights.........................           3,098,155

Growthshare 2002 - March 2002 allocation
---------------------------------------------------------------
Options....................................           1,854,000
Performance rights.........................             149,000

Growthshare 2003 - Sept 2002 allocation
---------------------------------------------------------------
Deferred shares............................           2,022,498
Performance rights.........................           4,034,226

Growthshare 2003 - March 2003 allocation
---------------------------------------------------------------
Deferred shares............................              22,100
Performance rights.........................              44,200
</TABLE>


                                                                             257
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
19. Employee share plans (continued)

(c) Share plan information (continued)

(v) Instruments outstanding at the end of fiscal 2003 (continued)

<TABLE>
<CAPTION>
                                  No. of instruments
                                  outstanding as at
                                     30 June 2003
----------------------------------------------------
DirectShares
----------------------------------------------------
<S>                               <C>
15 September 2000 allocation....               7,585
19 March 2001 allocation........              11,104
14 September 2001 allocation....              14,453
14 March 2002 allocation........              18,117
5 September 2002 allocation.....              19,713
7 March 2003 allocation.........              40,709

OwnShares
----------------------------------------------------
15 September 2000 allocation....             276,725
14 September 2001 allocation....             287,763
2 November 2001 allocation......              88,518
5 September 2002 allocation.....             565,466
28 October 2002 allocation......             159,600
</TABLE>

The grant dates, performance hurdles, exercise prices and other terms relating
to the above instruments have not changed from initial allocation date or from
those terms disclosed at the beginning of fiscal 2003.

(vi) Other information relevant to our employee share plans

Shares held by the TESOP99 and TESOP97 trusts for the purposes of facilitating
the operations of the relevant share plans amount to 69,160,725 shares (2002:
82,564,136 shares). The fair value of these shares as at 30 June 2003 based on
the market value of Telstra shares at balance date amounts to $304 million
(2002: $385 million). As the final restriction period for these shares was
completed on 16 October 2002, they are now considered fully transferable to the
employees once the loan has been repaid in full.

Shares held by the Telstra Growthshare Trust for the purposes of facilitating
the operations of the Telstra Growthshare, Directshare and Ownshare plans amount
to 23,168,288 shares (2002: 23,278,359 shares). The fair value of these shares
as at 30 June 2003 based on the market value of Telstra shares at balance date
amounts to $102 million (2002: $108 million).

Options, restricted shares, and performance rights are subject to a performance
hurdle. Deferred shares require a prescribed period of service to be completed.
Generally, if these requirements are not achieved the instruments will have a
$nil value and will lapse. As the achievement of the performance hurdle and
completion of the service period is uncertain, a remuneration value is not
attributed to the options, restricted shares, performance rights and deferred
shares.

Under Telstra's USGAAP disclosures (refer note 30), an approach consistent with
the binomial and Black-Scholes pricing models was used to determine the fair
value of these instruments for the purpose of inclusion in the potential
compensation expenses. The value of the allocations per security as used in our
USGAAP disclosures is as follows:

<TABLE>
<CAPTION>
                           Restricted   Performance   Deferred
Offers          Options      shares       rights       shares
               ----------------------------------------------
<S>            <C>         <C>          <C>          <C>
Sept 1999....  $    1.38   $    5.64           (a)         (a)
Sept 2000....  $    0.89   $    2.05           (a)         (a)
March 2001...  $    0.80   $    2.15           (a)         (a)
Sept 2001....  $    0.90          (a)    $   2.33          (a)
March 2002...  $    0.97          (a)    $   2.51          (a)
Sept 2002....         (a)         (a)    $   2.54    $    3.77
March 2003...         (a)         (a)    $   2.15    $    3.08
               ----------------------------------------------
</TABLE>

The following valuations are based on the same methodologies, but in all cases,
exclude adjustments for the effect of non-retention of participants and
non-transferability of the instruments.

<TABLE>
<CAPTION>
                          Restricted  Performance   Deferred
Offers          Options     shares      rights       shares
               ----------------------------------------------
<S>            <C>        <C>          <C>          <C>
Sept 1999....  $    1.38  $     5.64           (a)         (a)
Sept 2000....  $    1.59  $     3.62           (a)         (a)
March 2001...  $    1.53  $     3.77           (a)         (a)
Sept 2001....  $    1.13          (a)  $     2.86          (a)
March 2002...  $    1.19          (a)  $     3.08          (a)
Sept 2002....         (a)         (a)  $     2.99   $    4.41
March 2003...         (a)         (a)  $     2.60   $    3.60
               ----------------------------------------------
</TABLE>

(a) There were no allocations of options, performance rights, restricted shares
or deferred shares in the relevant offer periods.

The following weighted average assumptions were used in determining the above
current year valuations:

<TABLE>
<CAPTION>
------------------------------------------------------------------
                                       Growthshare deferred shares
                                         and performance rights
                                       ---------------------------
                                         Sept 2002     March 2003
------------------------------------------------------------------
<S>                                    <C>             <C>
Risk free rate.......................          5.12%          4.64%
Dividend yield.......................           4.0%           4.0%
Expected stock volatility............          19.0%          18.3%
Expected life - performance rights...       5 years        5 years
Expected life - deferred shares......       3 years        3 years
Average forfeiture rate per annum-
performance rights...................            10%            10%
Average forfeiture rate per annum-
deferred shares......................          14.5%          14.5%
                                       ===========================
</TABLE>

On this basis, the resultant outcomes of the model indicate that the performance
hurdles are expected to be met in 61.6% of cases for the September 2002
allocation and 62.7% for the March 2003 allocation.


258
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
19. Employee share plans (continued)

(c) Share plan information (continued)

(vi) Other information relevant to our employee share plans (continued)

The following table highlights shareholdings by individual non-executive
directors as at 30 June 2003 as allocated under the directshare equity plan.
These shareholdings have been included in the total shareholding disclosures
made in note 27.

<TABLE>
<CAPTION>
                            Total shares                                     Total shares
                            held as at 30   September 2002     March 2003    held as at 30
                              June 2002       allocation       allocation     June 2003
                            --------------------------------------------------------------
                            No. of shares   No. of shares    No. of shares   No. of shares
------------------------------------------------------------------------------------------
<S>                         <C>             <C>              <C>             <C>
Robert C Mansfield........        16,139           4,928          7,137          28,204
John T Ralph..............         8,071           2,464          3,569          14,104
Sam H Chisholm (i)........            --              --             --              --
Anthony J Clark...........         4,595           1,540          2,474           8,609
John E Fletcher...........         3,744           1,335          3,771           8,850
Belinda J Hutchinson......         1,664           1,540          2,176           5,380
Catherine B Livingstone...         3,744           1,335          2,068           7,147
Charles Macek.............         1,554           1,540          2,474           5,568
Donald G McGauchie........         4,373           1,335          3,771           9,479
William A Owens...........         1,997           1,848          3,650           7,495
John W Stocker............         5,378           1,848          9,619          16,845
                            -----------------------------------------------------------
                                  51,259          19,713         40,709         111,681
---------------------------------------------------------------------------------------
</TABLE>

(i) As fees are declined by the director, no directshares have been allocated
under this equity plan.



                                                                             259
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                Telstra Group     Telstra Entity
--------------------------------------------------------------   ---------------
                                                As at 30 June     As at 30  June
                                                2003     2002    2003       2002
                                                 $m       $m      $m         $m
--------------------------------------------------------------   ---------------
<S>                                            <C>        <C>    <C>        <C>
20. Expenditure commitments

(a) Capital expenditure commitments
Total capital expenditure commitments
contracted for at balance date but not
recorded in the financial statements:

Within 1 year...............................      366      379      434      353
Within 1-2 years............................      168      148      140      131
Within 2-3 years............................      127      139      122      114
Within 3-4 years............................      140      109      135      106
Within 4-5 years............................       --      109       --      106
After 5 years...............................       --       23       --       23
                                               ---------------   ---------------
                                                  801      907      831      833
                                               ===============   ===============
</TABLE>

The capital expenditure commitments above include contracts for building and
improving our networks and software enhancements.

<TABLE>
<S>                                            <C>        <C>    <C>        <C>
Included in the amounts above are capital
commitments relating to information
technology services (i):
Within 1 year...............................      157      198      149      181
Within 1-2 years............................      129      101      124       92
Within 2-3 years............................      127       92      122       90
Within 3-4 years............................      140       90      135       88
Within 4-5 years............................       --       91       --       88
After 5 years...............................       --        5       --        5
                                               ---------------------------------
                                                  553      577      530      544
                                               =================================
</TABLE>

(i) These capital commitments predominantly relate to amounts to be spent on
software assets developed for internal use under a 10 year contract with IBM
Global Services Australia Limited (IBM GSA) (Refer note 20(d)(ii) for other
commitments relating to IBM GSA).


<TABLE>

<S>                                            <C>        <C>    <C>        <C>
(b) Operating lease commitments
Future lease payments for non-cancellable
operating leases not recorded in the
financial statements:
Within 1 year...............................      251      234      136      148
Within 1-2 years............................      174      180       86      117
Within 2-3 years............................      144      101       63       67
Within 3-4 years............................      130       73       48       44
Within 4-5 years............................      114       60       34       34
After 5 years...............................      487      198       83       54
                                               ---------------   ---------------
                                                1,300      846      450      464
                                               ===============   ===============
</TABLE>

In addition, in fiscal 2003 the Telstra Group have total future commitments
under cancellable operating leases of $471 million (2002: $492 million). In
fiscal 2003 the Telstra Entity have total future commitments under cancellable
operating leases of $426 million (2002: $404 million).


260
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

20. Expenditure commitments (continued)

Description of our operating leases

We have operating leases for the following major services:

-  rental of land and buildings;

-  rental of motor vehicles, caravan huts and trailers and mechanical aids; and

-  rental of personal computers, laptops, printers and other related equipment
   that are used in non communications plant activities.

The average lease term is:

-  seven years for land and buildings;

-  four years for motor vehicles, five years for light commercial vehicles and
   seven to twelve years for trucks and mechanical aids; and

-  three years for personal computers and related equipment.

Contingent rental payments only exist for motor vehicles and are not significant
compared with total rental payments made. These are based on unfair wear and
tear, excess kilometres travelled, additional fittings and no financial loss to
be suffered by the leasing company from changes to the original agreements. Our
motor vehicles and related equipment must also remain in Australia.

We do not have any significant purchase options in our operating leases.

Operating leases related to our personal computers and associated equipment had
average interest rates of 5.1% for fiscal 2003 (5.5% for fiscal 2002).

<TABLE>
<CAPTION>
                                                                   Telstra Group    Telstra Entity
----------------------------------------------------------------------------------  ---------------
                                                                    As at 30 June    As at 30 June
                                                                   2003      2002    2003      2002
                                                         Note       $m        $m      $m        $m
----------------------------------------------------------------------------------  ---------------
<S>                                                      <C>       <C>        <C>    <C>       <C>
(c) Finance lease commitments
Within 1 year .........................................              21        22       9        7
Within 1-2 years ......................................              --        19      --        1
Within 2-3 years ......................................              --         2      --       --
Within 3-4 years ......................................              --        --      --       --
Within 4-5 years ......................................              --        --      --       --
                                                                  ----------------  ---------------
Total minimum lease payments ..........................              21        43       9        8
Future finance charges on finance leases ..............              (1)       (2)     --       --
                                                                  ----------------  ---------------
Present value of net future minimum lease payments ....              20        41       9        8
                                                                  ================  ===============
Recorded as current interest-bearing liabilities ......    16        20        20       9        7
Recorded as non current interest-bearing liabilities ..    16        --        21      --        1
                                                                  ----------------  ---------------
Total finance lease liabilities .......................    16        20        41       9        8
                                                                  ================  ===============
</TABLE>

Description of our finance leases

In addition to the above finance lease commitments, we have also guaranteed the
performance of a third party for finance lease payments to be made by the third
party, on our behalf (refer note 21 for further information).

We have finance leases for the following major services:

-  communications exchange equipment denominated in US dollars; and

-  computer mainframes, computer processing equipment and other related
   equipment.

The average lease term is:

-  13 years for communications exchange equipment denominated in US dollars; and

-  three years for computer mainframe and associated equipment.

We entered into US finance leases for communications exchange equipment in
fiscal 2000 and fiscal 1999. We have prepaid all lease rentals due under the
terms of these leases. We have guaranteed that the lease payments will be paid
as scheduled over the lease term to the ultimate lessor. We received guarantee
fees of $39 million in fiscal 2000 and $37 million for fiscal 1999. These fees
are recorded in revenue received in advance and are being released to the
statement of financial performance over the term of the leases being 13 years.
The structure of each lease includes an early buy out option with approximately
10 years remaining.


                                                                             261
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

20. Expenditure commitments (continued)

Interest rates for our finance leases are:

-  US dollar communication assets between 4.25% and 5.06%; and

-  computer mainframe, computer processing equipment and associated equipment
   between 8.26% and 9.36%.

Refer note 12 for further details on communication assets and equipment that are
held under finance lease

<TABLE>
<CAPTION>
                                               Telstra Group     Telstra Entity
--------------------------------------------------------------   ---------------
                                               As at 30 June      As at 30 June
                                               2003      2002    2003      2002
                                                $m       $m       $m        $m
--------------------------------------------------------------   ---------------
<S>                                            <C>       <C>     <C>       <C>
(d) Other commitments
Other expenditure commitments, other than
commitments dealt with in (a), (b) and (c)
above, which have not been recorded in the
financial statements are:
Within 1 year...............................      920    1,125      635      844
Within 1-2 years............................      582      651      350      467
Within 2-3 years............................      521      553      308      374
Within 3-4 years............................      515      487      313      308
Within 4-5 years............................      156      489       10      309
After 5 years...............................    1,547    1,427        4       22
                                               ---------------   ---------------
                                                4,241    4,732    1,620    2,324
                                               ===============   ===============
</TABLE>

The other expenditure commitments above include contracts for purchase of
capacity, printing, engineering and operational support services, software
maintenance, license fees, naming rights and building maintenance. The above
commitments also include commitments relating to our investment in FOXTEL (refer
note 24) and commitments relating to information technology services (other than
those disclosed as capital commitments) as follows:

<TABLE>
<S>                                            <C>       <C>     <C>       <C>
FOXTEL commitments (i):
Within 1 year...............................      193      139       --       --
Within 1-2 years............................      194      139       --       --
Within 2-3 years............................      174      139       --       --
Within 3-4 years............................      163      139       --       --
Within 4-5 years............................      133      139       --       --
After 5 years...............................    1,352    1,174       --       --
                                               ---------------   ---------------
                                                2,209    1,869       --       --
                                               ===============   ===============
</TABLE>

<TABLE>
<S>                                            <C>       <C>      <C>      <C>
Commitments relating to information
technology services (ii)....................
Within 1 year...............................      399      496      338      375
Within 1-2 years............................      306      350      277      316
Within 2-3 years............................      297      334      270      305
Within 3-4 years............................      308      328      279      299
Within 4-5 years............................       --      334       --      305
After 5 years...............................       --       18       --       18
                                               ---------------   ---------------
                                                1,310    1,860    1,164    1,618
                                               ===============   ===============
</TABLE>


262
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

20. Expenditure commitments (continued)

(i)  Our joint venture entity, FOXTEL has commitments amounting to approximately
$4,418 million (US$2,960 million) (2002: $3,738 million, US$2,060 million), the
majority of our 50% share of these commitments relate to minimum subscriber
guarantees (MSG) for pay television programming agreements. These agreements are
for periods of between 1 and 17 years (2002: 1 and 18 years) and are based on
current prices and costs under agreements entered into between the FOXTEL
Partnership and various other parties. These minimum subscriber payments
fluctuate in accordance with price escalation/ reduction formulas contained in
the agreements.

On 1 December 2002, FOXTEL entered an unconditional content supply agreement
with Optus that allowed Optus to provide a number of FOXTEL pay TV channels over
the Optus cable network. Under this agreement, FOXTEL assumes some of Optus'
financial obligations under its movie and other content arrangement.

Refer also to note 21 'FOXTEL minimum subscriber guarantees', for further
information.

(ii) Commitments for information technology (IT) services predominantly result
from a contract with IBM GSA. Under the IBM GSA contract, IBM GSA will provide
IT services to the Telstra Entity and selected Australian controlled entities
for a period of 10 years from 24 July 1997. The Telstra Entity is committed to a
total amount of $1,596 million (2002: $2,026 million) over the period, of which
$507 million (2002: $458 million) relates to a capital commitment (refer note
20(a)).

Commitments with Reach Ltd (REACH)

Under an International Services Agreement Australia (AISA) signed with our joint
venture entity REACH in fiscal 2002, we are committed to the purchase of
switched voice, international transmission and global internet access services
to meet certain percentages of our annual capacity requirement ("committed
services"). The committed services may also include the services for the
carriage of calls or data between places outside of Australia.

In fiscal 2003, the AISA was updated to expand our initial five year commitment
until 31 December 2010 in accordance with the terms of the new capacity
prepayment agreement (refer note 9 for further information). Under the revised
AISA, we are committed to the purchase of switched voice, international
transmission and global internet access services to meet 90% of our annual
capacity requirement.


                                                                             263
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

21. Contingent liabilities and contingent assets

We have no significant contingent assets as at 30 June 2003. The details and
maximum amounts (where reasonable estimates can be made) are set out below for
contingent liabilities.

Telstra Entity

Common law claims

Certain common law claims by employees and third parties are yet to be resolved.
The maximum amount of these contingent liabilities cannot be reasonably
estimated. As at 30 June 2003, management believes that the resolution of these
contingencies will not have a significant effect on the Telstra Entity's
financial position, results of operations or cash flows.

Indemnities, performance guarantees and financial support

We have provided the following indemnities, performance guarantees and financial
support through the Telstra Entity as follows:

-  Indemnities to financial institutions to support bank guarantees to the value
   of $276 million (2002: $311 million) in respect of the performance of
   contracts.

-  Indemnities to financial institutions in respect of the obligations of our
   controlled entities. The maximum amount of our contingent liabilities for
   this purpose was $249 million (2002: $219 million).

-  Financial support for certain controlled entities to the amount necessary to
   enable those entities to meet their obligations as and when they fall due.
   The financial support is subject to conditions including individual monetary
   limits totalling $7 million (2002: $nil) and a requirement that the entity
   remains our controlled entity.

-  Guarantee of the performance of joint venture entities under contractual
   agreements to a maximum amount of $247 million (2002: $422 million).

-  Guarantee of the performance of a third party for lease payments to be made
   by the third party, on our behalf, over the remaining terms of the finance
   leases (average 13 years). The lease payments over the remaining period of
   the lease amount to $1,042 million (US$698 million) (2002: $1,256 million
   (US$709 million)).

-  During fiscal 1998, we resolved to provide our associated entity, IBM Global
   Services Australia Limited (IBM GSA), with our pro rata 26% share of
   shareholder guarantees on a several basis up to $210 million. These
   guarantees may be made with IBM GSA bankers, or directly to IBM GSA
   customers. Our shareholding in IBM GSA, and our pro rata share of any future
   payments made under the shareholder guarantees, reduced to 22.6% during
   fiscal 2000. We issued a shareholder guarantee of $68 million on behalf of
   IBM GSA during fiscal 2000. As at 30 June 2003, $142 million (2002: $142
   million) of the $210 million guarantee facility remains unused.

-  Indemnities to Telstra Growthshare Pty Ltd for all liabilities, costs and
   expenses incurred by the trustee in the execution of the powers vested in it.

Controlled entities

Indemnities provided by our controlled entities

At 30 June 2003, our controlled entities had outstanding indemnities in respect
of obligations to financial institutions and corporations. The maximum amount of
our controlled entities' contingent liabilities in respect of these indemnities
was $1 million (2002: $58 million).

During fiscal 2002, our controlled entity Hong Kong CSL Limited (HK CSL)
guaranteed a performance bond of $57 million (HK$250 million) issued by a bank
to the Office of Telecommunications Authority of Hong Kong (OFTA) in respect of
the 3G licence awarded to HK CSL. The performance bond was equal to the minimum
annual fees payable to the OFTA for five years.

On 22 October 2002, a revised performance bond of $38 million (HK$200 million)
was issued to the OFTA with a duration of four years. A one year waiver has been
granted to HK CSL. In addition, this bond was issued with indemnity from the
Telstra Entity. At 30 June 2003, this amount has been included within
indemnities to financial institutions in respect of the obligations of our
controlled entities. Total expenditure commitments pursuant to the 3G licence
are included within other commitments in note 20.

Other

The PT Mitra Global Telekomunikasi Indonesia (MGTI) joint venture agreement
(JVA) was renegotiated during the financial year ending 30 June 2000. The
revised JVA reduced the amount of base equity to be contributed by shareholders
from US$340 million to US$208 million (which has now been contributed).

However, Telstra Global Limited (TGL), under the JVA, may be severally liable
for calls against standby equity that would be made by MGTI if certain
conditions are met. Should this equity be called, TGL will be liable to
contribute additional equity of $25 million (US$17 million) (2002: $30 million
(US$17 million)). If the other shareholders in MGTI default on contributing
their share of a standby equity call, TGL may be liable to contribute an
additional $102 million (US$68 million) (2002: $120 million (US$68 million)) as
standby equity.


264
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

21. Contingent liabilities and contingent assets (continued)

Controlled entities (continued)

Other (continued)

TGL has granted a limited recourse pledge over its shares in MGTI in support of
MGTI's obligations under a $716 million (US$480 million) (2002: $850 million
(US$480 million)) Loan Agreement dated 23 September 1996 between MGTI and
various lenders. As a result of agreements with lenders reached in September
1999 the facility is now limited to the debt drawn and outstanding. The
outstanding debt under this facility is currently $106 million (US$71 million)
(2002: $175 million (US$99 million)). Repayments are being made on schedule. The
lenders have no recourse under the pledge to the assets of Telstra Global
Limited other than to its shares in MGTI (except in the case of a breach of
representation, warranty or covenant by TGL).

In February 2001, changes in Indonesian banking regulations required MGTI to
cash in currency hedges associated with the loan facility. These hedges yielded
a gain of $75 million (US$38 million), which was applied against the principal
of the loan.

Other

FOXTEL minimum subscriber guarantees

The Telstra Entity and its partners, News Corporation and Publishing and
Broadcasting Limited, and Telstra Media and its partner, Sky Cable, have entered
into agreements relating to pay television programming with various parties.
These involve commitments for minimum subscriber fees. Due to joint and several
liability under the agreements, if News Corporation, Publishing and Broadcasting
Limited or Sky Cable fail to meet any of their obligations, the Telstra Entity
and Telstra Media would be contingently liable to the extent of those failures.
Refer note 20 for details of minimum subscriber guarantee commitments.

ASIC deed of cross guarantee

A list of the companies that are part of our deed of cross guarantee appear in
note 23. Each of these companies (except Telstra Finance Limited) guarantees the
payment in full of the debts of the other named companies in the event of their
winding up. Refer to note 23 for further information.


                                                                             265
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

22. Superannuation commitments

The employee superannuation schemes that we participate in or sponsor exist to
provide benefits for our employees and their dependants after finishing
employment with us. It is our policy to contribute to the schemes at rates
specified in the governing rules for accumulation schemes or at rates determined
by the actuaries for defined benefit schemes.

Commonwealth Superannuation Scheme (CSS) and the Telstra Superannuation Scheme
(Telstra Super)

Before 1 July 1990, eligible employees of the Telstra Entity were members of the
Commonwealth Superannuation Scheme (CSS). The CSS is a defined benefit scheme
for Commonwealth Public Sector employees. Under the CSS, we are responsible for
funding all employer financed benefits that arise from 1 July 1975 for employees
who are CSS members. Employer contributions by us, and other employers that
participate in the CSS, are paid to the Commonwealth Consolidated Revenue Fund.
Employee contributions to the CSS are separately managed.

On 1 July 1990, the Telstra Superannuation Scheme (Telstra Super) was
established. Telstra Super has both defined benefit and accumulation divisions.
A majority of our CSS members transferred to Telstra Super when it was first
established. As CSS members transferred, the liability for benefits for their
past service was transferred to Telstra Super and a transfer of assets was
payable from the CSS to Telstra Super (deferred transfer values).

The benefits received by members of each defined benefit scheme take into
account factors such as the employee's length of service, final average salary,
employer and employee contributions.

As at 30 June 2000, S J Schubert FIAA completed an actuarial investigation of
Telstra's obligations under the CSS and K O'Sullivan FIAA completed an actuarial
investigation of the two defined benefit divisions of Telstra Super.

The actuarial investigation of Telstra Super reported that a surplus continued
to exist. As per the recommendations within the actuarial investigation, we were
not required to make employer contributions to Telstra Super until the next
actuarial investigation that is due to be completed by 30 June 2004 based on the
scheme's financial position as at 30 June 2003. This contribution holiday
includes the contributions otherwise payable to the accumulation divisions of
Telstra Super. The continuance of the holiday, is however, dependant on the
performance of the fund. In fiscal 2003, there has been a reduction in the value
of the assets of the fund and therefore we are closely monitoring the situation
in light of the current financial market performance.

The actuarial investigation of our obligations under the CSS also recommended
that we continue to make no employer contributions to the CSS. We will review
our contribution rate for the CSS at the next actuarial investigation that is
due to be completed by 30 June 2004 based on the scheme's financial position as
at 30 June 2003.

In June 1999, the Minister for Finance and Administration signed a document
which allowed the CSS surplus (otherwise known as the residual notional fund
surplus or RNFS) based on the scheme's financial position at 30 June 1997 to be
transferred to Telstra Super over a 40 year period. This amounted to $1,428
million. Any RNFS amounts transferred to Telstra Super are taxed at the rate of
15%. The CSS actuarial investigation as at 30 June 2000 was conducted during
fiscal 2001. The Department of Finance and Administration is currently
considering the results of the actuarial investigation. That consideration has
not been completed pending the outcome of our discussions with the Commonwealth
on superannuation matters. Based on the results of the CSS actuarial
investigation, our actuary has recommended that the schedule to transfer the
RNFS be reviewed to take into account the revised surplus position.

Prior to 31 August 2000, we had an ongoing arrangement to pay an additional $121
million each year to Telstra Super over 16 years ending 30 June 2011. This
contribution commitment was independent of the contribution holiday advised by
the actuary.

On 31 August 2000, the trustee of Telstra Super and the Commonwealth (who
guaranteed our payments) released us from our obligation to make these
additional contributions. As part of the terms of the release, we have agreed to
provide such future employer payments to Telstra Super as may be required to
maintain the vested benefits index (VBI - the ratio of fund assets to members'
vested benefits) of the defined benefit divisions of Telstra Super in the range
of 100-110%.

The trustee of Telstra Super agreed to the release of the obligation based on
actuarial advice that the removal of these additional contributions, coupled
with Telstra's contribution commitment, will maintain the solvency level of
Telstra Super at a satisfactory level (refer to note 3 for the financial effect
of the removal of this obligation). The VBI of the defined benefit divisions was
approximately 113% as at 30 June 2003 (129% at 30 June 2002).

Other superannuation schemes

Our controlled entity, Hong Kong CSL Limited (HK CSL), participates in a
superannuation scheme known as the HK CSL Retirement Scheme (formerly Pacific
Century CyberWorks (PCCW) Retirement Benefit Scheme). The scheme has both
defined benefits and defined contributions divisions.


266
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

22. Superannuation commitments (continued)

Other superannuation schemes (continued)

The HK CSL Retirement Scheme is established under trust and is administered by
an independent trustee. The benefits received by members for the defined
benefits scheme are based on the employees' remuneration and length of service.

At 30 June 2002, the employee liability of HK CSL formed part of a scheme in the
name of PCCW-HKT Limited, which was HK CSL's previous immediate parent. On 1
December 2002, HK CSL established the new HK CSL Retirement Scheme.


Financial position

The financial position of the defined benefit divisions of Telstra Super, our
Notional Fund in the CSS and the HK CSL Retirement Scheme is shown as follows:

<TABLE>
<CAPTION>
                                      Net scheme assets  Accrued benefits   Net surplus(a)  Vested benefits
-----------------------------------------------------------------------------------------------------------
                                         As at 30 June     As at 30 June    As at 30 June     As at 30 June
                                       2003       2002     2003     2002     2003    2002     2003     2002
                                        $m         $m       $m       $m      $m       $m       $m       $m
-----------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>    <C>        <C>    <C>       <C>     <C>      <C>
Telstra Super (i)...................    4,222     4,804    2,847    3,078    1,375   1,726    3,729   3,734
CSS (ii)............................    7,479     7,479    3,865    3,865    3,614   3,614    4,091   4,091
HK CSL Retirement Scheme (iii)......       67        73       67       73       --      --       66      73
                                      ---------------------------------------------------------------------
                                       11,768    12,356    6,779    7,016    4,989   5,340    7,886   7,898
Less 85% residual notional fund
surplus (i).........................   (1,050)   (1,195)      --       --   (1,050) (1,195)      --      --
                                      ---------------------------------------------------------------------
Total...............................   10,718    11,161    6,779    7,016    3,939   4,145    7,886   7,898
                                      =====================================================================
</TABLE>

(a) Net surplus is the excess of net scheme assets over accrued benefits.

(i) Amounts for the defined benefit divisions of Telstra Super have been taken
from the audited financial report of the scheme as at 30 June 2003 and 30 June
2002. The scheme assets are stated at net market values.

Telstra Super net scheme assets include the carrying value of the CSS RNFS as at
30 June 2003 of $1,235 million (2002: $1,406 million). The CSS RNFS balance
represents the revised surplus position recognised as receivable by Telstra
Super. As any amounts transferred from the CSS to Telstra Super are taxed at the
rate of 15%, the adjustment in the table represents 85% of the RNFS which should
be reduced from net scheme assets and net surplus to eliminate the recognition
of the CSS surplus by Telstra Super.

The assets attributable to HK CSL of the previous scheme were transferred to the
new HK CSL Retirement Scheme along with an additional lump sum contribution from
HK CSL. This equated to the aggregate past service liability of the previous
scheme and ensured that the HK CSL Retirement Scheme was fully funded. The
transfers as at 1 December 2002 were based on an actuarial investigation
conducted by Watson Wyatt Hong Kong Limited.

(ii) The CSS amounts show our share of the benefit liability in respect to past
service of our employees and former employees who are members of the CSS. The
CSS amounts for both 30 June 2003 and 30 June 2002 are based on notional amounts
shown in the actuarial valuation dated 30 June 2000, subject to the following:

-  deferred transfer values of $2,142 million have been excluded from the CSS
   net scheme assets, accrued benefits and vested benefits as Telstra Super is
   responsible for CSS members transferred to Telstra Super. Amounts for
   deferred transfer values have been recognised by Telstra Super;

-  the net surplus of $3,614 million excludes $694 million related to the
   present value of future service liabilities. By including the $694 million,
   the surplus of notional assets over total liabilities for the CSS is $2,920
   million; and

-  based on the most recent actuarial investigation as at 30 June 2000, it has
   been recommended by the actuary that the surplus of $2,920 million, less
   superannuation contribution tax at the rate of 15%, be transferred to Telstra
   Super as previously described in this note. The Department of Finance and
   Administration is still considering the results of the actuarial
   investigation and the balance may be subject to change. Based on more recent
   estimates provided by our actuary this balance has declined, although it is
   still expected to be above its carrying value of $1,235 million recognised as
   receivable by Telstra Super.


                                                                             267
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

22. Superannuation commitments (continued)

Financial position (continued)

(iii) We acquired full ownership of HK CSL on 28 June 2002. At 30 June 2002, the
scheme was still in the name of PCCW-HKT Limited, which is HK CSL's previous
immediate parent. Amounts for 30 June 2002 are based on our share of the
notional amounts shown in the actuarial valuation dated 30 June 2002. On 1
December 2002, the assets attributable to HK CSL were transferred from the PCCW
Retirement Benefit Scheme to the HK CSL Retirement Scheme. Amounts for 30 June
2003 for the HK CSL Retirement Scheme have been taken from the actuarial
valuation dated 30 June 2003. The scheme assets are stated at net market values.


Investment types and estimated returns on those asset groups held by our
significant superannuation schemes

<TABLE>
<CAPTION>

                                   Telstra Super/CSS
                                      (i)(ii)
----------------------------------------------------
                                   Estimated returns
                                     As at 30 June
                                   2003         2002
                                     %            %
----------------------------------------------------
<S>                                <C>          <C>
Australian shares................   9.3          7.8
International shares.............   8.7          7.5
Listed property..................   6.2          6.3
Direct property..................   7.5          6.2
Australian fixed interest........   4.8          5.1
International fixed interest.....   4.6          5.5
Cash.............................   4.3          4.2
                                   -----------------
</TABLE>

(i) Our estimates are based on expected 10 year after tax returns with an
allocation of 85% growth assets and 15% defensive assets.

(ii) Every three years our actuaries calculate the financial position of our
notional fund in the CSS as part of their actuarial investigation. The assets of
this scheme are accumulated at the same rate of return as that earned by Telstra
Super. As a result, the expected after tax returns of the CSS will be identical
to those returns expected to be generated by Telstra Super.

The estimated period over which the benefits of our members will be returned is
13 years for Telstra Super and 12 years for the CSS.

Employer contributions

Employer contributions made to:

-  the defined benefits divisions of Telstra Super were $nil for the past three
   fiscal years;

-  the CSS were $nil for the past three fiscal years;

-  the defined benefit divisions of the HK CSL scheme for fiscal 2003 were $8
   million (2002: $7 million; 2001: $3 million); and

-  the accumulation divisions of Telstra Super for fiscal 2003 were $4 million
   (2002: $6 million; 2001: $7 million), including voluntary salary sacrifice
   contributions made at the discretion of the employee of $1 million (2002: $1
   million; 2001: $1 million).

Telstra Super additional contributions were $nil for the last three years. As
described in this note, the Trustee of Telstra Super and the Commonwealth
released us from our obligation to make these additional contributions.


268
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities

Below is a list of our investments in controlled entities.

<TABLE>
<CAPTION>
                                                                                              Telstra Entity's
                                                                      Country of               recorded amount   % of equity held by
Name of entity                                                        incorporation           of investment (a)   immediate parent
---------------------------------------------------------------------------------------------------------------  -------------------
                                                                                                 As at 30 June      As at 30 June
                                                                                                2003      2002     2003       2002
                                                                                                  $m       $m       %           %
---------------------------------------------------------------------------------------------------------------  -------------------
<S>                                                                   <C>                      <C>        <C>    <C>          <C>
Parent entity
Telstra Corporation Limited (1)....................................   Australia
Controlled entities
Telecommunications Equipment Finance Pty Ltd (5) *.................   Australia                    --        --         --        --
Telstra Finance Limited (1) (4)....................................   Australia                    --        --      100.0     100.0
Telstra Corporate Services Pty Ltd (1).............................   Australia                     6         6      100.0     100.0
Transport Communications Australia Pty Ltd *.......................   Australia                     4         4      100.0     100.0
Telstra ESOP Trustee Pty Ltd (4) *.................................   Australia                    --        --      100.0     100.0
Telstra Growthshare Pty Ltd (4) *..................................   Australia                    --        --      100.0     100.0
On Australia Pty Ltd (1) (3).......................................   Australia                    11        11      100.0     100.0
Telstra Media Pty Ltd (1)..........................................   Australia                   381       347      100.0     100.0
Telstra Multimedia Pty Ltd (1).....................................   Australia                 2,678     1,720      100.0     100.0
Telstra International Limited (1)..................................   Australia                    84        84      100.0     100.0
------------------------------------------------------------------------------------------------------------------------------------
Telstra OnAir Holdings Pty Ltd *...................................   Australia                   302       302      100.0     100.0
   - Telstra OnAir Infrastructure Holdings Pty Ltd *...............   Australia                    --        --      100.0     100.0
      - Telstra 3G Spectrum Holdings Pty Ltd *.....................   Australia                    --        --      100.0     100.0
------------------------------------------------------------------------------------------------------------------------------------
Telstra New Wave Pty Ltd (1).......................................   Australia                     1         1      100.0     100.0
   - Hypertokens Pty Ltd *.........................................   Australia                    --        --      100.0     100.0
   - Customer Contact Technologies Pty Ltd (10)*...................   Australia                    --        --      100.0        --
   - Data & Text Mining Technologies Pty Ltd (10) *................   Australia                    --        --      100.0        --
   - Lyrebird Technologies Pty Ltd (10)*...........................   Australia                    --        --      100.0        --
------------------------------------------------------------------------------------------------------------------------------------
Telstra Holdings Pty Ltd (1) (12)..................................   Australia                 7,293     5,810      100.0     100.0
   - Beijing Australia Telecommunications Technical
     Consulting Services Company Limited (7) (8)...................   China                        --        --      100.0     100.0
   - Telstra Holdings (Bermuda) No. 2 Limited (8)..................   Bermuda                      --        --      100.0     100.0
      - Telstra CSL Limited (formerly Joint Venture
        (Bermuda) No. 2 Limited) (2) (8)...........................   Bermuda                      --        --      100.0     100.0
         - Bestclass Holdings Ltd (8)..............................   British Virgin Islands       --        --      100.0     100.0
            - Hong Kong CSL Limited (8)............................   Hong Kong                    --        --      100.0     100.0
               - Integrated Business Systems Limited (8)...........   Hong Kong                    --        --      100.0     100.0
               - One2Free Personalcom Limited (8)..................   Hong Kong                    --        --      100.0     100.0
               - CSL Limited (8)...................................   Hong Kong                    --        --      100.0     100.0
         - RWC, HK Limited (3) (8).................................   Hong Kong                    --        --          -     100.0
   - Telstra Holdings (Bermuda) No 1 Limited (8)...................   Bermuda                      --        --      100.0     100.0
   - Telstra International HK Limited (8)..........................   Hong Kong                    --        --      100.0     100.0
   - Telstra IDC Holdings Limited (8)..............................   Bermuda                      --        --      100.0     100.0
   - Telstra Japan Retail K.K.  (8)................................   Japan                        --        --      100.0     100.0
   - Telstra Singapore Pte Ltd (8) (10)............................   Singapore                    --        --      100.0        --
   - Telstra Wholesale Inc. (3) (8)................................   United States                --        --         --     100.0
   - Mobitel (Pvt) Limited (8) (12)................................   Sri Lanka                    --        --         --      60.0
   - Telstra New Zealand Limited (3) (8)...........................   New Zealand                  --        --         --     100.0
   - Telstra Global Limited (8)....................................   United Kingdom               --        --      100.0     100.0
      - Telstra Europe Limited (8).................................   United Kingdom               --        --      100.0     100.0
      - PT Telstra Nusantara (8)...................................   Indonesia                    --        --      100.0     100.0
   (continued over page)
</TABLE>


                                                                             269
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

<TABLE>
<CAPTION>
                                                                                              Telstra Entity's
                                                                      Country of              recorded amount    % of equity held by
Name of entity                                                        incorporation           of investment (a)   immediate parent
---------------------------------------------------------------------------------------------------------------  -------------------
                                                                                                As at 30 June       As at 30 June
                                                                                                2003      2002    2003        2002
                                                                                                 $m        $m       %           %
---------------------------------------------------------------------------------------------------------------  -------------------
<S>                                                                   <C>                       <C>       <C>    <C>          <C>
Controlled entities (continued)
------------------------------------------------------------------------------------------------------------------------------------
   - Telstra Inc. (8)..............................................   United States                --        --      100.0     100.0
   - Telstra India Private Limited (8).............................   India                        --        --      100.0     100.0
   - NDC New Zealand Limited (8) (12)..............................   New Zealand                  --        --      100.0     100.0
      - TelstraClear Limited (8) (11) (12).........................   New Zealand                  --        --      100.0      58.4
         - Saturn Communications Limited (3) (8)...................   New Zealand                  --        --         --     100.0
         - Paradise.Net Limited (3) (8)............................   New Zealand                  --        --         --     100.0
         - Kiwi Cable Company Limited (3) (8)......................   New Zealand                  --        --         --     100.0
         - Netlink Limited (3) (8).................................   New Zealand                  --        --         --     100.0
         - TelstraSaturn Holdings Limited (8)......................   New Zealand                  --        --      100.0     100.0
            - CLEAR Communications Limited (8).....................   New Zealand                  --        --      100.0     100.0
         - CLEAR Communications (Australia) Pty Ltd (3) (8)........   Australia                    --        --         --     100.0
         - ZFREE Limited (3) (8)...................................   New Zealand                  --        --         --     100.0
         - ZTALK Limited (3) (8)...................................   New Zealand                  --        --         --     100.0
------------------------------------------------------------------------------------------------------------------------------------
Telstra Communications Limited (1).................................   Australia                    29        29      100.0     100.0
   - Telecom Australia (Saudi) Company Limited (3) (6) (7) (8).....   Saudi Arabia                 --        --       50.0      50.0
------------------------------------------------------------------------------------------------------------------------------------
Telstra Rewards Pty Ltd *..........................................   Australia                    14        14      100.0     100.0
   - Telstra Visa Card Trust (3)...................................   Australia                    --        --      100.0     100.0
   - Qantas Telstra Card Trust (3).................................   Australia                    --        --      100.0     100.0
   - Telstra Visa Business Card Trust (3)..........................   Australia                    --        --      100.0     100.0
------------------------------------------------------------------------------------------------------------------------------------
Telstra Media Holdings Pty Ltd (1).................................   Australia                    29        29      100.0     100.0
   - Telstra Enterprise Services Pty Ltd (1) (12)..................   Australia                    --        --      100.0     100.0
      - Telstra Limited (8) (12)...................................   New Zealand                  --        --      100.0     100.0
   - Telstra Pay TV Pty Ltd (1)....................................   Australia                    --        --      100.0     100.0
------------------------------------------------------------------------------------------------------------------------------------
Telstra CB Holdings Limited (1)....................................   Australia                   898       898      100.0     100.0
   - Telstra CB.net Limited (1)....................................   Australia                    --        --      100.0     100.0
   - Telstra CB.Com Limited (1)....................................   Australia                    --        --      100.0     100.0
   - Telstra CB.fs Limited (1).....................................   Australia                    --        --      100.0     100.0
      - InsNet Pty Ltd (1).........................................   Australia                    --        --      100.0     100.0
         - Australasian Insurance Systems Pty Ltd (1)..............   Australia                    --        --      100.0     100.0
         - TRC Computer Systems Pty Ltd (1)........................   Australia                    --        --      100.0     100.0
         - DBA Limited (1).........................................   Australia                    --        --      100.0     100.0
            - Brokerlink Pty Ltd (1)...............................   Australia                    --        --       81.3      81.3
            - DBA Computer Systems Pty Ltd (1).....................   Australia                    --        --      100.0     100.0
               - Brokerlink Pty Ltd (1)............................   Australia                    --        --       18.7      18.7
               - Unilink Group Pty Ltd (1).........................   Australia                    --        --      100.0     100.0
------------------------------------------------------------------------------------------------------------------------------------
   (continued over page)
</TABLE>



270
<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

<TABLE>
<CAPTION>
                                                                       Telstra Entity's   % of equity held
                                                        Country of      recorded amount     by immediate
Name of entity                                          incorporation  of investment (a)       parent
----------------------------------------------------------------------------------------  -----------------
                                                                         As at 30 June      As at 30 June
                                                                         2003       2002    2003       2002
                                                                           $m         $m       %          %
----------------------------------------------------------------------------------------  -----------------
Controlled entities (continued)
<S>                                                     <C>            <C>          <C>   <C>          <C>
Sensis Pty Ltd (formerly Pacific Access
Pty Ltd) (1) (2)......................................  Australia         121        121   100.0      100.0
   - CitySearch Australia Pty Ltd *...................  Australia          --         --   100.0      100.0
      - CitySearch Canberra Pty Ltd *.................  Australia          --         --   100.0      100.0
   - Telstra Retail Pty Ltd *.........................  Australia          --         --   100.0      100.0
   - Sensis Holdings Pty Ltd (formerly Telstra
     Retail Services Pty Ltd) (2) *...................  Australia          --         --   100.0      100.0
   - Pacific Access Enterprises Pty Ltd *.............  Australia          --         --   100.0      100.0
   - WorldCorp Holdings (S) Pte Ltd (3) (8)...........  Singapore          --         --   100.0      100.0
      - WorldCorp Publishing Pte Ltd (3) (8)..........  Singapore          --         --   100.0      100.0
Network Design and Construction Limited (1)...........  Australia         177        177   100.0      100.0
   - NDC Global Holdings Pty Ltd (1) (12).............  Australia          --         --   100.0      100.0
      - NDC Telecommunications India Private
        Limited (8)...................................  India              --         --   100.0      100.0
      - PT NDC Indonesia (8)..........................  Indonesia          --         --    95.0       95.0
      - NDC Global Philippines, Inc (8)...............  Philippines        --         --   100.0      100.0
      - NDC Global Services (Thailand)
        Limited (8)...................................  Thailand           --         --    49.0       49.0
      - NDC Global Holdings (Thailand)
        Limited (8)...................................  Thailand           --         --    90.4       90.4
         - NDC Global Services (Thailand)
           Limited (8)................................  Thailand           --         --    51.0       51.0
      - NDC Global Services Malaysia Sdn.
        Bhd (8).......................................  Malaysia           --         --   100.0      100.0
   - NDC Global Services Pty Ltd (1)..................  Australia          --         --   100.0      100.0
</TABLE>

(a) The amounts recorded are before any provision for reduction in value.
* These entities are Australian small proprietary limited companies, which are
not required to prepare and lodge individual audited financial reports with the
ASIC.

                                                                             271

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

ASIC deed of cross guarantee

(1) The following companies have entered into a deed of cross guarantee dated 4
June 1996 (or have been subsequently added to this deed by an assumption deed):

-  Telstra Corporation Limited;
-  Telstra Holdings Pty Ltd;
-  Telstra International Limited;
-  Telstra Communications Limited;
-  Telstra New Wave Pty Ltd;
-  Telstra Multimedia Pty Ltd;
-  On Australia Pty Ltd;
-  Telstra Media Holdings Pty Ltd;
-  Network Design and Construction Limited;
-  Sensis Pty Ltd (formerly Pacific Access Pty Ltd);
-  Telstra CB Holdings Limited;
-  Telstra CB.net Limited;
-  Telstra CB.Com Limited;
-  Telstra CB.fs Limited;
-  InsNet Pty Ltd;
-  Australasian Insurance Systems Pty Ltd;
-  TRC Computer Systems Pty Ltd;
-  DBA Limited;
-  Brokerlink Pty Ltd;
-  DBA Computer Systems Pty Ltd;
-  Unilink Group Pty Ltd;
-  Telstra Media Pty Ltd;
-  Telstra Enterprise Services Pty Ltd;
-  Telstra Pay TV Pty Ltd;
-  NDC Global Holdings Pty Ltd;
-  NDC Global Services Pty Ltd *; and
-  Telstra Corporate Services Pty Ltd *.

Telstra Finance Limited is trustee to the deed of cross guarantee.

* These entities were added to the deed of cross guarantee during fiscal 2003 by
an assumption deed dated 31 October 2002.

The deed of cross guarantee was formed under ASIC Class Order 98/1418, including
those subsequent amendments made. This class order was dated 13 August 1998 and
has been subsequently amended by class orders 98/2017, 00/321, 01/1087, 02/248
and 02/1017. Under this class order and the deed of cross guarantee, the
companies listed above, except for Telstra Finance Limited:

-  form a closed group and extended closed group as defined in the class order;
-  do not have to prepare and lodge audited financial reports under the
   Corporations Act 2001. This does not apply to Telstra Corporation Limited;
   and
-  guarantee the payment in full of the debts of the other named companies in
   the event of their winding up.

The consolidated assets and liabilities of the closed group and extended closed
group at 30 June 2003 and 2002 is presented according to ASIC class order
98/1418 (as amended) as follows. This excludes Telstra Finance Limited. All
significant transactions between members of the closed group have been
eliminated.


272
<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

<TABLE>
<CAPTION>
Closed Group Statement of Financial Position           Closed Group
---------------------------------------------------------------------
                                                      As at 30 June
                                                       2003      2002
                                                         $m        $m
---------------------------------------------------------------------
<S>                                                   <C>      <C>
Current assets
Cash assets......................................     1,187       528
Receivables......................................     3,509     5,254
Inventories......................................       238       196
Other assets.....................................       783     1,244
                                                     ----------------
Total current assets.............................     5,717     7,222
                                                     ----------------
Non current assets
Receivables......................................     1,848       725
Inventories......................................        14         9
Investments - accounted for using the equity
method...........................................        59        80
Investments - other..............................     2,632     3,838
Property, plant and equipment....................    21,766    22,166
Future income tax benefit........................        --       131
Intangibles - goodwill...........................        81        91
Intangibles - other..............................       189       285
Other assets.....................................     2,519     2,197
                                                     ----------------
Total non current assets.........................    29,108    29,522
                                                     ----------------
Total assets.....................................    34,825    36,744
                                                     ----------------
Current liabilities
Payables.........................................     2,194     2,185
Interest-bearing liabilities.....................     1,650     1,624
Income tax payable...............................       614       596
Provisions.....................................         348     1,879
Revenue received in advance......................     1,180     1,241
                                                     ----------------
Total current liabilities........................     5,986     7,525
                                                     ----------------
Non current liabilities
Payables.........................................        48       127
Interest-bearing liabilities.....................    11,231    11,845
Provision for deferred income tax................     1,753     1,917
Provisions.......................................       790       823
Revenue received in advance......................       433       438
                                                     ----------------
Total non current liabilities....................    14,255    15,150
                                                     ----------------
Total liabilities................................    20,241    22,675
                                                     ----------------
Net assets.......................................    14,584    14,069
                                                     ================
Shareholders' equity
Contributed equity...............................     6,433     6,433
Reserves.........................................        39        13
Retained profits.................................     8,112     7,623
                                                     ----------------
Shareholders' equity available to the
closed group.....................................    14,584    14,069
                                                     ================
</TABLE>


                                                                             273

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

ASIC deed of cross guarantee (continued)

(1) (continued)

The consolidated net profit of the Closed Group and Extended Closed Group for
the fiscal years ended 30 June 2003 and 2002 is presented according to ASIC
class order 98/1418 (as amended) as follows. This excludes Telstra Finance
Limited. All significant transactions between members of the Closed Group have
been eliminated.

<TABLE>
<CAPTION>
Closed Group Statement of Financial Performance and
Retained Profits reconciliation                               Closed Group
------------------------------------------------------------------------------
                                                           Year ended 30 June
                                                              2003        2002
                                                                $m          $m
------------------------------------------------------------------------------
<S>                                                       <C>         <C>
Ordinary activities
Profit before income tax expense.......................      3,949       4,973
Income tax expense.....................................      1,502       1,763
                                                          --------------------
Net profit available to the closed group...............      2,447       3,210
Retained profits at the beginning of the financial year
available to the closed group..........................      7,623       7,018
Transfer out of the closed group (1)(a)................         --         225
Transfers to retained profits (1)(b)...................        (22)         --
Effect on retained profits from additions of new
entities to the closed group...........................         (6)         --
                                                          --------------------
Total available for distribution.......................     10,042      10,453
Dividends provided for or paid.........................      1,930       2,830
                                                          --------------------
Retained profits at the end of the financial year
available to the closed group..........................      8,112       7,623
                                                          ====================
</TABLE>

(1)(a) The consolidated assets and liabilities of the closed group includes
closed group members' equity accounted investments and investments in controlled
entities that are not members of the closed group. Investments in controlled
entities which are not part of the closed group are recorded at cost less
provision for diminution and are not consolidated as part of this group.

On 12 December 2001, we acquired a further 8.4% shareholding in TelstraClear
Limited (TelstraClear) giving us a 58.4% controlling interest. Prior to this
date TelstraClear was a joint venture entity and included as an equity accounted
investment in the closed group. The increase in retained profits in fiscal 2002
of $225 million represents a transfer out of accumulated equity accounted
retained losses in relation to TelstraClear as at 12 December 2001. From this
date, TelstraClear has been a controlled entity and is included in the closed
group at cost less provision for diminution.

(1)(b) During fiscal 2003, we sold our remaining shareholding in Solution 6
Holdings Limited (Solution 6). As a result, the foreign currency translation and
general reserves arising from equity accounting our investment in Solution 6
were transferred out of reserves and into retained profits. The total amount of
equity accounted reserves transferred in fiscal 2003 was a negative $22 million,
resulting in a reduction in retained profits and a corresponding increase in
reserves.

Change of company names

(2) The following entities changed names during fiscal 2003:

-  Pacific Access Pty Ltd changed its name to Sensis Pty Ltd on 19 August 2002;
-  Telstra Retail Services Pty Ltd changed its name to Sensis Holdings Pty Ltd
   on 20 March 2003; and
-  Joint Venture (Bermuda) No. 2 Limited changed its name to Telstra CSL Limited
   on 12 March 2003.

Liquidations

(3) As at 30 June 2003, the following companies were in voluntary liquidation:

-  On Australia Pty Ltd;
-  Telecom Australia (Saudi) Company Ltd;
-  WorldCorp Holdings (S) Pte Ltd; and
-  WorldCorp Publishing Pte Ltd.


274

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

Liquidations (continued)

(3)(continued)

The following companies were liquidated during fiscal 2003:

-  Saturn Communications Limited on 7 August 2002;
-  Paradise.Net Limited on 7 August 2002;
-  Netlink Limited on 7 August 2002;
-  ZFREE Limited on 7 August 2002;
-  ZTALK Limited on 7 August 2002;
-  CLEAR Communications (Australia) Pty Ltd on 30 September 2002;
-  Kiwi Cable Company Limited on 11 November 2002;
-  Telstra New Zealand Limited on 11 November 2002;
-  RWC, HK Limited on 4 April 2003; and
-  Telstra Wholesale Inc. on 30 June 2003.

During fiscal 2002, we entered into arrangements to transfer responsibility for
the operation and funding of the Telstra Visa Card, Qantas Telstra Visa Card and
the Telstra Visa Business Card loyalty programs and related trusts from Telstra.
Telstra's involvement with these trusts will be dissolved during fiscal 2004.

Rounded investments

(4) The cost of the Telstra Entity's investments in controlled entities, which
is not shown when rounded to the nearest million dollars is as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------
                                                    As at 30 June
                                                    2003     2002
                                                       $        $
--------------------------------------------------------     ----
<S>                                                 <C>   <C>
Telstra Finance Limited......................          5        5
Telstra ESOP Trustee Pty Ltd.................          2        2
Telstra Growthshare Pty Ltd..................          1        1
                                                    ====     ====
</TABLE>

Controlled entities in which we have no equity ownership

(5) We do not have an equity investment in Telecommunications Equipment Finance
Pty Ltd. We have effective control over this entity through economic dependency
and have consolidated it into our group financial report. This company does not
have significant assets or liabilities.

Controlled entities in which our equity ownership is less than or equal to 50%

(6) We own 50% of the issued capital of Telecom Australia (Saudi) Company
Limited. We can exercise control over the board of directors of this entity in
perpetuity, and therefore we have consolidated the financial results, position
and cash flows of this entity into our group financial report.

Controlled entities with different balance dates

(7) The following companies have different balance dates to our balance date of
30 June for fiscal 2003:

-  Telecom Australia (Saudi) Company Limited - 31 December; and
-  Beijing Australia Telecommunications Technical Consulting Services Company
   Limited - 31 December.

Financial reports prepared as at 30 June are used for consolidation purposes.

Controlled entities not individually audited by the Australian National Audit
Office

(8) Companies not audited by the Australian National Audit Office, our
Australian statutory auditor.

Dividends received by the Telstra Entity

(9) There were no significant dividends received by the Telstra Entity during
fiscal 2003 or fiscal 2002 from our controlled entities.

New incorporations and investments

(10) We have invested in or  incorporated  the following  entities during fiscal
2003:

-  Customer Contact Technologies Pty Ltd on 30 July 2002;
-  Data & Text Mining Technologies Pty Ltd on 30 July 2002;
-  Lyrebird Technologies Pty Ltd on 30 July 2002; and
-  Telstra Singapore Pte Ltd on 12 November 2002.

The amounts initially invested were not significant.

(11) On 9 April 2003, we acquired the remaining 41.6% of TelstraClear for $25
million, taking our ownership interest to 100%. As a result of this acquisition,
the shareholder's agreement between us and the minority shareholder was
terminated, and all rights and options attaching to our respective shareholdings
under this agreement ceased to exist.

                                                                             275

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

23. Investments in controlled entities (continued)

Sales and disposals

(12) On 31 October 2002, we sold our 60% shareholding in the Sri Lankan mobile
carrier, Mobitel (Pvt) Limited for $17 million (US$9 million).

The following entities were sold between entities within the Telstra Group:

-  On 30 September 2002, Telstra Holdings Pty Ltd sold its investment in Telstra
   Limited to Telstra Enterprise Services Pty Ltd; and
-  On 23 June 2003, NDC Global Holdings Pty Ltd sold its investment in NDC New
   Zealand Limited to Telstra Holdings Pty Ltd. As part of this restructure,
   TelstraClear performed a share buy-back of Telstra Holdings Pty Ltd's entire
   shareholding in TelstraClear and issued new shares to NDC New Zealand
   Limited. TelstraClear is now a 100% owned controlled entity of NDC New
   Zealand Limited.

Other structural changes

(13) On 28 June 2002, we signed a deed poll whereby we gave up our rights to
appoint a majority of the directors to the board of Keycorp Limited (Keycorp).
Accordingly, we no longer had the capacity to control this entity and
reclassified our investment from a controlled entity to an associated entity on
the basis that we have the capacity to significantly influence Keycorp's
operating and financial policies (refer note 24 for further information). As a
result, Keycorp Limited and its subsidiaries are not included in our controlled
entity listing as at 30 June 2003 or 30 June 2002.

276

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities

Our investments in joint venture entities are listed below:

<TABLE>
<CAPTION>
Name of joint venture                Principal                    Ownership     Telstra Group's carrying  Telstra Entity's carrying
entity                               activities                    interest     amount of investment (*)  amount of investment (*)
------------------------------------------------------------------------------  ------------------------  -------------------------
                                                                As at 30 June         As at 30 June              As at 30 June
                                                                 2003     2002         2003         2002         2003          2002
                                                                    %        %           $m           $m           $m            $m
------------------------------------------------------------------------------  ------------------------  -------------------------
<S>                                  <C>                        <C>       <C>         <C>           <C>          <C>           <C>
(i) Joint venture entities
FOXTEL Partnerships (#)............  Pay television              50.0     50.0           44           42           --            --
Customer Services Pty Ltd (c)......  Customer service            50.0     50.0           --           --           --            --
FOXTEL Management Pty Ltd (1)......  Management services         50.0     50.0           --           --           --            --
FOXTEL Cable Television Pty Ltd
(c) (3)............................  Pay television              80.0     80.0           --           --           --            --
                                     International
Reach Ltd (incorporated in           connectivity services to
Bermuda) (a) (c) (11)..............  wholesale customers         50.0     50.0           --          945           --            --
DataOne Corporation Pte Ltd
(incorporated in Singapore) (a) (9)  Internet hosting company      --     20.0           --           --           --            --
                                     Call centre services and
Stellar Call Centres Pty Ltd (2)...  solutions                   50.0     50.0           11            9            3             3
Xantic B.V. (incorporated in The     Global satellite
Netherlands) (a)...................  communications              35.0     35.0           74          114           --            --
                                     Olympic business
Investment 2000 Pty Ltd (1) (8)....  investment opportunities      --     25.0           --           --           --            --
IDC Limited (incorporated in
Bermuda) (a) (8)...................  Dormant                       --     50.0           --           --           --            --
                                     Toll free number
TNAS Limited (incorporated in        portability in New
New Zealand) (b) (c) (7)...........  Zealand                     33.3     50.0           --           --           --            --
-------------------------------------------------------------                   ------------------------  -------------------------
                                                                       note 11          129        1,110            3             3
                                                                                ========================  =========================
</TABLE>

(#) This includes both the FOXTEL Partnership and the FOXTEL Television
Partnership.

(a) Balance date is 31 December.

(b) Balance date is 31 March.

Unless noted above, all investments have a balance date of 30 June and are
incorporated in Australia. Where there is a different balance date, financial
reports prepared as at 30 June are used for equity accounting purposes.

(c) Equity accounting of these investments has been suspended and the investment
is recorded at zero due to losses made by the entities and/or reductions in the
equity accounted carrying amount.

(*) The Telstra Group carrying amounts are calculated using the equity method of
accounting. The Telstra Entity's carrying amounts are at cost less any provision
for reduction in value. Refer note 1.10(b) for details of our equity accounting
policy. All amounts recorded are net of provision for reduction in value.


                                                                             277

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24.  Investments in joint venture entities and associated entities (continued)

Our investments in associated entities are listed below:

<TABLE>
<CAPTION>
Name of associated                   Principal                    Ownership     Telstra Group's carrying  Telstra Entity's carrying
entity                               activities                    interest     amount of investment (*)   amount of investment (*)
------------------------------------------------------------------------------  ------------------------  -------------------------
                                                                As at 30 June         As at 30 June              As at 30 June
                                                                 2003     2002         2003         2002         2003          2002
                                                                    %        %           $m           $m           $m            $m
------------------------------------------------------------------------------  ------------------------  -------------------------
<S>                                  <C>                        <C>       <C>         <C>           <C>          <C>           <C>
(ii) Associated entities
IBM Global Services                  Information
Australia Limited (a) (2) (#)......  technology services         22.6     22.6            2           --           --            --
Australian-Japan Cable Holdings
Limited (incorporated in
Bermuda) (a) (c) (12)..............  Network cable provider      39.9     39.9           --           34           --            --
                                     Business software
Solution 6 Holdings Limited (9)....  system provider               --     15.2           --           14           --            --
                                     Smart card transaction
ECard Pty Ltd (7)..................  processing                  50.0     41.0            3           12            7            31
PT Mitra Global Telekomunikasi
Indonesia (incorporated in           Telecommunications
Indonesia) (a).....................  services                    20.4     20.4           25           27           --            --
Telstra Super Pty Ltd (c) (1) (4)..  Superannuation trustee     100.0    100.0           --           --           --            --
myinternet Limited (c).............  Educational portal          21.1     21.1           --           --           --            --
                                     Electronic transactions
Keycorp Limited (c) (6)............  solutions                   47.9     47.9           --           --           --            --
                                     Charitable trustee
Telstra Foundation Limited (5).....  organisation               100.0    100.0           --           --           --            --
CityLink Limited (incorporated in    Provider of wholesale
New Zealand) (b) (c) (1)...........  fibre bandwidth             27.1     27.1           --           --           --            --
                                                                       note 11           30           87            7            31
                                                                                ========================  =========================
</TABLE>

(a) Balance date is 31 December.

(b) Balance date is 31 March.

Unless noted above, all investments have a balance date of 30 June and are
incorporated in Australia. Where there is a different balance date, financial
reports prepared as at 30 June are used for equity accounting purposes.

(c) Equity accounting of these investments has been suspended and the investment
is recorded at zero due to losses made by the entities and/or reductions in the
equity accounted carrying amount.

(*) The Telstra Group carrying amounts are calculated using the equity method of
accounting. The Telstra Entity's carrying amounts are at cost less any provision
for reduction in value. Refer note 1.10(b) for details of our equity accounting
policy. All amounts recorded are net of provision for reduction in value.

(#) Equity accounting recommenced for this investment in fiscal 2003.


278

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities (continued)

Share of joint venture entities' and associated entities' net losses/(profits)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                            Year ended 30 June
                                                                2003       2002
                                                                  $m         $m
-------------------------------------------------------------------------------
<S>                                                         <C>        <C>
Our net  loss/(profit)  from joint venture entities and
associated  entities has been contributed by the
following entities:

Joint venture entities
- FOXTEL Partnerships (#)................................         47         47
- Stellar Call Centres Pty Ltd (2).......................         (2)        (4)
- TelstraClear Limited (10)..............................         --         75
- Xantic B.V.............................................         24         --
- Dynegy Connect LP......................................         --         12
- Reach Ltd (11).........................................        946        (53)
- DataOne Corporation Pte Ltd (9)........................         --          2
                                                            -------------------
                                                               1,015         79
                                                            -------------------
Associated entities
- IBM Global Services Australia Limited (2)..............         (6)        (7)
- Australian-Japan Cable Holdings Limited (12)...........          6         12
- Solution 6 Holdings Limited (9)........................          2         (9)
- ECard Pty Ltd (7)......................................         10         15
- PT Mitra Global Telekomunikasi Indonesia...............         (2)        (9)
                                                            -------------------
                                                                  10          2
                                                            -------------------
                                                               1,025         81
                                                            ===================
</TABLE>

(#) This includes both the FOXTEL Partnership and the FOXTEL Television
Partnership.


                                                                             279

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities (continued)

Rounded investments

(1) The carrying amounts of our investments in joint venture entities and
associated entities which are not shown when rounded to the nearest million
dollars are shown below:

<TABLE>
<CAPTION>
                                            Carrying amount of investment
                                         Telstra Group       Telstra Entity
----------------------------------------------------------------------------
                                         As at 30 June       As at 30 June
                                          2003      2002      2003      2002
                                             $         $         $         $
--------------------------------------------------------   -----------------
<S>                                     <C>    <C>         <C>     <C>
(i) Joint venture entities
FOXTEL Management Pty Ltd...........         1         1        --        --
Investment 2000 Pty Ltd (8).........        --         *        --        12
(ii) Associated entities
Telstra Super Pty Ltd (4)...........         *         *         2         2
CityLink Limited....................   299,403   296,272        --        --
                                       =================   =================
</TABLE>

* Equity accounted amount of investment is suspended and the investment is
recorded at zero due to losses made by the entities or as a result of reducing
the equity accounted amount to zero.

Dividends received from joint venture and associated entities

(2) We received or were presently entitled to receive dividends and
distributions from the following entities during fiscal 2003:

-  IBM Global Services Australia Limited $4.9 million (2002: $9.0 million); and
-  Stellar Call Centres Pty Ltd $1.2 million (2002: $0.1 million).

Associated and joint venture entities in which we own more than 50% equity

(3) We own 80% of the equity of FOXTEL Cable Television Pty Ltd. This entity is
disclosed as a joint venture entity, as the outside equity shareholders have
participating rights that prevent us from dominating the decision making of the
board of directors. Effective voting power is restricted to 50% and we have
joint control.

(4) We own 100% of the equity of Telstra Super Pty Ltd, the trustee for the
Telstra Superannuation Scheme (Telstra Super). We do not consolidate Telstra
Super Pty Ltd, as we do not control the board of directors. We have equal
representation with employee representatives on the board. The entity is
therefore classified as an associated entity as we have significant influence
over it.

(5) We own 100% of Telstra Foundation Limited (TFL). TFL is limited by guarantee
(guaranteed to $100) with Telstra Corporation Limited being the sole member. We
did not contribute any equity to TFL on incorporation. TFL is the trustee of the
Telstra Community Development Fund and manager of the Telstra's Kids Fund. We do
not consolidate TFL as we do not control the board of directors. However, due to
our board representation we significantly influence this entity.

Equity accounted investments previously consolidated

(6) On 28 June 2002, we signed a deed poll whereby we gave up our rights to
appoint a majority of the directors to the board of Keycorp Limited (Keycorp).
Accordingly, we no longer had the capacity to control this entity.

We deconsolidated the Keycorp Group from 28 June 2002 and reclassified the
investment from a controlled entity to an associated entity on the basis that we
have the capacity to significantly influence the operating and financial
policies of the entity.

We have equity accounted our share of Keycorp's post acquisition losses and
reserves to the extent that the investment carrying value is reduced to $nil and
as at 30 June 2003 and 30 June 2002 equity accounting was suspended. The equity
method of accounting will not recommence until our share of profits and reserves
exceeds our cumulative share of losses and reserve reductions.


280

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities (continued)

New incorporations and changes in investments

(7) On 14 November 2002, a share buy back by Ecard Pty Ltd (Ecard) increased our
ownership interest in this entity to 50.0% (from 41.0% at 30 June 2002).

On 26 June 2003, we received $2.5 million as a result of a capital reduction
performed by Ecard. This reduced the carrying amount of our investment in this
entity by $2.5 million. This transaction did not effect our ownership interest.

As at 30 June 2003, our interest in TNAS Limited is 33.3% (2002: 50.0%). Our
shareholding was diluted due to a cancellation of issued capital of this entity
during the financial year.

Liquidation and de-registration of companies

(8) On 27 December 2002, the non operating company IDC Limited was dissolved.

Investment 2000 Pty Ltd was liquidated on 28 April 2003.

Sale of investments

(9) On 29 November 2002, we exercised a put option under the Joint Venture
Agreement between Telstra Holdings Pty Ltd, DataOne Corporation Pte Limited
(DataOne) and other venture parties for the sale of our shares in DataOne for a
total consideration of $3 million (SGD$3 million).

On 8 May 2003, we sold 1 million of our shares in Solution 6 Holdings Limited
(Solution 6) for $0.5 million, reducing our ownership interest from 13.2% to
12.7%. On 19 June 2003, we sold our remaining 32 million shares for $16.7
million.

Prior to the sale of our shares, our investment in Solution 6 decreased from
15.2% at 30 June 2002 to 13.2% in May 2003 due to six separate dilutions in our
shareholding. We were the largest single shareholder and had entitlement to
appoint a director to the board of Solution 6. On that basis, we had the
capacity to affect substantially the financial and operating policies of the
entity and up until the sale of the investment, we continued to equity account
this investment.

Investments no longer equity accounted

(10) On 12 December 2001, we acquired a controlling interest in TelstraClear
Limited (TelstraClear). Subsequent to this, TelstraClear is a controlled entity
and as such nil share of (profits)/losses is recorded for equity accounting
purposes.

Investment in Reach Ltd (REACH)

(11) We have written off the carrying amount of the investment in our 50% owned
joint venture, REACH. Equity accounting of the investment is suspended and the
investment is recorded at zero.

The write off occurred due to the depressed conditions in the global market for
international data and internet capacity resulting in high levels of excess
capacity, intense price competition and lower than expected revenues. Refer note
3 for further information.

Included in our net loss from REACH are the following components:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                                     Year ended
                                                                      30 June
                                                                        2003
                                                                         $m
-------------------------------------------------------------------------------
<S>                                                                  <C>
Our share of REACH's profits up to suspension of equity
accounting........................................................          (57)
Notional goodwill amortisation up to suspension of equity
accounting........................................................           60
Recognition of deferred profit up to suspension of equity
accounting........................................................          (22)
Write off of the carrying value of our investment (note 3)........          965
                                                                     ----------
                                                                            946
                                                                     ==========
</TABLE>

Investment in Australian-Japan Cable Holdings Limited

(12) We have written off the carrying value of our investment in our 39.9% owned
joint venture, Australian-Japan Cable Holdings Limited.


                                                                             281

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Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities (continued)

The movements in the consolidated equity accounted amount of our joint venture
and associated entities are summarised as follows:

<TABLE>
<CAPTION>
                                                                                  Joint venture     Associated
                                                                                     entities        entities
                                                                                  Telstra Group    Telstra Group
------------------------------------------------------------------------------------------------   -------------
                                                                                  Year ended/As    Year ended/As
                                                                                    at 30 June      at 30 June
                                                                                    2003    2002    2003   2002
                                                                            Note      $m      $m      $m     $m
------------------------------------------------------------------------------------------------   -------------
<S>                                                                               <C>      <C>     <C>     <C>
Carrying amount of investments at beginning of year.............................   1,110   1,192      87      67
Additional investments made during the year.....................................      49      67      --      39
                                                                                  --------------   -------------
                                                                                   1,159   1,259      87     106
Share of profits/(losses) before income tax expense.............................      (1)     38      (5)     (1)
Share of income tax expense.....................................................     (12)    (41)     (5)     (2)
                                                                                  --------------   -------------
Share of net losses.............................................................     (13)     (3)    (10)     (3)
Amortisation of unrealised inter-entity profits after income tax................      24      47      --       1
Write off of notional goodwill and release of deferred profit of
Reach Ltd.......................................................................    (965)     --      --      --
Amortisation of notional goodwill...............................................     (61)   (123)     --      --
                                                                                  --------------   -------------
Share of net losses.............................................................  (1,015)    (79)    (10)     (2)
Dividends and distributions received............................................      (1)     --      (5)     (9)
Share of reserves...............................................................      --      53       3     (18)
Share of foreign currency translation reserve and movements due to
exchange rate translations......................................................     (14)     45      (7)     10
Sale, transfers and reductions of investments during the year...................      --    (168)    (13)     --
                                                                                  --------------   -------------
Carrying amount of investments before reduction to recoverable amount...........     129   1,110      55      87
Reduction in value of investments to recoverable amount.........................      --      --     (25)     --
                                                                                  --------------   -------------
Carrying amount of investments at end of year.................................11     129   1,110      30      87
                                                                                  ==============   =============
Our share of contingent liabilities of joint venture entities and associated
entities - we are not directly liable for these.................................       3       1      28      36
Our share of capital commitments contracted for, by our joint venture entities
and associated entities - we are not directly liable for these..................     115     239       2      44
Our share of other expenditure commitments contracted for (other than the supply
of inventories), by our joint venture entities and associated entities - we are
not directly liable for these (a)...............................................     147     287      55      70
                                                                                  ==============   =============
</TABLE>

(a) Our share of commitments of our joint venture entity FOXTEL for which we are
directly liable are included within note 20.


282

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities (continued)

Other disclosures for joint venture entities

Summarised presentation of our share of all of our joint venture entities'
assets, liabilities, revenue and expense items (including joint venture entities
where equity accounting has been suspended):

<TABLE>
<CAPTION>
                                                      Telstra Group
--------------------------------------------------------------------
                                                      Year ended/As
                                                        at 30 June
                                                       2003     2002
                                                         $m       $m
--------------------------------------------------------------------
<S>                                                   <C>     <C>
Joint venture entities
Current assets...................................       461      547
Non current assets...............................     1,190    3,654
                                                      --------------
Total assets.....................................     1,651    4,201
                                                      --------------
Current liabilities..............................       556      566
Non current liabilities..........................     1,376    1,742
                                                      --------------
Total liabilities................................     1,932    2,308
                                                      --------------
Net assets.......................................      (281)   1,893
                                                      ==============
Total revenues...................................     1,721    1,839
Total expenses...................................     1,789    1,825
                                                      --------------
Profits/(losses) before income tax expense.......       (68)      14
Income tax expense...............................        23       41
                                                      --------------
Net losses.......................................       (91)     (27)
                                                      ==============

Other disclosures for associated entities

Summarised presentation of our share of all of
our associated entities' assets, liabilities
and net profits/(losses) (including associated
entities where equity accounting has been
suspended):
Associated entities
Net profits/(losses).............................       (82)       3
                                                      ==============
Assets...........................................       413      571
                                                      ==============
Liabilities......................................       380      474
                                                      ==============
</TABLE>


                                                                             283

<PAGE>

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

24. Investments in joint venture entities and associated entities (continued)

Included in the consolidated financial report of the Telstra Group are:

<TABLE>
<CAPTION>
                                                                                    Joint venture       Associated
                                                                                      entities           entities
                                                                                   Telstra Group       Telstra Group
---------------------------------------------------------------------------------------------------    -------------
                                                                                    As at 30 June      As at 30 June
                                                                                    2003       2002    2003     2002
                                                                                      $m         $m      $m       $m
---------------------------------------------------------------------------------------------------    -------------
<S>                                                                               <C>        <C>       <C>      <C>
Amount of our recorded retained losses balance relating to equity accounting
our joint venture entities and associated entities (i)..........................  (2,545)    (1,530)   (179)    (143)
Amount of our recorded foreign currency translation reserve credit/(debit)
balance relating to equity accounting our joint venture entities and
associated entities.............................................................     (13)         9     (42)     (35)
Amount of our recorded general reserve credit/(debit) balance relating to
equity accounting our joint venture entities and associated entities............      --         --       9      (17)
                                                                                  =================    =============
</TABLE>

(i) The following items are included in this amount:

-   share of net (losses)/profits;
-   initial unrealised inter-entity profit after tax adjustment;
-   notional goodwill amortisation and writedowns;
-   deferred profits amortised; and
-   reduction in value of investments to recoverable amount.


284

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                 Telstra Group   Telstra Entity
---------------------------------------------------------------  --------------
                                                 Year ended 30    Year ended 30
                                                     June             June
                                                  2003     2002   2003     2002
                                                    $m       $m     $m       $m
---------------------------------------------------------------  --------------
<S>                                              <C>       <C>   <C>      <C>
25.  Directors' remuneration -
salaries and other benefits

Total income and benefits of all
directors of the Telstra Entity (a)............                  3,300    3,927
                                                                 ==============
Total income and benefits of all
directors of the Telstra Entity and all of the
directors of our controlled entities (a).......  3,310    4,338
                                                 ==============
</TABLE>

The income brackets of Telstra Entity directors are displayed below together
with the number of Telstra Entity directors with income in those brackets:

<TABLE>
<CAPTION>
                                                                Number   Number
                                                                ---------------
<S>                                                             <C>      <C>
$ 40,000 - $ 49,999..........................................       --        1
$ 50,000 - $ 59,999..........................................       --        1
$ 70,000 - $ 79,999..........................................        1        3
$ 80,000 - $ 89,999..........................................        2        1
$ 90,000 - $ 99,999..........................................        2        1
$ 110,000 - $ 119,999........................................        1        1
$ 120,000 - $ 129,999........................................       --        2
$ 130,000 - $ 139,999........................................        2       --
$ 140,000 - $ 149,999........................................        1       --
$ 150,000 - $ 159,999........................................       --        1
$ 250,000 - $ 259,999........................................       --        1
$ 270,000 - $ 279,999........................................        1       --
$ 280,000 - $ 289,999........................................       --        1
$ 2,110,000 - $ 2,119,999....................................        1       --
$ 2,390,000 - $ 2,399,999....................................       --        1
                                                                ===============
</TABLE>

(a) Directors' remuneration also includes employer contributions made to
superannuation funds


                                                                             285

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                                                Telstra Group    Telstra Entity
--------------------------------------------------------------   ---------------
                                                 Year ended        Year ended
                                                   30 June           30 June
                                                 2003     2002     2003     2002
                                                   $m       $m       $m       $m
--------------------------------------------------------------   ---------------
<S>                                              <C>      <C>    <C>        <C>
26. Executives' remuneration - salaries and
other benefits

An executive officer is a person who is a
member of our senior management team and is
involved in our strategic direction and
operational management. This includes the
chief executive officer (CEO), those who
report directly to the CEO and the next
level of executives who have a direct
reporting relationship to the CEO's direct
reports.
Total income and benefits of all Australian
based executive officers of the Telstra
Entity where their income is $100,000 or
more (a)(b)(c)(d)...........................                     42.680   44.540
                                                                 ===============
Total income and benefits of all Australian
based executive officers of the Telstra
Entity and our controlled entities where
their income is $100,000 or
more (a) (b) (c) (d)........................   42.900   47.106
                                               ===============
</TABLE>

The income brackets of all Australian based
executives whose income is $100,000 or more
are displayed below, together with the
number of executives with income in those
brackets:

<TABLE>
<CAPTION>
                                               Number   Number   Number   Number
                                               ---------------   ---------------
<S>                                            <C>      <C>      <C>      <C>
$100,000 - $109,999.........................        1        1        1       --
$110,000 - $119,999(d)......................        2        1        2        1
$120,000 - $129,999.........................       --        5       --        3
$130,000 - $139,999.........................        1       --        1       --
$140,000 - $149,999.........................       --        5       --        3
$150,000 - $159,999.........................        1        2        1        2
$160,000 - $169,999.........................       --        2       --        2
$170,000 - $179,999.........................       --        1       --       --
$180,000 - $189,999.........................       --        3       --        3
$190,000 - $199,999.........................        2        5        2        3
$200,000 - $209,999.........................        1        3        1        2
$210,000 - $219,999.........................        4        1        3       --
$220,000 - $229,999(d)......................        1        4        1        4
$230,000 - $239,999(d)......................        5       --        5       --
$240,000 - $249,999.........................       --        3       --        3
$250,000 - $259,999.........................        1        3        1        2
$260,000 - $269,999.........................        1       --        1       --
$270,000 - $279,999.........................        2        2        2        2
$280,000 - $289,999.........................        2        2        2        2
$290,000 - $299,999.........................       --        4       --        4
$300,000 - $309,999.........................        1        5        1        4
$310,000 - $319,999.........................        8        3        8        3
$320,000 - $329,999.........................        3        3        3        3
$330,000 - $339,999.........................       --        1       --        1
$340,000 - $349,999(d)......................        3        1        3        1
$350,000 - $359,999.........................        3        4        3        4
$360,000 - $369,999(d)......................        2        3        2        3
$370,000 - $379,999.........................       --        2       --        2
$380,000 - $389,999.........................       --        2       --        1
$390,000 - $399,999.........................        2        2        2        2
$400,000 - $409,999.........................        1        3        1        3
</TABLE>


(continued over page)


286

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                                                Telstra Group     Telstra Entity
--------------------------------------------------------------   ---------------
                                                 Year ended         Year ended
                                                   30 June           30 June
                                                 2003     2002     2003     2002
--------------------------------------------------------------   ---------------
<S>                                              <C>      <C>    <C>        <C>

</TABLE>

26. Executives' remuneration - salaries and other benefits

(continued)

<TABLE>
<CAPTION>
                                               Number   Number   Number   Number
                                               ---------------   ---------------
<S>                                            <C>      <C>      <C>      <C>
$420,000 - $429,999.........................        1        3        1        3
$430,000 - $439,999.........................        1        4        1        4
$440,000 - $449,999(d)......................        5        1        5        1
$450,000 - $459,999.........................       --        1       --        1
$460,000 - $469,999.........................        6        3        6        3
$470,000 - $479,999.........................        3        2        3        2
$480,000 - $489,999.........................       --        1       --        1
$490,000 - $499,999(d)......................        1        2        1        2
$500,000 - $509,999.........................        1        1        1        1
$510,000 - $519,999.........................        1       --        1       --
$520,000 - $529,999.........................        2        4        2        4
$530,000 - $539,999.........................       --        2       --        2
$540,000 - $549,999.........................        2       --        2       --
$550,000 - $559,999.........................        1       --        1       --
$560,000 - $569,999.........................        1        2        1        2
$580,000 - $589,999.........................        1       --        1       --
$600,000 - $609,999(d)......................        1       --        1       --
$610,000 - $619,999.........................        1       --        1       --
$620,000 - $629,999.........................        1        2        1        2
$640,000 - $649,999.........................        1       --        1       --
$650,000 - $659,999(d)......................        1       --        1       --
$670,000 - $679,999.........................       --        1       --        1
$710,000 - $719,999.........................       --        1       --        1
$740,000 - $749,999.........................        1        1        1        1
$880,000 - $889,999(d)......................        1       --        1       --
$890,000 - $899,999(d)......................        1       --        1       --
$930,000 - $939,999.........................        1        1        1        1
$1,000,000 - $1,009,999(d)..................        1       --        1       --
$1,060,000 - $1,069,999.....................       --        1       --        1
$1,130,000 - $1,139,999(d)..................        3       --        3       --
$1,190,000 - $1,199,999.....................       --        1       --        1
$1,250,000 - $1,259,999.....................       --        1       --        1
$1,340,000 - $1,349,999.....................       --        1       --        1
$1,510,000 - $1,519,999.....................        1       --        1       --
$1,680,000 - $1,689,999(d)..................        1        1        1        1
$1,700,000 - $1,709,999.....................       --        1       --        1
$2,110,000 - $2,119,999.....................        1       --        1       --
$2,390,000 - $2,399,999.....................       --        1       --        1
                                               ===============   ===============
</TABLE>


                                                                             287

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

26. Executives' remuneration - salaries and other benefits (continued)

(a) Income and benefits of executives includes:

-  fixed remuneration which is made up of salary, company superannuation
   contributions and benefits including fringe benefits tax;
-  manager incentive plan payments relating to actual performance for Telstra
   and the individual in fiscal 2003;
-  retirement/redundancy/termination payments totalling $5.81 million (2002:
   $4.06 million) for the Telstra Group; and
-  retirement/redundancy/termination payments totalling $5.78 million (2002:
   $4.00 million) for the Telstra Entity.

(b) The Manager Incentive Plan (MIP) is an annual plan open to all of our
executives. The amount of remuneration at risk (target incentive) varies between
10% and 43% (2002: 10% and 43%) of the total remuneration package depending on
the executive's role. The plan is based on performance against set targets for
corporate, business unit and individual measures. The measures include
financial, customer service, employee opinion and individual measures that
support our key business objectives. Before any MIP is payable, a target must be
reached, according to the predefined measures. The plan also provides that
payments are capped at a specified level.

(c) Telstra Growthshare commenced in fiscal 2000 and provides for selected
senior executives who contribute significantly to our future long term
profitability to be invited to participate in an equity based Long Term
Incentive (LTI) plan and/or an equity based deferred remuneration plan, on an
annual basis. Since the commencement of the plan, those selected senior
executives have been eligible to receive an allocation of options, restricted
shares, performance rights or deferred shares, or a combination of each in a
given fiscal year. The options, restricted shares and performance rights can
only be exercised to obtain normal ordinary shares between certain time periods
and if specific long term company performance hurdles have been achieved.
Generally, deferred shares can only be exercised after a certain period of
service has been completed. If the hurdle is not achieved or the service period
not completed, the instrument will have a $nil value and will lapse. For further
details of the LTI plan and equity based deferred remuneration plan, including
detailed explanations of performance hurdles and allocations, refer to note 19.

As there is no AGAAP requirement to record an expense for the fair value of the
options, performance rights and deferred shares issued under Telstra Growthshare
in fiscal 2003 or fiscal 2002, no remuneration value has been included in our
director and executive remuneration disclosures relating to those instruments.
Under Telstra's USGAAP disclosures (refer note 30), we are however required to
derive a value for the purposes of our USGAAP statement of financial
performance. An approach consistent with the binomial and Black-Scholes
valuation models was adopted to complete this requirement.

Details of the valuations derived since the commencement of Telstra Growthshare
and the assumptions used in deriving those values for fiscal 2003 are detailed
in note 19. For further details on our USGAAP disclosures, refer to note 30.

(d) Includes payments relating to individual contractual commitments and the
commencement or completion of employment with us during fiscal 2003.


288

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

27. Related entity transactions

Ultimate controlling entity

The Commonwealth is the ultimate parent and controlling entity of the Telstra
Group. Telstra Corporation Limited is the parent entity in the group comprising
the Telstra Entity and its controlled entities.

We supply telecommunications services to, and acquire other services from, the
Commonwealth, its Departments of State, trading and other agencies. These
transactions are made within normal customer/ supplier relationships on terms
and conditions no more favourable than those available to other customers or
suppliers. There are no exclusive rights to supply any of these services.
Services provided to any one governmental department or agency or the
combination of all of these services in total, do not represent a significant
component of our operating revenues. For these reasons, the financial reports do
not disclose transactions relating to the purchase and sale of goods and
services from or to the Commonwealth, its Departments of State, trading and
other agencies.

Directors of the Telstra Entity

The name of each person who held office as a director of the Telstra Entity for
the whole of fiscal 2003 is:

Robert C Mansfield      John E Fletcher                 Donald G McGauchie
John T Ralph            Belinda J Hutchinson            William A Owens
Sam H Chisholm          Catherine B Livingstone         John W Stocker
Anthony J Clark         Charles Macek                   Zygmunt E Switkowski

Details of directors' remuneration, superannuation and retirement payments are
listed in note 25.

Loans to directors of the Telstra Entity

No non-executive director of the Telstra Entity had a loan with the Telstra
Entity or any of its controlled entities at any time during fiscal 2003 or 2002.

In fiscal 1998, Z E Switkowski (before being appointed chief executive officer
and managing director) was provided with a loan from the Telstra Entity as part
of his participation in the Telstra Employee Share Ownership Plan (TESOP97). The
loan was provided interest free and on the same terms as all other eligible
employees who participated in TESOP97. During fiscal 2000, Z E Switkowski also
participated in the Telstra Employee Share Ownership Plan II (TESOP99). Further
details of the share plans are contained in note 19.

The total amounts repaid during fiscal 2003 was $555 (2002: $469). At 30 June
2003, the outstanding balance of the loan to Z E Switkowski was $7,144 (2002:
$7,699). There were no loans provided during fiscal 2003 and fiscal 2002.

Other transactions with directors of the Telstra Entity and their director
related entities

Each of the directors of the Telstra Entity have telecommunications services
transactions with the Telstra Group, which are not significant and are both
trivial and domestic in nature. Director related entities also have
telecommunications services which are on normal commercial terms and conditions.

Loan to Telstra Growthshare

During fiscal 2000, Telstra created Telstra Growthshare (a senior executive
equity participation plan). In fiscal 2003, we advanced $nil (2002: $81 million)
to Telstra Growthshare to enable it to purchase shares in the Telstra Entity. In
the prior year, of the $81 million loan provided, $7 million was used to acquire
performance rights. This amount has been immediately expensed to the statement
of financial performance as it is not repayable to Telstra. The loan balance at
30 June 2003 of $88 million (2002: $115 million) was used to acquire Telstra
Entity shares over which certain senior executives are granted options. Telstra
Growthshare also holds in trust certain shares allocated to senior executives
and non-executive directors under the ownshare and directshare schemes (refer
note 19 for further information).

Loans to employees

We have two employee shares schemes, being TESOP97 and TESOP99. At the
commencement of the scheme, loans were advanced to participating employees to
enable the purchase of Telstra shares. Loans under TESOP97 and TESOP99 are
provided interest free. During fiscal 2003, $32 million (2002: $40 million) of
the loans under TESOP97 and TESOP99 was repaid. At 30 June 2003, the outstanding
loan balance for both schemes was $198 million (2002: $230 million). Refer to
note 19 for further information.


                                                                             289

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

27. Related entity transactions (continued)

Directors of the Telstra Entity's interests in shares of the Telstra Entity

As at 30 June 2003 and 2002, the directors, family members and their related
entities had interests in the share capital of the Telstra Entity as follows:

Telstra Entity - shares (a)

<TABLE>
<CAPTION>
-----------------------------------------
                         As at 30 June
                           2003      2002
-----------------------------------------
<S>                     <C>       <C>
R C Mansfield........   130,604   118,539
J T Ralph............    92,204    81,171
S H Chisholm.........        --        --
A J Clark............    92,609    84,095
J E Fletcher.........    40,850    35,744
B J Hutchinson.......    62,091    58,375
C B Livingstone......    34,697    31,294
C Macek..............    37,568    23,554
D G McGauchie........    26,476    23,073
W A Owens............     7,495     1,997
J W Stocker..........    85,670    60,503
Z E Switkowski (a)...   155,810   155,810
-----------------------------------------
</TABLE>

Total shareholdings include shares held by the directors and their director
related entities. Unless related to TESOP99, TESOP97 or Telstra Growthshare,
shares acquired or disposed by directors during the year were on an arm's length
basis at market price. Overall, there has been 91,919 shares (2002: 83,420
shares) acquired and nil shares (2002: 2,950 shares) disposed of during fiscal
2003.

(a) There have been no shares issued under TESOP97 and TESOP99 during fiscal
2003 or fiscal 2002. Shares have, however, been allocated under the directshare
equity plan. A schedule of the shareholdings and details on this plan are
included in note 19.

Telstra Entity - cumulative equity based instruments issued under Telstra
Growthshare

<TABLE>
<CAPTION>
--------------------------------------------
                          Z E Switkowski (b)
--------------------------------------------
<S>                       <C>
As at 30 June 2003
Options................            3,456,000
Restricted shares......              146,000
Performance rights.....              756,200
Deferred shares........              249,100
                          ------------------
As at 30 June 2002
Options................            3,456,000
Restricted shares......              146,000
Performance rights.....              258,000
Deferred shares........                   --
                          ------------------
</TABLE>

(b) Refer to note 19 for details of Telstra Growthshare terms and conditions.

Directors of controlled entities

Each of our controlled entity directors and their director related entities have
telecommunications services transactions with us, which are on normal commercial
terms and conditions which are trivial and domestic in nature.

Loans to directors of controlled entities

Certain employees of the Telstra Group who were eligible to participate in
TESOP99 and TESOP97 (refer note 19) were also directors of controlled entities.
The directors of the controlled entities were provided with an interest free
loan to enable the purchase of shares from the Commonwealth on the same terms
and conditions as all other employees eligible to participate in TESOP99 and
TESOP97. During fiscal 2003 and fiscal 2002, certain employees became directors
of controlled entities in the Telstra Group. These directors brought with them
existing loans of $nil and $130,696 respectively.

The amount of new loans advanced during fiscal 2003 was $nil (2002: $nil). Loan
repayments of $45,078 (2002: $55,698) were made including 5 directors who repaid
their TESOP97 loans in full. For TESOP99 shares, directors that have left
continue to be the beneficial owner of the shares. The balance of the loans
outstanding at 30 June 2003 was $211,046 (2002:$315,245). All controlled entity
directors listed below made loan repayments during fiscal 2003 and 2002:

B Akhurst     B Grisdale    M Robey
R Baxter      P Hastings    C Rowles
B Beros       J Hibbard     L Saly
H Bradlow     H Kelly       H Sawczak
T Bundrock    S Lee         G Shepherd
J Burke       A Lockwood    D Simmonds
C Cameron     G Moriarty    R Simpson
D Campbell    G Nicholson   J Stanhope
A Cherubin    T Pearson     P Wallis
T Crossley    N Peckham     P Whorlow
C Davis       P Pickering   K Wijeyewardene
A Day         B Pineau      G Willis
A Dix         D Pitt        L Wood
W Donaldson   J Price

290

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

27. Related entity transactions (continued)

Loans to directors of controlled entities (continued)

There were five directors who repaid their TESOP97 loan in full during the year;
they were C Cameron, G Moriarty, B Pineau, M Robey, and G Shepherd. G Moriarty
and G Shepherd also repaid their TESOP99 loans in full.

Telstra shares owned by the Telstra Superannuation Scheme (Telstra Super)

Telstra Super owns shares in Telstra Corporation Limited. As at 30 June 2003
Telstra Super owned 9,975,761 (2002: 14,838,932) shares at a cost of $46 million
(2002: $77 million) and a market value of $44 million (2002: $69 million). In
fiscal 2003, we paid dividends to Telstra Super of $3 million (2002: $3
million). In addition, Telstra Super holds bonds issued by Telstra Corporation
Limited. As at 30 June 2003, Telstra Super holds bonds with a cost of $8 million
(2002: $3 million) and a market value of $8 million (2002: $3 million). All
purchases and sales of Telstra shares and bonds by Telstra Super are determined
by the trustee and/or its investment managers on behalf of the members of
Telstra Super.

Wholly owned group and other related entity disclosures

Amounts  receivable  from and payable to entities in the wholly owned group and
other related entities:

<TABLE>
<CAPTION>
                                                 Telstra Group   Telstra Entity
---------------------------------------------------------------  --------------
                                                  As at 30 June   As at 30 June
                                                   2003    2002    2003    2002
                                           Note      $m      $m      $m      $m
---------------------------------------------------------------  --------------
<S>                                        <C>    <C>      <C>    <C>      <C>
Total amounts receivable
(including trade debtors) at 30 June from:
Current
Wholly owned controlled entities..............9      --      --     689   2,620
Provision for amounts owed by
controlled entities (i).......................9      --      --    (285)   (855)
                                                 --------------  --------------
                                                     --      --     404   1,765
Other controlled entities.....................9      --      --      --     528
Joint venture entities and associated
entities......................................9      61      61      48      29
Non current
Wholly owned controlled entities..............9      --      --     511     202
Provision for amounts owed by controlled
entities......................................9      --      --     (69)    (86)
                                                 --------------  --------------
                                                     --      --     442     116
Joint venture entities and associated
entities......................................9      29      46      29      46
                                                 --------------  --------------
                                                     90     107     923   2,484
                                                 ==============  ==============
Total amounts payable
(including accounts payable) at 30
June to:
Current
Wholly owned controlled entities..........15,16      --      --   2,015   1,829
Joint venture entities and associated
entities..................................15,16      63     125      56     103
                                                 --------------  --------------
                                                     63     125   2,071   1,932
                                                 ==============  ==============
</TABLE>


                                                                             291

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

27. Related entity transactions (continued)

Wholly owned group and other related entity disclosures (continued)

Transactions with our wholly owned controlled entities

(i) Included in the profit before income tax expense of the Telstra Entity was a
positive net movement of $570 million (2002: $855 million expense) in relation
to the provision for amounts owed by a controlled entity. This balance is
eliminated on consolidation for Telstra Group reporting purposes (refer note 3
for further information).

(ii) In fiscal 2003, a number of purchase and sale transactions occurred between
the Telstra Entity and its wholly owned controlled entities.

-    During fiscal 2003, communication assets were sold by the Telstra Entity to
     a controlled entity in the wholly owned group at cost of $29 million (2002:
     $34 million).

-    The Telstra Entity sold services, purchased goods and communications
     assets, paid fees and received and paid interest to entities in the wholly
     owned group during the year. These transactions are in the normal course of
     business and are on normal commercial terms and conditions.

-    Our controlled entity Network Design and Construction Limited (NDC)
     constructs communication assets on our behalf. During fiscal 2003, we paid
     for the purchase and maintenance of communication assets from NDC totalling
     $737 million (2002: $784 million).

Included in the revenue received in advance amount at 30 June 2003 is $228
million (2002: $233 million) for the use of our Yellow Pages (R) trademark and
$84 million (2002:$90 million) for the use of our White Pages (R) trademark that
were received from a controlled entity. These amounts are not recorded as
revenue until the directories are published according to our accounting policy
described in note 1.19.

During fiscal 2003, the Telstra Entity elected to form a tax consolidated group
with its Australian resident wholly owned controlled entities. We have
transferred the amount of $191 million relating to future income tax benefits
and $94 million relating to provision for deferred income tax from our resident
wholly owned controlled entities to the Telstra Entity as a result of this
election. In addition, the Telstra Entity has reimbursed our resident wholly
owned controlled entities $10 million relating to PAYG instalments made prior to
entering the tax consolidation system (refer note 4 for further information).

Transactions with our other related entities

On 25 April 2003, we entered a capacity prepayment agreement with our joint
venture entity Reach Ltd (REACH). Included in non current receivables for the
year ended 30 June 2003 is a payment of $230 million (US$143 million) to REACH
for a right to receive future carriage and related services capacity. This non
current receivable earns interest at market rates (refer note 9 for further
information).

During fiscal 2003, purchases were made by the Telstra Group of $506 million
(2002: $788 million) and Telstra Entity of $471 million (2002: $735 million)
from Reach. These amounts were for both the purchase of, and entitlement to,
capacity and connectivity services. These purchases were made in line with
market prices. Entitlement to capacity with Reach takes into account our future
needs and growth opportunities. Sales were made for international inbound call
termination services, construction and consultancy by the Telstra Group of $109
million (2002: $115 million) and Telstra Entity of $105 million (2002: $94
million) to Reach.

During fiscal 2003, purchases were made by the Telstra Group of $413 million
(2002: $417 million) and Telstra Entity of $403 million (2002: $407 million)
from our associated entity IBMGSA. These amounts were for information technology
services predominately resulting from a contract with IBMGSA. These purchases
were made on normal commercial terms and conditions (refer note 20 for further
information).

Included in software assets for fiscal 2003 is $132 million (2002: $168 million)
paid to IBMGSA.

During fiscal 2003, we paid for operating expenses on behalf of the following
entities:

-    Telstra Foundation Limited;
-    Telstra Community Development Trust;
-    Telstra Growthshare Trust;
-    Telstra Employee Share Ownership Plan I (TESOP97); and
-    Telstra Employee Share Ownership Plan II (TESOP99).


292

<PAGE>

                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

27. Related entity transactions (continued)

Wholly owned group and other related entity disclosures (continued)

During fiscal 2003, 2002 and 2001, we had the following transactions between
members of the wholly owned group and other related entities:

<TABLE>
<CAPTION>
                                                       Telstra Group           Telstra Entity
---------------------------------------------------------------------------  ------------------
                                                    Year ended 30 June       Year ended 30 June
                                                   2003      2002      2001      2003      2002
                                         Note        $m        $m        $m        $m        $m
---------------------------------------------------------------------------  ------------------
<S>                                      <C>      <C>       <C>        <C>       <C>      <C>

Our transactions with entities in the wholly
owned group and other related entities

Profit before income tax expense for the year
includes the following transactions:

Interest revenue from:
Wholly owned controlled entities............2        --        --        --       124        67
Joint venture entities and associated
entities....................................2         2         2         2         2         2
Borrowing costs:
Wholly owned controlled entities............3        --        --        --        80        58
Provision for doubtful debts - increase/
(decrease):
Wholly owned controlled entities............3        --        --        --      (587)      830
Sale of goods and services to:
Joint venture entities and associated
entities.....................................       232       370       152       124       120
Purchase of goods and services from:
Joint venture entities and associated
entities.....................................     1,113     1,332       616       985     1,210
                                               ----------------------------  ------------------
</TABLE>


                                                                             293

<PAGE>

Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

28. Events after balance date

The directors are not aware of any matter or circumstance that has occurred
since 30 June 2003 that, in their opinion, has significantly affected or may
significantly affect in future years:

-  our operations;
-  the results of those operations; or
-  the state of our affairs;

other than:

On 28 August 2003, the directors of Telstra Corporation Limited declared a fully
franked final ordinary dividend of 12 cents per ordinary share, payable on 31
October 2003 to those shareholders on record at 26 September 2003. A provision
for dividend payable has been raised as at the date of declaration, amounting to
$1,544 million.

On 28 August 2003, plans were announced to spend between $800 million and $1,000
million to buy-back a portion of the Telstra Entity's share capital, subject to
regulatory approval. The share buy-back will be an off market buy-back and is
the first step of a capital management program. The financial effect of the
buy-back cannot be reliably estimated as yet.

On 27 August 2003, we entered into an agreement to sell our 22.6% shareholding
in our associated entity IBM Global Services Australia Limited (IBMGSA), subject
to regulatory approvals. Revenue from the sale of this investment amounted to
$154 million resulting in a profit before income tax expense of $149 million. We
also modified a 10 year contract with IBMGSA to provide information technology
services. This modification will result in an expense of $130 million being
recognised in our fiscal 2004 statement of financial performance and the removal
of $1,596 million of expenditure commitments disclosed as at 30 June 2003 (refer
to note 20 for additional information). In fiscal 2004, the net impact on our
profit before income tax expense of this transaction will be $19 million.

On 18 July 2003, we sold our 16.4% remaining interest in Commander
Communications Limited for $24 million.

The financial effect of the above events after balance date have not been
recognised in our statements of financial performance, financial position or
cash flows for the year ending 30 June 2003.


294

<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures

We undertake transactions in a range of financial instruments which can be
classified as either primary (physical instruments) or secondary instruments
(derivative instruments).

Our primary instruments include:

-  cash assets;
-  receivables;
-  payables;
-  bank deposits;
-  bills of exchange and commercial paper;
-  listed investments and investments in other corporations; and
-  various forms of borrowings both receivable and payable.

These primary financial instruments enable us to achieve company objectives
through facilitating our ongoing operating activities and ensuring that all
entities within the Telstra Group remain solvent at all times.

Secondary instruments or derivative instruments create an obligation or right
that effectively transfers one or more of the risks associated with an
underlying primary financial instrument. We use derivatives to manage our
exposure within levels considered acceptable to the group as determined by
guidelines and policies approved by the board of directors. Instruments that we
use to achieve this include:

-  forward foreign currency contracts;
-  cross currency swaps; and
-  interest rate swaps.

Primary instruments create underlying exposures for the group. The main risks
associated with these instruments include:

-  interest rate risk;
-  foreign currency risk;
-  credit risk; and
-  liquidity risk.

Interest rate risk refers to the risk that the value of a financial instrument
will fluctuate due to changes in market interest rates. Our interest rate risk
arises from the interest bearing financial assets and liabilities that we use
whether the primary instrument has a fixed or variable rate attached. We monitor
this risk on our net debt portfolio which includes our financial liabilities
less matching short term financial assets. We manage interest rate risk by:

-  controlling the settings of the group financial position to target levels of
   fixed and variable interest proportions of the net debt portfolio; and
-  ensuring access to diverse sources of funding, minimising risks of
   refinancing.

We use suitable derivative instruments as part of the management of this risk.

Foreign currency risk refers to the risk that the value of a financial
commitment or investment will fluctuate due to changes in foreign currency
exchange rates. Our foreign currency risk arises due to:

-  firm or anticipated transactions for receipts and payments for international
   telecommunications traffic settled in foreign currencies;
-  purchase commitments priced in foreign currencies;
-  investments denominated in foreign currencies; and
-  a portion of our borrowings denominated in foreign currencies.

We manage this risk by initially seeking contracts effectively denominated in
Australian dollars where possible and economically favourable to do so. Where
financial commitments are effectively denominated in foreign currencies and do
not form part of a natural hedging position, we manage exposure to rate
movements through the use of derivative instruments.

Credit risk is the risk that a contracting entity will not complete its
obligations under a financial instrument and cause us to make a financial loss.
We have exposure to credit risk on all financial assets included in our
statement of financial position. To help manage this risk:

-  we have a policy for establishing credit limits for the entities we deal
   with;
-  we may require collateral where appropriate; and
-  we minimise exposure to individual entities we either transact with or enter
   into derivative contracts with (through a system of credit limits).

Liquidity risk includes the risk that, as a result of our operational liquidity
requirements:

-  we will not have sufficient funds to settle a transaction on the due date;
-  we will be forced to sell financial assets at a value which is less than what
   they are worth; or
-  we may be unable to settle or recover a financial asset at all.

To help reduce these risks we:

-  have a liquidity policy which targets a minimum and average level of cash and
   cash equivalents to be maintained;
-  have readily accessible standby facilities and other funding arrangements in
   place; and
-  generally use instruments that are tradeable in highly liquid markets.


                                                                             295
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

After we have minimised the potential risk associated with entering into a
primary financial instrument, any remaining risk is then hedged through the use
of derivative instruments within guidelines approved by the board of directors.
These instruments enable us to minimise our exposure to:

-  interest rate risk;
-  foreign currency risk; and/or
-  other market risk.

After hedging risk through derivatives, the remaining potential for gain or loss
is managed. This is due to the gains or losses on the underlying physical
transactions being offset by the gains or losses on the related derivative
instrument. Hedging activities also enable us to minimise the volatility of our
cash flows due to changes in interest rates and foreign currency exchange rates.

We do not speculatively trade in derivative instruments. All our derivative
transactions are entered into to hedge the risks relating to underlying physical
transactions.

To hedge our interest rate risk, we mainly use interest rate swaps and cross
currency swaps. Our interest rate risk is calculated on our net debt portfolio
which includes both physical borrowings such as bonds and commercial paper and
associated derivative instruments. We manage our net debt in accordance with set
targeted interest rate profiles and debt maturity profiles.

To hedge our foreign currency risk, we predominantly use cross currency swaps
and forward foreign currency contracts.

Our currency risk arising from translation of foreign currency borrowings and
investments is determined by reference to the underlying primary instrument. In
relation to borrowings, we effectively remove the currency risk by fully
converting them to Australian dollar borrowings at drawdown by applying cross
currency swaps, unless a natural hedge exists. In relation to investments, we
hedge borrowings in the same currency and with the same interest rate
characteristics where appropriate. We enter into forward foreign currency
contracts on anticipated future transactions to reduce our risk to a level
considered acceptable by the company.

Foreign currency risk on transactions (i.e. excluding translation risks) are
calculated on a net foreign exchange basis for individual currencies. This
underlying foreign exchange risk is combined (offset) with the associated
foreign exchange derivatives used to hedge these risks generating our net
foreign exchange risk.

Foreign currency risk also arises on translation of the financial reports of our
non-Australian controlled entities. Our significant non-Australian controlled
entities operate independently from us both financially and operationally. As a
result, the majority of the foreign currency gains or losses arising from this
risk are recorded through the foreign currency translation reserve. Where
hedging of this risk is undertaken, we prefer to use foreign currency borrowings
to provide a natural hedge position. Where this is not an option, other
derivative instruments are used (e.g. forward foreign currency contracts).

We enter into, and hedge transactions in the following significant foreign
currencies:

-  United States dollars;
-  British pounds sterling;
-  New Zealand dollars;
-  Euro;
-  Hong Kong dollars; and
-  Japanese yen.


296
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Interest rate risk

Our exposure to interest rate risk and the effective interest rates on financial
instruments at 30 June 2003 are shown in Table A below. This information
includes all financial instruments both recognised and unrecognised in the
statement of financial position. The information as at 30 June 2002 is shown in
Table B.

<TABLE>
<CAPTION>
Table A                                                                         Telstra Group
---------------------------------------------------------------------------------------------------------------------------------
                                                                          As at 30 June 2003
                                                                        Interest rate
                                            Weighted  ------------------------------------------------
                                            average   Floating              Fixed due dates                Non
                                           effective            --------------------------------------  interest
                                            interest            1 yr.or less  2 to 5 yrs.  over 5 yrs.   bearing  Total (c)
                                              rate    ---------------------------------------------------------------------
                                               %         $m          $m            $m           $m         $m         $m     Note
---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>        <C>       <C>           <C>          <C>          <C>       <C>        <C>
Financial assets
Cash assets...........................(a)       4.48     1,101            --           --           --       199      1,300     8
Trade debtors and accrued revenue........         --        --            --           --           --     3,305      3,305     9
Bank deposits, bills of exchange
and commercial paper > 90 days........(a)         --        --            --           --           --        --         --     9
Share loan to employees..................         --        --            --           --           --       198        198     9
Other receivables.....................(a)       2.50        --            --           --           88       346        434     9
Loans to joint ventures and
associated entities...................(a)       5.23        --            33           29           --        --         62     9
Cross currency swaps..................(a)         --    (1,892)           10        2,192          (27)       --        283     9
Investments...........................(b)         --        --            --           --           --        96         96    11
PCCW converting note..................(a)       5.00        --            --           83           --        --         83    14
                                                      ---------------------------------------------------------------------
Total financial assets/(liabilities)
as at 30 June 2003.......................                 (791)           43        2,304           61     4,144      5,761
                                                      ---------------------------------------------------------------------
Financial liabilities
Trade creditors and accrued
expenditure..............................         --        --            --           --           --     2,275      2,275    15
Other creditors..........................         --        --            --           --           --       301        301    15
Loan from joint venture entity........(a)       4.70        --             1           --           --       --           1    16
Bills of exchange and commercial
paper.................................(a)       3.22       643            --           --           --        --        643    16
Bank loans............................(a)         --        --            --           --           --        --         --    16
Telstra bonds.........................(a)       8.19        --           210          784        1,619        --      2,613    16
Other loans...........................(a)       5.65        --           449        4,409        3,994        --      8,852    16
Cross currency swaps..................(a)         --       593            --         (148)         (19)       --        426    16
Finance lease liabilities.............(a)       7.55        --            18            2           --        --         20    16
Interest rate swaps...................(a)         --     2,222           230         (149)      (2,303)       --         --
                                                      ---------------------------------------------------------------------
Total financial liabilities as at
30 June 2003.............................                3,458           908        4,898        3,291     2,576     15,131
                                                      ---------------------------------------------------------------------
Net financial assets/(liabilities)
as at 30 June 2003.......................               (4,249)         (865)      (2,594)      (3,230)    1,568     (9,370)
                                                      =====================================================================
</TABLE>

(a) The effective yield (effective interest rate) on our net debt at 30 June
2003 was 7.45%, after taking into account the impact of interest rate swaps and
cross currency swaps.

(b) This excludes investments in joint venture entities and associated entities.

(c) Carrying amount as per statement of financial position.


                                                                             297
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Interest rate risk (continued)

<TABLE>
<CAPTION>
Table B                                                                         Telstra Group
---------------------------------------------------------------------------------------------------------------------------------
                                                                            As at 30 June 2002
                                                                        Interest rate
                                            Weighted  ------------------------------------------------
                                            average   Floating              Fixed due dates                Non
                                           effective            --------------------------------------  interest
                                            interest            1 yr.or less  2 to 5 yrs.  over 5 yrs.   bearing  Total(c)
                                              rate    ---------------------------------------------------------------------
                                               %            $m            $m           $m           $m        $m         $m  Note
---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>        <C>       <C>           <C>          <C>          <C>       <C>        <C>
Financial assets
Cash assets...........................(a)       3.45       759            --           --           --       311      1,070     8
Trade debtors and accrued revenue........         --        --            --           --           --     3,438      3,438     9
Bank deposits, bills of exchange and
commercial paper > 90 days............(a)       5.15       388            --           --           --        --        388     9
Share loan to employees..................         --        --            --           --           --       230        230     9
Other receivables.....................(a)       3.50        --            --           --          115       184        299     9
Loans to joint ventures and
associated entities...................(a)       4.61        --            16           46           --        --         62     9
Cross currency swaps..................(a)         --    (1,916)          148        1,548          871        --        651     9
Investments...........................(b)         --        --            --           --           --       105        105    11
PCCW converting note..................(a)       5.00        --            --          337           --        --        337    14
                                                      ---------------------------------------------------------------------
Total financial assets/(liabilities)
as at 30 June 2002.......................                 (769)          164        1,931          986     4,268      6,580
                                                      ---------------------------------------------------------------------
Financial liabilities
Trade creditors and accrued
expenditure..............................         --        --            --           --           --     2,336      2,336    15
Other creditors..........................         --        --            --           --           --       555        555    15
Loan from joint venture entity........(a)       4.70        --             4           --           --        --          4    16
Bills of exchange and commercial
paper.................................(a)       4.41       602            --           --           --        --        602    16
Bank loans............................(a)       3.87     1,613            --           --           --        --      1,613    16
Telstra bonds.........................(a)       8.74        --           582          989        1,616        --      3,187    16
Other loans...........................(a)       5.85        --           148        3,736        4,932        --      8,816    16
Cross currency swaps..................(a)         --       331            --           --         (217)       --        114    16
Finance lease liabilities.............(a)       7.11        --            20           21           --        --         41    16
Interest rate swaps...................(a)         --     1,150          (280)      (1,763)         893        --         --    --
                                                      ---------------------------------------------------------------------
Total financial liabilities as at
30 June 2002.............................                3,696           474        2,983        7,224     2,891     17,268
                                                      ---------------------------------------------------------------------
Net financial assets/(liabilities)
as at 30 June 2002.......................               (4,465)         (310)      (1,052)      (6,238)    1,377    (10,688)
                                                      =====================================================================
</TABLE>

(a) The effective yield (effective interest rate) on our net debt at 30 June
2002 was 7.7%, after taking into account the impact of interest rate swaps and
cross currency swaps.

(b) This excludes investments in joint venture entities and associated entities.

(c) Carrying amount as per statement of financial position.


298
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Credit risk

The recorded amounts of financial assets included in the consolidated statement
of financial position, net of any applicable provisions for loss, represent our
maximum exposure due to credit risk for these assets. Where entities have a
right of set-off and intend to settle on a net basis under master netting
arrangements, this set-off has been recognised in the financial statements on a
net basis. Accordingly, our maximum credit risk exposure amounts to $5,761
million (2002: $6,580 million).

The major concentrations of credit risk for the group arise from our
transactions in money market instruments, forward foreign currency contracts,
cross currency and interest rate swaps. One of the methods that we use to manage
the risk relating to these instruments is to monitor our exposure by country of
institution. When reviewing concentrations of risk, we adjust for the period to
maturity of relevant instruments in our portfolio to accurately consider our
exposure at a point in time. On this basis, our credit risk exposure (which
includes a time based volatility allowance (VAR)) by country of institution is
included in Table C below.

<TABLE>
<CAPTION>
Table C                           Telstra Group
-------------------------------------------------------------
                     Credit risk concentrations (VAR based)
                                  As at 30 June
                    -----------------------------------------
                             2003                 2002
                          %        $m           %        $m
---------------------------------------   -------------------
<S>                 <C>           <C>     <C>           <C>
Australia........         30      2,232         26      2,079
United States....         51      3,876         51      4,027
Japan............         --         16         --         35
Europe...........          9        680         11        847
Hong Kong........         --         --          5        405
Other............         10        767          7        542
                    -------------------   -------------------
                         100      7,571        100      7,935
                    ===================   ===================
</TABLE>

We also have credit risk exposure to an individual contracting entity through a
converting note we hold in PCCW Limited (PCCW). Our maximum credit risk exposure
relating to this transaction amounts to $83 million (2002: $337 million) (refer
to note 14 for further information).

Outside of these above transactions, we do not have any other significant
exposure to any individual contracting entity.

Net fair value of our financial assets and financial liabilities

Apart from those items referred to below, our financial assets and financial
liabilities recorded in the statement of financial position approximate net fair
value.

<TABLE>
<CAPTION>
Table D                           Telstra Group
----------------------------------------------------------
                        Carrying amount    Net fair value
                         As at 30 June     As at 30 June
                         2003     2002     2003     2002
                              %    $m           %    $m
----------------------------------------  ----------------
<S>                     <C>       <C>     <C>       <C>
Not readily traded
Financial assets
Converting note
issued by PCCW               83      337       85      337
                        ----------------  ----------------
Traded on organised
markets
Financial assets
Listed
investments                  32       41       89      144
                        ----------------  ----------------
Financial liabilities
Telstra bonds             2,663    3,253    2,990    3,472
Other loans               8,957    8,904    9,707    9,097
                        ----------------  ----------------
                         11,620   12,157   12,697   12,569
                        ----------------  ----------------
</TABLE>

Unless there is evidence to suggest otherwise, financial assets and financial
liabilities with a short term to maturity are considered to approximate net fair
value. This includes items such as bank deposits, trade debtors, payables, bills
of exchange and commercial paper.

The net fair values of other financial assets and financial liabilities (apart
from our listed investments) are determined through reference to discounted cash
flows, current risk adjusted market interest rates and any rights specific to
each instrument or group of instruments. The net fair values of our listed
investments are determined by reference to prices quoted on the relevant stock
exchanges where the securities are traded.

The net fair value of our derivative instruments is included in the following
discussion on derivatives.


                                                                             299
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Other information on our primary financial instruments

Until 28 June 2002, we held a US$750 million convertible note issued by PCCW. On
this date, PCCW redeemed the note in full and the fair value of the redemption
was applied to acquire PCCW's 40% interest in Telstra CSL Limited and to
subscribe to a new US$190 million mandatorily converting secured note. We valued
the original note on a yield to maturity basis which resulted in a $96 million
expense recorded in our statement of financial performance in fiscal 2002. As
this transaction was completed at the prior year end, the carrying value of the
converting note was considered to represent fair value at 30 June 2002. Also
included in interest expense for fiscal 2002, was $66 million relating to a mark
to market adjustment for interest rate swaps taken out over the convertible note
where the underlying exposure was no longer present.

On 25 April 2003, the converting note was partially redeemed by PCCW as part of
our entry into a capacity prepayment arrangement with our 50% owned joint
venture, Reach Ltd. The remaining converting note at the time of entry into this
arrangement was approximately US$54 million (refer to note 9 and note 14 for
additional information).

Additional information about our derivative instruments

As indicated, we enter into contracts for derivative instruments to hedge risks
relating to underlying transactions. The following information provides further
details on terms and conditions relating to those derivative instruments. To
appropriately assess our exposure to risk, these secondary instruments should be
viewed in the context of the underlying transactions and balances being hedged.
As a result, net market values and other data should not be assessed on their
own.

Our major exposure to interest rate risk and foreign currency risk arises from
our loans and borrowings. It is our policy to hedge the interest rate exposure
on our debt portfolio to adjust the ratio of fixed interest debt to variable
interest debt, as required by our debt management policy. We also hedge currency
exposure on our foreign currency loans and borrowings remaining after
considering any natural hedging positions. We mainly use cross currency swaps,
interest rate swaps, and forward foreign currency exchange contracts to achieve
this position.

The terms and conditions in relation to interest rate and maturity of the cross
currency swaps are similar to the terms and conditions of the underlying hedged
borrowings in note 16.

The due dates of interest rate swaps match the due dates of the underlying debt
within the requirements of our debt management policy. Net interest receipts and
payments are recognised as an adjustment to borrowing costs.

At 30 June 2003 and 2002, the Australian dollar interest rates applicable to our
derivatives varied as shown in Table E below.

<TABLE>
<CAPTION>
Table E                      Telstra Group
----------------------------------------------------
                          Interest rate variations
                               As at 30 June
                        ----------------------------
Cross currency
swaps                       2003           2002
----------------------------------------------------
<S>                     <C>            <C>
Fixed.................  from 7.05% to  from 7.05% to
                             7.87%          7.87%
Variable..............  from 4.60% to  from 4.69% to
                             6.14%          6.58%
Interest rate swaps
-------------------------------------  -------------
Fixed.................  from 5.25% to  from 5.25% to
                            10.11%          8.46%
Variable..............  from 4.42% to  from 4.15% to
                             5.21%          5.44%
----------------------------------------------------
</TABLE>

The notional principal amounts of interest rate swaps represent the face values
of swap contracts entered into by us and that are outstanding at balance date.
The notional principal amounts do not represent amounts exchanged or to be
exchanged by the parties to the contract. They are not a true reflection of the
credit risk and are therefore not recorded in the statement of financial
position.

The maturity dates, net notional principal amounts, net fair value and carrying
amounts of our outstanding interest rate swaps at balance date are shown in
Table F following.

The gross notional principal amounts of our interest rate swaps are $11,551
million (2002: $11,416 million). The gross notional principal amounts of
interest rate swaps is significantly larger than the net notional principal
amounts shown. This is due to the net notional principal amount taking into
account our offsetting positions. Gross positions have also been modified over
time as volumes and positions have changed.


300
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Additional information about our derivative instruments (continued)

<TABLE>
<CAPTION>
Table F                                                                            Telstra Group
----------------------------------------------------------------------------------------------------------------------------
                                                           Net notional
                                                       principal amount (a)      Net fair value (b)     Carrying amount (c)
----------------------------------------------------------------------------------------------------------------------------
                                                                                   As at 30 June
                                                            2003        2002        2003        2002        2003        2002
                                                              $m          $m          $m          $m          $m          $m
----------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>         <C>          <C>         <C>         <C>
Interest rate swaps with floating interest rates
- Less than one year receivable/(payable)...........        (230)        280          (4)         (3)         (2)         (1)
- One to five years receivable/(payable)............         149       1,763         (71)        (89)         (8)        (79)
- Greater than five years receivable/(payable)......       2,303        (893)        319         (12)         31          (8)
                                                       ---------------------------------------------------------------------
                                                           2,222       1,150         244        (104)         21         (88)
                                                       =====================================================================
</TABLE>

(a) At 30 June 2003 and 30 June 2002, we had a net interest rate swap position
of pay fixed. This means that on a net basis we receive interest on the interest
rate swap at variable rates and pay interest on the interest rate swaps at fixed
rates. As a result our exposure to movements in interest rates is managed.

(b) The net fair value represents the market value of both the fixed and
floating components of our interest rate swaps.


(c) The carrying amount represents the accrued interest payable on interest rate
swaps which is included in current payables.

The maturity profile, net principal amounts, net fair values and carrying
amounts of our outstanding cross currency swaps at balance date are shown in
Table G below.

<TABLE>
<CAPTION>
Table G                                                  Telstra Group
-----------------------------------------------------------------------------------------------
                                     Notional
                               principal amount (a)   Net fair value (b)    Carrying amount (c)
-----------------------------------------------------------------------------------------------
                                                         As at 30 June
                                    2003       2002       2003       2002       2003       2002
                                      $m         $m         $m         $m         $m         $m
-----------------------------------------------------------------------------------------------
<S>                            <C>            <C>         <C>        <C>        <C>        <C>
Cross currency swaps
- Less that one year.........        440        119          8         36          7         31
- One to five years..........      4,024      3,273        348        561        172        502
- Greater than five years....      4,287      4,894       (477)      (102)      (308)        33
                               ----------------------------------------------------------------
                                   8,751      8,286       (121)       495       (129)       566
                               ================================================================
</TABLE>

(a) The notional principal amount represents the face value of the payable leg
of our swaps we have entered into, denominated in Australian dollars.

(b) The net fair value represents the market value of our outstanding cross
currency swaps.

(c) The carrying amount represents the net principal which is recorded in
interest bearing liabilities, current receivables and non current receivables
and accrued interest which is recorded in current receivables.


                                                                             301
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Additional information about our derivative instruments (continued)

We also have exposure to foreign currency risk through our ongoing business
activities where we have purchase or settlement commitments in foreign
currencies. This includes equipment and material purchases or other currency
conversion exposures on ongoing receivables and payables, excluding loan and
borrowing balances. In addition, we have exposure to foreign currency risk as a
result of our investments in offshore activities, including our investments in
TelstraClear Limited and Hong Kong CSL Limited. This risk is created by the
translation of the net assets of these entities from their operating currency to
Australian dollars. Our exposures before and after hedging are detailed in Table
H below:

<TABLE>
<CAPTION>
Table H                                                 Telstra Group
-------------------------------------------------------------------------------
                                                 Exposure          Exposure
                                              before hedging     after hedging
-------------------------------------------------------------------------------
                                              As at 30 June     As at 30 June
                                                2003     2002     2003     2002
                                                  $m       $m       $m       $m
-------------------------------------------------------------   ---------------
<S>                                           <C>        <C>    <C>        <C>
Net anticipated future transactions
(amounts payable)...........................     273      503      139      261
Net transaction exposure (on amounts payable
recorded in the statement of financial
position)...................................     176      299       79      154
Translation exposure (offshore investments).  (1,802)    (959)  (1,065)    (959)
                                              ---------------   ---------------
                                              (1,353)    (157)    (847)    (544)
                                              ===============   ===============
The maturity dates of the anticipated future
transactions are as follows:
Less than one year..........................     264      503
One to five years...........................       9       --
                                              ---------------
                                                 273      503
                                              ===============
</TABLE>

Our hedging policy provides effective hedging for all our foreign currency
exchange exposures within levels considered acceptable to the company.

Details of forward foreign currency contracts we have entered into to hedge our
trading activities are combined with forward foreign currency contracts entered
into to hedge our loans and borrowings in Table I below. Details include net
Australian dollar amounts receivable/(payable), settlement dates and average
contractual forward exchange rates.

<TABLE>
<CAPTION>
Table I                                                        Telstra Group
-------------------------------------------------------------------------------
                                                               As at 30 June
                                                                2003       2002
                                                                  $m         $m
-------------------------------------------------------------------------------
<S>                                                         <C>            <C>
United States dollars
- less than three months, at rates averaging United States
  dollars $0.5465 (2002: US$0.5389).......................         6        117
- 3 to 12 months, at rates averaging United States
  dollars $0.6112 (2002: US$0.5643).......................        97        251
- 12 to 18 months, at rates averaging United States
  dollars $0.6046 (2002: US$0.4989).......................         5          9
- over 18 months, at rates averaging United States
  dollars $0.6716 (2002: US$0.5630).......................        16         (2)
                                                            -------------------
                                                                 124        375
                                                            -------------------
</TABLE>


302
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

29. Additional financial instruments disclosures (continued)

Additional information about our derivative instruments (continued)

<TABLE>
<CAPTION>
Table I (continued)                                             Telstra Group
-------------------------------------------------------------------------------
                                                                As at 30 June
                                                                 2003      2002
                                                                   $m        $m
-------------------------------------------------------------------------------
<S>                                                            <C>         <C>
British pounds sterling
- less than three months, at rates averaging British pounds
  sterling 0.3560 (2002: British pounds sterling 0.3991)....        1         1
- 3 to 12 months, at rates averaging British pounds
  sterling nil (2002: British pounds sterling 0.3784).......       --         7
                                                               ----------------
                                                                    1         8
                                                               ----------------
Euro
- less than three months, at rates averaging Euro 0.5430
  (2002: Euro 0.5895).......................................        3        17
- 3 to 12 months, at rates averaging Euro nil
  (2002: Euro 0.5927).......................................       --        31
                                                               ----------------
                                                                    3        48
                                                               ----------------
Japanese yen
- less than three months, at rates averaging Japanese
  yen nil (2002: Japanese yen 69.5398)......................       --         1
- 3 to 12 months, at rates averaging Japanese yen nil
  (2002: Japanese yen 70.2000)..............................       --         3
                                                               ----------------
                                                                   --         4
                                                               ----------------
New Zealand dollars
- less than three months, at rates averaging New Zealand
  dollars $1.1465 (2002: New Zealand dollars $1.215)........     (148)     (500)
                                                               ----------------
                                                                 (148)     (500)
                                                               ----------------
Hong Kong dollars
- less than three months, at rates averaging Hong Kong
  dollars $4.4593 (2002: Hong Kong dollars nil).............     (255)       --
                                                               ----------------

Our offshore controlled entities have also entered into the
following Australian dollar forward foreign currency
contracts:
- less than three months, at rates averaging Australian
  dollars $0.8764 (2002: Australian dollars nil)............       (1)       --
- 3 to 12 months, at rates averaging Australian dollars
  $0.9702 (2002: Australian dollars nil)                           (4)       --
                                                               ----------------
                                                                   (5)       --
                                                               ----------------
</TABLE>

The net fair value of forward foreign currency contracts at 30 June 2003 is a
$22 million gain (2002: $30 million loss).

For interest rate swaps, cross currency swaps and forward foreign currency
contracts where the carrying amount is in excess of net fair value at balance
date, no reduction to net fair value is made since these derivatives act as
hedges of underlying physical transactions.

In addition to the credit risk on our primary financial instruments, we also
have exposure on our derivative instruments. The values shown in Table J below
include all transactions where the net fair value is favourable. For credit
purposes, there is only a credit risk where the contracting entity is liable to
pay us in the event of a closeout. The amounts disclosed in Table J are
different from those shown in the net fair value amounts in Tables G and H as
these show the net fair value after netting favourable against unfavourable
transactions. Table J only shows the favourable transactions.

<TABLE>
<CAPTION>
Table J                                                 Telstra Group
------------------------------------------------------------------------
                                                        Net fair value
                                                     -------------------
                                                        As at 30 June
                                                         2003       2002
                                                           $m         $m
------------------------------------------------------------------------
<S>                                                  <C>            <C>
Interest rate swaps...............................        623        129
Cross currency swaps..............................        431        562
Forward foreign currency contracts................         50          9
                                                     -------------------
                                                        1,104        700
                                                     ===================
</TABLE>


                                                                             303
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures

Reconciliations to financial reports prepared using USGAAP

Our consolidated financial report is prepared in accordance with accounting
principles generally accepted in Australia (AGAAP). AGAAP has significant
differences from the accounting principles generally accepted in the United
States (USGAAP).The significant differences between AGAAP and USGAAP are
presented throughout note 30. Additionally, where there is no conflict with
AGAAP requirements we have incorporated some of the additional USGAAP
requirements throughout the AGAAP financial statements.

<TABLE>
<CAPTION>
                                                                    Telstra Group
-----------------------------------------------------------------------------------------------
                                                                 Year ended 30 June
                                                          2003       2003       2002       2001
                                               Note         $m       US$m         $m         $m
-----------------------------------------------------------------------------------------------
<S>                                           <C>     <C>           <C>        <C>        <C>
Reconciliation of net income to USGAAP

AGAAP net income reported in statement of
financial performance..............................      3,429      2,297      3,661      4,058
Adjustments required to agree with USGAAP
Property, plant and equipment.................30(a)       (323)      (216)      (204)      (192)
Retirement benefit gain/(expense).............30(f)        130         87        472       (110)
Amortisation of software assets...............30(i)         --         --         --        (25)
Mobile phone subsidies........................30(k)         --         --         30        144
Income tax benefit/(expense)..................30(l)        164        110        (59)       307
Employee compensation expense.................30(m)         --         --        (41)        (9)
Redundancy and restructuring provision -
fiscal 2000 reversal..........................30(n)         --         --        (94)      (392)
Derivative financial instruments and
hedging activities............................30(o)       (420)      (281)       (17)      (101)
PCCW converting note..........................30(o)         12          8        198       (198)
Sale of Global Wholesale Business to
Reach Ltd (REACH).............................30(p)         --         --         --       (882)
Equity accounting and write-off adjustments
for REACH.....................................30(q)        665        445         36         17
Consolidation adjustment for Telstra CSL
Limited (CSL).................................30(r)         --         --        (65)       959
Fair value / general reserve adjustments......30(s)          9          6        (19)        --
Goodwill adjustments..........................30(t)       (216)      (145)        --         --
                                                      -----------------------------------------
Net income per USGAAP..............................      3,450      2,311      3,898      3,576
                                                      =========================================
Statement of financial performance measured
and classified per USGAAP

Operating revenue (i)..............................     20,495     13,732     20,196     19,456
Operating expenses:
Labour.............................................      3,074      2,060      2,862      2,899
Goods and services purchased.......................      3,236      2,168      3,613      3,320
Depreciation and amortisation......................      3,532      2,366      3,536      3,149
Other operating expenses...........................      4,337      2,906      4,072      3,854
                                                      -----------------------------------------
Total operating expenses...........................     14,179      9,500     14,083     13,222
                                                      -----------------------------------------
Operating income...................................      6,316      4,232      6,113      6,234
Net interest expense (ii)..........................       (823)      (552)      (851)      (705)
Dividend income...................................2          1          1          1         16
Share of net losses of associates and joint
venture entities...................................       (114)       (76)       (41)      (143)
Other (expense)/income (iii).......................       (297)      (199)       537        370
                                                      -----------------------------------------
Net income before income tax expense and
minority interests.................................      5,083      3,406      5,759      5,772
Income tax expense............................30(l)      1,359        911      1,859      2,044
                                                      -----------------------------------------
Net income before minority interests and
cumulative effect adjustments......................      3,724      2,495      3,900      3,728
Minority interests.................................         35         23         (2)        10
                                                      -----------------------------------------
Net income before cumulative effect
adjustments........................................      3,759      2,518      3,898      3,738
Cumulative effect of changes in
accounting principles, net of
tax...............................30(j),30(o),30(t)       (309)      (207)        --       (162)
                                                      -----------------------------------------
Net income per USGAAP..............................      3,450      2,311      3,898      3,576
                                                      =========================================
</TABLE>


304
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Reconciliations to financial reports prepared using USGAAP
(continued)

<TABLE>
<CAPTION>
                                                                                               Telstra Group
----------------------------------------------------------------------------------------------------------------------------
                                                                                             Year ended 30 June
                                                                                       2003       2003       2002       2001
                                                                            Note         $m       US$m         $m         $m
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>          <C>        <C>        <C>
Reconciliation of certain statement of financial performance
components to USGAAP
Presenting information according to USGAAP involves reclassifying the
presentation adopted for AGAAP. The reconciliation of operating revenue, net
interest expense and other income from AGAAP to USGAAP is provided below:
Revenue from ordinary activities per AGAAP.....................................2     21,616     14,483     20,802     22,983
Less:
Dividend income................................................................2          1          1          1         16
Revenue from the sale of non current assets....................................2        859        575        302      3,303
Reclassifications due to cumulative effect of change in
accounting principle...................................................1.2, 3(c)         --         --         --       (777)
Writeback of superannuation additional contribution liability.........3(c),30(f)         --         --         --        725
Other revenue per AGAAP (iv)....................................................        261        175        303        260
                                                                                   -----------------------------------------
(i) Operating revenue per USGAAP................................................     20,495     13,732     20,196     19,456
                                                                                   =========================================
Net borrowing costs per AGAAP...................................................       (795)      (533)      (770)      (666)
Additional derivative financial instruments and hedging expenses................        (15)       (10)       (20)       (15)
Interest income on REACH capacity prepayment....................................          2          1         --         --
PCCW converting note interest revenue reversal..................................        (15)       (10)       (61)       (24)
                                                                                   -----------------------------------------
(ii) Net interest expense per USGAAP............................................       (823)      (552)      (851)      (705)
                                                                                   =========================================
(iv) Other revenue per AGAAP....................................................        261        175        303        260
Add/(subtract):
AGAAP Net profit/(loss) on sale of:
- property, plant and equipment.............................................3(a)        173        116         (4)         7
- investments in controlled entities........................................3(a)          5          3          3          4
- investments in joint venture entities.....................................3(a)          3          2         --          2
- investments in associated entities........................................3(a)          9          6         --         --
- investments in listed entities and other corporations.....................3(a)         (2)        (1)        (5)       266
- patents, trademarks and licences..........................................3(a)         --         --          1          8
- business..................................................................3(a)         10          7         --        852
USGAAP reversal of gain on sale of Global Wholesale Business....................         --         --         --       (859)
USGAAP net profit on sale of non current assets.................................         48         33         (7)        38
USGAAP write-off of REACH investment.......................................30(q)       (203)      (136)        --         --
USGAAP impairment of CSL goodwill..........................................30(t)        (85)       (57)        --         --
USGAAP reversal of gain on sale/leaseback and subsequent amortisation......30(a)       (162)      (109)        --         --
Derivative financial instruments and hedging activities.........................       (404)      (271)         4        (59)
PCCW converting note............................................................         27         18        259       (174)
Net foreign currency translation gains/(losses).................................         23         15        (17)        25
                                                                                   -----------------------------------------
(iii) Other (expense)/income per USGAAP.........................................       (297)      (199)       537        370
                                                                                   =========================================
</TABLE>


                                                                             305
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Reconciliations to financial reports prepared using USGAAP
(continued)

<TABLE>
<CAPTION>
                                                                                                 Telstra Group
----------------------------------------------------------------------------------------------------------------------------
                                                                                              Year ended 30 June
                                                                                       2003       2003       2002       2001
                                                                            Note         $m       US$m         $m         $m
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>           <C>        <C>          <C>        <C>
USGAAP Earnings per share
Net income per USGAAP...........................................................      3,450      2,311      3,898      3,576
                                                                                      CENTS   US CENTS      CENTS      CENTS
                                                                                   -----------------------------------------
Basic earnings per share before cumulative effect of change in
accounting principles...........................................................       29.4       19.7       30.5       29.3
Cumulative effect of change in accounting principles (net of tax):
Revenue recognition (SAB 101)..............................................30(j)         --         --         --       (1.1)
Derivative financial instruments and hedging activities....................30(o)         --         --         --       (0.1)
Transition impairment of CSL goodwill................................30(r),30(t)       (2.4)      (1.6)        --         --
                                                                                   -----------------------------------------
Basic earnings per share per USGAAP (cents).....................................       27.0       18.1       30.5       28.1
                                                                                   =========================================
Dilutive earnings per share before cumulative effect of change
in accounting principles........................................................       29.3       19.6       30.4       29.1
Cumulative effect of change in accounting principles (net of tax):
Revenue recognition (SAB 101)..............................................30(j)         --         --         --       (1.1)
Derivative financial instruments and hedging activities....................30(o)         --         --         --       (0.1)
Transition impairment of CSL goodwill................................30(r),30(t)       (2.4)      (1.6)        --         --
                                                                                   -----------------------------------------
Diluted earnings per share per USGAAP (cents)...................................       26.9       18.0       30.4       27.9
                                                                                   =========================================

                                                                                               Number (in millions)
                                                                                   -----------------------------------------
Weighted average number of ordinary shares and common share
equivalents used for basic earnings per share calculations (v)..................     12,793     12,793     12,783     12,764
Weighted average number of employee share options exercised
during the year (vi)............................................................         36         36         44         65
                                                                                   -----------------------------------------
Weighted average number of potential ordinary shares and
common share equivalents used for diluted earnings per share calculations.......     12,829     12,829     12,827     12,829
                                                                                   =========================================

(v) Reconciliation of weighted average number of ordinary shares and common
share equivalents used for basic earnings per share calculations                               Number (in millions)
                                                                                   -----------------------------------------
Number of shares used for AGAAP earnings per share calculations...............18     12,867     12,867     12,867     12,867
Adjusted for weighted average TESOP97 and 99 options outstanding
during the year (vii)...........................................................        (74)       (74)       (84)      (103)
                                                                                   -----------------------------------------
Number of shares used for USGAAP basic earnings per share calculations..........     12,793     12,793     12,783     12,764
                                                                                   =========================================
</TABLE>

(vi) Only the TESOP97 options are dilutive to dilutive earnings per share per
USGAAP. The average market price of Telstra shares is below the exercise price
of the TESOP99 options and therefore the TESOP99 options are not dilutive. The
exercise price for TESOP97 and TESOP99 options is the remaining loan balance
payable by the employee to Telstra.

(vii) For USGAAP, the earnings per share calculations for fiscal 2003, 2002 and
2001 are affected by the issue of TESOP97 and TESOP99 options referred to in
note 30(m) below.


306
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Reconciliations to financial reports prepared using USGAAP
(continued)

<TABLE>
<CAPTION>
                                                                                                 Telstra Group
----------------------------------------------------------------------------------------------------------------------------
                                                                                                 As at 30 June
                                                                                       2003       2003       2002       2001
                                                                            Note         $m       US$m         $m         $m
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>        <C>        <C>        <C>
Reconciliation of shareholders' equity to USGAAP
AGAAP shareholders' equity per statement of financial position..................     15,422     10,333     14,106     13,722
Cumulative adjustments required to agree with USGAAP
Property, plant and equipment..............................................30(a)         96         65        419        622
Listed investments (available-for-sale securities).........................30(b)         57         38        103        417
Dividend payable......................................................7,17,30(c)         --         --      1,415      1,416
Minority interests.........................................................30(d)         (2)        (2)         2       (483)
Retirement benefits........................................................30(f)      4,217      2,825      4,087      3,615
Mobile phone subsidies.....................................................30(k)         --         --         --        (30)
Income tax.................................................................30(l)     (1,031)      (691)    (1,293)    (1,337)
Employee share loans.......................................................30(m)       (198)      (133)      (230)      (270)
Redundancy and restructuring provision - fiscal 2000.......................30(n)         --         --         --         94
Derivative financial instruments and hedging activities....................30(o)       (538)      (360)      (133)      (133)
PCCW converting note (available-for-sale security).........................30(o)          2          1         --       (104)
Sale of Global Wholesale Business to Reach Ltd - fiscal 2001...............30(p)       (882)      (591)      (882)      (882)
Equity accounting and write-off adjustments for Reach Ltd................. 30(q)        696        466         41         17
Consolidation adjustment for Telstra CSL Limited (CSL).....................30(r)        456        306        821      1,131
Fair value / general reserve adjustments...................................30(s)        (54)       (36)       (54)        --
Goodwill adjustments.......................................................30(t)       (216)      (145)        --         --
                                                                                    ----------------------------------------
Shareholders' equity per USGAAP.................................................     18,025     12,076     18,402     17,795
                                                                                    ========================================
Statement of financial position measured and classified per USGAAP
Current assets
Cash...........................................................................8      1,300        871      1,070      1,077
Accounts receivable, net........................................................      3,561      2,386      4,038      4,259
Inventories...................................................................10        260        174        204        320
Deferred tax asset.........................................................30(l)        166        111        301        171
Other assets....................................................................        578        387        604        519
                                                                                    ----------------------------------------
Total current assets............................................................      5,865      3,929      6,217      6,346
                                                                                    ----------------------------------------
Non current assets
Receivables.....................................................................        259        174        178         74
Derivative financial instruments................................................        694        465        637        514
Inventories...................................................................10         14          9         20          8
Investments - accounted for using the equity method.............................        161        108        386        424
Investments - other non current.................................................        238        159        545      1,963
Property, plant and equipment...................................................     44,635     29,906     43,800     41,196
Accumulated depreciation of proprerty, plant and equipment......................    (21,356)   (14,309)   (19,515)   (17,758)
Goodwill, net...................................................................      2,112      1,415      2,800      2,636
Other intangible assets, net....................................................      1,146        768      1,358      1,464
Prepaid pension assets.....................................................30(f)      4,217      2,825      4,087      3,615
Other assets....................................................................      2,437      1,633      2,206      2,078
                                                                                    ----------------------------------------
Total non current assets........................................................     34,557     23,153     36,502     36,214
                                                                                    ----------------------------------------
Total assets....................................................................     40,422     27,082     42,719     42,560
                                                                                    ========================================
</TABLE>


                                                                             307
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Reconciliations to financial reports prepared using USGAAP
(continued)

<TABLE>
<CAPTION>
                                                                                                     Telstra Group
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                      As at 30 June
                                                                                            2003       2003       2002       2001
                                                                                 Note         $m       US$m         $m         $m
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>       <C>        <C>        <C>        <C>
Statement of financial position measured and classified per USGAAP (continued)
Current liabilities

Payables............................................................................       2,525      1,692      2,793      2,823
Borrowings - short term debt.......................................................16        644        431        606      2,552
Borrowings - long term debt due within one year....................................16        679        455      1,260         52
Income tax payable..................................................................4        660        442        632        657
Provisions..........................................................................         353        237        488        557
Revenue received in advance.........................................................         991        664      1,037      1,128
                                                                                       ------------------------------------------
Total current liabilities...........................................................       5,852      3,921      6,816      7,769
                                                                                       ------------------------------------------
Non current liabilities
Payables............................................................................          13          9        129        120
Derivative financial instruments....................................................         549        368        267        103
Borrowings - long term debt.........................................................      11,580      7,758     12,372     11,943
Income tax payable..................................................................          --         --         --         91
Deferred tax liability..........................................................30(l)      3,011      2,017      3,449      2,967
Provisions..........................................................................         814        545        848        846
Revenue received in advance.........................................................         576        386        438        456
                                                                                       ------------------------------------------
Total non current liabilities.......................................................      16,543     11,083     17,503     16,526
                                                                                       ------------------------------------------
Total liabilities...................................................................      22,395     15,004     24,319     24,295
                                                                                       ==========================================
Minority interests..................................................................           2          2         (2)       470
                                                                                       ------------------------------------------
Net assets                                                                                18,025     12,076     18,402     17,795
                                                                                       ==========================================
Shareholders' equity
Contributed equity.................................................................18      6,433      4,310      6,433      6,433
Share loan to employees.........................................................30(m)       (198)      (133)      (230)      (270)
Additional paid in capital from employee share plans............................30(m)        333        223        333        292
                                                                                       ------------------------------------------
Total share capital.................................................................       6,568      4,400      6,536      6,455
                                                                                       ------------------------------------------
Accumulated other comprehensive (loss)/income (reserves) (ix).......................        (554)      (371)       (27)       532
Retained earnings...................................................................      12,011      8,047     11,893     10,808
                                                                                       ------------------------------------------
Total shareholders' equity..........................................................      18,025     12,076     18,402     17,795
                                                                                       ==========================================
</TABLE>

(viii) Cost of sales includes both direct and indirect costs involved in the
sale of the Company's goods and services. For a service company this would
commonly include depreciation and other indirect costs associated with the
provision of services. However, the Company does not report its costs according
to this description and classifies all of its expenses according to the nature
of the expense, referred to as "goods and services purchased" in relation to the
sale of goods and services. Goods and services purchased comprises:

     -  Network service capacity from external communication service
        providers;
     -  Mobile handsets from third party suppliers;
     -  Cost of goods sold; and
     -  Directory paper costs.

Goods and services purchased does not equate to cost of sales due to the non
inclusion of depreciation and other indirect costs associated with the provision
of our telecommunications services.


308
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Reconciliations to financial reports prepared using USGAAP
(continued)

(ix) Accumulated other comprehensive (loss)/income (reserves)

Accumulated other comprehensive (loss)/income, net of related tax, for USGAAP
consists of the following components:

<TABLE>
<CAPTION>
                                                             Telstra Group
-------------------------------------------------------------------------------
                                                             As at 30 June
                                                         2003     2002     2001
                                                           $m       $m       $m
-------------------------------------------------------------------------------
<S>                                                    <C>        <C>      <C>
General reserve.....................................       --       --        4
                                                       ------------------------
Foreign currency translation reserve................     (645)     (98)     188
(tax effect)........................................       72       17      (15)
                                                       ------------------------
                                                         (573)     (81)     173
                                                       ------------------------
Derivative financial instruments....................      (22)     (27)     (31)
(tax effect)........................................        7        9        9
                                                       ------------------------
                                                          (15)     (18)     (22)
                                                       ------------------------
Unrealised gain on available-for-sale securities....       47      103      511
(tax effect)........................................      (13)     (31)    (134)
                                                       ------------------------
                                                           34       72      377
                                                       ------------------------
Accumulated other comprehensive
(loss)/ income (net of tax).........................     (554)     (27)     532
                                                       ========================
</TABLE>

Other comprehensive loss disclosure

Other comprehensive loss is calculated by totalling movements in shareholders'
equity that are not related to contributions from owners or payments to owners.

<TABLE>
<CAPTION>
                                                            Telstra Group
-------------------------------------------------------------------------------
                                                          Year ended 30 June
                                                         2003     2002     2001
                                                           $m       $m       $m
-------------------------------------------------------------------------------
<S>                                                    <C>        <C>      <C>
General reserve.....................................       --       (4)       3
Foreign currency translation reserve (after tax)....     (492)    (254)     214
Derivativefinancialinstruments (after tax)..........        3        4      (22)
Unrealised (loss)/gain on available-for-sale
securities (after tax)..............................      (49)    (302)      31
Realised loss/(gain) on sale of available-for-sale
securities (after tax) transferred to net income....       11       (3)    (266)
                                                       ------------------------
USGAAP other comprehensive loss.....................     (527)    (559)     (40)
                                                       ========================
</TABLE>

The re-classification out of accumulated other comprehensive (loss)/ income to
net income was determined on the basis of specific identification.

In fiscal 2003, the proceeds from sales of available-for-sale equity securities
were $7 million (2002: $22 million, 2001: $603 million).

Total comprehensive income disclosure

Total comprehensive income is calculated by adding net income and other
comprehensive loss.

<TABLE>
<CAPTION>
                                                             Telstra Group
-------------------------------------------------------------------------------
                                                          Year ended 30 June
                                                         2003     2002     2001
                                                           $m       $m       $m
-------------------------------------------------------------------------------
<S>                                                    <C>       <C>      <C>
Net income per USGAAP...............................    3,450    3,898    3,576
USGAAP other comprehensive loss.....................     (527)    (559)     (40)
                                                       ------------------------
USGAAP Total comprehensive income...................    2,923    3,339    3,536
                                                       ========================
</TABLE>


                                                                             309
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP

30(a) Property, plant and equipment

Revaluations

Prior to 1 July 2000, AGAAP allowed property, plant and equipment to be revalued
upwards. Increases in revalued amounts were recorded in an asset revaluation
reserve, unless they reversed a previous revaluation decrease charged to the
statement of financial performance. Impairments (decreases) to asset values were
recorded in the statement of financial performance, unless they reversed a
previous increase still remaining in the asset revaluation reserve.

Revaluations of property, plant and equipment are not allowed under USGAAP,
except for permanent impairments. Including the broadband network described
below, the net adjustment included in the reconciliation to shareholders equity
to reduce revalued property, plant and equipment to historical cost for
revaluations and impairments not allowed under USGAAP is $401 million for fiscal
2003 (2002: $407 million; 2001: $371 million). For fiscal 2003, net adjustments
for depreciation and disposals of $6 million benefit (2002: $36 million expense;
2001: $2 million benefit) has been included in the reconciliation of net income
to USGAAP.

Under USGAAP, a permanent impairment loss can only be recorded when the future
undiscounted cash flows relating to a group of assets are less than the recorded
amount of the assets. Under AGAAP, impairment losses are recorded in accordance
with Telstra's accounting policy when discounted future cash flows are less than
the recorded amount of the asset. Under AGAAP, in note 3, we recorded no
impairment losses during fiscal 2003 or fiscal 2002 and a $31 million impairment
loss in fiscal 2001. This loss related to Infrastructure Services & Wholesale
projects that were cancelled and the related capitalised internal use software
that was written off. This write off was allowed under USGAAP and no adjustment
to the USGAAP reconciliation was made.

USGAAP Impairment loss reversal - broadband network: In fiscal 1997, under AGAAP
we wrote down the value of our broadband network. We recognised an impairment
loss of $342 million in net income and $245 million was adjusted against the
asset revaluation reserve. Under USGAAP, the initial future undiscounted cash
flows derived from our broadband network were greater than the recorded value
and continue to be as at 30 June 2003. The reversal of the impairment loss has
been adjusted for in the reconciliations of net income and shareholders' equity
to USGAAP and additional depreciation of $62 million was recorded in the
reconciliation of net income to USGAAP in fiscal 2003 (2002: $62 million; 2001:
$62 million), included in the net adjustments above.

Depreciation expense

Depreciation expense for AGAAP and USGAAP has been calculated using the straight
line method of depreciation. Under AGAAP, depreciation expense is based on the
recorded amount of the asset and is therefore higher for assets that have been
revalued upwards. Depreciation expense has been adjusted to reflect depreciation
based on original cost in the reconciliations of net income and shareholders'
equity to USGAAP.

Indirect overheads included as part of the cost of constructed assets

Under AGAAP, before 1 July 1996 we recorded overhead costs directly associated
with the construction of our communication assets as part of the cost of those
assets. We expensed all indirect overhead costs as incurred. From 1 July 1996,
indirect overhead costs (as well as direct overhead costs) associated with
operations and management personnel directly involved in the construction of our
communication assets have been recorded as part of the cost of those assets.
This policy is now the same as USGAAP.

To reflect the current policy, as if it had always been in place for USGAAP
purposes, before 1 July 1996, capitalised overheads with a net book value of
$515 million (2002:$638 million, 2001: $782 million) have been included in the
reconciliation of shareholders' equity to USGAAP as at 30 June 2003. For fiscal
2003, additional depreciation and disposals of $123 million (2002: $144 million;
2001: $142 million) have been included in the reconciliation of net income to
USGAAP.

Borrowing costs included as part of the cost of constructed assets

Under AGAAP, before 1 July 1996, we expensed all borrowing costs when incurred.
From 1 July 1996, borrowing costs relating to the construction of property,
plant and equipment for internal use are recorded as part of the cost of the
asset. This policy is now the same as USGAAP.

To reflect the current policy, as if it had always been in place for USGAAP
purposes, before 1 July 1996, capitalised interest with a net book value of $144
million (2002:$188 million, 2001: $213 million) have been included in the
reconciliation of shareholders' equity to USGAAP as at 30 June 2003. For fiscal
2003, additional depreciation and disposals of $44 million (2002: $24 million;
2001: $51 million) have been included in the reconciliation of net income to
USGAAP.

Re-classification of assets held for sale

Under AGAAP, in fiscal 2002 we classified some land and buildings held for sale
as other current assets (refer note 14). Under USGAAP, usually assets held for
sale should be classified as current assets. However, as these assets were part
of a sale and leaseback transaction, the land and buildings remained in
property, plant and equipment until the sale was complete. In fiscal 2002, these
assets were reclassified, with a net increase to property, plant and equipment
of $435 million.


310
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(a) Property, plant and equipment (continued)

Reversal of gain on sale of property sold as part of a sale and lease back
transaction

The property held for sale under AGAAP in fiscal 2002 was sold in fiscal 2003.
Under AGAAP the net gain was recognised in net income.

Under USGAAP, any gains made on assets as part of a sale and leaseback
transaction must be deferred and recognised over the period of the underlying
leases. For fiscal 2003, the net gain reversed was $162 million before tax and
$49 million tax expense in the reconciliations of net income and shareholders'
equity to USGAAP.

Profits/(losses) on the sale of assets

Under AGAAP, proceeds on sale of non current assets are recorded as revenue from
ordinary activities - other revenue, and the net book value of assets sold is
recorded as other operating expenses, with the net impact representing the
profit or loss on sale of non current assets.

For USGAAP, the sale of non current assets is not considered to be an operating
activity and as a result the net profit or loss on the sale of non-current
assets is reclassified to other income below operating income.

AGAAP reported profits or losses on the sale of revalued assets are based on
revenue received less revalued net book value. For USGAAP, profits or losses are
based on revenue received less historical net book value. Adjustments are made
to the reconciliation of net income to USGAAP to record this difference in the
profit or loss on sale.

Asset retirement obligations

We adopted the requirements of SFAS 143 "Accounting for Asset Retirement
Obligations" (SFAS 143) for the first time from 1 July 2002. SFAS 143 requires
us to recognise the fair value of a liability for any legal obligations
associated with the retirement of a tangible long-lived asset that results from
the acquisition, construction, development, or normal operation of a long-lived
asset, with the cost capitalised as part of the asset carrying value.

Asset retirement obligations exist on general purpose leased buildings and
certain mobile tower communication assets that are situated on land held under
operating leases. Our treatment under AGAAP of these obligations is detailed in
note 1.18(c). We have calculated the impact of adopting SFAS 143 and have
determined that it is not material to us. Therefore, no adjustment has been made
to the USGAAP reconciliation. 30(b) Investments

Investments in joint venture entities and associated entities

From 1 July 1997, we adopted the equity method of accounting for investments in
joint venture entities and associated entities (refer note 1.10(b)). Under
AGAAP, equity accounting is suspended where the cumulative share of losses and
reserve movements have reduced the participating equity investment to zero.

Under USGAAP, equity accounted losses are required to be recognised in net
income to the extent that we have other non participating investments in the
equity accounted entity (i.e. preference shares or loans). In fiscal 2003 we
ceased equity accounting our REACH investment under AGAAP due to the investment
being written off to zero.

On 25 April 2003 we made a capacity prepayment of $230 million (US$143 million)
to REACH. This advance will accrue interest on a compounding basis at a market
reference rate and is to be repaid through the provision of capacity in the
future at market prices. This is recorded as a receivable under AGAAP (refer to
note 9). Under USGAAP, this amount (including accrued interest) is considered to
be a non participating investment in REACH. As such we continue to equity
account our share of the net assets and losses of REACH under USGAAP as an
adjustment to the adjusted basis of the receivable. Refer to note 30(q) for
further details regarding this adjustment.

In fiscal 2001, our investment in Reach Ltd, was initially recorded at a cost of
negative $30 million (refer note 30(p)). This negative investment was increased
to zero by crediting the goodwill created on the acquisition of Telstra CSL
Limited (CSL).

Equity securities (joint venture entities and associated entities)

Under AGAAP, temporary changes in the fair values of debt and equity securities
are not required to be adjusted and recorded in the financial statements. AGAAP
however does require permanent impairments in the value of debt and equity
securities to be recorded in the statement of financial performance.

Under USGAAP, Statement of Financial Accounting Standards No.115 (SFAS 115)
"Accounting for Certain Investments in Debt and Equity Securities," we are
required to account for debt and equity securities based on our intention to
hold or sell the securities. Securities classified as held-to-maturity are
stated at cost unless there is a decline in fair value that is considered
permanent. This reduction is recorded in the statement of financial performance.
Securities classified as available-for-sale are recorded at fair value with
changes in fair value, other than a permanent reduction, recorded in a separate
component of shareholders' equity (accumulated other comprehensive income) until
realised. Realised gains and losses are then recorded in the statement of
financial performance.


                                                                             311
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(b) Investments (continued)

Available-for-sale securities

The following is a summary of our available-for-sale debt and equity securities:

<TABLE>
<CAPTION>
                                                              Telstra Group
------------------------------------------------------------------------------------------------------
                                                            As at 30 June 2003
                                                                                                   Net
                                                           Accrued   Amortised              unrealised
                                                Principal  interest       cost  Fair value        gain
                                          Note         $m        $m         $m          $m          $m
------------------------------------------------------------------------------------------------------
<S>                                      <C>    <C>        <C>       <C>        <C>         <C>
Marketable securities included in cash:
Bank bills and promissory notes........             1,101         3      1,104       1,104          --
                                                ======================================================
Equity securities:
Listed investments.....................     11         32        --         --          89          57
                                                ------------------------------------------
Income tax expense.....................                                                            (17)
                                                                                            ----------
                                                                                                    40
Debt securities:
PCCW converting note - US$47 million
face value.............................  30(o)         95        --         --          85         (10)
                                                ------------------------------------------
Income tax benefit.....................                                                              4
                                                                                            ----------
                                                                                                    (6)
                                                                                            ----------
Total unrealised gain (net of tax) on
available-for-sale securities...............................................................        34
                                                                                            ==========
</TABLE>

<TABLE>
<CAPTION>
                                                              Telstra Group
------------------------------------------------------------------------------------------------------
                                                            As at 30 June 2002
                                                                                                   Net
                                                            Accrued  Amortised              unrealised
                                                Principal  interest       cost  Fair value        gain
                                          Note         $m        $m         $m          $m          $m
------------------------------------------------------------------------------------------------------
<S>                                      <C>    <C>        <C>       <C>        <C>         <C>
Marketable securities included in cash:
Bank deposits, bank bills and
promissory notes.......................               759         2        761         761          --
                                                ======================================================
Marketable securities due within one
year:
Bank bills and promissory notes........               382         1        383         383          --
                                                ======================================================
Equity securities:
Listed investments.....................     11         41        --         --         144         103
                                                --------------------------------------------
Income tax expense.....................                                                            (31)
                                                                                            ----------
                                                                                                    72
Debt securities:
PCCW converting note - US$190 million
face value.............................  30(o)        337        --         --         337          --
                                                ------------------------------------------------------
                                                                                            ----------
Total unrealised gain (net of tax) on available-for-sale securities.........................        72
                                                                                            ==========
</TABLE>


312
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(b) Investments (continued)

<TABLE>
<CAPTION>
                                Telstra Group
---------------------------------------------
                                As at 30 June
                                 2003    2002
                                   $m      $m
---------------------------------------------
<S>                             <C>      <C>
Held-to-maturity securities
Marketable securities maturing
in less than one year:
                                -------------
Foreign currency
deposits (a)..................     --       6
                                =============
</TABLE>

(a) Foreign currency deposits are directly related to our finance lease
liabilities and can only be used for settlement of these finance leases. The
cost basis above equates to fair value.

30(c) Dividend payable recognition

In fiscal 2002 and 2001, under AGAAP, dividends declared after balance date and
before approval of the financial reports were recognised as a liability in those
financial statements.

Under USGAAP, provisions for dividends are only recognised as liabilities if the
dividends are formally declared before balance date. The effect of this
adjustment is disclosed in the reconciliation of shareholders' equity to USGAAP.
In fiscal 2003, due to a change in AGAAP, AGAAP is now consistent with USGAAP
and this adjustment is no longer required. Refer to note 7 for additional
disclosures on dividends.

The dividends per share for USGAAP (including the TESOP97 and TESOP99 options
outstanding (refer note 30(m) below) as issued shares) in Australian dollars for
the last three years are:

<TABLE>
<CAPTION>
                                   Telstra Group
------------------------------------------------------
                                Year ended 30 June
                                  2003    2002    2001
                                 CENTS   CENTS   CENTS
------------------------------------------------------
<S>                             <C>      <C>     <C>
Dividends paid per share:
Total dividends paid per share
per USGAAP....................    26.0    22.0    18.0
                                ======================
</TABLE>

30(d) Minority interests (defined as outside equity interests per AGAAP)

Under AGAAP, minority interests are included in shareholders' equity in 'Outside
equity interests'. Under USGAAP, minority interests are disclosed as a separate
component of net assets rather than included in shareholders' equity. The effect
of this adjustment has been disclosed in the reconciliation of shareholders'
equity to USGAAP.

30(e) Dealer commissions and bonuses classification

Under AGAAP, dealer commissions and bonuses are included in goods and services
purchased as they are directly related to our sales revenue. Under USGAAP, they
are classified as other operating expenses. In the statement of financial
performance measured and classified under USGAAP, we have reclassified $379
million of dealer commissions and bonuses from goods and services purchased to
other operating expenses (2002: $353 million; 2001: $386 million).

30(f) Retirement benefits

Pension costs/benefits (defined as superannuation expense under AGAAP) for our
defined benefit plans are based on contributions payable to the plans for the
year, at rates determined by the actuary of the defined benefit plans. Refer to
note 22 for details of our superannuation plans.

For our defined benefit schemes, where scheme assets are greater than members'
vested entitlements, the difference is recorded as a prepaid pension asset.
Where there has been a shortfall in prior years of the net market value of the
scheme assets when compared to members' vested entitlements, we have provided
for the present value of any shortfall, to the extent that the shortfall
represents a present obligation.

Under USGAAP, pension costs/benefits for defined benefit plans are accounted for
under Statement of Financial Accounting Standards No. 87 (SFAS 87) "Employers'
Accounting for Pensions" and are calculated by an actuary using the projected
unit credit method. This method includes current service cost, interest cost,
return on plan assets and amortisation of transition assets. Aggregated
unrecorded gains and losses of the plans exceeding 10% of the greater of the
aggregated projected benefit obligation or the market value of the plan assets
are amortised over the average expected service period of active employees
expected to receive benefits under the plan.

We adopted SFAS 87 on 1 July 1992, as it was not feasible to adopt SFAS 87 from
its effective date of 1 July 1989. The transition asset recorded under SFAS 87
is being amortised from 1 July 1992 over 12 years, ending 30 June 2004. Where
scheme assets are greater than the present obligations relating to members'
vested entitlements, the difference is recognised as an asset in accordance with
USGAAP.


                                                                             313
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(f) Retirement benefits (continued)

The effect of the adjustments required by SFAS 87 to retirement benefit
expense/gain has been disclosed in the USGAAP reconciliations. If we had
reported our net periodic pension cost/benefit and the funded status of the
defined benefit superannuation plans in accordance with the accounting
principles and actuarial assumptions under USGAAP, the disclosures required are
as follows:

<TABLE>
<CAPTION>
                                                                     Telstra Group
--------------------------------------------------------------------------------------------
                                                                    Year ended 30 June
                                                              2003    2003     2002     2001
                                                      Note      $m    US$m       $m       $m
--------------------------------------------------------------------------------------------
<S>                                                   <C>   <C>      <C>     <C>      <C>
Net periodic pension (benefit)/cost (all funds
combined) The components of net periodic pension
cost for our defined benefit superannuation plans
are as follows:
Service cost on benefits earned...........................     337     226      333      380
Interest cost on projected benefit obligation.............     657     440      716      779
Expected return on assets.................................  (1,003)   (672)  (1,292)  (1,281)
Expenses and taxation.....................................      74      50       74       70
Member contributions for defined benefits.................    (113)    (76)    (109)    (113)
Amortisation of transition asset..........................     (84)    (56)     (85)     (87)
Amortisation of fund loss.................................      30      20       --       --
Transfers to CSL retirement scheme (i)....................       6       4       --       --
Settlement gain...........................................     (26)    (17)    (107)    (349)
                                                            --------------------------------
Net periodic pension benefit per USGAAP...................    (122)    (81)    (470)    (601)
Reverse amount expensed for AGAAP (labour
expense)..................................................      (8)     (5)      (2)     (14)
                                                            --------------------------------
Net periodic pension benefit USGAAP adjustment............    (130)    (86)    (472)    (615)
Writeback of superannuation additional
liability.............................................3(c)      --      --       --      725
                                                            --------------------------------
TOTAL USGAAP ADJUSTMENT - RETIREMENT BENEFIT
(GAIN)/EXPENSE............................................    (130)    (86)    (472)     110
                                                            ================================
We used the following major assumptions to account
for our defined benefit superannuation plans for
the years ended 30 June:
Discount rate.............................................    5.00%   5.00%    6.50%    6.00%
Expected rate of increase in future salaries..............    3.49%   3.49%    4.00%    3.50%
Expected long-term rate of return on assets...............    7.50%   7.50%    8.50%    8.50%
                                                            ================================
Reconciliation of change in benefit obligation
(all funds combined)
Projected benefit obligation at beginning of year.........   9,537   6,390    9,146    9,929
Service cost..............................................     337     226      333      380
Interest cost.............................................     657     440      716      779
Transfers to CSL retirement scheme (i)....................      80      54       --       --
Member contributions......................................     122      82      117       87
Benefit payments..........................................    (945)   (633)    (902)  (1,196)
Curtailments loss.........................................       9       6       32       --
Foreign currency exchange rate changes....................     (12)     (8)      --       --
Actuarial loss/(gain).....................................     464     311       95     (833)
                                                            --------------------------------
Projected benefit obligation at end of year...............  10,249   6,868    9,537    9,146
                                                            --------------------------------
</TABLE>


314
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(f) Retirement benefits (continued)

<TABLE>
<CAPTION>
                                                            Telstra Group
----------------------------------------------------------------------------------
                                                     Year ended 30 June
                                                   2003     2003     2002     2001
                                                     $m     US$m       $m       $m
----------------------------------------------------------------------------------
<S>                                             <C>       <C>      <C>      <C>
Reconciliation of change in fair value of plan
assets (all funds combined)
Fair value of plan assets at beginning
of year.......................................   12,208    8,179   13,502   13,486
Actual return on plan assets..................       53       36     (544)   1,068
Transfers to CSL retirement scheme (i)........       74       50       --       --
Employer contributions........................        8        5        2       14
Member contributions for defined benefits.....      113       76      109      113
Transfers/member contributions for
accumulation benefits.........................      122       82      117       87
Benefit payments..............................     (945)    (633)    (904)  (1,196)
Plan expenses.................................      (13)      (9)     (13)     (14)
Foreign currency exchange rate changes........      (13)      (9)      --        -
Contribution tax..............................      (61)     (41)     (61)     (56)
                                                ----------------------------------
Fair value of plan assets at end of year......   11,546    7,736   12,208   13,502
                                                ----------------------------------
Reconciliation of funded status of plan (all
 funds combined)
Projected benefit obligation..................  (10,249)  (6,868)  (9,537)  (9,146)
Plan assets at fair value.....................   11,546    7,736   12,208   13,502
                                                ----------------------------------
Funded status.................................    1,297      868    2,671    4,356
Unrecognised net transition asset (ii)........      (79)     (53)    (169)    (255)
Unrecognised net actuarial
loss/(gain) (ii)..............................    2,999    2,010    1,585     (486)
                                                ----------------------------------
Prepaid pension asset at 30 June..............    4,217    2,825    4,087    3,615
                                                ==================================
</TABLE>

(i) On 1 December 2002, Telstra CSL Limited (CSL) established a new scheme known
as the HK CSL Retirement Scheme. Previously, CSL participated in the Pacific
Century CyberWorks (PCCW) Retirement Scheme, the scheme of its previous
immediate parent. The assets attributable to CSL of the previous scheme were
transferred to the HK CSL Retirement Scheme. Refer to note 22 for further
details.

(ii) Settlements recorded in net periodic pension benefit/cost have effected the
unrecognised net transition asset and the unrecognised net actuarial loss/(gain)
as follows:
(a) unrecognised transition asset; 2003: $1 million gain; 2002: $1 million gain;
2001: $6 million loss.
(b) unrecognised net actuarial gain; 2003: $26 million; 2002: $110 million;
fiscal 2001: $343 million.

30(g) Employee entitlements - Long Service Leave

Our employee entitlement provisions include a liability for long service leave.
Refer to note 1.18 (a) for a definition of long service leave. The assumptions
used to calculate this liability for AGAAP are consistent with those used under
SFAS 87 for USGAAP.

30(h) Enterprise bargaining agreements

Fiscal 2003 saw Telstra negotiate with its Staff Associations a new redundancy
agreement and six separate Business Unit Enterprise Agreements (the Agreements).
The Agreements provide improved operating efficiencies for both management and
staff and provide a firm basis for future productivity improvements and ability
to respond to our customers needs.

As provided for in the Agreements the staff covered by these Agreements received
a 2% salary increase in January 2003. A further four 2% increases will be paid
every six months, effective July 2003.

These Agreements are due to expire in June 2005 and implementation plans are
presently underway towards realising the benefits provided for by these new
Enterprise Agreements.

As at 30 June 2003 approximately 54% of full time staff were covered by the
Business Unit Enterprise Agreements and the Telstra Shop Agreement.


                                                                             315
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(i) Software assets developed for internal use

Under AGAAP, before 1 July 1996, we did not record costs associated with
software developed for internal use as software assets. From 1 July 1996, we
recorded costs (including borrowing costs) associated with software developed
for internal use as software assets. This policy is now the same as USGAAP.
These costs include direct labour (both internal and external) and other
directly associated costs.

To reflect the current policy as if it had always been in place for USGAAP
purposes before 1 July 1996 in the reconciliations of net income and
shareholders' equity to USGAAP, we originally recorded $1,370 million as
software assets and accumulated amortisation of $732 million. These assets have
been fully amortised and/or disposed of in full during fiscal 2001, therefore
there are no further reconciling items included in the reconciliation of net
income for fiscal 2003 (2002: $nil; 2001: $25 million).

30(j) Revenue recognition - cumulative adjustment

On 3 December 1999, the United States Securities Exchange Commission (SEC)
released "Staff Accounting Bulletin (SAB) No. 101 - Revenue Recognition", (SAB
101), which provides guidance on our recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. This guidance was adopted in
fiscal 2001 in our AGAAP financial statements, refer to note 1.2 for a
description of the initial impact of the change in the accounting policy and
note 1.19 for revenue accounting policies.

In fiscal 2001, there were no differences in total net income between AGAAP and
USGAAP other than a reclassification of the cumulative effect on adoption of SAB
101 from sales revenue and direct cost of sales to the cumulative effect of
change in accounting principle, net of tax. In future years there will be no
further differences between USGAAP and AGAAP as we have aligned AGAAP revenue
recognition policies to accord with US requirements.

30(k) Mobile phone subsidies

Under AGAAP, from 1 July 1999, we changed our accounting policy relating to
subsidies provided to our customers when they purchase mobile phones. From this
date, we deferred the subsidy provided to customers who enter into mobile phone
contracts with a length of two years or greater. This policy was considered to
be inconsistent with industry practice in the United States and therefore $174
million of costs were expensed under USGAAP in fiscal 2000 and reversed as an
expense as the amounts were amortised under AGAAP during fiscal 2001 and fiscal
2002.

Due to changes in industry practice in the United States, this policy is now
consistent with USGAAP from fiscal 2001. The amounts recognised in the USGAAP
reconciliation of shareholders equity in fiscal 2000 have now been fully
reversed in fiscal 2002. From 1 July 2002 there are no further adjustments.

30(l) Income tax

Under AGAAP, timing differences are recorded in the statement of financial
position as deferred tax assets and liabilities using the liability method of
tax effect accounting. Future income tax benefits relating to tax losses and
timing differences are not recorded as an asset unless the benefit is considered
virtually certain of being realised.

Under USGAAP, deferred tax assets and liabilities are created for all temporary
differences between the accounting and tax bases of assets and liabilities that
will reverse during future taxable periods, including tax losses. Deferred tax
assets are reduced by a valuation allowance if, in the opinion of management, it
is more likely than not that some portion, or all of the deferred tax asset,
will not be realised. We increase or decrease our deferred tax balances for the
income tax effect of accounting differences included in our reconciliations of
net income and shareholders' equity to USGAAP.

AGAAP requires the effect of a change in the income tax rate to be included in
the calculation of deferred tax balances when the change has been announced by
the Treasurer of the Commonwealth. USGAAP requires the tax rate change to be
recognised in the year that the Australian Parliament has approved the
legislation and it has received royal assent from the Governor General of
Australia (Head of State).

For AGAAP, we classify all deferred tax balances as non current. For USGAAP, the
classification between current and non current is based on the statement of
financial position classification of the underlying net current and non current
asset or liability. Where there is no underlying asset or liability the
classification is based on when the temporary difference is expected to reverse.
The effect of this has been disclosed in the statement of financial position
measured and classified per USGAAP.

Under AGAAP and USGAAP we do not create deferred tax assets or liabilities for
temporary differences relating to investments where there is no intention of
disposing of the investment or where we are incapable of realising any benefit
or incurring any obligations due to tax law restrictions.


316
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using
USGAAP (continued)

30(l) Income tax (continued)

<TABLE>
<CAPTION>
                                                                        Telstra Group
-----------------------------------------------------------------------------------------------
                                                                        As at 30 June
                                                                2003     2003     2002     2001
                                                                  $m     US$m       $m       $m
-----------------------------------------------------------------------------------------------
<S>                                                           <C>      <C>      <C>      <C>
Future income tax benefit (deferred tax assets)
Property, plant and equipment..............................       33       22       33       46
Foreign exchange translation, hedge and other
finance costs..............................................      238      159       58       48
Employee entitlements......................................      252      169      331      275
Revenue received in advance................................       49       33        7       10
Inventory valuation........................................        9        6       --        6
Provisions.................................................       99       66      212       29
Tax losses.................................................       --       --       --        5
Other......................................................      171      115      104      145
                                                              ---------------------------------
Total deferred tax assets under USGAAP.....................      851      570      745      564
                                                              =================================
Deferred income tax (deferred tax liabilities)
Property, plant and equipment..............................    2,366    1,585    2,521    2,033
Foreign exchange translation, hedge and other
finance costs..............................................       --       --        1       19
Prepaid pension cost.......................................    1,265      847    1,226    1,085
Prepayments................................................        3        2        6        8
Expenditure accruals.......................................       --       --       69       --
Marketable securities......................................        1        1       27      102
Other......................................................       61       41       43      113
                                                              ---------------------------------
Total deferred tax liabilities under USGAAP................    3,696    2,476    3,893    3,360
                                                              ---------------------------------
Net deferred tax liability under USGAAP....................   (2,845)  (1,906)  (3,148)  (2,796)
                                                              =================================
Represented by:
AGAAP future income tax benefit - non current..............       --       --      132      114
AGAAP deferred income tax - non current....................   (1,814)  (1,215)  (1,987)  (1,573)
USGAAP/AGAAP income tax differences........................   (1,031)    (691)  (1,293)  (1,337)
                                                              ---------------------------------
Net deferred tax liability under USGAAP....................   (2,845)  (1,906)  (3,148)  (2,796)
                                                              =================================
Reported as follows for the USGAAP statement of
financial position:
Current deferred tax asset (future income tax benefit).....      169      113      307      183
Current deferred tax liability (deferred income tax).......       (3)      (2)      (6)     (12)
                                                              ---------------------------------
NET CURRENT DEFERRED TAX ASSET (FUTURE INCOME TAX
BENEFIT)...................................................      166      111      301      171
                                                              ---------------------------------
Non current deferred tax asset (future income tax
benefit)...................................................      682      457      438      381
Non current deferred tax liability (deferred income tax)...   (3,693)  (2,474)  (3,887)  (3,348)
                                                              ---------------------------------
NET NON CURRENT DEFERRED TAX LIABILITY (DEFERRED
INCOME TAX)................................................   (3,011)  (2,017)  (3,449)  (2,967)
                                                              ---------------------------------
                                                              (2,845)  (1,906)  (3,148)  (2,796)
                                                              =================================
The components of income tax expense for USGAAP are:
Current tax expense........................................    1,567    1,051    1,608    1,498
Deferred tax expense.......................................     (180)    (121)     235      540
(Over)/under provision in prior year.......................      (28)     (19)      16        6
                                                              ---------------------------------
Income tax expense for USGAAP..............................    1,359      911    1,859    2,044
                                                              =================================
</TABLE>


                                                                             317
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(m) Employee share plans and compensation expenses

Our employee and executive share plans are described in note 19. AGAAP does not
require certain employee compensation and option expenses to be recorded in the
statement of financial performance for our employee share plans.

Under USGAAP, we have adopted Statement of Financial Accounting Standards No.123
(SFAS 123) "Accounting for Stock Based Compensation,". Under this method,
compensation expense is calculated based on the fair value of options on the
grant date and recognised over the associated service period, which is usually
the vesting period. USGAAP requires that shares issued under TESOP97 and TESOP99
in conjunction with non-recourse loans be accounted for as options. In addition
options, restricted shares, performance rights and deferred shares issued under
the Telstra Growthshare executive compensation scheme are also accounted for as
options.

In fiscal 2003, there was no additional compensation expense included in the
reconciliation of net income for USGAAP (2002: $41 million; 2001: $9 million). A
life to date expense of $333 million is recorded as additional paid in capital
in total shareholders equity for USGAAP. The outstanding balance of the loans
for TESOP97 and TESOP99 provided to employees is deducted from shareholders'
equity rather than classified as a receivable. The Telstra Growthshare trust
loan is not reclassified as it is not linked to non-recourse loans.

There is no income tax effect on the additional compensation expense for USGAAP
as it is a permanent difference (non taxable) for TESOP97, TESOP99 and
Growthshare schemes.

A brief description of the schemes and details of options granted and
outstanding under each scheme are as follows:

TESOP General

Options allocated to employees under the TESOP schemes all vested immediately
upon grant and will expire at the earlier of repayment of the loan balance or
the termination of employment. Employee compensation expense has been recognised
on inception of the TESOP97 scheme (fiscal 1998 and subsequent loyalty share
issues) and TESOP99 scheme (fiscal 2000 and subsequent loyalty share issues).
Dividends on both TESOP schemes are not recorded as further compensation expense
as their forecasted value was included when calculating the initial option
valuations.

For fiscal 2002 and 2001, only the TESOP97 options are dilutive for the USGAAP
earnings per share calculation as the exercise price of the TESOP99 options was
above the average Telstra share price.

TESOP97
There were 98,547,625 options outstanding at 30 June 2000.
FISCAL 2001 options exercised 24,324,500 - resulting in 74,223,125
options outstanding at 30 June 2001.
FISCAL 2002 options exercised 10,749,750 - resulting in 63,473,375
options outstanding at 30 June 2002.
FISCAL 2003 options exercised 9,141,250 - resulting in 54,332,125 options
outstanding at 30 June 2003.

At 30 June 2003, the weighted average expected life of the options was 2 years.
The weighted average price of the option at 30 June 2003, 30 June 2002 and 30
June 2001 was $1.58.

TESOP99
There were 16,816,400 options outstanding at 30 June 2000.
FISCAL 2001 options exercised 1,150,000 - resulting in 15,666,400
options outstanding at 30 June 2001.
FISCAL 2002 options exercised 700,900 - resulting in 14,965,500 options
outstanding at 30 June 2002.
FISCAL 2003 options exercised 136,900 - resulting in 14,828,600 options
outstanding at 30 June 2003.

At 30 June 2003, the weighted average expected life of the options was 4 years.
The weighted average price of the option at 30 June 2003, 30 June 2002 and 30
June 2001 was $3.53.

TESOP99 loyalty shares

In fiscal 2001 we recognised compensation expense of $8 million for loyalty
shares issued to employees by the Commonwealth.

Telstra Growthshare General

The Telstra Growthshare options issued under all schemes vest when the
performance hurdles have been reached and the executive pays the exercise price
per share. The Growthshare restricted share options, performance right options
and deferred share options allocated to employees under all schemes vest when
the performance hurdles have been reached or period of service completed.

For USGAAP compensation expense is measured in the year that the options are
granted less any compensation expense paid under AGAAP based on calculated
"option values" for Growthshare options, restricted share options, performance
right options and deferred share options. An allowance is made for expected
resignations and cancellations when calculating the various option values.

These options, restricted share options, performance right options and deferred
share options are not dilutive for earnings per share calculations.


318
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(m) Employee share plans and compensation expense (continued)

Telstra Growthshare 2000
There were 2,708,000 options and 463,500 restricted share options outstanding at
30 June 2000.
FISCAL 2001 options lapsed 445,333 - resulting in 2,262,667 options outstanding
at 30 June 2001. Fiscal 2001 restricted share options lapsed 89,500 - resulting
in 374,000 restricted share options outstanding as at 30 June 2001.
FISCAL 2002 options lapsed 137,000 - resulting in 2,125,667 options outstanding
at 30 June 2002. Restricted share options lapsed 23,312 - resulting in 350,688
restricted share options outstanding as at 30 June 2002.
FISCAL 2003 options lapsed 591,945 - resulting in 1,533,722 options outstanding
at 30 June 2003. Restricted share options lapsed 90,410 - resulting in 260,278
restricted share options outstanding at 30 June 2003.

Telstra Growthshare 2001
FISCAL 2001 options granted - 4,852,910, options lapsed 366,742 - resulting in
4,486,168 options outstanding at 30 June 2001. In addition restricted share
options of 1,005,771 were granted with 76,013 lapsing resulting in 929,758
restricted share options outstanding at 30 June 2001.
FISCAL 2002 options lapsed 296,617 resulting in 4,189,551 options outstanding at
30 June 2002. Restricted share options lapsed 59,058 - resulting in 870,700
restricted share options outstanding as at 30 June 2002.
FISCAL 2003 options lapsed 668,891 resulting in 3,520,660 options outstanding at
30 June 2003. Restricted share options lapsed 132,740 - resulting in 737,960
restricted share options outstanding at 30 June 2003.

Telstra Growthshare 2002
FISCAL 2002 options granted - 39,102,000, options lapsed 532,305 resulting in
38,569,695 options outstanding at 30 June 2002. In addition, performance rights
options of 3,704,300 were granted with 50,859 lapsing resulting in 3,653,441
performance rights options outstanding at 30 June 2002.
FISCAL 2003 options lapsed 4,298,750 resulting in 34,270,945 options outstanding
at 30 June 2003. Performance rights options lapsed 406,286 - resulting in
3,247,155 performance rights options outstanding at 30 June 2003.

Telstra Growthshare 2003
FISCAL 2003 deferred share options of 2,145,100 were granted with 8,925
exercised and 91,577 lapsing resulting in 2,044,598 deferred share options
outstanding at 30 June 2003. In addition, 4,290,200 performance right options
were granted with 211,774 lapsing resulting in 4,078,426 performance right
options outstanding at 30 June 2003.

For the valuation methodology and assumptions regarding Telstra Growthshare
issues, refer to note 19(c).

30(n) Redundancy and restructuring provisions

In fiscal 2000, under AGAAP, we recorded a provision for redundancy and
restructuring of $486 million before tax. The amount charged for income tax
expense was $175 million with a net amount after tax of $311 million. We
satisfied the AGAAP requirements for recording this provision. However, under
USGAAP, we did not meet the stricter requirements imposed on us to be able to
record the provision. By fiscal 2002, this provision had been fully utilised.
Therefore, we reversed the AGAAP provision in the reconciliation of
shareholders' equity to USGAAP for fiscal 2001 and recognised the movement in
this provision in fiscal 2002 as an expense in the reconciliation to net income
of $94 million (2001:$392 million).

Redundancy and restructuring disclosures for fiscal 1997 program

The disclosures required by USGAAP for the redundancy and restructuring
provision recorded by us are as follows:

In fiscal 1997, we approved a plan to reduce the number of employees by
approximately 25,500 to approximately 51,000 employees by 30 June 2000. In June
1998, we also approved a three year plan, to 30 June 2001, which included an
additional reduction of approximately 2,000 employees by redundancy. We effected
the reduction in employees through a combination of natural attrition and
outsourcing (approximately 6,700 employees) and voluntary redundancy offers and
involuntary terminations (approximately 20,800 employees). Reductions have
occurred primarily in sales and service areas, communication assets, broadband
rollout construction areas and field operations and maintenance staff.

The total estimated cost of the fiscal 1997 redundancy program was $1,320
million including estimated severance and award payments of $1,043 million and
estimated career and transition costs of $277 million. There has been no
reversal of costs no longer required to the statement of financial performance.


                                                                             319
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(n) Redundancy and restructuring provisions (continued)

Career transition costs include payments to employees who are in the
outplacement process and amounts paid to third parties for the outplacement
program.

In future periods, the expected number of 80 redundancies and payments of $3
million still remains as a provision balance. For fiscal 2002, staff unrelated
to the 1997 program were made redundant and their costs were charged as an
expense.

<TABLE>
<CAPTION>
                                                Telstra Group
-------------------------------------------------------------------
                                                As at 30 June
                                             2003     2002     2001
                                           Number   Number   Number
-------------------------------------------------------------------
<S>                                        <C>      <C>      <C>
Accepted offers for redundancy
or involuntary redundancies..........          --       --        8
Expected redundancies................          80       80       88
                                           ========================
</TABLE>

We have made the following payments which have been charged against the
provision for redundancy and restructuring:

<TABLE>
<CAPTION>
                                                Telstra Group
-------------------------------------------------------------------
                                                As at 30 June
                                             2003     2002     2001
                                               $m       $m       $m
-------------------------------------------------------------------
<S>                                        <C>      <C>      <C>
Severance payments...................          --       --        1
Career transition and other
employee costs.......................          --        1        8
                                           ========================
</TABLE>

The fiscal 1997 redundancy and restructuring provision has been substantially
utilised as at 30 June 2003. The $3 million provision balance remains due to
contractual obligations Telstra has with third parties in relation to
outsourcing agreements, superannuation arrangements and surplus leased space.

The impact of redundancies has been taken into consideration in the SFAS 87
calculation in note 30(f) Retirement benefits.

30(o) Derivative financial instruments and hedging activities

Our risk management policies and objectives of entering into derivative
financial instruments have been disclosed in note 29, "Additional financial
instrument disclosures."

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133), as amended by Statement of Financial
Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities". SFAS 133 requires us to recognise all of our
derivative instruments as either assets or liabilities in the statement of
financial position at fair value. The accounting for changes in the fair value
(i.e. gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and further, on the
type of hedging relationship. For those derivative instruments that are
designated and qualify as hedging instruments, we must designate the hedging
instrument, based upon the exposure being hedged, as a fair value hedge, cash
flow hedge or a hedge of a net investment in a foreign operation.

For derivative instruments that are designated and qualify as a fair value hedge
(i.e., hedging the exposure to changes in the fair value of an asset or a
liability or an identified portion thereof that is attributable to a particular
risk), the gain or loss on the derivative instrument, as well as the offsetting
loss or gain on the hedged item attributable to the hedged risk, are recognised
in net income during the period of the change in fair values. For derivative
instruments that are designated and qualify as a cash flow hedge (i.e., hedging
the exposure to variability in expected future cash flows that is attributable
to a particular risk), the effective portion of the gain or loss on the
derivative instrument is reported as a component of accumulated other
comprehensive income and reclassified into net income in the same period or
periods during which the hedged transaction affects net income. The remaining
gain or loss on the derivative instrument in excess of the cumulative change in
the present value of future cash flows of the hedged item, if any, is recognised
in net income during the period of change. For derivative instruments that are
designated and qualify as a hedge of a net investment in a foreign currency, the
gain or loss is that reported in other comprehensive income as part of the
cumulative translation adjustment to the extent it is effective. For derivative
instruments not designated as hedging instruments, the gain or loss is
recognised in net income during the period of change.


320
<PAGE>
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(o) Derivative financial instruments and hedging activities (continued)

Effective 1 July 2000, we adopted SFAS 133 in the reconciliations to financial
reports prepared using USGAAP. On adoption we recognised, as a cumulative effect
of change in accounting principle, a charge of $27 million, before tax, in the
statement of financial performance measured and classified per USGAAP and a
charge of $47 million, before tax, in other comprehensive income. The basis of
accounting for the adjustments made on adoption, in either the statement of
financial performance or other comprehensive income, is dependent upon the
hedging relationships that existed for the particular derivative instrument
prior to adoption.

We enter into forward foreign exchange contracts to hedge certain firm
commitments denominated in foreign currencies relating to our capital
expenditure programs. Under AGAAP, realised gains and losses on termination of
these hedges are recognised as a net cost of the equipment acquired.

We are not able to identify specific forward foreign exchange contracts with
specific capital expenditure contracts to meet the designation criteria in SFAS
133. As a result, changes in fair value of the forward foreign exchange
contracts are required to be recognised in net income for USGAAP purposes. We
have recorded a marked to market gain of $5 million in other income per USGAAP
for the forward foreign exchange contracts outstanding at 30 June 2003 (2002:
$11 million loss; 2001:$4 million gain). We also recorded an additional
adjustment of $1 million, net of tax, in other income per USGAAP to reverse net
realised foreign exchange gains capitalised in property, plant and equipment in
fiscal 2003 under AGAAP (2002:$1 million loss, 2001:$14 million gain).

We enter into interest rate swaps to manage our exposure to interest rate risk
relating to our outstanding short-term commercial paper. SFAS 133 does not allow
us to consider the interest rate swaps used to manage our interest rate exposure
as hedges. As a result, changes in the fair values of these interest rate swaps
are required to be included in the reconciliation of net income to USGAAP. We
have recorded a marked to market loss of $128 million, before tax, as an expense
in other income per USGAAP for changes in fair value of interest rate swap
contracts outstanding at 30 June 2003 (2002: $17 million gain; 2001:$77 million
loss).

We enter into cross currency interest rate swaps to hedge our exposure to the
risk of overall changes in fair value relating to interest rate and foreign
currency risk of our foreign currency borrowings. During fiscal 2003, 2002 and
2001, the ineffective portion of our hedging instruments (inclusive of the time
value of money) was taken to the statement of financial performance.

During the year ended 30 June 2003, we reclassified $17 million of losses, net
of tax, from accumulated other comprehensive income to other income (2002: $15
million; 2001:$15 million). At 30 June 2003 there are no remaining losses
recorded in accumulated other comprehensive income related to the repayment of
borrowings that have been hedged by interest rate and cross currency swaps in
cash flow hedging relationships prior to the adoption of SFAS 133.

PCCW Converting Note

As a part of our strategic alliance with PCCW, we purchased a US$750 million
convertible note issued by PCCW in February 2001. This convertible note was
convertible at our option into PCCW common stock at a conversion price of
HK$6.886 per share. This note was redeemed on 28 June 2002 in consideration for
the remaining 40% interest in CSL and a new converting note with a face value of
US$190 million.

During the year ended 30 June 2003 we redeemed US$143 million of this converting
note in return for entering into a capacity prepayment agreement with Reach Ltd
as discussed in note 30(b).

Under AGAAP, the initial values of the converting notes are recorded at face
value in other non-current receivables. The old convertible note was, and the
newly issued note will, continue to be carried at the face value, adjusted for
accrued interest and any provision for permanent diminution considered
necessary. Any foreign exchange gains and losses on translation of the
converting note to A$ are recorded in the statement of financial performance in
operating expenses.

Our conversion option contained in the original note was classified as an
embedded derivative under SFAS 133 as its underlying risk, relating to changes
in the value of PCCW common stock, was not clearly and closely related to
changes in the underlying risk of the note, namely changes in interest rates.
The note portion of the instrument was classified as an available-for-sale
security (refer note 30(b)) with changes in fair value being recorded in other
comprehensive income. The fair value of the option in the original note was
written off in full before redemption. We recorded a loss of $10 million in
fiscal 2002 and $63 million in fiscal 2001.

The newly issued note is also classified as an  available-for-sale  security and
is disclosed in note 30(b).


                                                                             321
<PAGE>
Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(o) Derivative financial instruments and hedging activities (continued)

TelstraClear SFAS 133 adjustments

In November 2001, the underlying debt of TesltraClear was restructured and
effectively cancelled and replaced with a new credit facility. The swap
contracts were not restructured. As a result, the transition adjustment has been
amortised over the maturity schedule of the restructured debt (to June 2002),
resulting in amortisation for fiscal 2002 of $3 million.

At June 2002, the change in fair value of the interest rate swap contract of $1
million was recorded as interest income.

30(p) Sale of Global Wholesale Business to Reach Ltd

In fiscal 2001, as a part of the strategic alliance with PCCW, a joint venture
entity, Reach Ltd, was formed through the combination of our international
wholesale business and certain other wholesale assets together with certain PCCW
assets. Under AGAAP, the investment in the joint venture entity was recognised
at its cost of acquisition, being the fair value of the assets transferred net
of cash received and including acquisition costs. The gain on sale of the Global
Wholesale Business, measured as the difference between the cost of the
investment and the net book values of the net assets transferred, was deferred
to the extent of our ownership interest retained in the joint venture entity, in
this case being 50%.

For US GAAP purposes, the investment in joint venture entities should be
recorded at the net book value of the assets and liabilities transferred,
reduced by the amount of any cash received by the investor. Where the resultant
investment carrying value would be a negative amount, the excess credit is
recognised as an adjustment to the amount of goodwill on other components of the
interdependent transactions - in this case a reduction of $30 million on the CSL
goodwill (refer note 30(r)). Also, for USGAAP, there were differences in the
fair valuation of the net assets. These related to pre-1996 capitalised
interest, assembled work force and other fair value adjustments.

The total effect of these differences reduces shareholders' equity under USGAAP
by $882 million as at 30 June 2003 (2002: $882 million; 2001:$882 million). In
fiscal 2001, this adjustment reduced the reconciliation of net income to USGAAP
by $882 million.

30(q) Equity accounting and write-off adjustments for Reach Ltd

USGAAP adjustments made on the sale of the Global Wholesale Business to REACH in
30(p) above, will result in ongoing differences in the reconciliations of net
income and shareholders' equity to USGAAP.

Under AGAAP, 50% of the profit after tax was deferred and accounted for in the
investment carrying value. The deferred gain was to be recognised in the
statement of financial performance on a straight line basis over a period of 20
years. For fiscal 2003, this adjustment was $22 million up to the date of
write-off of REACH (refer below) and has been reversed for USGAAP (2002: $44
million; 2001: $18 million). Under AGAAP there is no further recognition of this
amount due to the write-off.

For USGAAP equity accounting, there is also a calculation of notional negative
goodwill at inception that is required to be amortised over the life of the
investment. This notional goodwill is determined by comparing the investment
carrying value to 50% of the net assets/(liabilities) of the REACH joint
venture. This amount, similar to AGAAP, is not separately recognised in the
statement of financial position, however, it is included in the investment
carrying amount. This notional goodwill has been written off with the write-off
of the REACH investment (refer below).

Write-off of REACH investment

As discussed in notes 3 and 24, as at 31 December 2002, we wrote off the entire
carrying amount of our investment in REACH. In accordance with Accounting
Principles Board Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock", where there is evidence that would indicate a loss
in value of an investment that is other than a temporary decline, the loss in
value should be recognised. Such factors include, but are not limited to, a
current fair value of an investment that is less than its carrying amount and
the inability of the investee to sustain an earnings capacity that would justify
the carrying amount of the investment.

A discounted cash flow model has been used to calculate the fair value of our
investment in REACH and as a result the carrying amount has been written down to
zero. For AGAAP, this resulted in a write-off of $965 million. However, due to
GAAP differences discussed above and in note 30(p), under USGAAP the write-off
of the investment was $203 million. Therefore, an additional net adjustment of
$762 million was recognised in the reconciliations of net income and
shareholders equity to USGAAP. Please refer to note 3 for further explanation of
the write down made under AGAAP.


322
<PAGE>
                             Telstra Corporation Limited and controlled entities


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(q) Equity accounting and write-off adjustments for Reach Ltd (continued)

Subsequent to the write-off of our investment in REACH, we made a capacity
prepayment of $230 million (US$143 million) and hence we continue to equity
account for our share of losses and net assets from REACH under USGAAP as
discussed in note 30(b). For fiscal 2003, the adjustment required to take
account of our share of the equity accounting losses of REACH is $82 million in
the reconciliation of net income to USGAAP.

In fiscal 2003 and 2002, there is also a difference due to the adoption of SFAS
133 for REACH. Our share of the SFAS 133 accumulated other comprehensive loss of
REACH has decreased the receivable by $22 million (2002: $12 million).

The total net adjustment in the reconciliation of net income to USGAAP in fiscal
2003 for all of these differences is an increase of $665 million (2002: $36
million; 2001: $17 million). The total net adjustment included in the
reconciliation of shareholders' equity to USGAAP is $696 million (2002: $41
million; 2001:$17 million).

30(r) Consolidation adjustment for Telstra CSL Limited (CSL)

There are several adjustments that need to be made for the consolidation of CSL
for USGAAP purposes.

For AGAAP, gains/losses on a hedge for the purchase of CSL are included in the
cost of the acquisition, thereby effecting the determination of goodwill. For
USGAAP, gains/losses on hedges of a purchase business combination are recognised
in net income. Accordingly, in fiscal 2001, hedging losses of $30 million that
were included in the cost of acquisition of CSL for AGAAP, have been recognised
in the net income under USGAAP.

For AGAAP, purchase price allocations in an acquisition accounted for as a
business combination are not tax effected. The tax effect of basis differences
arising from purchase price allocations (fair value adjustments) will be
recognised in net income as those basis differences reverse. For USGAAP, such
basis differences are treated as temporary differences and tax-effected as part
of the acquisition accounting.

For AGAAP, acquisition costs of $999 million were written off on acquisition of
CSL in January 2001. In fiscal 2002 and 2001, USGAAP did not allow such a write
off, unless it could be supported by an analysis of the undiscounted cash flows
of the entity. As a result of an analysis of undiscounted cash flows relating to
CSL, a goodwill write off was not supportable under USGAAP in fiscal 2002 and
2001. Accordingly, in fiscal 2001 the goodwill write off was reversed in the
reconciliation of net income to USGAAP and is carried forward as a difference in
the reconciliation of shareholders' equity to USGAAP. This amount was also
amortised in fiscal 2002 for USGAAP. For fiscal 2003 $309 million of goodwill
was recorded as an impairment loss under USGAAP, based on the transitional
goodwill impairment test. Refer to note 30(t) for further information as to the
accounting requirements and basis of the impairment.

Goodwill under AGAAP is translated at its historical foreign currency
translation rate as the goodwill arises in $A. Under USGAAP, using the current
rate method, goodwill is translated at the spot rate at year end. Amortisation
of goodwill is translated using the weighted average rate. Adjustments have been
made to restate amortisation at the weighted average exchange rate and to adjust
the ending goodwill balance for fluctuations in the Hong Kong dollar, being
CSL's functional currency.

The net adjustments above resulted in an increase to goodwill amortisation
expense for USGAAP in fiscal 2002 of $52 million and in fiscal 2001 of $23
million. For fiscal 2003 goodwill under USGAAP is no longer amortised, refer
note 30(t).

30(s) Fair Value and General Reserve adjustments

In AGAAP, when we acquire a controlled entity, we are required to restate the
net identifiable assets of that controlled entity to fair value. To the extent
we have an equity accounted ownership interest in the company prior to
consolidation, we are required to recognise our share of the reserve created on
consolidation. In USGAAP, this fair value adjustment is offset against goodwill
on consolidation. For fiscal 2002, the adjustment to the reconciliation to
shareholders equity was $54 million.

In AGAAP, the effect of dilutions of ownership due to equity transactions
conducted by third parties are recorded in a reserve. In USGAAP, this is treated
as a sale of ownership interest and taken to net income. In fiscal 2003, the
adjustment to net income was $2 million loss (2002: $19 million loss).

In AGAAP, we also have a share of a foreign associated entity's general reserve
credit of $2 million in fiscal 2002. For USGAAP purposes this reserve has been
transferred to the foreign currency translation reserve.

                                                                             323

<PAGE>
Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(t) Goodwill adjustments and other intangible assets

We adopted Statement of Financial Accounting Standard No. 142 (SFAS 142),
"Goodwill and Other Intangible Assets", on 1 July 2002. Under SFAS 142, goodwill
is no longer amortised but reviewed for impairment annually, or more frequently
if certain impairment indicators or triggers arise. Goodwill is tested for
impairment at a "reporting unit" level and we have assigned goodwill to
reporting units in accordance with the net goodwill balances by legal entity
included in Note 13.

We completed the initial step of the transitional impairment test within six
months of adoption of SFAS 142, using a discounted cash flow technique to
calculate the fair value of the reporting units to identify any impairment in
the carrying value of goodwill. As a result we have recorded an impairment loss
of $309 million relating to the USGAAP carrying value of goodwill in CSL as a
cumulative effect of a change in accounting principle.

At 30 June 2003, we identified a further impairment in the USGAAP carrying value
of the goodwill in CSL under SFAS 142. The fair value of CSL was determined
using a discounted cash flow technique. As a result, under USGAAP we have
recognised an additional impairment loss of $85 million.

Under AGAAP, goodwill is still amortised over its useful life and we have
reversed the goodwill amortised of $178 million for the year ended 30 June 2003
in the reconciliations of net income and shareholders' equity to USGAAP.

The following table represents adjusted net income per USGAAP and adjusted
earnings per share to exclude amortisation expense for goodwill that is no
longer amortised:

<TABLE>
<CAPTION>
                                                Telstra Group
-------------------------------------------------------------------
                                              Year ended 30 June
                                             2003     2002     2001
                                               $m       $m       $m
-------------------------------------------------------------------
<S>                                        <C>      <C>      <C>
Net income per USGAAP................       3,450    3,898    3,576
Goodwill amortisation expense........          --      262      126
                                           ------------------------
ADJUSTED NET INCOME PER
USGAAP...............................       3,450    4,160    3,702
                                           ========================
                                            CENTS    CENTS    CENTS
                                           ------------------------
Basic earnings per share per
USGAAP (cents).......................        27.0     30.5     28.1
Goodwill amortisation................          --      2.0      0.9

Adjusted basic earnings per
share per USGAAP (cents).............        27.0     32.5     29.0
                                           ------------------------
Diluted earnings per share
USGAAP (cents).......................        26.9     30.4     27.9
Goodwill amortisation................          --      2.0      0.9
                                           ------------------------
Adjusted diluted earnings per
share per USGAAP (cents).............        26.9     32.4     28.9
                                           ========================

</TABLE>

The following table represents the estimated aggregate amortisation expense for
other intangible assets which are still amortised under USGAAP. These items are
brandnames, customer bases, and patents, trademarks and licences:

<TABLE>
<CAPTION>
                                      Telstra Group
-------------------------------------------------------------
                                    Year ended 30 June
                             2004   2005   2006   2007   2008
                               $m     $m     $m     $m     $m
-------------------------------------------------------------
<S>                          <C>    <C>    <C>     <C>    <C>
Estimated aggregate
amortisation expense          136    136    130     95     58
                             ================================
</TABLE>

The following table is a reconciliation of the carrying amount of our
goodwill under USGAAP by reportable segment:

<TABLE>
<CAPTION>
Telstra Group
--------------------------------------------------------------------------------------------------------------
                                                         Telstra
                                                        Business &         Telstra
                                                        Government      International       Other       Total
                                                            $m               $m               $m         $m
--------------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>              <C>        <C>
Carrying amount of goodwill (USGAAP) at 30 June 2001.....   75              2,519             42        2,636
Additional goodwill recognised...........................   --                551             10          561
Removal of goodwill on disposal..........................  (13)                --             --          (13)
Amortisation.............................................  (12)              (125)            (2)        (139)
Foreign currency translation adjustment..................   --               (245)            --         (245)
                                                          ----------------------------------------------------
Carrying amount of goodwill (USGAAP) at 30 June 2002.....   50              2,700             50        2,800
Additional goodwill recognised...........................   --                 71             --           71
Impairment losses........................................   --               (394)            --         (394)
Foreign currency translation adjustment..................   --               (365)            --         (365)
                                                          ----------------------------------------------------
Carrying amount of goodwill (USGAAP) at 30 June 2003.....   50              2,012             50        2,112
                                                          ====================================================
</TABLE>

30(u) Consolidation

AGAAP requires consolidation of an entity where we are able to dominate decision
making, directly or indirectly, relating to the financial and operating policies
of that entity to enable it to operate with us in achieving our objectives.
Ownership percentage as a single factor does not determine consolidation under
AGAAP.

Under USGAAP, prior to the adoption of FIN 46 (refer to note 30(w) for further
information), the usual condition for a controlling financial interest is
ownership of a majority voting interest, and, therefore, as a general rule
ownership by one company, directly or indirectly, of over fifty per cent of the
outstanding voting shares of another company is a condition pointing towards
consolidation.

USGAAP also provides for exemptions from consolidation where control is likely
to be temporary or where control does not rest with majority owners.

Also, in certain circumstances, an investment may not be consolidated when the
investor owns a majority of the voting stock, but the minority shareholder or
shareholders have certain approval, veto or participating rights.

Our AGAAP consolidation policy does not result in material differences between
the consolidation policy applicable under USGAAP, and therefore we have not made
any adjustments to the USGAAP reconciliation.


324
<PAGE>
                             Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(v) Recently issued Australian accounting standards

A number of new accounting standards have been issued by the Australian
Accounting Standards Board (AASB) that have not yet been adopted for AGAAP. A
summary of the standards appears in note 1.3.

Some of these standards, once adopted, will result in certain adjustments in the
reconciliations of net income to USGAAP and shareholders' equity to USGAAP no
longer being required.

The more significant changes are:

Income tax

AASB 1020 "Income taxes" has been amended to introduce the balance sheet
liability method currently adopted in USGAAP. Although conceptually AASB 1020
will bring AGAAP in closer alignment with USGAAP, management have not yet
determined the impact the adoption of AASB 1020 will have on our financial
position, results of operations or cash flows.

Adoption of International Financial Reporting Standards

The Australian Financial Reporting Council (FRC) has determined that Australian
entities adopt International Financial Reporting Standards (IFRS) from 1 January
2005. This will involve completing a first time set of financial statements
under IFRS for the half-year ended 31 December 2005 and for the financial year
ended 30 June 2006.

Management have not yet determined the impact the adoption of IFRS will have on
our financial position, results of operations or cash flows.

30(w) Recently issued United States accounting standards

Revenue Arrangements with Multiple Deliverables

In November 2002, the Emerging Issues Task Force reached a consensus on Issue
No. 00-21 (EITF 00-21), "Revenue Arrangements with Multiple Deliverables", and
is effective for fiscal years beginning after 15 June 2003. EITF 00-21
prescribes the determination of multiple revenue-generating activities and
whether those activities contain more than one unit of accounting. Revenue from
arrangements involving multiple deliverables that contain more than one unit of
accounting must be allocated among the units based on their relative fair
values. Management have not yet determined the effect, if any, the adoption of
EITF 00-21 will have on our financial position, results of operations or cash
flows.

Accounting for Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146 (SFAS 146) "Accounting for Costs Associated with Exit or Disposal
Activities", effective for fiscal years beginning after 31 December 2002. SFAS
146 requires that a liability for a cost that is associated with an exit or
disposal activity be recognised when the liability is incurred. Under SFAS 146,
the FASB determined that an entity's commitment to a plan does not, by itself,
create a present obligation to other parties that meets the definition of a
liability. SFAS 146 also establishes that fair value is the objective for the
initial measurement of the liability. Management have not yet determined the
effect, if any, the adoption of SFAS 146 will have on our financial position,
results of operations or cash flows.

Amendment of SFAS 133 on Derivative Instruments and Hedging Activities

In May 2003, the FASB issued Statement of Financial Accounting Standard No. 149
(SFAS 149), "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." SFAS 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS 133. Statement 149 clarifies
under what circumstances a contract with an initial net investment meets the
characteristics of a derivative as discussed in SFAS 133. In addition, it
clarifies when a derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS 149 amends certain other existing
pronouncements. Those changes will result in more consistent reporting of
contracts that are derivatives in their entirety or that contain embedded
derivatives that warrant separate accounting. SFAS 149 is generally effective
for contracts entered into or modified after 30 June 2003 and for hedging
relationships designated after 30 June 2003. The guidance should be applied
prospectively. Management have not yet determined the effect, if any, the
adoption of SFAS 149 will have on our financial position, results of operations
or cash flows.


                                                                             325
<PAGE>
Telstra Corporation Limited and controlled entities

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

30. United States generally accepted accounting principles disclosures
(continued)

Notes to the reconciliations to financial reports prepared using USGAAP
(continued)

30(w) Recently issued United States accounting standards (continued)

Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity

In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150
(SFAS 150), "Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity." SFAS 150 affects the issuer's accounting for
three types of freestanding financial instruments. One type is manditorily
redeemable shares, which the issuing company is obligated to buy back in
exchange for cash or other assets. A second type, which includes put options and
forward purchase contracts, involves instruments that do or may require the
issuer to buy back some of its shares in exchange for cash or other assets. The
third type of instruments that are liabilities under this Statement is
obligations that can be settled with shares, the monetary value of which is
fixed, tied solely or predominately to a variable such as a market index, or
varies inversely with the value of the issuer's shares. SFAS 150 does not apply
to features embedded in a financial instrument that is not a derivative in its
entirety. This Statement is effective for financial instruments entered into or
modified after 31 May 2003, and otherwise is effective at the beginning of the
first interim period beginning after 15 June 2003. Management have not yet
determined the impact, if any, the adoption of SFAS 150 will have on our
financial position, results of operations or cash flows.

Accounting for Contingencies

In accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5),
"Accounting for Contingencies", and FASB Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others", we are required to recognise and
measure at fair value a liability for certain guarantees we issue at the
inception of the guarantee. This applies to all guarantees issued or modified by
us after 31 December 2002.

Under AGAAP, we do not recognise our guarantees that we issue in the statement
of financial position. They are disclosed as contingent liabilities in note 21.

We have reviewed our guarantees issued or modified after 31 December 2002 and
determined that the liability to be recognised under those guarantees is not
material. Therefore, no adjustment has been made to the USGAAP reconciliation.

Consolidation of Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation
of Variable Interest Entities". FIN 46 requires a beneficiary to consolidate a
variable interest entity if it is the primary beneficiary of that entity. The
primary beneficiary is defined as having a variable interest in a variable
interest entity that will absorb a majority of the entity's expected losses if
they occur, receive a majority of the entity's expected residual returns if they
occur, or both.

We own 100% of the equity of Telstra ESOP Trustee Pty Ltd and Telstra
Growthshare Pty Ltd, the corporate trustees for the Telstra Employee Share
Ownership Plan Trust (TESOP97), the Telstra Employee Share Ownership Plan Trust
II (TESOP99) and the Telstra Growthshare Trust. Under AGAAP we do not
consolidate or equity account these trusts as we do not control or significantly
influence the trusts. Refer to note 1 and note 24 for further information.

TESOP97, TESOP99 and the Telstra Growthshare Trust are considered to be variable
interest entities under FIN 46. Our maximum potential exposure to loss as a
result of our involvement with TESOP97, TESOP99 and the Telstra Growthshare
Trust at 30 June 2003 is $88 million. We are currently determining whether we
are the primary beneficiary of the trusts. We are also still in the process of
considering other potential variable interest entities. Management have not yet
determined the full impact, if any, the adoption of FIN 46 on 1 July 2003 will
have on our financial position, results of operations or cash flows.


326
<PAGE>
Telstra Corporation Limited and controlled entities

Report of Independent Accountants to the Shareholders and Board of Directors of
Telstra Corporation Limited
--------------------------------------------------------------------------------

This report is included solely for the purpose of incorporation in Telstra
Corporation Limited's Annual Report 2003 on Form 20-F as required by the United
States Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder.

We have audited the accompanying consolidated statements of financial position
of Telstra Corporation Limited and its subsidiaries as of 30 June 2003 and 2002,
and the related consolidated statements of financial performance, changes in
shareholders' equity and cash flows for each of the three years in the period
ended 30 June 2003, all expressed in Australian dollars. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in Australia and the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Telstra
Corporation Limited and its subsidiaries at 30 June 2003 and 2002, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended 30 June 2003, in conformity with accounting principles
generally accepted in Australia.

Accounting principles generally accepted in Australia vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
consolidated net income expressed in Australian dollars for each of the three
years in the periods ended 30 June 2003, and the determination of consolidated
shareholders' equity, also expressed in Australian dollars, at 30 June 2003, 30
June 2002 and 30 June 2001, to the extent summarised in note 30 to the
consolidated financial statements.

As discussed in note 1 to the consolidated financial statements, in 2001 Telstra
Corporation Limited and its subsidiaries changed their accounting for service
activation and certain installation fee revenues.

/s/ Ernst & Young
--------------------------------------
Ernst & Young

Date: 28 August 2003
Melbourne, Australia


327
<PAGE>
ITEM 19. EXHIBITS


<TABLE>
<S>                                                  <C>
Telstra Corporation Limited Constitution* .....      Exhibit 1
Employment Contract - Ziggy Switkowski* .......      Exhibit 4.1
Employment Contract - Ted Pretty*..............      Exhibit 4.2
Rule 13a-14(a) Certifications..................      Exhibit 12
Rule 13a-14(b) Certifications..................      Exhibit 13
</TABLE>


-----------
* Previously filed.


                                       5
<PAGE>
                                    SIGNATURE


      The registrant hereby certifies that it meets the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.



                                        TELSTRA CORPORATION LIMITED
                                                (Registrant)



                                        By: /s/ John V Stanhope
                                            ------------------------------------
                                            Name:  John V. Stanhope
                                            Title: Chief Financial Officer


Dated: August 11, 2004


                                       6
<PAGE>
Exhibit Index

<TABLE>
<S>                                                  <C>
Telstra Corporation Limited Constitution* .....      Exhibit 1
Employment Contract - Ziggy Switkowski* .......      Exhibit 4.1
Employment Contract - Ted Pretty*..............      Exhibit 4.2
Rule 13a-14(a) Certifications..................      Exhibit 12
Rule 13a-14(b) Certifications..................      Exhibit 13
</TABLE>

---------

* Previously filed.


                                       7