Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p57
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 57/61)
Character Range: 189729–193284

for the advance lease payment and initial direct costs when it made those payments. The difference between the tax base (nil) and the carrying amount of each component results in taxable temporary differences of CU15 (related to the advance lease payment) and CU5 (related to the initial direct costs).

The exemption from recognising a deferred tax liability in paragraph 15 does not apply because the temporary differences arise from transactions that, at the time of the transactions, affect Lessee's taxable profit (that is, the tax deductions Lessee received when it made the advance lease payment and paid initial direct costs reduced its taxable profit). Accordingly, Lessee recognises a deferred tax liability of CU3 (CU15 × 20%) and CU1 (CU5 × 20%) for the taxable temporary differences related to the advance lease payment and initial direct costs, respectively.

Deferred tax on the lease liability and related component of the lease asset's cost
At the commencement date, the tax base of the lease liability is nil because Lessee will receive tax deductions equal to the carrying amount of the lease liability (CU435). The tax base of the related component of the lease asset's cost is also nil because Lessee will receive no tax deductions from recovering the carrying amount of that component of the lease asset's cost (CU435).
The differences between the carrying amounts of the lease liability and the related component of the lease asset's cost (CU435) and their tax bases of nil result in the following temporary differences at the commencement date:
(a) a taxable temporary difference of CU435 associated with the lease asset; and
(b) a deductible temporary difference of CU435 associated with the lease liability.
The exemption from recognising a deferred tax asset and liability in paragraphs 15 and 24 does not apply because the transaction gives rise to equal taxable and deductible temporary differences. Lessee concludes that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. Accordingly, Lessee recognises a deferred tax asset and a deferred tax liability, each of CU87 (CU435 × 20%), for the deductible and taxable temporary differences.

Summary of recognised deferred tax
The table below summarises the deferred tax that Lessee recognises on initial recognition of the lease (including the advance lease payment and initial direct costs):
                                                                                                                                                     Deferred tax asset /
                 Carrying amount                                                    Tax base     Deductible / (taxable) temporary difference         (liability)
Lease asset
–                advance lease payment                                         15             —                                               (15)                         (3)
–                initial direct costs                                          5              —                                               (5)                          (1)
–                the amount of the initial measurement of the lease liability  435            —                                               (435)                        (87)
Lease liability  435                                                                —            435                                                 87

Applying paragraph 22(b) of AASB 112, Lessee recognises deferred tax assets and liabilities as