Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p49
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 49/61)
Character Range: 162721–167240

Year 4  0                          40,000                            17
Year 5  0                          40,000                            20

The entity recognises a deferred tax asset and deferred tax income in years 1–4 and current tax income in year 5 as follows. In years 4 and 5, some of the deferred and current tax income is recognised directly in equity, because the estimated (and actual) tax deduction exceeds the cumulative remuneration expense.
Year 1

Deferred tax asset and deferred tax income:
(50,000 × 5 × 1/3(a) × 0.40) =                                                                                                                                                                                                                                                                                                                                              33,333
    (a) The tax base of the employee services received is based on the intrinsic value of the options, and those options were granted for three years' services. Because only one year's services have been received to date, it is necessary to multiply the option's intrinsic value by one-third to arrive at the tax base of the employee services received in year 1.

The deferred tax income is all recognised in profit or loss, because the estimated future tax deduction of 83,333 (50,000 × 5 × 1/3) is less than the cumulative remuneration expense of 188,000.

Year 2

Deferred tax asset at year-end:
(45,000 × 8 × 2/3 × 0.40) =                                                                                                                                96,000
Less deferred tax asset at start of year                                                                                                                   (33,333)
Deferred tax income for year                                                                                                                                                                                                  62,667*
* This amount consists of the following:
Deferred tax income for the temporary difference between the tax base of the employee services received during the year and their carrying amount of nil:
(45,000 × 8 × 1/3 × 0.40)                                                                                                                                  48,000
Tax income resulting from an adjustment to the tax base of employee services received in previous years:
                                                                                                                                                           (a)       increase in intrinsic value: (45,000 × 3 × 1/3 × 0.40)   18,000
                                                                                                                                                           (b)       decrease in number of options: (5,000 × 5 × 1/3 × 0.40)  (3,333)
Deferred tax income for year                                                                                                                                                                                                  62,667

The deferred tax income is all recognised in profit or loss, because the estimated future tax deduction of 240,000 (45,000 × 8 × 2/3) is less than the cumulative remuneration expense of 373,000 (188,000 + 185,000).

Year 3

Deferred tax asset at year-end:
(40,000 × 13 × 0.40) =                    208,000
Less deferred tax asset at start of year  (96,000)
Deferred tax income for year              112,000

The deferred tax income is all recognised in profit or loss, because the estimated future tax deduction of 520,000 (40,000 × 13) is less than the cumulative remuneration expense of 563,000 (188,000 + 185,000 + 190,000).

Year 4

Deferred tax asset at year-end:
(40,000 × 17 × 0.40) =                                                                                    272,000
Less deferred tax asset at start of year                                                                  (208,000)
Deferred tax income for year                                                                                                                                                64,000

The deferred tax income is recognised partly in profit or loss and partly directly in equity as follows:
                                                                                                          Estimated future tax deduction (40,000