Document ID: chunk:federal_register_of_legislation:F2021L00963:body:0:p7
Version: federal_register_of_legislation:F2021L00963
Segment Type: other
Provision Reference: 
Character Range: 16116–18969

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 illustrated in this example and recognises the resulting deferred tax income or expense in profit or loss.

Commencement of the legislative instrument
For legal purposes, this legislative instrument commences on 31 December 2022.
  [1]  Depending on the applicable tax law, an entity might alternatively conclude that the tax deductions it will receive for lease payments relate to the lease asset, in which case temporary differences would not arise on initial recognition of the lease liability and the related component of the lease asset's cost. Accordingly, the entity would not recognise deferred tax on initial recognition but would do so if and when temporary differences arise after initial recognition.