Document ID: chunk:federal_register_of_legislation:F2023C00930:reg:5:p48
Version: federal_register_of_legislation:F2023C00930
Segment Type: reg
Provision Reference: reg 5 (pt 48/61)
Character Range: 160050–163017

91
Deferred tax expense (income)        –        (30)     (33)     (37)
                                     –        45       50       54

Example 5 – Share-based payment transactions
In accordance with AASB 2 Share-based Payment, an entity has recognised an expense for the consumption of employee services received as consideration for share options granted. A tax deduction will not arise until the options are exercised, and the deduction is based on the options' intrinsic value at exercise date.
As explained in paragraph 68B of the Standard, the difference between the tax base of the employee services received to date (being the amount the taxation authorities will permit as a deduction in future periods in respect of those services), and the carrying amount of nil, is a deductible temporary difference that results in a deferred tax asset. Paragraph 68B requires that, if the amount the taxation authorities will permit as a deduction in future periods is not known at the end of the period, it should be estimated, based on information available at the end of the period. If the amount that the taxation authorities will permit as a deduction in future periods is dependent upon the entity's share price at a future date, the measurement of the deductible temporary difference should be based on the entity's share price at the end of the period. Therefore, in this example, the estimated future tax deduction (and hence the measurement of the deferred tax asset) should be based on the options' intrinsic value at the end of the period.
As explained in paragraph 68C of the Standard, if the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, this indicates that the tax deduction relates not only to remuneration expense but also to an equity item. In this situation, paragraph 68C requires that the excess of the associated current or deferred tax should be recognised directly in equity.
The entity's tax rate is 40 per cent. The options were granted at the start of year 1, vested at the end of year 3 and were exercised at the end of year 5. Details of the expense recognised for employee services received and consumed in each accounting period, the number of options outstanding at each year-end, and the intrinsic value of the options at each year-end, are as follows:
        Employee services expense  Number of options at year-end     Intrinsic value per option

Year 1  188,000                    50,000                            5
Year 2  185,000                    45,000                            8
Year 3  190,000                    40,000                            13
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