The Deferred Tax Reconciliation Report has been added to assist you in reconciling the Deferred Tax Liability for a fund. You will need to ensure that Tax Effect Accounting has been ticked in Fund Details. The report will show:
- Total revaluation amounts for each investment;
- Permanent (non-assessable) differences;
- Temporary (timing) differences;
- Any tax deferred distributions received;
- Deferred tax closing balance for the year.
Tax Deferred amounts displaying in the report will not have the 33% discount applied. The Tax Deferred amounts are accounted for when the investment is disposed of. The Simple Fund 360 logic for CGT calculations is as follows:
1. The cost-base is decreased by the Tax-deferred amount;
2. The consideration less adjusted cost base = total capital gain;
3. The 33% discount is then applied to this total capital gain.
How to Prepare
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- On the left-hand side of the Reports screen, search for the Report.
- Select the green arrow to add the report to the Report Pack List.
- Select either Download PDF, Download Word or Download Excel.
You can also add this report to a Report Pack. See Reports for instructions.
Reconciling the Report
A fund using Tax Effect accounting will be able to generate a Deferred Tax Reconciliation report.
Instructions for the reconciliation of these amounts are split into two sections:
- Report Amounts (the amounts that are used to calculate totals used in the summary)
- Summary Amounts (the amounts that are used to calculate the closing Deferred Tax amount)
Revaluation/Tax Deferred is calculated by all journals involving:
- Revaluation journals posted to 24700
- Tax-deferred posted in 23800 and 25000 journal components.
If it is the first year having Tax Effect Accounting toggled on, this will include the revaluations for all investments over the lifetime of the fund.
Permanent Difference (Non-Assessable)
Permanent Difference (Non-Assessable) is 33% of the Revaluation/Tax Deferred based on a discounted gain.
Temporary Difference (Assessable)
Temporary Difference (Assessable) is 66% of the Revaluation/Tax Deferred.
Temporary Difference (Accumulation Portion)
Temporary Difference (Accumulation Portion) is the Temporary Difference (Assessable) adjusted by the Actuary Percentage of the year entered in the Fund Pension Policies screen.
This is equal to the balance of the Deferred Tax Liability Account (89000) as at the report start date.
If the account balance is in Credit, this will display as a negative figure and would be recognised as a Deferred Tax Asset.
Otherwise, if the account balance is in Debit, this would display as a positive figure and be recognised as a Deferred Tax Liability.
Current Year Transactions
This figure includes all Temporary Differences that have accumulated throughout the financial year multiplied by the fund's tax rate.
In other words:
- Temporary Difference (Accumulation Portion) x Fund Tax Rate (commonly 15%)
= Current Year Transactions.
The Temporary Differences included in this figure are:
- Revaluations of investments
- Tax deferred distributions
= (Revaluations + Tax Deferred Distributions) x (Fund Tax Rate)
Consider the example below:
The total Temporary Difference that has resulted as a result of the revaluation of the BHP shares is $45.00.
As this was a revaluation downwards, this will create a Deferred Tax Asset of:
45.00 x 15% = 6.75
Current Year Capital Loss
This amount is determined by multiplying the Net Capital Loss for the financial year mulitplied by the fund's tax rate:
= (Net Capital Loss) x (Fund Tax Rate)
The Net Capital Loss figure used can be found on the fund's Annual Return's CGT Schedule under Section 3 Label B
Current Year Tax Loss
This amount is calculated by multiplying the fund's Current Year Tax Loss by the fund's tax rate:
= (Current Year Tax Loss) x (Fund Tax Rate)
The Current Year Tax Loss figure can be found on the fund's Annual Return under Section C Label O
Deferred Tax WriteBacks/Adjustment
This figure is the sum of any Bank Statements or Journal Transactions posted to the Deferred Tax Liability Account (89000).
If the balance of the account is Credit, this will display as a positive number.
Capital Loss carried forward recouped
This figure is calculated by multiplying the fund's prior year capital losses applied to any gains in the current financial year by the fund's tax rate:
= (Total prior year net capital losses applied) x (Fund Tax Rate)
The total prior capital losses applied figure can be found on the fund's Annual Return's CGT Schedule under Section 2 Label C.
Tax Loss carried forward recouped
This figure is calculated by multiplying the fund's tax losses deducted for the current financial year by the fund's tax rate:
= (Total tax losses deducted) x (Fund Tax Rate)
The Total tax losses deducted figure can be found in the fund's Annual Return's Losses Schedule under Part F Label H
This amount will be the sum of the opening balance and the six headings above. This amount will be carried forward to future periods.