Notes to the financial statements (continued) Section 2: Profit for the reporting years presented (continued) 7. Income tax equivalent expense
Deferred tax equivalent Deferred tax equivalent is provided using the liability method on temporary differences arising between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for taxation purposes. Deferred tax equivalent is measured at the tax rates that are expected to be applied when the asset is realised or the liability is settled, based on the laws that have been enacted or substantially enacted as at the reporting date. A deferred tax equivalent asset is recognised only to the extent it is probable future taxable profits will be available against which the asset can be utilised. Deferred tax equivalent assets are reviewed at the end of each reporting year and are reduced to the extent it is no longer probable the related tax equivalent benefit will be realised. Unrecognised deferred tax equivalent assets are reassessed at each reporting date and are recognised to the extent it has become probable future taxable profits will allow the deferred tax equivalent asset to be recovered. Deferred tax equivalent assets and liabilities are offset when there is a legally enforceable right to offset current tax equivalent assets and liabilities, and when the deferred tax equivalent balances relate to the same taxation authority.
A. Accounting policy National taxation equivalent regime
Western Power operates under the National Taxation Equivalent Regime ( NTER ). While income tax equivalent payments under this scheme are remitted to the Western Australian State Government, Western Power’s tax equivalent is subject to Australian Taxation Office ( ATO ) administration. The calculation of the liability in respect of these taxes is governed by the Income Tax Administration Acts and the NTER guidelines as agreed by the State Government. Income tax equivalent expense The income tax equivalent expense for a reporting year comprises current and deferred tax equivalents. It is calculated on income assessable and expenses deductible for tax – irrespective of when the assessment or deduction arises, and includes adjustments for permanent and temporary differences. Permanent differences are recognised for transactions that will not be included in taxable income or loss – although recognised in accounting profit or loss. Temporary differences are recognised for transactions included in taxable income or loss – but at a different point in time to recognition in accounting profit or loss. Income tax equivalent expense is recognised in profit or loss, except to the extent it relates to items recognised in other comprehensive income or directly in equity, in which case the tax equivalent expense is too recognised in other comprehensive income or directly in equity. Current tax equivalent Current tax equivalent is the expected tax equivalent payable or receivable on the taxable income or loss for the reporting year, using tax rates enacted or substantially enacted as at the reporting date, and any adjustment to the tax equivalent in respect of previous years.
Western Power Annual Report 2025
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