AUB Group Limited Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2023

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INCOME TAX (CONTINUED)

Effective Tax Rate The Effective Tax Rate for the Year Ended 30 June 2023 was 28% (2022: 18%). The Group’s tax rate is below the main effective tax rate in Australia of 30% largely as a result of the $9m tax impact of entities that are accounted for on an equity basis. Entities accounted for on an equity basis are fully tax paying in Australia, however for accounting purposes the related tax expense is reflected in the net return on the investment rather than the tax expense of the Group. This is offset by a $4m increase in the tax charge resulting from expenses that are not deductible for tax purposes which principally relate to fees incurred when acquiring new businesses in the year. The increase in the effective tax rate of 10% is largely the result of a net loss on the adjustment to carrying value of investments in 2022 (see Note 4 (f)), that did not have an associated tax credit, which did not recur in 2023. The main impact on the tax rate in future years is expected to be the continued profitability of the business accounted for under the equity accounting rules as discussed above, the change in geographic profile of the earnings of the Group and any changes in tax legislation. The AUB Group consists of AUB Group Limited, the parent entity and ASX listed entity, and over 300 entities in which the parent has a direct or indirect economic interest. The information reported by the Australian Taxation Office (ATO) (as prescribed by statute) in respect of corporate tax entities will not necessarily provide the complete picture, particularly for organisations such as the AUB Group that receive a significant amount of its income is received from franked dividends. The AUB Tax Consolidation Group (AUB TCG), comprises only AUB Group Limited (the parent entity) and its 100% wholly owned entities. The primary income of the AUB TCG is the receipt of franked dividend income received from the partly owned entities. Given tax has already been paid in respect of the franked dividends, the AUB TCG is entitled to a credit equal to that tax. That is, the franking credits attaching to the dividends reflect tax that has already been paid by the individual entity paying the dividends. While the franking credits represent tax paid, they are reflected in the income tax return of the AUB TCG as an offset against AUB’s gross tax, thereby reducing the amount disclosed as ‘tax payable’. The amount disclosed by the ATO in their report is after the franking credits have been taken into account, which does not reflect the tax paid by the Group.

a) Income tax expense i)

Major components of income tax expense are as follows:

2023 $’000

2022 $’000

Current income tax Current income tax charge Adjustment for prior years

49,638 (1,077)

21,810

(15)

Deferred tax credit Origination and reversal of temporary differences

(13,081) 35,480

527

Total income tax expense in Consolidated Statement of Comprehensive Income

22,322

ii) A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the company’s applicable income tax rate is as follows:

2023 $’000

2022 $’000

Profit before income tax

127,103 38,131

122,206 36,662

At the company's statutory income tax rate of 30% (2022: 30%) Impact of: Equity accounted income/distributions from entities operating as trusts

(8,975)

(8,998) (1,375) (9,545)

(Loss)/Gain on sale

775

Adjustments to carrying value (see Note 4(f))

1,995 1,095

Tax losses not recognised

- -

Benefit of tax losses not previously recognised

(1,099)

Income taxed at different tax rates on overseas operations

981

(115)

(Over)/under provision prior year

(1,077)

(16)

Acquisition costs and other non-deductible expenses

3,654

5,709

Income tax expense reported in the Consolidated Statement of Comprehensive Income

35,480

22,322

AUB GROUP ANNUAL REPORT 2023

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