## Notes to the financial statements (cont’d) 

For the year ended 30 June 2012 

recognised by the Company (as head entity in the tax- consolidated group). 

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. 

Further information about the tax funding arrangement is detailed in note 10 to the financial statements. 

Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants. 

## (ii) Uncertain Tax Position 

On the 27 June 2012, Tax Laws Amendment (2012 Measures No. 2) Act 2012 (“The 2012 Act”) was substantially enacted. 

It sought to limit the availability of deductions previously made available by the passing of Tax Laws Amendment (2010 Measures No. 1) Act 2010 (“The 2010 Act”). Both Acts contain a number of amendments to the tax consolidation regime that deal with rights to future income assets acquired upon an entity joining a tax consolidated group. The 2012 Act limits deductions that were available under the 2010 Act in respect to the tax cost setting amount of those assets, and under the business related expenditure provisions. 

As such IOOF has reclassified some tax positions relating to deductions made by IOOF and its subsidiaries. The 2012 Act expressly protects certain deductions claimed under the 2010 Act where an assessment notice was received prior to 30 March 2011. Consequently, the amount received in respect to deductions claimed in IOOF’s 2010 Income Tax Return has been credited to profit as an income tax benefit in the 2012 year. The impact of the above reclassifications resulted in an increase to current tax liability of $23.5m, a reduction to income tax expense of $6.9m, and a decrease in deferred tax liability of $30.4m. IOOF is still analysing the 2012 Act and therefore all potential deductions cannot be quantified at this stage. 

The Company is also appealing to the Administrative Appeals Tribunal in respect to the result of an ATO private ruling it sought to confirm its entitlement to deductions under the 2010 Act. For these reasons the matter is ongoing. 

## (p) Goods and service tax (GST) 

Revenues, expenses and assets (excluding receivables) are recorded net of GST. GST input tax credits are initially recorded as an asset and GST collected as a liability. These balances are offset as at the reporting date and recognised as either an amount receivable or payable to the Australian Taxation Office. The GST portion relating to financial supplies and non- deductible expenditure, for which an input tax credit cannot be claimed, is expensed or is recognised as part of the cost of acquisition of an asset. 

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included with other receivables or payables in the statement of financial position. 

Cash flows are presented in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the Australian Taxation Office are presented as operating cash flows. 

## (q) Deferred acquisition costs 

Deferred acquisition costs relate to service fees paid, and are deferred as an asset in recognition that they relate to a future economic benefit. Deferred acquisition costs are initially measured at historical cost and are written down immediately to their recoverable amount if the carrying amount is greater than its estimated recoverable amount. 

Deferred acquisition costs are progressively amortised in profit or loss by a systematic allocation over the period of time the future economic benefits are expected to be received. The amortisation period is between 5 and 7 years. 

## (r)  Investment contract liabilities and claims expense 

## (i)  Investment contracts with Discretionary Participation Features (DPF) 

The value of these liabilities changes in relation to the change in unit prices for unit linked contracts, and are decreased by management fee charges. In accordance with the rules of the funds, any remaining surplus is attributed to the policyholders. Adjustments to the liabilities at each reporting date are recorded in profit or loss. 

## (ii) Other investment contracts 

The value of these liabilities changes in relation to the change in unit prices for unit linked contracts, and are decreased by management fee charges. In accordance with the rules of the funds, any remaining surplus is attributed to the members of 

