Telstra Corporation Limited is an Australian telecommunications and media company that builds and provides land-based and mobile telecom services along with internet and pay television products. The company is Australia's largest 3G and 4G enabled mobile network. The footnote below reports income statement and balance sheet data for the company's income taxes.

Required

a. What income tax expense does Telstra report in its 2012 income statement? How much of this expense was paid during the year or is currently payable?

b. Determine the company's effective tax rate.

c. What is the company's marginal (statutory) tax rate?

d. Telstra reports \(\$ 1,241\) million of deferred tax liabilities in 2012 relating to "Property, plant and equipment." Explain how such liabilities arise.
\(e\). Describe how a \$292 million deferred tax asset can arise from "Provision for employee entitlements."

Transcribed Image Text:

($ in millions) Major components of income tax expense Current tax expense.. Deferred tax resulting from the origination and reversal of temporary differences... Under/(over) provision of tax in prior years Notional income tax expense on profit differs from actual income tax expenses recorded as follows: Profit before income tax expense Notional income tax expense calculated at the Australian tax rate of 30%. Which is adjusted by the tax effect of: Different rates of tax on overseas income Non-assessable and non-deductible items. Amended assessments Under/(over) provision of tax in prior years Income tax expense on profit.. Deferred tax (liability) asset Property, plant and equipment. Intangible assets.... Borrowings and derivative financial instruments Provision for employee entitlements Revenue received in advance Provision for workers' compensation.. Allowance for doubtful debts.. Defined benefit liability/asset. Trade and other payables.. Other provisions... Income tax losses Other.. As at 30 June 2012 2011 $1,826 (337) 21 $1,510 $4,934 $ 1,480 (15) 63 (39) 21 $1,510 $(1,241) (830) (59) 292 194 20 57 98 111 49 39 (32) $(1,302) $1,519 (209) (3) $1,307 $4,557 $1,367 (17) (16) (24) (3) $1,307 $(1.434) (876) (90) 252 52 21 64 138 135 52 46 (29) $(1,669)