Gin Ltd, a listed South African company, is a distiller and retailer of gin and other spirits. The company has a 30 June financial year-end.

The profit before tax of Gin Ltd for the year ended 30 June 2019 amounted to R450 000, before taking into account the additional information below. The profit before tax includes donations paid (not tax deductible) amounting to R15 000 and interest paid on VAT penalties amounting to R4 700.

The company provides for deferred tax on all temporary differences using the statement of financial position approach. There are no other exempt or temporary differences except those mentioned in the question. There is certainty beyond reasonable doubt that the company will have sufficient taxable profit in the future against which any deductible temporary differences can be utilised. Gin Ltd has an assessed loss of R516 000 for the 2018 tax year.

The following is an extract from the trial balance of Gin Ltd for the years ended 30 June 2018 and 30 June 2019 respectively, before taking into account the additional information below:

2019 2018

Dr/(Cr) Dr/(Cr)

Prepaid insurance (for the period 1 July 2019 to 31 August 2019) 80 000 0

Machinery at cost (refer 1) 1 200 000 1 200 000

Accumulated depreciation - machinery (refer 1) (432 000) (240 000)

Vehicles at cost (refer 2) 320 000 320 000

Accumulated depreciation - vehicles (refer 2) (192 000) (128 000)

Additional information:

1. On 30 June 2019 the company sold all its machinery for R1 225 000 and decided to rather lease all machinery in future. No other machinery was purchased or sold since the original acquisition date on 1 July 2017. On 30 June 2019 and 30 June 2018 the tax base of the machinery amounted to R600 000 and R900 000 respectively. This sales transaction has not yet been recorded in the accounting records of Gin Ltd for the year ended 30 June 2019.

2. After the draft annual financial statements of Gin Ltd had been prepared, the directors decided to change the residual value of the vehicles from R0 to R30 000. The residual value was changed due to a change in the use of the vehicles. All the vehicles of Gin Ltd were originally purchased on 1 July 2016. The vehicles were available for use, as well as brought into use, on acquisition date. No other vehicles were acquired or disposed of since then. The estimated useful lives of the vehicles on acquisition were determined to be five years, which remained unchanged throughout the period.

The effect of this change has not yet been recorded in the accounting records of Gin Ltd for the year ended 30 June 2019. The SA Revenue Service allows a tax allowance of four years on vehicles according to the straight-line method, in terms of section 11 (e) of the Income Tax Act.

QUESTION:

Calculate the deferred tax balance in the statement of financial position of Gin Ltd for both the years ended 30 June 2018 and 30 June 2019, using the statement of financial position approach, according to the requirements of IAS 12, Income taxes.

Indicate if your answer is a deferred tax asset or a deferred tax liability.