Taxation Analysis of Huon Aquaculture Group Limited

The analysis of Huon Aquaculture Group Limited's financial documents reveals their compliance with Australian tax laws. The company ensures proper justification and clarity in its financial reporting, which enhances transparency concerning its taxation treatment. This report provides insights in...Read More

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Answer to Question I.......................................................................................................................2
Answer to Question II......................................................................................................................3
Answer to Question III....................................................................................................................3
Answer to Question IV....................................................................................................................4
Answer to Question V.....................................................................................................................5
Answer to Question VI....................................................................................................................5
Answer to Question VII...................................................................................................................6
References........................................................................................................................................7

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Answer to Question I
Balance sheet depicts the overall financial position of the business organizations at the
end of the year. Three major factors of balance sheet are Assets, Liabilities and Equity. From the
latest annual report of Huon Aquaculture Group Limited, it can be observed that there are three
major items under ‘Equity’; they are Contributed Equity, Other Reserves and Retained Earnings.
Contributed equity refers to the equity capital used for raining capital. It can be seen that the
amount of contributed equity has remained same for Huon Aquaculture Group Limited in 2017
and 2016 that is $164,302,000. The main reason is that the company has issued same number of
shares in 2017 and 2016 that is 87,337,207 (investors.huonaqua.com.au 2018). The next item is
Other Reserves that refers to the extra amount of money paid by the shareholders except the
basic share price (Brigham and Houston 2012). The latest annual report of Huon Aquaculture
Group Limited shows increase in the amount of other reserves; that is $544,000 in 2017 and
$255,000 in 2016 (investors.huonaqua.com.au 2018). Issue of shares with premium is the main
reason for this increase in other reserves. In addition, another major reason for increase in the
reserves of the company is the presence of share-based payment expenses. As per the latest
annual report, the company has incurred $289,000 in 2017 and $255,000 in 2016 as share based
payment expenses. Retained Earnings refer to the amount not paid as dividend so that they can
be reinvested (Brigham and Ehrhardt 2013). Increase in retained earnings can be seen in 2017;
that is $128,376,000 in 2017 and $86,216,000 in 2016. Huge increase in the net profit of the
company is the main reason behind the increase in retained earnings (investors.huonaqua.com.au
2018).

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Answer to Question II
Business organizations are required to incur different types of expenses so that the
business operations can be carried out in a smooth manner. Some of the major business expenses
are selling expenses, administrative expenses, and direct expenses. One of such major expense
for the companies is Tax Expenses. It is the kind of expenditure that the business organizations
owes to the federal government and the state government. In the financial statements of Huon
Aquaculture Group Limited, the presence of tax expenditure can be seen. According to the latest
annual report of Huon Aquaculture Group Limited, the company has reported $14,332,000 and
$627,000 as the income tax expenses for the year 2017 and 2016 respectively
(investors.huonaqua.com.au 2018). From the annual report of the company, it can be seen that
the total expenses have been segregated into four parts; they are Current tax expenses or income,
Adjustments for current tax of previous year, Increase in the differed tax assets and increase in
deferred tax liabilities. In this context, it needs to be mentioned that the company has tax rate of
30% in both 2017 and 2016. In addition, the company had to make certain adjustment in the
actual taxation expenses for getting the reported tax expenses (Kusnirova 2014).
Answer to Question III
It needs to be mentioned that the business organizations can obtain tax expenses by
multiplying the applied tax rate with the income before income tax after doing the necessary
adjustments. The annual report of Huon Aquaculture Group Limited states that the company has
$56,492,000 and $4,054,000 as profit before income tax in 2017 and 2016 respectively. At 30%
tax rate, the tax expenditure should be $16,948,000 ($56,492,000*30%) and $1,216,000
($4,054,000*30%) in 2017 and 2016 respectively (investors.huonaqua.com.au 2018). However,
these figures differ from the above reported tax expenses of the company. From the notes of

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income statement of the company, it can be seen that certain substances are responsible for
making this difference. The first factor is research and development costs (Gitman, Juchau and
Flanagan 2015). It needs to be mentioned that companies are not required to pay any taxes on
their research and development activities that will be helpful for the community. However, in
this case, research and development has been done for increasing the production. As per the
taxation regulations of Australia, companies are required to pay taxes on the expense of research
and development that is incurred for the increase in the production of the company. The same
aspect can be seen in case of Huon Aquaculture Group Limited. Due to this, the company has
adjusted $3,315,000 and $599,000 in 2017 and 2016 respectively. Apart from this, some items
can be seen in the company that are not subject to tax deduction. For this reason, the company
have to make adjustments of $691,000 and $10,000 in 2017 and 2016 respectively. The next item
is non-tax deductible items and for this, $800 and $10,000 has been adjusted in 2017 and 2016
respectively (investors.huonaqua.com.au 2018).
Answer to Question IV
Deferred tax assets and deferred tax liabilities are two important parts that the companies
are required to consider while doing their tax calculations. Deferred tax assets refer to that
particular situation when the companies pay extra amount of taxes or advance taxes for their
companies and due to this, they are considered as the assets for the companies. Deferred tax
liabilities arise for the companies due to the temporary difference in the tax rates and thus, they
are considered as the liabilities. The analysis of the latest annual report of Huon Aquaculture
Group Limited states that the company has reported differed tax liabilities in their balance sheet;
that is $55,650,000 in 2017 and $41,313,000 in 2016 (investors.huonaqua.com.au 2018). It needs
to be mentioned that the company has not reported any deferred tax assets in their balance sheet.

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In Huon Aquaculture Group Limited, the main reason for the development of deferred tax asset
can be seen due to the temporary differences in the tax rate that needs to be applied. In addition,
the main reason for the development of differed tax liabilities is the payment of less amount of
tax than the actual tax expenses (Tran 2015).
Answer to Question V
Current tax assets and current tax liabilities are important part of the current assets and
current liabilities of the companies. Current income tax payable refers to the amount of income
tax that the companies are required to pay for the current business period. It is obligation on the
companies to report their current tax assets and income tax payable in the balance sheet. From
the latest annual report of Huon Aquaculture Group Limited, it can be seen that the company has
reported $3000 as current tax receivables for the year 2016 (investors.huonaqua.com.au 2018). In
addition, the company has not reported any current tax liabilities or income tax payable in the
balance sheet. It needs to be mentioned that there is difference between income tax expenses and
income tax payable. Income tax expenses refer to the expenditure that the companies use to
calculate on their income based on the accounting rules and it is shown in the income statement
of the companies. However, income tax payable is the amount of tax the companies are required
to the tax authority as per the taxation ruling (Carling 2015). This aspect creates difference.
Answer to Question VI
It can be seen that the business organizations use to report about their income tax
expenses in different part of their financial statements like income statements, balance sheet,
cash flow statements and others. The same aspect can be seen for Huon Aquaculture Group
Limited. As per the latest income statement of Huon Aquaculture Group Limited, the income tax

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expenses are $14,332,000 for 2017 and $627,000 for 2016. As per the latest cash flow statement
of Huon Aquaculture Group Limited, the income tax expenses are $8000 for 2017 and
$4,355,000 for 2016 (investors.huonaqua.com.au 2018). Thus, clear difference can be seen. In
the income statement, companies are required to record the income tax expenditure that the
companies are required to be paid for the current year. However, cash flow from operating
activities deals with the increase and decrease in current assets and current liabilities. For this
reason, the amount of cash flow statements includes differed tax expenses and income tax
payable (Rimmer, Smith and Wende 2014). This is the main reason for the difference.
Answer to Question VII
From the above discussion, it can be seen that Huon Aquaculture Group Limited has
complied with the Australian taxation authority for doing the tax treatment of their company.
The analysis shows that the company has carried out their taxation transactions with proper
justification and clarification so that the transparency of financial statements can be maintained.
All these justifications and clarifications along with calculation have provided transparency
related with the taxation treatment of the company. In addition, there is not anything of
confusion related with the taxation of the company as the company has done their tax
calculations in a simple format by complying with the required guidelines. From the taxation
treatment of Huon Aquaculture Group Limited, one can obtain proper insight about the manner
in which large organizations carry on their taxation transactions along with different tax
adjustments.

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References
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage
Learning.
Brigham, E.F. and Houston, J.F., 2012. Fundamentals of financial management. Cengage
Learning.
Carling, R.G., 2015. Right or Rort? Dissecting Australia's Tax Concessions. Centre for
Independent Studies.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Investors.huonaqua.com.au. (2018). Annual Report 2017. [online] Available at:
http://investors.huonaqua.com.au/FormBuilder/_Resource/_module/y8hXOlgfx0a4WjSUgjZk7A
/docs/Reports/Annual/HUON_Annual_Report_FY2017.pdf [Accessed 25 Jan. 2018].
KUŠNÍROVÁ, J., 2014. Challenges to a corporate taxation in selected countries. FINANCE
AND RISK 2014 vol., 1, p.129.
Rimmer, X., Smith, J. and Wende, S., 2014. The incidence of company tax in
Australia. Economic Round-up, (1), p.33.
Tran, A., 2015. Can taxable income be estimated from financial reports of listed companies in
Australia?. Browser Download This Paper.

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