12 Deferred tax balances

The movement for the year in the Group’s net deferred tax position is as follows:


	2018			2017		2016
	US$M			US$M		US$M
Net deferred tax asset/(liability)
At the beginning of the financial year		2,023			1,823		(1,681	)
Income tax (charge)/credit recorded in the income statement ⁽¹⁾		(1,445	)		188		3,508
Income tax credit/(charge) recorded directly in equity		17			12		(25	)
Other movements		(26	)		–		21

At the end of the financial year		569			2,023		1,823

⁽¹⁾	Includes Discontinued operations income tax credit to the income statement of US$510 million (2017: US$219 million; 2016: US$2,990 million).

For recognition and measurement refer to note 5 ‘Income tax expense’.

The composition of the Group’s net deferred tax assets and liabilities recognised in the balance sheet and the deferred tax expense charged/(credited) to the income statement is as follows:


	Deferred tax assets						Deferred tax liabilities						Charged/(credited) to the income statement
	2018			2017			2018			2017			2018			2017			2016
	US$M			US$M			US$M			US$M			US$M			US$M			US$M
Type of temporary difference
Depreciation		(2,756	)		(3,454	)		1,356			1,411			(752	)		391			(2,282	)
Exploration expenditure		492			543			–			–			51			(22	)		(3	)
Employee benefits		321			379			(2	)		3			31			(37	)		56
Closure and rehabilitation		1,627			1,809			(194	)		(230	)		218			(151	)		36
Resource rent tax		468			559			1,328			1,614			(194	)		(189	)		(8	)
Other provisions		141			131			(2	)		(1	)		(11	)		14			8
Deferred income		21			(2	)		–			(10	)		(13	)		3			(49	)
Deferred charges		(374	)		(443	)		272			322			(119	)		(77	)		62
Investments, including foreign tax credits		546			1,145			691			648			615			(17	)		(284	)
Foreign exchange gains and losses		(120	)		(87	)		16			69			(20	)		(77	)		(310	)
Tax losses		3,758			5,352			–			–			1,595			(381	)		(809	)
Other		(83	)		(144	)		7			(61	)		44			355			75

Total		4,041			5,788			3,472			3,765			1,445			(188	)		(3,508	)

The Group recognises the benefit of tax losses amounting to US$3,758 million (2017: US$5,352 million) only to the extent of anticipated future taxable income or gains in relevant jurisdictions. The amounts recognised in the Financial Statements in respect of each matter are derived from the Group’s best judgements and estimates as described in note 5 ‘Income tax expense’.

The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:


	2018		2017
	US$M		US$M
Unrecognised deferred tax assets
Tax losses and tax credits ⁽¹⁾		3,028		2,687
Investments in subsidiaries ⁽²⁾		1,659		856
Deductible temporary differences relating to PRRT ⁽³⁾		2,282		2,293
Mineral rights ⁽⁴⁾		2,263		2,293
Other deductible temporary differences ⁽⁵⁾		437		478

Total unrecognised deferred tax assets		9,669		8,607

Unrecognised deferred tax liabilities
Investments in subsidiaries ⁽²⁾		2,216		2,500
Taxable temporary differences relating to unrecognised deferred tax asset for PRRT ⁽³⁾		685		694

Total unrecognised deferred tax liabilities		2,901		3,194

⁽¹⁾

At 30 June 2018, the Group had income and capital tax losses with a tax benefit of US$1,946 million (2017: US$1,844 million) and tax credits of US$1,082 million (2017: US$843 million), which are not recognised as deferred tax assets, because it is not probable that future taxable profits or capital gains will be available against which the Group can utilise the benefits.

The gross amount of tax losses carried forward that have not been recognised are as follows:


Year of expiry	Total
	US$M
Income tax losses
Not later than one year		363
Later than one year and not later than two years		402
Later than two years and not later than five years		897
Later than five years and not later than 10 years		398
Later than 10 years and not later than 20 years		2,446
Unlimited		1,734

		6,240

Capital tax losses
Not later than one year		–
Later than two years and not later than five years		144
Unlimited		3,471

Gross amount of tax losses not recognised		9,855

Tax effect of total losses not recognised		1,946

Of the US$1,082 million of tax credits, US$831 million expires not later than 10 years and US$251 million expires later than 10 years and not later than 20 years.

⁽²⁾

The Group had deferred tax assets of US$1,659 million at 30 June 2018 (2017: US$856 million) and deferred tax liabilities of US$2,216 million (2017: US$2,500 million) associated with undistributed earnings of subsidiaries that have not been recognised because the Group is able to control the timing of the reversal of the temporary differences and it is not probable that these differences will reverse in the foreseeable future.

⁽³⁾

The Group had US$2,282 million of unrecognised deferred tax assets relating to Australian Petroleum Resource Rent Tax (PRRT) at 30 June 2018 (2017: US$2,293 million relating to Australian PRRT), with a corresponding unrecognised deferred tax liability for income tax purposes of US$685 million (2017: US$694 million). Recognition of a deferred tax asset for PRRT depends on benefits expected to be obtained from the deduction against PRRT liabilities.

⁽⁴⁾

The Group had deductible temporary differences relating to mineral rights for which deferred tax assets of US$2,263 million at 30 June 2018 (2017: US$2,293 million) had not been recognised because it is not probable that future capital gains will be available, against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation.

⁽⁵⁾

The Group had deductible temporary differences for which deferred tax assets of US$437 million at 30 June 2018 (2017: US$478 million) had not been recognised because it is not probable that future taxable profits will be available against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation.