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INCOME TAX | 12 Months Ended
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Jun. 30, 2022
Income tax [abstract] |
Income tax | 18 INCOME TAX SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES Management periodically evaluates positions taken where tax regulations are subject to interpretation. This includes the treatment of both Ergo and FWGR as single mining operations respectively, pursuant to the relevant ring-fencing legislation. The deferred tax liability is calculated by applying a forecast weighted average tax rate that is based on a prescribed formula. The calculation of the forecast weighted average tax rate requires the use of assumptions and estimates and are inherently uncertain and could change materially over time. These assumptions and estimates include expected future profitability and timing of the reversal of the temporary differences. Due to the forecast weighted average tax rate being based on a prescribed formula that increases the effective tax rate with an increase in forecast future profitability, and vice versa, the tax rate can vary significantly year on year and can move contrary to current period financial performance. A 100 basis points increase in the effective tax rate will result in an increase in the net deferred tax liability at June 30, 2022 of approximately R 18.7 million (2021: R 14.2 million; 2020: R 10.3 million). The assessment of the probability that future taxable profits will be available against which the tax losses and unredeemed capital expenditure can be utilised requires the use of assumptions and estimates and are inherently uncertain and could change materially over time. Capital expenditure is assessed by the South African Revenue Service (“ SARS ”) when it is redeemed against taxable mining income rather than when it is incurred. A different interpretation by SARS regarding the deductibility of these capital allowances may therefore become evident subsequent to the year of assessment when the capital expenditure is incurred. ACCOUNTING POLICIES Income tax expense comprises current and deferred tax. Each company is taxed as a separate entity and tax is not set-off between the companies. Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment on tax payable or receivable in respect of the previous year. Amounts are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or OCI. The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date. Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax is not recognised on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit. Deferred tax assets relating to unutilised tax losses and unutilised capital allowances are recognised to the extent that it is probable that future taxable profits will be available against which the unutilised tax losses and unutilised capital allowances can be utilised. The recoverability of these assets is reviewed at each reporting date and adjusted if recovery is no longer probable. Deferred tax related to gold mining income is measured at a forecast weighted average tax rate that is expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The calculation of the forecast weighted average tax rate requires the use of assumptions and estimates, including the Group’s life-of-mine plan (as discussed in note 9 to the consolidated financial statements) that is applied to calculate the expected future profitability. Current tax on gold mining income for the periods presented was determined based on a formula: Y = 34 - 170/X where Y is the percentage rate of tax payable and X is the ratio of taxable income, net of any qualifying capital expenditure that bears to gold mining income derived, expressed as a percentage. Non-mining income, which consists primarily of interest accrued, is taxed at a standard rate of 28 % for the periods presented. All mining capital expenditure is deducted in the year it is incurred to the extent that it does not result in an assessed loss. Capital expenditure not deducted from mining income is carried forward as unutilised capital allowances to be deducted from future mining income. Amendment in the corporate income tax rate and mining tax rate formula and broadening the tax base On February 23, 2022 the Minister of Finance announced in his budget speech that the corporate income tax (“ CIT ”) rate will be lowered from 28 % to 27 % for companies with years of assessment commencing on or after April 1, 2022. The mining operations of the Group accounts for income tax using the gold mining tax formula as opposed to the CIT rate. The gold mining tax formula was changed to Y = 33 - 165/X for years of assessment commencing on or after April 1, 2022. It was further announced that the lowering of the CIT rate will be implemented alongside additional amendments to broaden the CIT base by limiting interest deductions and assessed losses. Section 23M which limits the deduction of interest payable to certain parties who are not subject to tax was significantly widened. A maximum of R 1 million or 80 % of assessed losses (whichever is greater) is permitted to be set-off against taxable income. The deferred tax assets and liabilities for the Group have been calculated taking into account the above changes as they are effective for the financial year and year of assessment commencing July 1, 2022. Deferred tax is recognised using the gold mining tax formula to calculate a forecast weighted average tax rate considering the expected timing of the reversal of temporary differences. The formula is calculated as: Y = 33 – 165/X where Y is the percentage rate of tax payable and X is the ratio of taxable income, net of any qualifying capital expenditure that bears to mining income derived, expressed as a percentage. Amendment in the corporate income tax rate and mining tax rate formula and broadening the tax base continued Due to the forecast weighted average tax rate being based on the expected future profitability, the tax rate can vary significantly year-on-year and can move contrary to current year financial performance. The forecast weighted average deferred tax rate of Ergo has decreased from 25 % to 22 % as a result of the change in the gold mining tax formula and increase in the life of mine and increases in operating costs. The forecast weighted average deferred tax rate of FWGR has decreased from 30 % to 29 % as a result of the change in the gold mining tax formula. 18.1 INCOME TAX EXPENSE Amounts in R million 2022 2021 2020 Current tax (261.6) (423.7) (263.2) Mining tax (250.2) (423.7) (263.2) Non-Mining, company and capital gains tax (11.4) - - Deferred tax (72.7) (100.0) (80.7) Deferred tax charge - Mining tax (119.9) (104.0) (59.1) Deferred tax charge - Non-mining, company and capital gains tax 1.6 (19.1) (2.1) Deferred tax rate adjustment 45.6 - (20.7) Recognition of previously unrecognised tax losses 0.4 7.8 - (Derecognition of previously recognised)/Recognition of previously unrecognised tax losses of a capital nature - (1.2) 1.2 (Derecognition of previously recognised)/Recognition of previously unrecognised deductible temporary differences (0.4) 16.5 - (334.3) (523.7) (343.9) Tax reconciliation Major items causing the Group's income tax expense to differ from the statutory rate were: Tax on net profit before tax at the South African corporate tax rate of 28 % (408.3) (549.9) (274.1) Rate adjustment to reflect the actual realised company tax rates applying the gold mining formula 36.4 3.7 (0.9) Deferred tax rate adjustment (a) 45.6 - (20.7) Depreciation of property, plant and equipment exempt from deferred tax on initial recognition (b) (22.2) (21.2) (21.4) Non-deductible expenditure (c) (7.3) (6.2) (7.9) Exempt income and other non-taxable income (d) 19.0 22.8 2.4 (Derecognition of previously recognised)/Recognition of previously unrecognised deductible temporary differences (0.4) 16.5 - (Derecognition of previously recognised)Recognition of previously unrecognised tax losses of a capital nature - (1.2) 1.2 Utilisation of tax losses for which deferred tax assets were previously unrecognised 0.4 7.8 - Current year tax losses for which no deferred tax was recognised (1.4) (0.1) (23.5) Other items 3.6 3.3 0.4 Tax incentives 0.3 0.8 0.6 Income tax (334.3) (523.7) (343.9) (a) Deferred tax rate adjustment Ergo’s forecast weighted average deferred tax rate decreased to 22 % (2021: remained unchanged at 25 %; 2020: increased from 22 % to 25 % due to an increase in forecast taxable income of Ergo). FWGR’s forecast weighted average deferred tax rate decreased to 29 % (2021 and 2020: remained unchanged at 30 %). (b) Depreciation of property, plant and equipment exempt from deferred tax on initial recognition Depreciation of R 72.1 million (2021: R 68.7 million; 2020: R 73.2 million) on the fair value of FWGR’s property, plant and equipment that was exempt from deferred tax on initial recognition in terms of IAS 12 Income Taxes . (c) Non-deductible expenditure The most significant non-deductible expenditure incurred by the Group during the year includes: R 21.1 million discount recognised on Payments made under protest (2021: R 7.4 million; 2020: R 7.1 million); ● R 17.8 million expenditure not incurred in generation of taxable income or capital in nature (2021: R 17.0 million; 2020: R 2.7 million); and ● R 5.8 million net operating cost related to Ergo Business Development Academy Not for Profit Company that is not deductible as it is exempt from income tax (2021: R nil ; 2020: R 14.6 million). (d) Exempt income and other non-taxable income The most significant exempt income earned by the Group during the year includes: ● R 71.5 million dividends received (2021: R 76.1 million; 2020: R 4.3 million); ● R 5.8 million unwinding recognised on Payments made under protest (2021: R 4.8 million; 2020: R 4.0 million); and ● R nil net operating income related to Ergo Business Development Academy Not for Profit Company that is not taxable as it is exempt from income tax (2021: R 1.0 million; 2020 Ergo Business Development Academy Not for Profit Company incurred net operating cost that is not deductible as it is exempt from income tax) – refer to (c) non-deductible expenditure. 18.2 DEFERRED TAX Amounts in R million 2022 2021 Included in the statement of financial position as follows: Deferred tax assets 14.5 5.8 Deferred tax liabilities (451.9) (377.1) Net deferred tax liabilities (437.4) (371.3) Reconciliation of the deferred tax balance: Balance at the beginning of the year (371.3) (265.1) Recognised in profit or loss (72.7) (100.0) Recognised in other comprehensive income 6.6 (6.2) Balance at the end of the year (437.4) (371.3) The detailed components of the net deferred tax liabilities which result from the differences between the amounts of assets and liabilities recognised for financial reporting and tax purposes are: Amounts in R million 2022 2021 Deferred tax liabilities Property, plant and equipment (excluding unredeemed capital allowances) (537.6) (494.4) Environmental rehabilitation obligation funds (63.3) (60.2) Other investments (0.9) (7.4) Gross deferred tax liabilities (601.8) (562.0) Deferred tax assets Environmental rehabilitation obligation 105.6 124.5 Other provisions 49.3 46.7 Other temporary differences 1 4.6 14.3 Estimated tax losses 4.1 4.1 Estimated unredeemed capital allowances 0.8 1.1 Gross deferred tax assets 164.4 190.7 Net deferred tax liabilities (437.4) (371.3) 1 Includes the temporary differences on the lease liability Deferred tax assets have not been recognised in respect of the following: Amounts in R million 2022 2021 Estimated tax losses 18.1 16.7 Estimated tax losses - Capital nature 313.6 325.2 Unredeemed capital expenditure 252.0 253.3 Deferred tax assets for tax losses, unredeemed capital expenditure and capital losses have not been recognised where future taxable profits against which these can be utilised are not anticipated. These do not have an expiry date. A maximum of R 1 million or 80 % of assessed losses (whichever is greater) is permitted to be set-off per year against taxable income.

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