29 The Australian consolidated tax group elected to adopt from 1 July 2009 onwards the new Taxation of Financial Arrangements ("TOFA") regime for financial instruments. The TOFA aims to align the tax and accounting treatment of financial arrangements. The election made is irrevocable. A transitional election was made to bring pre-existing arrangements into TOFA. Global Minimum top-up tax For the financial year ended 30 June 2025, management has assessed the Group’s exposure to top-up tax under the OECD Pillar Two Global Anti-Base Erosion (GloBE) Rules and has not identified material top-up tax in any jurisdiction in which it operates on the basis that all jurisdictions either satisfy the Transitional Safe Harbour (TSH) tests or have an Effective Tax Rate (ETR) above the 15% minimum under the GloBE Rules. In accordance with AASB 112 as amended by AASB 2023-2, the Group has applied a mandatory relief from deferred tax accounting for impacts of the top-up tax and has not recognised any deferred tax assets or liabilities related to Pillar Two top-up taxes in these financial statements. The Group also notes that the Australian Government has enacted legislation to implement the Pillar Two rules, including the Taxation (Multinational—Global and Domestic Minimum Tax) Act 2024 and related instruments. Under this framework: • A 15% global minimum tax applies to large multinational groups for fiscal years beginning on or after 1 January 2024. • The Undertaxed Profits Rule (UTPR) will apply from 1 January 2025. • A 15% domestic minimum tax also applies from 1 January 2024. The Group will continue to monitor legislative developments and guidance in all relevant jurisdictions and assess the potential impact on future reporting periods. 2025 2024 All figures are in A$000's Raw materials, components (at cost) 1,402 3,185 Total inventories 1,402 3,185 Consolidated 5. Taxation (continued) Tax consolidation McConnell Dowell Corporation and its wholly owned Australian entities are members of the Aveng Australia Holdings Pty Ltd tax consolidated group with effect from the 12 May 2004. Members of the Group have entered into a tax sharing agreement (TSA) that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of the TSA on the basis that the possibility of default is remote. Tax effect accounting by members of the Aveng Australia Holdings Pty Ltd consolidated tax group The measurement method is adopted under AASB Interpretation 1052 Tax Consolidation Accounting. The head entity and the controlled entities in the tax consolidation group continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidation group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below. Members of the tax consolidated group have entered into a tax funding agreement. The agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the period, while deferred taxes are allocated to members of the consolidated group in accordance with the principles of AASB 112 T Income axes. Nature of tax funding agreement The Group has applied the group allocation approach in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. This approach is based on a modified stand alone method, where the Group measures its current and deferred taxes as if it continued to be a separate taxable entity adjusted for inter-group dividends and capital gains / (losses). The tax funding agreement require payments to / (from) the head entity equal to the current tax liability / (asset) assumed by the head entity and any tax loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-company receivable / (payable) equal in amount to the tax liability / (asset) assumed. The inter-company receivable / (payable) is at call. 6. Inventories
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