Treatment of Deferred Tax Liabilities in Australian Debt Contract

Abstract

The purpose of this study is to ascertain whether deferred tax liabilities are treated as liabilities of substance in the drafting and monitoring of debt contracts in Australia. Three main hypotheses are tested in a logical sequence. The ï¬rst, concerns the actual treatment of deferred tax-liabilities in relation to monitoring debt contracts which do not mention deferred tax liabilities in their deï¬nition of liabilities. The second tests whether the treatment accorded reflects the actual perception of the parties to such debt contracts, and the third tests for the same lawyer effect. The results, based on a sample of one hundred and eighty debt contracts, show that there is no clear consensus on the nature of deferred tax liabilities.