Notes to the Group Annual Financial Statements | Note 7.2

7. TAXATION
7.2 DEFERRED TAXATION

Deferred taxation is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by year-end and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Capital allowances 
R'000 		 PPAs and fair value gains*
R'000 		 Provisions 
R'000 		 Tax losses 
R'000 		 Prepayments 
R'000 		 Unrealised foreign exchange differences 
R'000 		 Share Scheme 
R'000 		 Other**
R'000 		 Total 
R'000 
AT 31 MAY 2024 280 151  49 678  (33 995) (102 834) 5 066  8 466  (3 590) 9 825  212 767 
Charged/ (credited) to the income statement  (37 953) (8 406) (33 681) 3 236  683  (3 365) (25 673) (88 812) (193 971)
AT 31 MAY 2025 242 198  41 272  (67 676) (99 598) 5 749  5 101  (29 263) (78 987) 18 796 
Charged/ (credited) to the income statement  (45 657) 9 949  (59 296) (61 095) (2 431) (8 098) (9 993) 52 418  (124 203)
Charged to equity compensation benefit reserve  –  –  –  –  –  –  (7 310) –  (7 310)
Acquisition of subsidiary  –  2 771 820  (537 084) (2 024 752) –  –  –  –  209 984 
Disposal of subsidiary  (219 409) (2 822 596) 588 993  2 096 754  165  –  2 166  16 150  (337 777)
AT 31 MAY 2026 (22 868) 445  (75 063) (88 691) 3 483  (2 997) (44 400) (10 419) (240 510)
* These relate to intangible assets included in note 4.2.
** Other deferred tax included the following:
– R21.2 million (2025: R28.6 million) deferred taxation liability in respect of contract revenue recognised in advance; and
– R29.3 million (2025: R20.6 million) deferred taxation asset in respect of income received in advance.

2026
R'000		 2025
R'000 
DEFERRED TAX ASSET COMPRISES:
Capital allowances  (40 481) (292)
Purchase price allocations and fair value gains  – (302)
Provisions  (77 813) (109 414)
Tax losses  (88 691) (99 598)
Prepayments  – (214)
Unrealised foreign exchange differences  (2 997) (1 883)
Share scheme  (44 400) (29 263)
Other  (33 585) (107 599)
Total deferred tax asset  (287 967) (348 565)
DEFERRED TAX LIABILITY COMPRISES:
Capital allowances  17 613  242 490 
Purchase price allocations and fair value gains  445  41 574 
Provisions  2 750  41 738 
Prepayments  3 483  5 963 
Unrealised foreign exchange differences  –  6 984 
Other  23 166  28 612 
Total deferred tax liability  47 457  367 361 
The analysis of deferred tax assets and deferred tax liabilities is as follows: 
Deferred tax assets 
Deferred tax assets to be recovered after more than 12 months  (97 549) (58 681)
Deferred tax assets to be recovered within 12 months  (161 907) (145 871)
Net deferred tax asset  (259 456) (204 552)
Deferred tax liabilities 
Deferred tax liabilities to be recovered after more than 12 months  18 654  39 861 
Deferred tax liabilities to be recovered within 12 months  292  183 487 
Net deferred tax liability  18 946  223 348 

Where deferred tax assets have been recognised in respect of entities which have incurred losses in the current or prior years, a formal process of assessment of the future profitability of the entity has been performed based on detailed budgets and cash flow forecasts. As a result, management believes that the current tax losses will be utilised within one to five years.

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of R734.6 million (2025: R59.6 million) in respect of losses amounting to R2.7 billion (2025: R224.1 million) that can be carried forward against future taxable income.

There is no withholding tax that would be payable on any dividends received from the Group’s equity-accounted associates and joint ventures and therefore no deferred tax has been raised in this regard.