Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes



The Company follows ASC 740-10-10, under which an entity recognizes deferred tax assets and liabilities for future tax consequences or for events that were previously recognized in the Company’s financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on enacted tax law provisions. The effects of future changes in tax laws or rates are not anticipated. Through June 30, 2010, the Company operated exclusively in Australia. The Company was wholly subject to Australian income tax laws and regulations, which are administered by the Australian Taxation Office for the years ended June 30, 2010 and all prior years.


On November 23, 2010, the Company was incorporated in the state of Delaware. In January 2011, the Company acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis with Propanc PTY LTD becoming a wholly-owned subsidiary of the Company. As a result of these transactions, the Company is subject to the income tax laws of both the United States and Australia for the years ended June 30, 2013 through June 30, 2018.


For the years ended June 30, 2018 and 2017, the Company’s losses before income taxes resulted from both its Australian and US activities and its taxable losses are subject to both Australian and U.S. tax law. At June 30, 2018, the Company has net operating loss (“NOL”) carryforwards for Australian tax purposes only that is approximately $18,896,000. At June 30, 2018, the Company has NOL carryforwards for US tax purposes only that is approximately $2,767,000. Consequently, the Company may have NOL carryforwards available for income tax purposes that will continue to be available until they are recovered through earning taxable income. Deferred tax assets would arise from the recognition of anticipated utilization of these net operating losses to offset future taxable income. The NOL for Australian tax purposes is subject to a reduction of $4,693,000 for research and development credits granted by the Australian Taxation Office through June 30, 2018.


The components for the provision for income taxes are as follows:


    Year Ended  
    June 30, 2018     June 30, 2017  
Current Taxes   $ (278,320 )   $ (305,673 )
Deferred Taxes     -       -  
Income Taxes Expense (Benefit)   $ (278,320 )   $ (305,673 )


The items accounting for the difference between income taxes at the Australia statutory rate and the provision for income taxes are as follows:


    Year Ended  
    June 30, 2018     June 30, 2017  
    Amount     Impact on
    Amount     Impact on
Income Tax Expense (Benefit) at Australia Statutory Rate   $ (2,325,482 )     (32.22 )%   $ (1,830,192 )     (22.39 )%
Expenses Paid by Parent on Behalf of Foreign Subsidiary     159,944       2.22 %     922,125       11.28 %
R&D Refundable Tax Credit     (179,307 )     (2.48 )%     (305,673 )     (3.74 )%
Reduction of NOL Carryforward Due to R&D Tax Credit     179,307       2.48 %     305,673       3.74 %
Change in Federal Tax Rates     (99,013 )     (1.37 )%     -       0.00 %
Change in Deferred Tax Valuation Allowance     1,005,570       13.93 %     881,596       10.79 %
Foreign Exchange Rate Changes     980,661       13.59 %     (279,202 )     (3.42 )%
Total Income Tax Expense (Benefit)   $ (278,320 )     (3.86 )%   $ (305,673 )     (3.74 )%


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows:


    June 30, 2018     June 30, 2017  
Current Deferred Tax Assets                
Warrant Derivative Liability   $ 7,403     $ 8,460  
Provision for Annual Leave     44,969       36,190  
Superannuation     4,041       99  
Total Current Deferred Tax Assets   $ 56,413     $ 44,749  
Current Deferred Tax Liabilities                
Prepaid Investor Services   $ 18,378     $ 16,966  
Total Current Deferred Tax Liabilities   $ 18,378     $ 16,966  
Non-Current Deferred Tax Assets                
Prepaid Investor Services   $ 335,175     $ 426,664  
Capital Raising Costs     23,559       23,325  
Legal Costs     23,885       23,648  
Intellectual Property     11,760       11,643  
Patent Costs     171,195       128,950  
Formation Expense     7,208       6,881  
Net Operating Loss Carryover     5,668,743       4,215,141  
Foreign Exchange Loss (OCI)     (39,379 )     (39,379 )
Total Non-Current Deferred Tax Assets     6,202,146       4,796,873  
Deferred Tax Valuation Allowance     (6,276,937 )     (4,858,588 )
Total Non-Current Deferred Tax Assets     (74,791 )     (61,715 )
Total Deferred Tax Assets (Net)   $ -     $ -  


Management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of such benefits.


The Company follows ASC 740-10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial statements. Recognition involves a determination whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information.


The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of June 30, 2018 the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the years ended June 30, 2018 and 2017. The Company did not recognize any interest or penalties during fiscal 2018 or 2017 related to unrecognized tax benefits.


The income tax returns filed for the tax years from inception will be subject to examination by the relevant taxing authorities.