timing differences, which arise from items
being brought to account in different
periods for income tax and accounting
purposes, is carried forward in the
statements of financial position as a
deferred tax asset or deferred tax liability.
Future income tax benefits relating to
entities which incur losses are brought to
account where realisation of the benefits
is considered to be virtually certain.
Santos Ltd is the head entity in the
tax-consolidated group comprising all
the Australian resident wholly-owned
controlled entities set out in note 22.
The implementation date for the
tax-consolidated group was 
1 January 2003.
The head entity recognises all of the
current and deferred tax assets and
liabilities of the tax-consolidated group.
The tax-consolidated group has entered 
into a tax funding agreement that requires
wholly-owned subsidiaries to make
contributions to the head entity for tax
liabilities and deferred tax balances arising
from external transactions occurring after
implementation of tax consolidation. The
contributions are calculated as a
percentage of profit from ordinary
activities before income tax expense.
Contributions are payable following
payment of the liabilities by Santos Ltd.
The assets and liabilities arising under the
tax funding agreement are recognised as
intercompany assets and liabilities with a
consequential adjustment to income tax
expense or revenue.
The tax-consolidated group has also
entered into a tax sharing agreement
pursuant to which the wholly-owned
controlled entities may be required to
contribute to the tax liabilities of Santos
Ltd in the event of default by Santos Ltd
or upon leaving the group.
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