IOOF  | Annual Report 2012 (m) Lease payments (n) Finance income and finance costs (o) Income tax (i) Tax consolidation Payments made under operating leases are recognised in  profit or loss on a straight-line basis over the term of the lease.  Lease incentives received are recognised as an integral part of  the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are  apportioned between the finance expense and the reduction  of the outstanding liability. The finance expense is allocated to  each period during the lease term so as to produce a constant  periodic rate of interest on the remaining balance of the  liability. Finance income comprises interest income on funds invested  (including available-for-sale financial assets), dividend income,  gains on the disposal of available-for sale financial assets and  changes in the fair value of financial assets at fair value through  profit or loss. Interest income is recognised as it accrues in  profit or loss, using the effective interest method. Dividend  income is recognised in profit or loss on the date that the  Group’s right to receive payment is established, which in the  case of quoted securities is the ex-dividend date. Finance costs comprise interest expense on borrowings,  unwinding of the discount on provisions, changes in the fair  value of financial assets at fair value through profit or loss and  impairment losses recognised on financial assets.  Borrowing costs that are not directly attributable to the  acquisition, construction or production of a qualifying asset are  recognised in profit or loss using the effective interest method. Income tax expense comprises current and deferred tax.  Current and deferred tax are recognised in profit or loss except  to the extent that it relates to a business combination, or  items recognised directly in equity or in other comprehensive  income. Current tax is the expected tax payable or receivable on  the taxable income for the year, using tax rates enacted  or substantively enacted at the reporting date, and any  adjustment to tax payable in respect of previous years.  The applicable rates of income tax vary depending upon the  fund or entity involved. The segregated superannuation and  rollover fund business of the IOOF Ltd benefit funds attracts  income tax at the rate of 15% (2011: 15%) and the ordinary  business of the Company is taxed at the rate of 30%  (2011: 30 %). Deferred tax is recognised in respect of temporary differences  between the carrying amounts of assets and liabilities for  financial reporting purposes and the amounts used for  taxation purposes. Deferred tax is not recognised for the  following temporary differences: the initial recognition of  assets or liabilities in a transaction that is not a business  combination and that affects neither accounting nor taxable  profit or loss, and differences relating to investments in  subsidiaries and associates to the extent that it is probable  that they will not reverse in the foreseeable future. In  addition, deferred tax is not recognised for taxable temporary  differences arising on the initial recognition of goodwill.  Deferred tax is measured at the tax rates that are expected to  be applied to temporary differences when they reverse, based  on the laws that have been enacted or substantively enacted  by the reporting date. In determining the amount of current and deferred tax the  Group takes into account the impact of uncertain tax positions  and whether additional taxes and interest may be due. The  Group believes that its accruals for tax liabilities are adequate  for all open tax years based on its assessment of many factors,  including interpretations of tax law and prior experience.  This assessment relies on estimates and assumptions and  may involve a series of judgements about future events. New  information may become available that causes the Group to  change its judgement regarding the adequacy of existing tax  liabilities; such changes to tax liabilities will impact tax expense  in the period that such a determination is made. Deferred tax assets and liabilities are offset when there is  a legally enforceable right to offset current tax assets and  liabilities and when deferred tax balances relate to the same  taxation authority. Current tax assets and liabilities are offset  where the entity has a legally enforceable right to offset and  intends either to settle on a net basis, or to realise the asset and  settle the liability simultaneously. IOOF Holdings Ltd and its wholly owned Australian resident  entities (including IOOF Ltd benefit funds) are part of a  tax-consolidated group under Australian taxation law. As a  consequence, all members of the tax-consolidated group are  taxed as a single entity. Tax expense/income, deferred tax liabilities and deferred tax  assets arising from temporary differences of the members of  the tax-consolidated group are recognised in the separate  financial statements of the members of the tax-consolidated  group using the ‘separate taxpayer within group’ approach  by reference to the carrying amounts in the separate financial  statements of each entity and the tax values applying under  tax consolidation. Current tax liabilities and assets and deferred  tax assets arising from unused tax losses and relevant tax  credits of the members of the tax-consolidated group are  page 69