Incannex Healthcare Inc. Income Taxes Disclosure
Note 14 - Income Tax
The prima facie income tax benefit on pre-tax accounting loss from operations reconciles to the income tax benefit in the financial statements as follows:
| June 30, 2025 | June 30, 2024 | |||||||
| (in thousands) | ||||||||
| Accounting loss before tax | (46,885 | ) | (18,415 | ) | ||||
| Income tax benefit at the applicable tax rate of 30% | (14,066 | ) | (5,525 | ) | ||||
| Non-deductible expenses | 4,511 | 6,545 | ||||||
| Non-assessable income | (1,527 | ) | (3,431 | ) | ||||
| Deferred tax assets not recognized | 1,143 | 927 | ||||||
| Income tax benefit | (30 | ) | ||||||
| Unrecognized Deferred Tax Asset | ||||||||
| Deferred tax asset not recognized in the financial statements: | ||||||||
| Unused tax losses | 10,648 | 6,887 | ||||||
| Net unrecognized tax benefit at 25% | 11,790 | 7,813 | ||||||
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carry forwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry forward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. As of June 30, 2025 and 2024, the Company established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 29, 2025 | Showing above |
| 2024 | Sep 30, 2024 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.