Income Tax

12 Months Ended

Jun. 30, 2020

The major components of income tax expense for the fiscal years ended 2020, 2019 and 2018 are as follows:


	Fiscal Year Ended June 30,
	2020		2019		2018
	(U.S. $ in thousands)
Current income tax:
Current income tax charge	$	(25,715)	$	(15,788)	$	(1,956)
Adjustments in respect of current income tax of previous years	1,276		(361)		(48)
Deferred tax:
Benefit (expense) relating to origination and reversal of temporary differences	18,702		30,417		(19,934)
Adjustments in respect of temporary differences of previous years	1,292		(46,333)		(33,363)
Income tax expense	$	(4,445)	$	(32,065)	$	(55,301)

A reconciliation between income tax expense and the product of accounting loss multiplied by the U.K.'s domestic tax rate for the fiscal years ended 2020, 2019 and 2018, is as follows:


	Fiscal Year Ended June 30,
	2020		2019		2018
	(U.S. $ in thousands)
Loss before income tax expense	$	(346,209)	$	(605,556)	$	(58,131)
At the United Kingdom's statutory income tax rate of 19% in fiscal years 2020, 2019 and 2018	65,688		115,031		12,508
Tax effect of amounts that are not taxable (deductible) in calculating taxable income:
Research and development incentive	6,816		660		2,620
Non-deductible charges relating to exchangeable senior notes	(80,262)		(104,445)		(3,195)
Share-based payment	(10,619)		(3,729)		(11,199)
Foreign tax credits not utilized	(93)		—		—
Foreign tax paid	4,765		—		—
Amortization of intangible assets that do not give rise to deferred taxes	—		(4)		(31)



Foreign tax rate adjustment	1,416		1,685		(4,968)
Adjustment to deferred tax balance	8,835		6,337		(14,602)
Other items, net	(3,559)		(906)		(3,023)
	(7,013)		14,629		(21,890)
Adjustments in respect to current income tax of previous years	1,276		(361)		(48)
Adjustments in respect to deferred income tax of previous years	1,292		(46,333)		(33,363)
Income tax expense	$	(4,445)	$	(32,065)	$	(55,301)

Details of deferred taxes, recognized and unrecognized:


	Consolidated Statements of Financial Position						Consolidated Statements of Operations

	As of June 30,						Fiscal Year Ended June 30,
	2020		2019		2020		2019
	(U.S. $ in thousands)
Depreciation for tax purposes	$	500	$	35	$	465	$	(2,564)
Provisions, accruals and prepayments	152		(454)		240		(7,164)
Deferred revenue	697		(3,073)		3,775		(23,932)
Unrealized foreign currency exchange gains	(1,414)		(428)		(986)		(101)
Unrealized investment losses (gains)	(26,133)		(8,213)		421		(405)
Carried forward tax losses (gains)	5,893		2,034		3,430		(409)
Carried forward tax credits—credited to profit and loss	3,571		2,452		1,055		(3,005)
Intangible assets	17,538		9,943		9,445		13,095
Tax benefit from share plans—income	1,012		551		459		331
Tax benefit (expense) from share plans—equity	1,230		889		(91)		300
Deferred foreign taxes	—		—		—		10,605
Other, net	1,001		(524)		1,781		(2,667)
Deferred tax benefit (expense)	—		—		$	19,994	$	(15,916)
Deferred tax assets, net	$	4,047	$	3,212
Reflected in the consolidated statements of financial position as follows:
Deferred tax assets	$	35,351	$	17,084
Deferred tax liabilities	(31,304)		(13,872)
Deferred tax assets, net	$	4,047	$	3,212
Items for which no deferred tax asset has been recognized:
Depreciation and amortization for tax purposes	7,197		4,804
Provisions, accruals and prepayments	19,561		13,421
Deferred revenue	45,874		37,342
Unrealized foreign currency exchange gains	92		—
Unused tax losses	616,667		401,108
Intangible assets	1,818,086		1,963,534
Tax benefit from share plans- income	54,066		45,849
Tax benefit from share plans- equity	89,151		109,061
Capital loss	1,291		1,391
Carried forward tax credits- credited to profit and loss	70,259		47,537
Unrealized loss on investments	—		1,076
Other, net	10,787		10,610
	$	2,733,031	$	2,635,733


	2020		2019
	(U.S. $ in thousands)
Reconciliation of deferred tax assets, net
Balance at the beginning of	$	3,212	$	47,060
Deferred tax expense for the year	19,994		(15,916)
Debited to equity	(17,867)		(8,884)

Impact from business combinations	(1,401)		(19,092)
Currency revaluation impact	109		44
Balance at the end of	$	4,047	$	3,212

In June 2019, as a result of the Group’s assessment of the realizability of its Australian deferred tax assets, the Group recorded non-cash charges to tax expense of $54.7 million. The assessment of the realizability of the Australian and U.S. deferred tax assets is based on all available positive and negative evidence. Such evidence includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilization of deferred tax assets. The Group will continue to assess and record any necessary changes to align its deferred tax assets to their realizable value.

The impact on the net deferred tax asset from business combinations of $19.1 million in fiscal year 2019 represents the net deferred tax assets and liabilities recognized as a result of the acquisition of OpsGenie. The Group acquired net operating loss carryforward deferred tax assets of approximately $1.8 million from OpsGenie. The Group also recognized deferred tax liabilities of approximately $19.6 million primarily related to acquired intangibles from OpsGenie, the amortization of which will not be deductible from future taxable profits.

The Group recognizes certain amounts directly in equity including current tax benefits related to tax deductions in excess of cumulative book expense for share based payment awards, deferred tax benefits related to revaluing its deferred tax assets for share based payment awards to fair market value at each reporting date, and deferred tax expense or benefit related to unrealized gains and losses that are recorded in other comprehensive income.


	2020		2019
	(U.S. $ in thousands)
Amounts recognized directly in equity:

Net deferred tax—debited directly to equity	$	(17,867)	$	(8,884)

The Group has the following losses and credits available for offsetting future profit and taxes:


	Expiration	Amount carried forward		Amount recognized as of June 30, 2020
U.S. net operating loss (Pre - 2017 Tax Reform)	June 30, 2031 - December 30, 2038	$	126,612	$	384
U.S. net operating loss (Post - 2017 Tax Reform)	None	2,598,427		5,122
State net operating loss- various states	June 30, 2024 - June 30, 2040	774,308		422

U.S. research and development credits	June 30, 2030 - June 30, 2040	49,848		468
State research and development credits- California	None	20,621		175
State research and development credits- Texas	June 30, 2036 - June 30, 2040	2,923		2,923
Australia capital loss	None	4,637		—
State enterprise zone credits	June 30, 2020 - June 30, 2024	436		4