Australian Taxation Office - Section 5: Budgeted financial statements

Section 5: Budgeted financial statements

5.1: Analysis of budgeted financial statements

Budgeted departmental statement of financial performance

The Australian Taxation Office (Tax Office) is budgeting for an operating loss of $15.1 million in 2005-06 after income tax equivalents payable by the Australian Valuation Office (AVO). The operating loss is mainly due to timing differences as expenditure originally planned for 2004-05 will now be spent in 2005-06.

Operating revenues

Total agency revenue is estimated to be $2,487.6 million and consists of $2,443.6 million appropriation and revenue from other sources of $44.0 million. This is an increase of $57.1 million from the 2004-05 estimated actual.

This rise in revenue is primarily as a result of the 2002-03 Outputs Pricing Agreement forecast for 2005-06. The remaining increase relates to increases in appropriation as a result of new budget measures.

Operating expenses

Total expenses are estimated to be $2,502.4 million. This is an increase of $57.1 million from the 2004-05 estimated actual.

Operating expenses consist of $1,569.8 million in employees expenditure, $815.0 million in suppliers and $117.6 million in depreciation and amortisation, as illustrated in the following chart.

Budgeted total departmental expenses

Parameter adjustments

There was a reduction in appropriation of $2.3 million in 2005-06 as a result of applying revised economic parameters. Employees account for $1.5 million of the reduction, with the remaining $0.8 million being supplier expenditure.

Application of increased efficiency dividend

The efficiency dividend increase resulted in reduced appropriation for 2005-06 of $6.1 million which was allocated across employees ($3.0 million) and supplier expenses ($3.1 million).

Budgeted departmental statement of financial position

In 2005-06 the Tax Office’s equity position will be negative $48.4 million. This is a decline of $15.4 million from the 2004-05 result, as a result of the approved operating loss.

Assets

The Tax Office’s assets are predominantly non-financial assets.

In 2005-06 the Tax Office will be maintaining its commitment to long term improvement, investing $154.4 million in capital expenditure.

A significant proportion of the Tax Office’s capital investment is directed toward the development or improvement of internally developed systems and software in support of the Tax Office’s intention of making people’s experience with the revenue systems easier, cheaper and more personalised, and improving the integrity/flexibility of the Superannuation Business systems.

Budgeted total departmental assets 2005-06

Liabilities

The Tax Office’s liabilities are predominantly employee entitlements. Total liabilities have decreased by $24.8 million from 2004-05. This has been driven by a decrease in other provisions of $50.3 million due to the 2004-05 estimated actual including anticipation of several large payables at the end of the financial year. This decrease is partially offset by an increase in employee entitlements.

Budgeted total departmental liabilities 2005-06

5.2: Budgeted financial statements tables

Table 5.1: Budgeted departmental statement of financial performance
for the period ended 30 June

Table 5.1: Budgeted departmental statement of financial performance for the period ended 30 June

Table 5.2: Budgeted departmental statement of financial position
as at 30 June

Table 5.2: Budgeted departmental statement of financial position as at 30 June

* ‘Equity’ is the residual interest in assets after deduction of liabilities.

Table 5.3: Budgeted departmental statement of cash flows
for the period ended 30 June

Table 5.3: Budgeted departmental statement of cash flows for the period ended 30 June

Table 5.4: Departmental capital budget statement

Table 5.5: Departmental property, plant, equipment and intangibles — summary of movement (Budget year 2005‑06)

Table 5.6: Schedule of budgeted revenues and expenses administered on behalf of Government for the period ended 30 June

1 The amount showing for ‘Revenue from government’ represents special appropriations and annual appropriations to deliver Tax Office administered programmes and benefits. This amount does not include amounts to pay taxation refunds. Total taxation revenue is shown net of taxation refunds.

Note: The Tax Office reviewed its accounting policy for recognising its administered expense programmes in 2004-05, which has resulted in a one-off increase in the expenses for 2004-05. The change in policy reflects an improved capability to measure the expense programmes on a full accrual basis.

Table 5.7: Schedule of budgeted assets and liabilities administered on behalf of Government as at 30 June

Table 5.8: Schedule of budgeted administered cash flows
for the period ended 30 June

Table 5.8: Schedule of budgeted administered cash flows for the period ended 30 June

1 The amount showing for ‘appropriations’ represents appropriations to deliver Tax Office administered programmes and benefits. This amount does not include amounts to pay taxation refunds. Taxation receipts are shown net of taxation refunds.

Table 5.9: Schedule of administered capital budget

This table is not applicable to the Tax Office.

Table 5.10: Schedule of property, plant, equipment and intangibles — summary of movement (Budget Year 2005‑06)

This table is not applicable to the Tax Office.

5.3: Notes to the financial statements

Basis of accounting

The budgeted financial statements have been prepared on an accrual basis.

Notes to the departmental statements

Details of agency items in the financial statements included in Table 5.1 to 5.5 have been prepared on the basis of Australian Accounting Standards and Department of Finance and Administration guidance for the preparation of financial statements.

The budget statements and estimated forward years have been prepared to reflect the following matters.

Australian Valuation Office

The Tax Office’s agency budget statements are consolidated to include the financial operations of the Australian Valuation Office.

Cost of administering goods and services tax

Departmenal statements include the estimated costs of administering the goods and services tax pursuant to the ‘intergovernmental agreement on the reform of Commonwealth-State Financial Relations’. The GST revenue is collected on behalf of the States and Territories which agree to compensate the Australian Government for the agreed GST administration costs.

The recovery of GST administration costs are reported under the Department of the Treasury.

Notes to the administered statements

Details of administered revenue items in the financial statements included in Tables 5.6 to 5.8 have been prepared under the Tax Liability Method (TLM) of revenue recognition, consistent with the Australian Government’s recognition of taxation revenue. Under TLM, taxation revenue is recognised at the time a taxpayer makes a self-assessment or when an assessment of a tax liability is raised by the Tax Office or the Australian Customs Service. This method retains some elements of cash revenue recognition, for example, when a cash payment occurs prior to an assessment being raised.

The administered expense items in the financial statements included in tables 5.6 to 5.8 have been prepared on a full accrual basis. This change in accounting policy follows improvements in the capability of the Tax Office to measure all expense programmes on a full accrual basis. Expenses were previously recognised based on payments to be made plus known claims on hand (equivalent to the TLM for revenue recognition). The change in accounting policy was applied in 2004-05.

The budget statements and forward years have been prepared on the basis noted below and to reflect the following matters.

Recognition of taxation revenue

Since 1999-2000 administered taxation revenue has been brought to account on a year by year basis where:

the client or the client group can be identified in a reliable manner;
an amount of tax or other statutory charge is payable by the client or client group under legislative provisions; and
the amount of the tax or statutory charge payable by the client or client group can be reliably measured, and it is probable that the amount will be collected.

This recognition policy does not include the following items as revenue of the period:

estimates of future collections or refunds from individuals in respect of income tax returns to be lodged for the current financial year ended at 30 June;
estimates of instalments of tax and final payments for companies due after 30 June;
estimates of final amounts for petroleum resource rent tax due after 30 June; and
actual payments for Pay As You Go, GST, excise and withholding taxes for amounts collected or withheld in June but not remitted to the Commissioner until July.

Items recognised as reductions to taxation revenue

The following items are recognised as reductions (increases) to taxation revenue and not as an expense:

refunds of revenue; and
increase (decrease) in movement of provision for credit amendments.