Section 5: Budgeted financial statements
5.1 Analysis of budgeted financial statements
Budgeted departmental income statement
The Australian Taxation Office (Tax Office) is budgeting for a balanced budget in 2007-08 after income tax equivalents payable by the Australian Valuation Office.
Operating revenues
Total agency revenue is estimated to be $2,849.6 million and consists of $2,782.8 million appropriation and revenue from other sources of $66.8 million. This is an increase of $192.3 million from the 2006-07 estimated actual.
This rise in revenue is primarily a result of increases in appropriation flowing from budget measures.
Operating expenses
Total expenses are estimated to be $2,849.6 million. This is an increase of $192.9 million from the 2006-07 estimated actual.
Operating expenses consist of $1,683.9 million in employees, $1,044.2 million in suppliers and $121.3 million in depreciation and amortisation.
Budgeted departmental balance sheet
In 2007-08 the Tax Office’s equity position will be $19.8 million. This is a significant improvement over the estimated actual position for 2006-07 of negative $26.5 million due largely to equity injections of $46.6 million.
Assets
The Tax Office’s assets are predominantly non-financial assets. In 2007-08 the Tax Office will continue to maintain its commitment to long term improvement, investing $191.9 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 and flexibility of the superannuation business systems.
Liabilities
The Tax Office’s liabilities are predominantly employee entitlements and are estimated to be $782.4 million. Total liabilities have increased $17.1 million from 2006-07. This has been driven primarily by an increase in employee entitlements.
5.2 Budgeted financial statements tables
Table 5.1: Budgeted departmental income statement
(for the period ended 30 June)
Table 5.2: Budgeted departmental balance sheet (as at 30 June)
Table 5.3: Budgeted departmental statement of cash flows
(for the period ended 30 June)
Table 5.4: Departmental statement of changes in equity — summary of movement
(Budget year 2007-08)
Table 5.5: Departmental capital budget statement
Table 5.6: Departmental property, plant, equipment and intangibles — summary of movement (Budget year 2007-08)
Table 5.7: Schedule of budgeted income and expenses administered on behalf
of government (for the period ended 30 June)
Table 5.8: Schedule of budgeted assets and liabilities administered on behalf
of government (as at 30 June)
Table 5.9: Schedule of budgeted administered cash flows
(for the period ended 30 June)
Table 5.10: Schedule of administered capital budget
The Tax Office does not have any administered capital.
Table 5.11: Schedule of administered property, plant, equipment and intangibles — summary of movement
(Budget Year 2007-08)
The Tax Office does not have any administered property, plant, equipment or intangibles.
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 Tables 5.1 to 5.6 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
Departmental 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 by the Department of the Treasury.
Notes to the administered statements
The administered financial statements included in Tables 5.7 to 5.9 have been prepared on the basis of Australian Accounting Standards.
The standards require that taxation revenues are recognised on an accrual basis when the following conditions apply:
- the taxpayer or the taxpayer group can be identified in a reliable manner;
- the amount of tax or other statutory charge is payable by the taxpayer or taxpayer group under legislative provisions; and
- the amount of the tax or statutory charge payable by the taxpayer or taxpayer group can be reliably measured, and it is probable that the amount will be collected.
The amount of taxation revenue recognised takes account of legislative steps, discretion to be exercised and any refunds and/or credit amendments to which the taxpayers may become entitled.
Recognition of taxation revenue
Taxation revenue is recognised when the Government, through the application of legislation by the Tax Office and other relevant activities, gains control over the future economic benefits that flow from taxes and other statutory charges — the Economic Transaction Method (ETM). This methodology relies on the estimation of the probable flows of taxes from transactions which have occurred in the economy, but not yet reported, and are likely to be reported, to the Tax Office through an assessment or disclosure.
However in circumstances when there is an ‘inability to reliably measure tax revenues when the underlying transactions or events occur’, the standards permit an alternative approach — the Taxation Liability Method (TLM). Under this basis, taxation revenue is recognised at the earlier of when an assessment of a tax liability is made or payment is received by the Tax Office. This recognition policy means that taxation revenue is generally measured at a later time than would be the case if it were measured under the ETM method.
In accordance with the above revenue recognition approach, the Tax Office uses ETM as the basis for revenue recognition, except for income tax for individuals, companies and superannuation funds and superannuation surcharge which are recognised on a TLM basis.
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.