2003-04 Commonwealth Budget – Portfolio Budget Statements

Section 3: Budgeted financial statements

The budgeted financial statements will form the basis of the financial statements that will appear in the Australian Taxation Office (ATO) 2003-04 Annual Report, and for the input into the Whole of Government Accounts. The financial statements should be read in conjunction with the accompanying notes.

These budgeted financial statements and administered notes are consistent with the forms of financial statements specified under the draft 2002-03 `Requirements for the Preparation of Financial Statements of Commonwealth Agencies and Authorities'.

Analysis of budgeted agency financial statements

Budgeted agency statement of financial performance

The ATO is budgeting for an operating surplus of $0.6 million in 2003-04 after income tax equivalents payable by the Australian Valuation Office (AVO).

Total agency revenue is estimated to be $2,302.3 million. This is an increase of $85.5 million from the 2002-03 estimated actual.

This rise in revenue is primarily an increase in appropriation as a result of:

Additional funding under the Output Pricing Agreement; consistent with expectations for delivery of improved outputs and indexation movements;

$23.5 million for the increase in superannuation contribution rates. This amount is based on the whole of government rate increases; and

$7 million to replace foregone interest revenue due to the discontinuation of the Agency Banking Incentive Scheme from 1 July 2003.

Total expenses are estimated to be $2,301.5 million, an increase of $174.9 million from the 2002-03 estimated actual.

Employee expenses are rising consistent with increasing staff numbers. In 2002-03 the average number of full time equivalents is 19,700, with a planned increase to 20,930 in 2003-04. Following the finalisation of the Output Pricing Agreement, the ATO experienced delays in recruiting the desired level of compliance staff. This was the principal factor contributing to the ATO's $90 million net surplus in 2002-03.

On 1 July 2003 the ATO specific superannuation contribution rates will increase by more than the whole of government rate increase, compounded with increased staff numbers, the expected result is a $28.3 million rise in employer superannuation costs.

Supplier expenses are increasing by $63.4 million. This is due to increased demand for enabling infrastructure (for example accommodation and information technology (IT)) associated with increasing staff numbers as well as increased spending on specific IT infrastructure to facilitate a range of initiatives; including improved business continuity, enhanced web enabled access and increased online web security of client data and interaction.

Also impacting on supplier expenses was a one-off $30 million reduction in supplier expenses in 2002-03, the result of a reversal of an overstated liability resulting from duplicate expenses recognised in prior years.

Budgeted agency statement of financial position

In 2002-03 the ATO's total equity will be $8.8 million, this will be the second consecutive year the ATO will be in a positive equity position following the 2002-03 result. This positive equity position will be maintained in the forward years.

The transition to positive equity was possible due to the $90 million operating surplus in 2002-03. Of the $90 million surplus, $50 million was returned to Consolidated Revenue in 2002-03 and $40 million was retained by the ATO.

In 2003-04 the ATO continues its commitment to long term improvements, investing $126 million in capital. This is an increase of $36.3 million from 2002-03.

A large sum of the ATO capital investment is directed to the development or improvement of internally developed systems and software in support of the ATO's intention of making people's experience with the revenue systems cheaper, easier and more personalised.

Agency financial statements

Budgeted agency statement of financial performance

This statement provides a picture of the expected financial results for the ATO by identifying full accrual expenses and revenues, which highlights whether the ATO is operating at a sustainable level.

Budgeted agency statement of financial position

This statement shows the financial position of the ATO. It enables decision-makers to track the management of the ATO's assets and liabilities.

Budgeted agency statement of cash flows

This statement identifies expected cash flows from operating activities, investing activities and financing activities.

Agency capital budget statement

This statement shows all proposed capital expenditure funded either through the Budget as appropriations or from internal sources.

Agency non-financial assets - summary of movement

This statement shows the movement in the ATO's non-financial assets over the budget year.

Notes of administered activity

Details of transactions administered by the ATO on behalf of the Commonwealth are shown in the following notes to the financial statements.

Note of budgeted administered financial performance

This note identifies the main revenues and expenses administered on behalf of the Government. It also discloses administered revenues from government and transfers to the Official Public Account.

Note of budgeted administered financial position

This note shows the assets and liabilities administered on behalf of the Government.

Note of budgeted administered cash flows

This note shows cash flows administered on behalf of the Government.

Table 3.1: Budgeted Agency Statement of Financial Performance -
for the period ended 30 June

Table 3.1: Budgeted Agency Statement of Financial Performance - for the period ended 30 June

(1) K1 shows the link back to Table 1.1.

Table 3.2: Budgeted Agency Statement of Financial Position -
as at 30 June

Table 3.2: Budgeted Agency Statement of Financial Position - as at 30 June

Table 3.3: Budgeted Agency Statement of Cash Flows -
for the period ended 30 June

Table 3.3: Budgeted Agency Statement of Cash Flows - for the period ended 30 June

Table 3.4: Agency Capital Budget Statement

Table 3.5: Agency Non-financial Assets - Summary of Movement (Budget year 2003-04)

Table 3.6: Note of Budgeted Financial Performance Administered on behalf of the Government - for the period ended 30 June

(1) K2 shows the link back to Table 1.1.

Table 3.7: Note of Budgeted Financial Position Administered on behalf of the Government - as at 30 June

Table 3.8: Note of Budgeted Administered Cash Flows -
for the period ended 30 June

Table 3.8: Note of Budgeted Administered Cash Flows - for the period ended 30 June

Notes to the financial statements

Basis of accounting

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

Notes to the agency statements

Details of agency items in the financial statements included in Table 3.1 to 3.5 have been prepared in accordance with the requirements and 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 Australian Taxation Office's agency budget statements are aggregated to include the financial operations of the Australian Valuation Office.

Cost of administering goods and services tax

Agency 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 Commonwealth 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 items in the financial statements included in Tables 3.6 to 3.8 have been prepared under the Tax Liability Method (TLM) of revenue recognition, consistent with the Commonwealth'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 Australian 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 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 expense:

refunds of revenue; and

increase (decrease) in movement of provision for credit amendments.