PAES 2004-2005 - Part C: Agency Additional Estimates 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) 2004-05 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 2003-04 Finance Minister’s Orders ‘Requirements for the Preparation of Financial Statements of Australian Government Entities’.

Analysis of budgeted financial statements

Budgeted agency statement of financial performance

There has been no change in the ATO’s 2004-05 budgeted operating loss of $35.0 million outlined in the 2004-05 Treasury Portfolio Budget Statements (page 209).

Operating Revenues

Total agency revenue is estimated to be $2,430.5 million and consists of $2,372.2 million appropriation and revenue from other sources of $58.3 million. This is an increase of $117.0 million from the 2003-04 actual.

This rise in revenue is primarily an increase in appropriation as a result of Budget measures shown in Table 1.1 and those published in the 2004-05 Treasury Portfolio Budget Statements.

Operating Expenses

Total expenses are estimated to be $2,465.3 million. This is an increase of $150.3 million from the 2003-04 actual.

Operating expenses consist of $1,501.7 million in labour expenditure, $858.9 million in supplier expenditure and $104.7 million in depreciation and amortisation.

This rise in expenses is driven by additional operational activity as a result of Budget measures shown in Table 1.1 and those published in the 2004-05 Treasury Portfolio Budget Statements.

Budgeted agency statement of financial position

In 2004-05 the ATO’s equity position will be negative $51.8 million. This is a decline of $35.3 million from 2003-04, predominantly as a result of the approved operating loss.

Assets

In 2004-05 the ATO will be maintaining its commitment to long term improvement, investing $124.4 million in capital.

The ATO had an unusually high cash balance on 30 June 2004 to ensure sufficient cash was available for salary payments on 1 July 2004. This accounts for the majority of the $42.6 million difference in cash.

Liabilities

The ATO’s liabilities are predominantly employee entitlements. There is no significant movement in total liabilities from 2003-04.

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.

Note of administered activity

Details of transactions administered by the ATO on behalf of the Australian Government 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 Australian 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 Australian Government.

Note of budgeted administered cash flows

This note shows cash flows administered on behalf of the Australian 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)

Table 3.2: Budget agency statement of financial position
(as at 30 June)

Table 3.2: Budget agency statement of financial position(as at 30 June)

(1) ‘Equity' is the residual interest in assets after deduction of liabilities.

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 2004-05)

Table 3.5: Agency non-financial assets  Summary of movement (Budget year 2004-05)

Table 3.6: Note of budgeted financial performance administered on behalf of government (for the period ended 30 June)

(1) The amount showing for ‘Revenues from government’ represents special appropriations and annual appropriations to deliver Australian Taxation Office administered programs and benefits. This amount does not include amounts to pay taxation refunds. Total taxation revenue is shown net of taxation refunds.

(2) The significant increase in personal benefits expense form 2003-04 to 2004-05 reflects a change in the accounting treatment of the family tax benefit supplementary payment.

Table 3.7: Note of budgeted financial position administered on behalf of 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)

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

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 consolidated 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 Australian Government for the agreed GST administration costs.

The recovery of GST administration costs are reported under 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 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 Australian Taxation 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.