Appendix B: Australian Government Budget Financial Statements (continued)

Notes to the general government sector financial statements

Note 1: External reporting standards and accounting policies

The Charter of Budget Honesty Act 1998 (the Charter) requires that the Mid‑Year Economic and Fiscal Outlook (MYEFO) be based on external reporting standards and that departures from applicable external reporting standards be identified.

The external standards used for MYEFO reporting purposes are:

• the Australian Bureau of Statistics' (ABS) accrual Government Finance Statistics (GFS) publication, Australian System of Government Finance Statistics: Concepts, Sources and Methods, (cat. no. 5514.0), which in turn is based on the International Monetary Fund (IMF) accrual GFS framework; and
• the Australian Accounting Standards (AAS), issued by the Australian Accounting Standards Board (AASB), which includes International Financial Reporting Standards (IFRS) as adopted in Australia and the public sector specific standard AASB 1049 Whole of Government and General Government Sector Financial Reporting.

The financial statements have been prepared on an accrual basis that complies with both ABS GFS and AAS, except for departures disclosed at Note 2. A more detailed description of the AAS and ABS GFS frameworks, in addition to definitions of key terms used in these frameworks, can be found in Attachment A. Detailed accounting policies, as well as a set of notes and other disclosures, as required by AAS, are disclosed in the annual Consolidated Financial Statements.

Fiscal reporting focuses on the general government sector (GGS). The GGS provides public services that are mainly non‑market in nature and for the collective consumption of the community, or involve the transfer or redistribution of income. These services are largely financed through taxes and other compulsory levies, user charging and external funding. This sector comprises all government departments, offices and some other bodies. In preparing financial statements for the GGS, all material transactions and balances between entities within the GGS have been eliminated.

The Government's key fiscal aggregates are based on ABS GFS concepts and definitions, including the ABS GFS cash surplus/deficit and the derivation of the underlying cash balance and net financial worth. AASB 1049 requires the disclosure of other ABS GFS fiscal aggregates, including net operating balance, net lending/borrowing (fiscal balance) and net worth. In addition to these ABS GFS aggregates, the Uniform Presentation Framework (UPF) requires disclosure of net debt, net financial worth and net financial liabilities.

AASB 1049 and the UFP also provide a basis for reporting of the public non‑financial corporations (PNFC) and public financial corporations (PFC) sectors and the total non‑financial public sector (NFPS).

Explanations of major variations in fiscal balance, revenue, expenses, net capital investment, cash flows, net debt, net financial worth and net worth since the 2014‑15 Budget are disclosed in Part 3.

Updates to fiscal risks and contingent liabilities since the 2014‑15 Budget are disclosed in Appendix C.

Note 2: Departures from external reporting standards

The Charter requires that departures from applicable external reporting standards be identified. The major differences between AAS and the ABS GFS treatments of transactions are outlined in Table B10.

AASB 1049 requires AAS measurement of items to be disclosed on the face of the financial statements with reconciliation to ABS GFS measurement of key fiscal aggregates, where different, in notes to the financial statements. Differences from the AAS measurement of items outline above and reconciliation have not been included as they would effectively create different measures of the same aggregate.

Further information on the differences between the two systems is provided in the ABS publication Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2005 (cat. no. 5514.0).

Table B10: Major differences between AAS and ABS GFS

Issue	AAS treatment	ABS GFS treatment	Treatment adopted
Acquisition of defence weapons platforms (DWP)	Treated as capital expenditure. DWP appear as a non‑financial asset on the balance sheet. Depreciation expense on assets is recorded in the operating statement. AASB 1049 requires cost to be used where fair value of assets cannot be reliably measured.	ABS has updated its treatment in its GFS reports to record DWP as a non‑financial asset on a market value basis using the perpetual inventory method from September quarter 2009. This represents an early adoption of changes to the System of National Accounts.	AAS
Circulating coins — seigniorage	The profit between the cost and sale of circulating coins (seigniorage) is treated as revenue.	Circulating coins are treated as a liability, and the cost of producing the coins is treated as an expense.	AAS
Provisions for bad and doubtful debts	Reported in the balance sheet as an offset to assets. Under AASB 1049, it is included in the operating statement as other economic flows.	Creating provisions for bad and doubtful debts is not considered an economic event and therefore not considered to be an expense or reflected in the balance sheet.	AAS
Advances to the International Development Association and Asian Development Fund	Recorded at fair value in the balance sheet.	Recorded at nominal value in balance sheet.	ABS GFS
Concessional loans	Discounts concessional loans by a market rate of a similar instrument.	Does not discount concessional loans as no secondary market is considered to exist.	AAS
Investment in other public sector entities	Valued at fair value in the balance sheet as long as it can be reliably measured, otherwise net assets is permissible.	Unlisted entities valued based on their net assets in the balance sheet.	AAS
Provision for restoration, decommissioning and make‑good	Included in the fiscal balance capital adjustment.	Excluded from the calculation of net lending capital adjustment.	AAS
Renewable Energy Certificates (RECs)	The issuance and registration of RECs is considered to be an administrative function and does not result in the recognition of assets or liabilities and, consequently, no revenues or expenses are recognised.	The issuance and registration of RECs is considered to be government financial transactions resulting in the recognition of assets, liabilities, revenue and expenses.	AAS
Dividends paid by public corporations	Treated as an equity distribution. Equity distributions are treated as a distribution of profits, as opposed to an expense.	Dividends are treated as an expense.	ABS GFS
Commercial tax effect accounting assets and liabilities	Corporations in the PNFC and PFC sectors record tax expenses on a commercial basis.	Deferred tax assets and liabilities are reversed so that corporations record tax expenses on a consistent basis to the Australian Taxation Office.	ABS GFS
Fiscal aggregates differences
Finance leases	Does not deduct finance leases in the derivation of the cash surplus/deficit.	Deducts finance leases in the derivation of the cash surplus/deficit.	Both are disclosed
Net worth of PNFC and PFC sectors	Calculated as assets less liabilities.	Calculated as assets less liabilities less shares and other contributed capital.	AAS
Net financial worth of PNFC and PFC	Calculated as financial assets less total liabilities.	Calculated as financial assets less total liabilities less shares and contributed capital.	AAS
Classification difference
Prepayments	Treated as a non‑financial asset.	Treated as a financial asset.	ABS GFS
Spectrum sales	Recognise non‑financial asset sales for fiscal balance when payment is made and the licences take effect, which may be after the auction of licences, as this is regarded as the point control is transferred. Recognise cash at the time of receipt.	Recognise non‑financial asset sales for fiscal balance at time of auction as this is regarded as the point control is transferred. Recognise cash at the time of receipt.	AAS

Note 3: Taxation revenue by type

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Individuals and other withholding taxes
Gross income tax withholding	168,430	180,660		192,040	205,370
Gross other individuals	40,470	44,550		48,850	53,270
less Refunds	27,500	28,100		29,200	31,200
Total individuals and other withholding tax	181,400	197,110		211,690	227,440
Fringe benefits tax	4,480	5,030		5,260	5,100
Company tax	70,930	72,500		78,100	83,300
Superannuation fund taxes	7,130	9,760		10,860	11,560
Minerals resource rent tax(a)	60	0		0	0
Petroleum resource rent tax	1,770	1,700		1,680	1,650
Total income taxation revenue	265,770	286,100		307,590	329,050
Goods and services tax	56,820	60,390		63,510	66,950
Wine equalisation tax	810	840		880	910
Luxury car tax	400	360		380	400
Excise and customs duty
Petrol	5,970	6,200		6,410	6,820
Diesel	8,960	9,370		9,750	10,180
Other fuel products	3,280	3,170		3,330	3,500
Tobacco	8,320	9,580		10,600	10,890
Beer	2,430	2,480		2,590	2,730
Spirits	1,970	2,030		2,130	2,240
Other alcoholic beverages(b)	950	990		1,040	1,090
Other customs duty
Textiles, clothing and footwear	590	310		220	170
Passenger motor vehicles	800	520		510	530
Other imports	1,570	1,070		930	940
less Refunds and drawbacks	420	420		420	420
Total excise and customs duty	34,420	35,300		37,090	38,670
Carbon pricing mechanism	0	0		0	0
Agricultural levies	454	478		484	501
Other taxes	3,285	3,781		3,886	3,988
Mirror taxes	521	551		585	619
less Transfers to States in relation to mirror tax revenue	521	551		585	619
Mirror tax revenue	0	0		0	0
Total indirect taxation revenue	96,190	101,149		106,231	111,419
Total taxation revenue	361,959	387,249		413,821	440,468
Memorandum:
Total excise	25,360	26,990		28,360	29,680
Total customs duty	9,060	8,310		8,730	8,990
Capital gains tax(c)	8,900	11,300		13,500	15,600
Medicare and DisabilityCare Australia levy	14,130	15,040		15,830	16,650

(a) Net revenue from the MRRT is expected to be around $40 million in 2014‑15 which represents the net revenue impact across different revenue heads. These include the offsetting reductions in company tax (through deductibility) and interactions with other taxes. The Government has announced the MRRT will not apply beyond 30 September 2014.

(b) Other alcoholic beverages are those not exceeding 10 per cent by volume of alcohol (excluding beer, brandy and wine).

(c) Capital gains tax is part of gross other individuals, company tax and superannuation fund taxes.

Note 3(a): Taxation revenue by source

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Taxes on income, profits and capital gains
Income and capital gains levied on individuals	185,910	202,160		216,980	232,550
Income and capital gains levied on enterprises	79,860	83,940		90,610	96,500
Total taxes on income, profits and capital gains	265,770	286,100		307,590	329,050
Taxes on employers' payroll and labour force	738	760		755	757
Taxes on the provision of goods and services
Sales/goods and services tax	58,030	61,590		64,770	68,260
Excises and levies	25,814	27,468		28,844	30,181
Taxes on international trade	9,060	8,310		8,730	8,990
Total taxes on the provision of goods and services	92,904	97,368		102,344	107,431
Other sale of goods and services	2,547	3,021		3,132	3,231
Total taxation revenue	361,959	387,249		413,821	440,468
Memorandum:
Medicare and DisabilityCare Australia levy	14,130	15,040		15,830	16,650

Note 4: Sales of goods and services revenue

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Sales of goods	1,591	1,650		1,858	1,927
Rendering of services	3,998	3,855		5,761	10,238
Operating lease rental	64	62		63	63
Fees from regulatory services	3,536	3,691		3,771	3,842
Total sales of goods and services revenue	9,190	9,258		11,453	16,070

Note 5: Interest and dividend revenue

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Interest from other governments
State and Territory debt	25	50		50	45
Housing agreements	134	129		124	119
Total interest from other governments	159	179		174	164
Interest from other sources
Advances	50	56		62	102
Deposits	92	91		92	93
Bank deposits	148	135		138	143
Indexation of HELP receivable and other student loans	567	788		955	1,110
Other	2,972	3,422		3,609	3,711
Total interest from other sources	3,828	4,493		4,858	5,158
Total interest	3,987	4,672		5,031	5,322
Dividends
Dividends from other public sector entities	438	700		969	1,232
Other dividends	2,957	2,470		2,675	2,881
Total dividends	3,396	3,170		3,644	4,113
Total interest and dividend revenue	7,383	7,842		8,675	9,435

Note 6: Other sources of non‑taxation revenue

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Industry contributions	55	55		55	55
Royalties	1,548	1,524		1,547	1,463
Seigniorage	124	117		111	104
Other	5,616	5,637		5,375	5,579
Total other sources of non-taxation revenue	7,344	7,333		7,087	7,200

Note 7: Employee and superannuation expense

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Wages and salaries expenses	19,221	19,744		19,901	20,183
Other operating expenses
Leave and other entitlements	2,302	2,265		2,272	2,303
Separations and redundancies	280	54		50	49
Workers compensation premiums and claims	794	875		914	969
Other	2,095	2,173		2,241	2,262
Total other operating expenses	5,472	5,367		5,477	5,583
Superannuation expenses
Superannuation	6,777	4,340		4,275	4,305
Superannuation interest cost	8,989	9,630		9,979	10,333
Total superannuation expenses	15,767	13,970		14,254	14,638
Total employee and superannuation expense	40,460	39,081		39,633	40,404

Note 8: Depreciation and amortisation expense

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Depreciation
Specialist military equipment	3,053	3,202		3,484	3,695
Buildings	1,342	1,331		1,357	1,381
Other infrastructure, plant and equipment	1,455	1,454		1,421	1,422
Heritage and cultural assets	38	38		38	37
Total depreciation	5,889	6,025		6,300	6,536
Total amortisation	898	937		919	866
Total depreciation and amortisation expense	6,787	6,962		7,218	7,401

Note 9: Supply of goods and services expense

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Supply of goods and services	25,982	24,877		24,166	25,165
Operating lease rental expenses	2,534	2,507		2,545	2,578
Personal benefits - indirect	44,708	46,363		49,117	51,487
Health care payments	5,459	5,505		5,629	5,787
Other	2,126	2,413		2,602	2,760
Total supply of goods and services expense	80,809	81,665		84,059	87,776

Note 10: Interest expense

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Interest on debt
Government securities(a)	14,720	16,015		16,943	17,439
Loans	9	9		12	11
Other	528	526		522	523
Total interest on debt	15,258	16,550		17,477	17,973
Other financing costs	1,129	1,321		1,762	1,952
Total interest expense	16,387	17,871		19,239	19,925

(a) Public debt interest estimates are calculated using the contract interest rates incurred on existing Commonwealth Government Securities (CGS) when issued and technical assumptions, based on prevailing market interest rates across the yield curve, for yields on future CGS issuance.

Note 11: Current and capital grants expense

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Current grants expense
State and Territory governments	94,660	99,403		105,035	109,875
Local governments	6	2		0	0
Private sector	1,383	950		713	645
Overseas	4,612	4,558		5,149	5,121
Non-profit organisations	2,467	2,916		2,723	3,125
Multi-jurisdictional sector	10,132	10,262		9,811	9,961
Other	10,940	11,470		14,121	20,551
Total current grants expense	124,201	129,562		137,552	149,279
Capital grants expense
Mutually agreed write-downs	2,564	2,689		2,906	3,110
Other capital grants
State and Territory governments	6,983	8,709		9,642	5,941
Local governments	445	665		332	332
Private sector	0	0		0	0
Multi-jurisdictional sector	102	104		99	101
Other	453	475		586	854
Total capital grants expense	10,548	12,642		13,565	10,337
Total grants expense	134,749	142,204		151,117	159,616

Note 12: Personal benefits expense

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Social welfare - assistance to the aged	42,702	45,073		47,665	49,544
Assistance to veterans and dependants	6,038	5,837		5,669	5,454
Assistance to people with disabilities	24,578	25,576		26,761	27,996
Assistance to families with children	34,052	33,234		32,285	31,832
Assistance to the unemployed	10,808	10,761		10,784	10,508
Student assistance	3,604	3,153		3,212	3,304
Other welfare programmes	1,120	1,090		1,116	436
Financial and fiscal affairs	473	508		491	479
Vocational and industry training	169	95		84	92
Other	7,963	10,856		13,433	16,728
Total personal benefits expense	131,506	136,183		141,501	146,375

Note 13: Advances paid and other receivables

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Advances paid
Loans to State and Territory governments	3,209	3,390		3,174	2,953
Higher Education Loan Program	30,622	36,675		43,872	51,952
Student Financial Supplement Scheme	553	505		460	411
Other	12,061	12,512		14,639	15,677
less Provision for doubtful debts	237	227		217	207
Total advances paid	46,208	52,854		61,928	70,785
Other receivables
Goods and services receivable	806	778		781	780
Recoveries of benefit payments	3,799	3,961		4,114	4,231
Taxes receivable	20,866	23,177		25,438	27,896
Prepayments	3,146	3,304		3,470	3,587
Other	18,980	19,553		20,508	21,442
less Provision for doubtful debts	1,572	1,627		1,690	1,747
Total other receivables	46,024	49,145		52,622	56,190

Note 14: Investments, loans and placements

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Investments - deposits	32,706	28,438		33,979	28,545
IMF quota	11,001	11,064		11,217	11,370
Other	86,490	95,279		103,341	111,182
Total investments, loans and placements	130,197	134,782		148,537	151,097

Note 15: Total non‑financial assets

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Land and buildings
Land	9,299	9,275		9,281	9,209
Buildings	26,125	26,830		27,423	28,266
Total land and buildings	35,424	36,105		36,704	37,475
Plant, equipment and infrastructure
Specialist military equipment	43,129	45,426		47,149	49,584
Other	13,389	13,539		13,414	13,371
Total plant, equipment and infrastructure	56,518	58,964		60,563	62,955
Inventories
Inventories held for sale	1,380	1,503		1,582	1,637
Inventories not held for sale	6,957	6,786		6,698	6,588
Total inventories	8,337	8,289		8,280	8,225
Intangibles
Computer software	3,679	3,528		3,261	3,075
Other	2,680	2,871		3,096	3,721
Total intangibles	6,359	6,400		6,357	6,796
Total investment properties	198	213		218	223
Total biological assets	36	36		36	36
Total heritage and cultural assets	10,842	10,854		10,868	10,882
Total assets held for sale	133	95		95	95
Total other non-financial assets	604	360		244	250
Total non-financial assets	118,450	121,316		123,364	126,936

Note 16: Loans

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Promissory notes	7,910	7,437		7,415	7,391
Special drawing rights	5,092	5,122		5,193	5,265
Other	691	446		348	271
Total loans	13,693	13,004		12,957	12,927

Note 17: Employee and superannuation liabilities

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Total superannuation liability(a)	163,240	169,332		175,275	181,334
Other employee liabilities
Leave and other entitlements	7,357	7,433		7,528	7,651
Accrued salaries and wages	734	537		554	563
Workers compensation claims	3,271	3,350		3,435	3,527
Other	4,616	4,733		4,851	4,993
Total other employee liabilities	15,977	16,054		16,368	16,732
Total employee and superannuation liabilities	179,217	185,386		191,643	198,066

(a) For budget reporting purposes, a discount rate applied by actuaries in preparing Long Term Cost Reports is used to value the superannuation liability. This reduces the volatility in reported liabilities that would occur from year to year if the long term government bond rate were used. Consistent with AAS, the long term government bond rate as at 30 June is used to calculate the superannuation liability for the purpose of actuals reporting.

Note 18: Provisions and payables

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Suppliers payable
Trade creditors	3,936	3,888		3,861	3,985
Operating lease rental payable	280	279		279	279
Other creditors	689	693		695	694
Total suppliers payable	4,905	4,860		4,835	4,958
Total personal benefits provisions and payables	13,234	12,808		12,484	11,897
Total subsidies provisions and payables	4,397	4,592		4,754	4,797
Grants provisions and payables
State and Territory governments	105	104		103	99
Non-profit organisations	70	70		70	70
Private sector	237	232		231	231
Overseas	1,499	1,060		2,276	1,811
Local governments	2	2		2	2
Other	9,759	7,953		7,802	7,728
Total grants provisions and payables	11,671	9,420		10,485	9,942
Other provisions and payables
Provisions for tax refunds	2,377	2,423		2,439	2,427
Other	10,848	12,651		13,064	11,894
Total other provisions and payables	13,225	15,075		15,503	14,321

Note 19: Reconciliation of cash

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Net operating balance (revenues less expenses)	-37,022	-24,801		-15,060	-2,136
less Revenues not providing cash
Other	1,560	1,543		1,553	1,789
Total revenues not providing cash	1,560	1,543		1,553	1,789
plus Expenses not requiring cash
Increase/(decrease) in employee entitlements	8,382	6,380		6,635	6,622
Depreciation/amortisation expense	6,787	6,962		7,218	7,401
Mutually agreed write-downs	2,564	2,689		2,906	3,110
Other	1,549	1,184		664	1,800
Total expenses not requiring cash	19,282	17,215		17,423	18,933
plus Cash provided / (used) by working capital items
Decrease/(increase) in inventories	-248	-219		-181	-156
Decrease/(increase) in receivables	-6,046	-9,381		-10,512	-11,236
Decrease/(increase) in other financial assets	1,527	1,726		2,597	3,038
Decrease/(increase) in other non-financial assets	-95	-39		-65	-25
Increase/(decrease) in benefits, subsidies and grants payable	-2,174	-2,111		1,142	-713
Increase/(decrease) in suppliers' liabilities	568	-56		-32	39
Increase/(decrease) in other provisions and payables	-2,068	-854		-1,373	-2,181
Net cash provided / (used) by working capital	-8,537	-10,933		-8,425	-11,234
equals (Net cash from/(to) operating activities)	-27,837	-20,063		-7,616	3,774
plus (Net cash from/(to) investing activities)	-23,762	-27,239		-40,207	-26,567
Net cash from operating activities and investment	-51,599	-47,302		-47,823	-22,793
plus (Net cash from/(to) financing activities)	51,580	47,640		47,459	23,398
equals Net increase/(decrease) in cash held	-19	337		-364	605
Cash at the beginning of the year	3,844	3,825		4,163	3,799
Net increase/(decrease) in cash	-19	337		-364	605
Cash at the end of the year	3,825	4,163		3,799	4,404

Note 19(a): Consolidated Revenue Fund

	Estimates			Projections
	2014‑15	2015‑16		2016‑17	2017‑18
	$m	$m		$m	$m
Total general government sector cash	3,825	4,163		3,799	4,404
less cash balances of corporate Commonwealth entities	1,767	1,817		2,001	2,273
plus monies held by the Commonwealth on behalf of other parties	173	173		173	173
Balance of Consolidated Revenue Fund at 30 June	2,231	2,519		1,971	2,304

The estimated and projected cash balances reflected in the balance sheet for the Australian Government GGS (Table B2) include the reported cash balances controlled and administered by Australian Government entities subject to the Public Governance, Performance and Accountability Act 2013 from 1 July 2014 and previously subject to the Financial Management and Accountability Act 1997 (FMA Act) (non‑corporate Commonwealth entities) or the Commonwealth Authorities and Companies Act 1997 (CAC Act) (corporate Commonwealth entities), that implement public policy through the provision of primarily non‑market services.

Revenues or monies raised by the Executive Government automatically form part of the Consolidated Revenue Fund by force of section 81 of the Australian Constitution. For the purposes of this report and consistent with the presentation of previous notes, total Australian Government GGS cash, less cash controlled and administered by corporate Commonwealth entities, plus monies held by the Commonwealth on behalf of other parties (previously described as special public moneys), provides estimates and projections of the Consolidated Revenue Fund as presented in the table above.