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Financial Statements Overview

Basis of Preparation of the Financial Statements

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The financial statements have been prepared in accordance with:

  • Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
  • Australian Accounting Standards and Interpretations - Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand (departmental) or the nearest million (administered), unless disclosure of the full amount is required.

Unless an alternate treatment is required by an accounting standard or the FRRs, assets and liabilities are recognised in the Statement of Financial Position when, and only when, it is probable that economic benefits will flow to the ATO or a future sacrifice of economic benefits will be required and the amount can be reliably measured. However, assets and liabilities arising under executory contracts are not recognised unless required by an accounting standard. Unrecognised liabilities are reported in Note 9 Contingent Assets and Liabilities.

Unless an alternate treatment is required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when, and only when, the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

The ATO Reporting Entity

Included in the ATO’s financial statements are the operations of the Australian Charities and Not-for-profit (ACNC) through the ACNC Special Account, and the operations of the Australian Business Register (ABR) and Tax Practitioners Board (TPB).

Reporting of Administered Activities

The Administered Schedules of Comprehensive Income, Assets and Liabilities, Administered Reconciliation Schedule and Administered Cash Flow Statement reflect the Government’s transactions, through the ATO, with parties outside the Government.

A commitment note is not required for administered financial statements due to the nature of the items reported being legislated and not contractual arrangements.

Significant Accounting Judgements and Estimates for Departmental Items

Significant accounting estimate / judgement

Note

The fair value of leasehold improvements is determined by estimating the depreciated replacement cost, taking the useful life and remaining useful life of the asset into consideration.

4

The fair value of plant and equipment is determined based on the market value for items of similar type and age or, where there is no active or comparable market, by estimating depreciation replacement cost.

4

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.

Significant Accounting Judgements and Estimates for Administered Items

Significant accounting estimate / judgement

Note

Taxation revenue items reported under the economic transaction method

14

General interest charge revenue and remission expense that have not as yet been posted to taxpayers’ accounts

14

Penalties and interest charges and settlements

14

Allowance for impairment losses

15

Allowance for credit amendments and provision for refunds – key assumptions and methodologies used

15

New Accounting Standards

No accounting standard has been adopted earlier than the application date as stated in the standard.

Australian Accounting Standard AASB 9 Financial Instruments was applied for the first time in 2018-19. Financial assets are assessed for impairment at the end of each reporting period based on expected credit losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses.

Adoption of this standard did not have a material impact on the transactions and balances recognised in the financial statements.

Changes in Accounting Estimates

There have been no material changes in accounting estimates applied to the 2018-19 departmental financial statements. Changes in accounting estimates have been made to the following administered items:

  • Research and development tax incentive. Refer to the accounting policy at Note 13;
  • Unclaimed superannuation monies. Refer to the accounting policy at Note 14;
  • Impairment on taxation receivables. Refer to the accounting policy at Note 15;
  • Allowance for credit amendments. Refer to the accounting policy at Note 15; and
  • Contingent liabilities. Refer to accounting policy at Note 17.

Taxation

The ATO is exempt from all forms of taxation except fringe benefits tax and the goods and services tax (GST).

Revenues, expenses, assets and liabilities are recognised net of GST except:

  • where the amount of GST incurred is not recoverable under the applicable legislation; and
  • for receivables and payables.

Administered Prior Year Adjustment

Superannuation receivables adjustments

For the 2017-18 financial year, adjustments were made to superannuation receivables as the aggregate debts owing from taxpayers on the ATO’s business systems were not accurately recorded in the accounting system. This was identified through a continuation of the comprehensive reconciliation first conducted in 2017-18. Under AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, this change is considered an error and prior year adjustments have been made as per the adjustment in the table below.

Schedule Item (2018-19)

2018

Adjustment

Restated 2018

($m)

($m)

($m)

Administered Schedule of Assets and Liabilities

Non-Financial Assets

Receivables

22,572

44

22,616

Administered Reconciliation Schedule

Opening assets less liabilities as at 1 July

25,032

44

25,076

Note 15A: Receivables

Direct tax

Superannuation

501

44

545

Events After the Reporting Period

There was no subsequent event that had the potential to significantly affect the ongoing structure and financial activities of the ATO.