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7: Provisions





Note 7A: Employee Provisions

Performance bonus payments



Separations and redundancies









Total employee provisions



Accounting Policy

Liabilities for short-term employee benefits (as defined in AASB 119 Employee Benefits) and termination benefits which are expected to be settled within twelve months of the end of the reporting period are measured at the amount expected to be paid on settlement.

All other employee benefit liabilities are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date.


The liability for employee benefits includes provision for annual leave and long service leave.

Leave liabilities are calculated based on the employees’ remuneration at the estimated salary rates that will apply at the time the leave is taken. This includes an allowance for the ATO’s employer superannuation contribution rates, annual leave and long service leave accrued when the leave is taken, to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work undertaken by the Australian Government Actuary in 2017-18. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

The ATO recognises a provision for redundancy when it has developed a plan for the redundancy and has informed those employees affected that it will carry out the redundancy. Provision is made for separation and redundancy employee benefit payments.


Employees of the ATO are members of the Commonwealth Superannuation Scheme (CSS) or the Public Sector Superannuation Scheme (PPS), which are defined benefit schemes for the Government, or a defined contribution scheme. The defined contribution scheme can be the PSS accumulation plan (PSSap), a fund of the employee’s choice or Australian Super (as the default fund for employees who are covered under the Superannuation (Productivity Benefits) Act 1988).

The liability for defined benefits is recognised in the financial statements of the Government and is settled by the Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.

The ATO makes employer contributions to the employees' superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government. The ATO accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised at the end of the reporting period represents employer contribution accruals for the period from the last pay to 30 June 2019.

Note 7B: Other Provisions

Legal costs and indemnities

Onerous leases

Restoration obligations






As at 1 July 2018





Additional provisions made





Amounts used





Amounts reversed





Unwinding of discount or change in discount rate





Total as at 30 June 2019





Accounting Policy

Onerous leases

Where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, an onerous operating lease is recognised.

The threshold to recognise an onerous lease associated with a non-cancellable lease is $250,000 per lease.

Where an onerous operating lease exists, the net present value of future rental costs (net of sublease revenue that could be reasonably obtained) over the remaining period of the lease is recognised as a liability and an expense is booked. The liability is reduced over the period in which the lease is onerous.

Restoration obligations - Accommodation

A small number of ATO property leases are subject to restoration costs upon vacating the site.

An asset and provision are recognised at the commencement of a lease at the present value of the restoration obligations. Movements in the liability are recognised as finance expenses as the payment of restoration costs advances. Any difference between the provision and the amount paid at final settlement is recognised as a restoration obligation expense or gain.

The restoration obligations provision on all new leasehold improvement assets is determined in accordance with a valuation supplied by Jones Lang LaSalle.

Revaluation increments and decrements in relation to the provision of the restoration obligations and the associated assets are recognised in Other Comprehensive Income as a change in the asset revaluation reserve.

The restoration obligations asset and provision are reviewed and adjusted annually to assess whether the ATO is likely to make payments under a restoration obligation.