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4. Income and Expenses Administered on Behalf of Government

This section analyses the activities that the Treasury does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered — Expenses

Note 4.1A: Grants

2018

2017

$’000

$’000

Note 4.1A: Grants

Public sector

State and Territory Governments

98,625,548

94,137,712

Payment of COAG receipts from Government agencies

479,530

89,358

Grants to international financial institutions

-

17,500

Private sector

Grants to private sector

8,554

14,154

Total grants

99,113,632

94,258,724

Accounting Policy

The Treasury administers a number of grants on behalf of the Government. With the exception of the accounting treatment of payments to State and Territories under Natural Disaster Relief and Recovery Arrangements (NDRRA) detailed below, grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made.

Grants to States and Territories

Under the Federal Financial Relations Framework, the Treasurer is responsible for payments to the States and Territories, including general revenue assistance (GST and other general revenue), National Specific Purpose Payments (National SPPs), National Health Reform (NHR) funding and National Partnership (NP) payments. Portfolio Ministers are accountable for government policies associated with NP payments. An overview of these arrangements is available on the Council for Federal Financial Relations’ website.

There are four main types of payments under the framework:

  • General revenue assistance, including GST revenue payments — a financial contribution to a State or Territory which is available for use for any purpose.
  • National SPPs — a financial contribution to support a State or Territory to deliver services in a particular sector.
  • NHR payments — a financial contribution to State or Territory to improve health outcomes for all Australians and ensure the sustainability of Australia’s health system.
  • NP payments — a financial contribution in respect of an NP agreement with a State or Territory to support the delivery of specific projects, to facilitate reforms or to reward jurisdictions that deliver on national reforms or achieve service delivery improvements.

National SPPs and GST are paid under a special appropriation in the Federal Financial Relations Act 2009. After the end of the financial year, the Treasurer determines the amounts that should have been paid and an adjustment is made in respect of advances that were paid during the financial year.

NHR payments are paid monthly in advance under the Federal Financial Relations Act 2009. The Treasurer then makes one annual payment determination, with any adjustments made in the following financial year. Payments to the States and Territories are made on the condition that the financial assistance is spent in accordance with the National Health Reform Agreement.

NP and other general revenue assistance payments are paid under the Federal Financial Relations Act 2009 which allows the Treasurer (or the delegated Minister within the Treasury Portfolio) to determine an amount to be paid to a State or Territory for the purpose of making a grant of financial assistance. Once determined, this amount must be credited to the COAG Reform Fund and the Treasurer must ensure that, as soon as practicable after the amount is credited, the COAG Reform Fund is debited for the purposes of making the grant. In addition, the Treasurer must have regard to the Intergovernmental Agreement on Federal Financial Relations.

The Treasury is primarily reliant on certified payment advice from the Chief Financial Officers of Commonwealth agencies who have policy and program responsibility, to assure that the terms and conditions of the NP have been met prior to making a payment. The Treasury then advises the Treasurer on amounts to be determined.

Natural Disaster Relief and Recovery Arrangements

The Treasury accounts for payments made to States and Territories under NDRRA by recognising a liability equal to the discounted value of estimated future payments to States and Territories regardless of whether or not a State or Territory has completed eligible disaster reconstruction work or submitted an eligible claim to the Commonwealth. States and Territories were requested to provide to the Department of Home Affairs (Home Affairs) an estimate of costs expected to be incurred for disasters affecting States and Territories that occurred prior to 1 July 2018 which would be eligible for assistance. The signed representations from the States and Territories are quality assured by Home Affairs, which in turn provides a certification of the expenditure estimates to the Treasury.

Payments to the States and Territories through the COAG special account

COAG receipts are received from other government agencies for the following payments:

  • Department of Social Services — Commonwealth’s share of the wage increases arising from Fair Work Australia’s decision on 1 February 2012 to grant an Equal Remuneration Order in the Social and Community Services sector.
  • Department of Social Services — Payments to States and Territories in relation to the DisabilityCare Australia Fund.
  • Department of Infrastructure, Regional Development and Cities — distribution of interstate road transport fees to the States and Territories for the maintenance and upkeep of roads.

The Treasury receives funds from the relevant portfolio agency and pays the amount to the States and Territories. These amounts are recorded as ‘COAG receipts from Government Agencies’ to recognise the income and a corresponding grant expense for the payment to the States and Territories.

Mirror taxes collected by State Governments

On behalf of the States, the Government imposes mirror taxes which replace State taxes that may be constitutionally invalid in relation to Government places. Mirror taxes are collected and retained by the States, under the Commonwealth Places (Mirror Taxes) Act 1998. State Governments bear the administration costs of collecting mirror taxes.

2018

2017

$’000

$’000

Note 4.1B: Medicare Guarantee Fund

Medicare Guarantee Fund

34,774,894

-

Total Medicare Guarantee Fund

34,774,894

-

Accounting Policy

Medicare Guarantee Fund

The purpose of the Medicare Guarantee Act 2017 (the Act) is to secure ongoing funding of the Medical Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS).

The Act establishes the Medicare Guarantee Fund (MGF), which consists of the Medicare Guarantee Fund (Treasury) Special account (Treasury Special Account) and the Medicare Guarantee Fund (Health) Special Account (Health Special Account). The Treasury Special Account is administered by the Department of the Treasury and the Health Special Account is administered by the Department of Health.

Under the Act, the Treasurer must credit the Treasury Special Account with an amount that is sufficient to cover the estimated costs of the MBS and PBS for the next financial year. The Treasury is reliant on advice from the Department of Health in determining the estimated costs. The sole purpose of the Treasury Special Account is to ensure that amounts are available for transfer to the Health Special Account to fund the MBS and PBS.

The MGF funding payment is recorded in Treasury Administered expenses to reflect the payment into the Health Special Account from the Treasury Special Account. Refer to Note 6.2 Special accounts.

2018

2017

$’000

$’000

Note 4.1C: Net foreign exchange losses

IMF SDR allocation

-

(221,087)

IMF Maintenance of Value

-

(112,929)

IMF quota revaluation

-

471,293

IFIs revaluation

-

47,895

IMF new arrangement to borrow loans revaluation

-

28,070

Other

-

(2,068)

Total net foreign exchange losses1

-

211,174

  1. Refer to Note 4.2F for current year figures.

4.2 Administered — Income

2018

2017

Revenue

$’000

$’000

Non-Taxation Revenue

Note 4.2A: Sale of goods and rendering of services

GST administration fees - external entities

631,100

682,391

Guarantee Scheme for Large Deposits and

Wholesale Funding fee

-

-

Guarantee of State and Territory borrowing fee

7,303

13,825

Total sale of goods and rendering of services

638,403

696,216

Note 4.2B: Interest

Gross IMF remuneration

1,934

28

Less: burden sharing

-

-

Net IMF remuneration

1,934

28

Interest on loan to IMF under

New arrangements to borrow

3,615

1,300

Interest on loans to States and Territories

2,162

2,126

Total interest

7,711

3,454

Note 4.2C: Dividends

Reserve Bank of Australia

668,921

1,286,000

Australian Reinsurance Pool Corporation1

57,500

57,500

Total dividends

726,421

1,343,500

Note 4.2D: COAG revenue from Government

Building Australia Fund revenue

-

-

Health and Hospital Fund revenue

129,897

-

Interstate road transport revenue

62,922

67,601

Social and Community Services Sector Special Account

286,711

21,757

Total COAG receipts from government agencies

479,530

89,358

Note 4.2E: Other revenue

HIH Group liquidation proceeds

-

2,456

Australian Reinsurance Pool Corporation Fee1

90,000

90,000

Other revenue

4,009

6,685

Total other revenue

94,009

99,141

Gains

Note 4.2F: Net Foreign exchange gains

IMF SDR allocation

(286,081)

-

IMF Maintenance of Value

(404,964)

-

IMF quota revaluation

609,839

-

IFIs revaluation

68,253

-

IMF new arrangement to borrow loans revaluation

23,136

-

Other

-

-

Total foreign exchange gains2

10,183

-

  1. Australian Reinsurance Pool Corporation Dividend and Service fee are agreed in advance as part of the Budget process and finalised once the appropriate determination is provided under the Section 38(2) of the Terrorism Insurance Act 2003.
  2. Refer to Note 4.1C for the comparative year figures

Accounting Policy

Administered revenue

All administered revenue relate to ordinary activities performed by the Treasury on behalf of the Australian Government. As such, administered appropriations are not revenue of the individual entity that oversees distribution or expenditure of the funds as directed.

Reserve Bank of Australia dividend

The Treasurer is able to determine what portion of the Reserve Bank of Australia’s earnings is made available as a dividend to the Commonwealth having regard to the Reserve Bank Board’s advice and in accordance with section 30 of the Reserve Bank Act 1959.

The Treasury recognise the dividend revenue and a corresponding receivable in the year the RBA reports a net profit available to the Commonwealth, subject to reliable measurement. This does not affect the timing of the dividend receipt in the Cash Flow Statement, only the timing of the accrued revenue in the Statement of Comprehensive Income. Dividends are measured at nominal amounts.

Australian Reinsurance Pool Corporation dividend and fee

The dividend and fee from the Australian Reinsurance Pool Corporation (ARPC) are recognised when the relevant Minister signs the legislative instrument, and thus control of the income stream is established. These are measured at nominal amounts.

International Monetary Fund remuneration

Remuneration is interest paid by the International Monetary Fund (IMF) to Australia for the use of its funds. It is paid a portion of Australia’s IMF capital subscription (quota) and on money lent by Australia under the IMF’s Financial Transaction Plan, under which members in a strong external position provide quota resources to support IMF lending to borrowing member countries.

Where the IMF’s holdings of Australian dollars fall below a specified level, it pays remuneration on Australia’s average remunerated reserve tranche position. The rate of remuneration is based on the SDR interest rate. The SDR interest rate is the market interest rate computed by the IMF which is based on a weighted average of representative interest rates on short-term government debt instruments (generally 3 month bond rates of the five entities whose currencies make up the SDR basket: the United States, United Kingdom, European Union, Japan and China). This rate is then adjusted to account for the financial consequences of overdue obligations to the IMF which are shared between members and reflected at Note 4.2B as ‘burden sharing’.

Remuneration is calculated and paid at the end of the IMF’s financial quarters. An annual Maintenance of Value adjustment is made to the IMF’s holdings of Australia’s quota paid in Australian dollars to maintain its value in SDR terms.

International Monetary Fund New Arrangement to Borrow (NAB)

Australia also receives interest on amounts lent to the IMF under the New Arrangements to Borrow (NAB). Amounts lent to the IMF under the NAB accrue interest daily at the SDR interest rate (or such other rate as agreed by 85 per cent of NAB participants). The IMF pays interest on NAB amounts quarterly.

The IMF must repay amounts lent through the NAB five years after each call is made. Amounts can be repaid earlier at the IMF’s discretion.

The Guarantee of State and Territory Borrowing

Under the Guarantee of State and Territory Borrowing, a fee is paid to provide the guarantee over new and nominated existing State and Territory securities. Fees are reported as a fee for service in accordance with AASB 118 Revenue. The guarantee closed to new issuances of guaranteed liabilities on 31 December 2010.

Financial Guarantee Contracts

Financial guarantee contracts are accounted for in accordance with AASB 139 Financial Instruments: Recognition and Measurement. They are not treated as contingent liabilities, as they are regarded as financial instruments outside the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets. The Treasury’s administered financial guarantee contracts relate to components of the Guarantee of State and Territory Borrowing.