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Notes to and forming part of the financial statements for the period ended 30 June 2020

Overview

Objectives of the Department of the Treasury

The Department of the Treasury is an Australian Government controlled entity. It is a not-for-profit entity. The objective of The Department of the Treasury, known as ‘the Treasury’ is to support and implement informed decisions on policies for the good of the Australian people, including for achieving strong, sustainable economic growth, through the provision of advice to Treasury Ministers and the efficient administration of the Treasury’s functions.

The Basis of Preparation

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements have been prepared in accordance with:

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

The Treasury has applied the Reduced Disclosure Requirements issued by the AASB with the exception of disclosures for administered activities prepared under the following accounting standards, as required under Subsection 18(3) of the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015:

  • AASB 7 Financial Instruments: Disclosure;
  • AASB 12 Disclosure of Interests in Other Entities; and
  • AASB 13 Fair Value Measurement.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets 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. The financial statements are rounded to the nearest thousand.

Reporting of Administered Activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

Except where otherwise stated, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.

Appropriations of administered capital are recognised in administered equity when the amounts appropriated by Parliament are drawn down. For the purposes of the Treasury annual report, administered equity transactions are not disclosed separately.

New Accounting Standards

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

The following new standards were issued prior to the signing of the statement by the Departmental Secretary and Chief Financial Officer, were applicable to the current reporting period and had a material effect on the Treasury’s financial statements:

Standard/Interpretation

Nature of change in accounting policy, transitional provisions, and adjustment to financial statements

AASB 15 Revenue from Contracts with Customers / AASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities and AASB 1058 Income of Not-For-Profit Entities

AASB 15, AASB 2016-8 and AASB 1058 became effective 1 July 2019.

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

AASB 1058 is relevant in circumstances where AASB 15 does not apply. AASB 1058 replaces most of the not-for-profit (NFP) provisions of AASB 1004 Contributions and applies to transactions where the consideration to acquire an asset is significantly less than fair value principally to enable the entity to further its objectives, and where volunteer services are received.

The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease,

Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities

The Treasury adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2020 is not restated, that is, it is presented as previously reported under the various applicable AASBs and related interpretations.

Under the new income recognition model the Treasury shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), the Treasury applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, the Treasury shall consider whether AASB 1058 applies.

In relation to AASB 15, the Treasury elected to apply the new standard to all new and uncompleted contracts from the date of initial application. The Treasury is required to aggregate the effect of all of the contract modifications that occur before the date of initial application.

Impact on Transition of AASB 15/1058

1 July 2019

The impact on transition is summarised below:

$'000

Departmental

Assets

Goods and services receivables

558

Total assets

558

Liabilities

Unearned Income

(612)

Total liabilities

(612)

Total adjustment recognised in retained earnings

(54)

Application of AASB 16 Leases

The Treasury adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2020 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

The Treasury elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.

AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Treasury applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

· exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;

· reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application; and

· applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.

As a lessee, the Treasury previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, the Treasury recognises right-of-use assets and lease liabilities for most leases. However, the Treasury has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.

On adoption of AASB 16, the Treasury recognised right-of-use assets and lease liabilities in relation to leases of office space and motor vehicles, which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Treasury’s incremental borrowing rate as at 1 July 2019. The Treasury’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 1.35%.

The right-of-use assets were measured as follows:

a) Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

b) All other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.

Impact on Transition of AASB 16

On transition to AASB 16, the Treasury recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below:

1 July 2019

Departmental

$'000

Right-of-use assets - property, plant and equipment

98,979

Lease liabilities

(98,021)

Prepayments

(958)

Lease liabilities (straight lining)

295

Retained earnings

(295)

The following table reconciles the Departmental minimum lease commitments disclosed in the Treasury's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

$'000

Minimum operating lease commitment at 30 June 2019

44,598

Less: removal of GST component on adoption

(3,806)

Less: short-term leases not recognised under AASB 16

(1,511)

Plus: effect of extension options reasonable certain to be exercised

70,189

Undiscounted lease payments

109,470

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

(11,449)

Lease liabilities recognised at 1 July 2019

98,021

Taxation

The Treasury is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Foreign currency

Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables are translated at the exchange rates current as at balance date.

Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund

During 2019-20 the Treasury reviewed its exposure to the risk of not complying with statutory conditions on payments from appropriations, namely section 83 of the Constitution. To minimise potential breaches, the Treasury continues its established verification procedures, in consultation with the Portfolio Departments, particularly in relation to payments under the Federal Financial Relations Act 2009 and COAG Reform Fund Act 2008. An assessment framework determines the risk profile of each National Partnership Agreement (NPA) which forms the basis of what additional assurance may be required when making a payment. This review identified that no payments were made in contravention of section 83 of the Constitution (2019: Nil).

The Treasury will continue to monitor its level of compliance with section 83 of the Constitution across all legislation for which it is administratively responsible.

Glossary of abbreviations

The following abbreviations are standardised throughout the financial statements:

  • ATO - Australian Taxation Office
  • COAG - Council of Australian Governments
  • NHFIC - National Housing Finance and Investment Corporation
  • DRFA - Disaster Recovery Funding Arrangements (applicable to events after 1 November 2018)
  • NDRRA - Natural Disaster Relief and Recovery Arrangements (applicable to events prior to 1 November 2018)
  • SDR - Special Drawing Rights

Events After the Reporting Period

Departmental

There are no known events occurring after the reporting period that could impact on the financial statements.

Administered

Impact of Novel Coronavirus (COVID-19) Outbreak

On 10 March 2020, the World Health Organisation declared the COVID-19 outbreak a global pandemic. COVID-19 has severely impacted many economies around the world, including Australia’s. The Treasury, having administrative policy control over certain aspects of the Australian Government’s economic response to COVID-19, has recorded its COVID-19 measures in accordance with applicable accounting standards and has prepared the financial statements for the reporting period with the most up to date information available at the time of signing the statements.

The impact of COVID-19 has been particularly evident in relation to developing nations. These nations have approached the International Monetary Fund (IMF) and development banks for financial assistance. The Treasury is currently negotiating with the IMF, development banks and other developed nations to determine what assistance can be provided to the developing nations at this time. The outcome of these negotiations is currently uncertain. If the Treasury is called on to make additional investments, these may have a material impact on the administered financial statements of the Treasury in future.

1. Departmental Financial Performance

This section analyses the financial performance of the Treasury for the year ended 2020.

1.1. Expenses

2020

2019

$'000

$'000

Note 1.1A: Employee benefits

Wages and salaries

112,640

98,450

Superannuation

Defined contribution plans

11,448

9,148

Defined benefit plans

8,069

9,217

Redundancies

533

497

Leave and other entitlements

16,469

18,573

Other

2,979

3,383

Total employee benefits

152,138

139,268

Accounting Policy

Accounting policies for employee related expenses are contained in Note 3: People and Relationships.

Note 1.1B: Suppliers

Goods and services supplied or rendered

Consultants, secondees and contractors

19,064

14,445

Information communication technology

14,937

10,112

Property operating expenses

6,430

5,930

Travel

4,378

4,878

Legal

3,642

2,718

Publications and subscriptions

2,152

1,886

Fees - audit, accounting, bank and other

1,480

1,490

Conferences and training

1,413

1,602

Insurance

339

359

Printing

156

453

Other

1,727

1,423

Total goods and services supplied or rendered

55,718

45,296

Goods supplied

7,557

4,488

Rendering of services

48,161

40,808

Total goods and services supplied or rendered

55,718

45,296

Other suppliers

Workers compensation premiums

826

871

Operating lease rentals1

-

8,599

Short-term leases

840

-

Low value leases

27

-

Total other suppliers

1,693

9,470

Total suppliers

57,411

54,766

1. The Treasury has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

The Treasury has no short-term lease commitments as at 30 June 2020.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1D Finance costs, 2.2 Non-financial assets and 2.4A Leases.

Accounting Policy

Short-term leases and leases of low-value assets

The Treasury has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). The Treasury recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

2020

2019

$'000

$'000

Note 1.1C: Grants

Public sector:

Australian Government Entities (related entities)

-

4,741

Private sector:

Non-profit organisations

609

4,954

Total grants

609

9,695

Note 1.1D: Finance costs

Interest on lease liabilities1

1,579

-

Unwinding of discount

85

86

Total finance costs

1,664

86

1. The Treasury has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1B Suppliers, 2.2 Non-financial assets and 2.4A Leases.

Accounting Policy

All borrowing costs are expensed as incurred.

1.2. Own-Source Revenue and Gains

2020

2019

Own-Source Revenue

$'000

$'000

Note 1.2A: Revenue from contracts with customers

Rendering of services

9,750

8,174

Total revenue from contracts with customers

9,750

8,174

Disaggregation of revenue from contracts with customers

Major product / service line:

Actuarial services

3,383

2,040

Shared services

3,161

3,325

Cost recoveries

1,597

1,493

Research services

915

443

Legislative and Governance Forum on Consumer Affairs contributions

374

516

Income from subleasing

279

320

Other

41

37

9,750

8,174

Type of customer:

Australian Government entities (related parties)

9,220

7,563

State and Territory Governments

374

516

Non-government entities

156

95

9,750

8,174

Accounting Policy

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Treasury expects to be entitled in exchange for those goods or services. The Treasury has concluded that it is the principal in all of its revenue arrangements because it controls the goods or services before transferring them to the customer.

Actuarial Services

This revenue stream relates to services performed by the Australian Government Actuary division to other Commonwealth entities. The Treasury recognises revenue upon the completion of the services (that is, at a point in time) as defined by the underlying contract as this is when the customer obtains the ability to direct the use of, and obtain substantially all of the benefits from the services (typically a report or other deliverable). Invoicing occurs in line with the underlying agreement and can be in advance or in arrears.

Shared Services

This revenue stream relates to the Treasury providing finance, payroll and IT function services to other Commonwealth entities. The Treasury recognises revenue on the basis of expenses incurred to complete the service (that is, over time) because the customer simultaneously receives and consumes the benefits provided to them. The Treasury uses the input method in measuring progress of the services because there is a direct relationship between the Treasury’s effort (that is, expenditure incurred) and the transfer of the service to the customer. Invoicing occurs in line with the underlying agreement and can be in advance or in arrears.

Cost Recoveries

This revenue stream relates to cost recovery contributions received from Commonwealth and State government entities as well as other entities to support the Treasury’s facilitation of various grant programs, forums and/or councils. These arrangements are underpinned by enforceable agreements that are sufficiently specific to allow the Treasury to determine when the obligations are satisfied in return for consideration. The Treasury recognises revenue on the basis of expenses incurred to complete the service (that is, over time) because the customer simultaneously receives and consumes the benefits provided to them. The Treasury uses the input method in measuring progress of the services because there is a direct relationship between the Treasury’s effort (that is, expenditure incurred) and the transfer of the service to the customer. Invoicing occurs in line with the underlying agreement and can be in advance or in arrears.

Research Services

This revenue stream relates to economic modelling and policy services to other Commonwealth entities. The Treasury recognises revenue on the basis of expenses incurred to complete the service (that is, over time) because the customer simultaneously receives and consumes the benefits provided to them. The Treasury uses the input method in measuring progress of the services because there is a direct relationship between the Treasury’s effort (that is, expenditure incurred) and the transfer of the service to the customer. Invoicing occurs in line with the underlying agreement and can be in advance or in arrears.

Legislative and Governance Forum on Consumer Affairs

This revenue stream relates to contributions from States and Territories to fund the operations and projects of the Legislative and Governance Forum on Consumer Affairs (CAF). The operational contributions are based on the Commonwealth committing 30 per cent of funding with the remaining 70 per cent shared between the States and Territories. There are no sufficiently specific obligations related to these contributions, therefore the Department recognises revenue uniformly over time within the financial period in which the funds relate to. The Department recognises project revenue on the basis of expenses incurred to deliver the project (that is, over time) because the customer simultaneously receives and consumes the benefits provided to them. The Department uses the input method in measuring progress of the services delivered because there is a direct relationship between the Departments effort (that is, expenditure incurred) and the transfer of the service to the customer. Invoicing occurs in line with the underlying State and Territories agreements and can be in advance or arrears. Payment is generally due within 30 days upon issue of invoice.

Income from Subleasing Right-of-use assets

The Treasury sublets a portion of office space to the Australian Office of Financial Management. The Treasury does not transfer substantially all the risks and rewards incidental to ownership of its lease through this sublease and therefore classifies this sublease as an operating lease. Rental income is accounted for on a straight-line basis over the lease term and is included in revenue from contracts with customers due to its operational nature.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

2020

2019

$'000

$'000

Note 1.2B: Other revenue

ANAO audit services received free of charge

490

575

Secondment services received free of charge

5,349

3,794

Other

177

262

Total other revenue

6,016

4,631

Note 1.2C: Other gains

Reversal of restoration provision

96

30

Total other gains

96

30

Accounting Policy

Resources received free of charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another government entity as a consequence of a restructuring of administrative arrangements.

Sale of assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

Note 1.2D: Revenue from Government

Appropriations

Departmental appropriations

206,298

185,518

Supplementation

Other

-

3,837

Total revenue from Government

206,298

189,355

Accounting Policy

Revenue from Government

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the Treasury gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned.

Appropriations receivable are recognised at their nominal amounts.

2. Departmental Financial Position

This section analyses the Treasury assets used to generate financial performance and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

2.1 Financial Assets

2020

2019

$'000

$'000

Note 2.1A: Cash and cash equivalents

Cash on hand or on deposit

651

2,772

Total cash and cash equivalents

651

2,772

Note 2.1B: Trade and other receivables

Goods and services receivables

Contract assets

1,195

-

Total goods and services receivables

1,195

-

The contract assets are shared services and cost recoveries provided including TechnologyOne licences and workers compensation premiums not invoiced at 30 June.

Appropriations receivable

72,956

54,315

Supplementation receivable

-

3,837

Goods and services receivables

3,785

2,715

Net GST receivable from the ATO

1,298

1,153

Other receivables

820

424

Total trade and other receivables (gross)

78,859

62,444

Less impairment loss allowance

(2)

(2)

Total trade and other receivables (net)

80,052

62,442

Credit terms for goods and services were within 30 days (2019: 30 days).

Accounting Policy

Financial assets

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows, where the cash flows are solely payments for principal and interest that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

2.2 Non-Financial Assets

Note 2.2A: Reconciliation of the opening and closing balances of property, plant and equipment and computer software (2019-20)

Buildings

Plant and equipment

Computer software internally developed

Computer software purchased

Total

$’000

$’000

$’000

$’000

$’000

As at 1 July 2019

Gross book value

20,951

17,097

20,864

9,016

67,928

Accumulated depreciation / amortisation and impairment

(4,238)

(4,700)

(12,883)

(7,925)

(29,746)

Total value as at 1 July 2019

16,713

12,397

7,981

1,091

38,182

Recognition of right of use asset on initial application of AASB 16

98,951

28

-

-

98,979

Adjusted total value as at 1 July 2019

115,664

12,425

7,981

1,091

137,161

Additions

33,899

2,338

6,591

206

43,034

Purchased

5,974

2,321

-

206

8,501

Internally developed

-

-

6,591

-

6,591

Right-of-use assets

27,925

17

-

-

27,942

Depreciation and amortisation

(2,965)

(3,070)

(2,016)

(690)

(8,741)

Depreciation on right-of-use assets

(8,436)

(11)

-

-

(8,447)

Impairments on right-of-use assets recognised in net cost of services

-

(7)

-

-

(7)

Disposals

(512)

(228)

-

-

(740)

From write-down and impairment of assets

(512)

(228)

-

-

(740)

Total as at 30 June 2020

137,650

11,447

12,556

607

162,260

Total as at 30 June 2020 represented by:

Gross book value

152,021

18,977

26,268

9,222

206,488

Fair value

24,225

16,539

-

-

40,764

At cost

126,876

34

19,625

9,222

155,757

Under construction

920

2,404

6,643

-

9,967

Accumulated depreciation / amortisation and impairment

(14,371)

(7,530)

(13,712)

(8,615)

(44,228)

Total as at 30 June 2020

137,650

11,447

12,556

607

162,260

Carrying amount of right-of-use assets

118,440

27

-

-

118,467

No indicators of impairment were found for property, plant and equipment or computer software as at 30 June 2020.

No significant non-financial assets are expected to be sold or disposed within the next 12 months.

All revaluations are independent and are conducted in accordance with the revaluation policy stated at Note 7.5 Fair Value Measurement.

The fair value of property, plant and equipment has been taken to be the market value of similar properties or depreciated replacement value as determined by an independent valuer.

Contractual commitments1 for the acquisition of property, plant and equipment and intangible assets

Commitments are payable as follows:

2020

2019

$'000

$'000

Within 1 year

889

2,445

Between 1 to 5 years

2,891

-

Total commitments

3,780

2,445

1. Commitments are GST inclusive where relevant.

Accounting Policy

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

Asset recognition threshold

Purchases of plant and equipment and computer software are recognised initially at cost in the statement of financial position, except for purchases costing less than $10,000 (building – leasehold improvements and internally developed software $50,000) which are expensed in the year of acquisition.

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to restoration provisions in property leases taken up by the Treasury where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Treasury’s leasehold improvements with a corresponding provision for the restoration recognised.

Lease Right of Use (ROU) Assets

Leased ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Lease ROU assets continue to be measured at cost after initial recognition.

Revaluations

Following initial recognition at cost, property, plant and equipment (excluding ROU assets) are carried at fair value (or an amount not materially different from fair value) less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset is restated to the revalued amount.

Depreciation and Amortisation

Depreciable property, plant and equipment assets are written‑off to their estimated residual values over their estimated useful lives to the Treasury using, in all cases, the straight‑line method of depreciation. Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Software is amortised on a straight-line basis.

Depreciation rates applying to each class of depreciable assets are based on the following useful lives:

2020

2019

Buildings - leasehold improvements

5-25 years

1.75-25 years

Plant and equipment:

Plant and equipment

3-10 years

3-10 years

Motor vehicles

4 years

4 years

Office equipment

5 years

5 years

Computer software

3-5 years

3-5 years

The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.

Impairment

All assets were assessed for impairment at 30 June 2020. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows and the asset would be replaced if the Treasury were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An item or property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles

The Treasury’s intangible assets comprise internally developed and purchased software for internal use. These assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

All software assets were assessed for indications of impairment as at 30 June 2020, including the impact of factors such as project cessation and platform changes. No indications of impairment for intangible assets were identified as at 30 June 2020, therefore nil impairment loss for intangible assets was recognised (2019: nil).

Accounting Judgement and Estimates

The fair value of buildings – leasehold improvements and plant and equipment has taken to be the market value of similar properties or depreciated replacement value as determined by an independent valuer.

Refer to section 7.5 Fair Value Measurement - Accounting Policy.

2.3 Payables

2020

2019

$'000

$'000

Note 2.3A: Suppliers

Trade creditors and accruals

9,950

8,203

Operating lease rentals

-

295

Contract liabilities

825

-

Total suppliers

10,775

8,498

Settlement was usually made within 20 days (7 day payment terms were introduced in April 2020 to assist suppliers with their cash flows during the outbreak of COVID-19).

The contract liabilities are associated with the performance obligations not yet met at 30 June for the Australian Government Actuary, the Department of Foreign Affairs and Trade and the Legislative and Governance Forum on Consumer Affairs.

Note 2.3B: Other payables

Salaries and wages

2,234

983

Superannuation

330

137

Other creditors

356

385

Unearned income

-

2,006

Total other payables

2,920

3,511

Other payables are expected to be settled in no more than 12 months.

1. The Treasury has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117. Prior year operating lease rentals were transferred to equity on transition.

Accounting Policy

Financial liabilities

Other financial liabilities include trade creditors and accruals are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced). Settlement is usually made net 20 days.

2.4 Interest Bearing Liabilities

2020

2019

$'000

$'000

Note 2.4A: Leases

Lease liabilities

Buildings

122,773

-

Plant and equipment

27

-

Total leases

122,800

-

1. The Treasury has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

Total cash outflow for leases for the year ended 30 June 2020 was $8.8 million ($7.2 million in principal payments and $1.6 million in interest payments).

Accounting Policy

Refer Overview section for accounting policy on leases.

2.5 Other Provisions

Note 2.5A: Provision for restoration

Total

$’000

$’000

Carrying amount 1 July 2019

3,564

3,564

Additional provisions made

840

840

Amounts used

(164)

(164)

Amounts reversed

(96)

(96)

Unwinding of discount or change in discount rate

85

85

Closing balance 30 June 2020

4,229

4,229

The Treasury has 3 (2019: 5) lease agreements containing provisions to restore the premises to their original condition at the conclusion of the lease. The Treasury has made a provision to reflect the present value of this obligation. The value of the provision has been estimated by an independent valuer based on occupied floor space as per the leasing agreements.

3. People and relationships

This section describes a range of employment and post-employment benefits provided to our people and our relationships with other key people.

3.1. Employee Provisions

2020

2019

$'000

$'000

Note 3.1A: Employee provisions

Leave

63,174

53,475

Total employee provisions

63,174

53,475

Accounting Policy

Liabilities for short-term employee benefits and termination benefits expected within 12 months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

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

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Treasury’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

In 2017-18, the Treasury engaged the Australian Government Actuary to undertake a triennial actuarial assessment of its leave provisions, taking into account the likely tenure of existing staff, patterns of leave claims, payouts and future salary movements. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and general pay increases.

Separation and redundancy

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

Superannuation

Staff of the Treasury are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes of the Australian Government. The PSSap is a defined contribution scheme.

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

The Treasury makes employer contributions to the employee’s defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The Treasury accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June 2020 represents outstanding contributions.

3.2. Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities, directly or indirectly, of the Treasury. The Treasury has determined the key management personnel to be the Secretary and Deputy Secretaries. Key management personnel remuneration is reported in the table below:

2020

2019

$'000

$'000

Short-term employee benefits

2,883

3,065

Post-employment benefits

404

444

Other long-term employee benefits

73

130

Termination benefits

224

-

Total key management personnel remuneration expenses1

3,584

3,639

The total number of key management personnel that are included in the above table are 12 (2019:12).

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Treasurer and other Portfolio Ministers. Their remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the Treasury.

3.3 Related Party Disclosures

Related party relationships:

The Treasury is an Australian Government controlled entity. Related parties to the Treasury are key management personnel including the Portfolio Minister and Executive and other Australian Government entities.

Transactions with related parties:

Giving consideration to relationships with related entities and transactions entered into during the reporting period by the Treasury, it has been determined that one related party transaction is to be separately disclosed (2019: nil).

During the reporting period, Treasury paid $2.0 million (GST inclusive) in administered grant funding to the Australian Housing and Urban Research Institute Limted (AHURI). One of the key management personnel was a government-appointed director of AHURI during 2019-20.

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

2020

2019

$'000

$'000

Note 4.1A: Grants

Public sector

State and Territory Governments

98,864,309

101,676,454

Payment of COAG receipts from Government agencies

1,592,278

2,259,418

Private sector

Grants to private sector

1,825

9,389

Total grants

100,458,412

103,945,261

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 DRFA and 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, National Housing and Homelessness Agreement (NHHA) 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 five 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.

∙ NHHA payments – a financial contribution to State or Territory to improve access to affordable, safe and sustainable housing, including to prevent and address homelessness and support social and economic participation

∙ 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.

Disaster Recovery Funding Arrangements (DRFA) and Natural Disaster Relief and Recovery Arrangements (NDRRA)

The Treasury accounts for payments made to States and Territories under DRFA and 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 2020 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 (DSS) – 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 (DSS) – payments to States and Territories in relation to the DisabilityCare Australia Fund.

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.

2020

2019

$'000

$'000

Note 4.1B: Medicare Guarantee Fund

Medicare Guarantee Fund

37,961,055

36,233,451

Total Medicare Guarantee Fund

37,961,055

36,233,451

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.

2020

2019

$'000

$'000

Note 4.1C: Payments to corporate Commonwealth entities

NHFIC Operating funding

26,762

13,973

NHFIC grants payment

35,000

35,000

Total payments to corporate Commonwealth entities

61,762

48,973

Accounting Policy

Payments to corporate Commonwealth entities from amounts appropriated for that purpose are classified as administered expenses, equity injections or loans of the relevant portfolio department. The appropriation to the Treasury is disclosed in Note 6 Funding.

Refer to Notes 5.1B Loans and other receivables, 5.1C Investments and 7.2 Administered Contingent Assets and Liabilities for more information on the National Housing Finance and Investment Corporation (NHFIC).

Note 4.1D: Net foreign exchange losses

IMF SDR allocation

87,235

250,912

IMF Maintenance of Value

648,787

406,863

IMF quota revaluation

(185,958)

(534,870)

IFIs revaluation

6,536

(87,399)

IMF new arrangement to borrow loans revaluation

(8,112)

(14,754)

Total net foreign exchange losses

548,488

20,752

Note 4.1E: Suppliers

Small & Medium Enterprises Guarantee Scheme – Claims Provision1

93,385

-

AFCA disputes payments2

31,447

-

Advertising campaigns

26,354

14,107

NHFIC First Home Loan Deposit Scheme – Claims provision1

6,735

-

General supplier expenses

444

1,656

Total suppliers

158,365

15,763

1. Refer to Note 5.4A Accounting Policy for further details on the Small & Medium Enterprises Guarantee Scheme and the NHFIC First Home Loan Deposit Scheme.

2. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry presented its final report to the Governor-General on 1 February 2019. As part of its response, the Government expanded the remit of the Australian Financial Complaints Authority (AFCA) to accept applications for external disputes dating back to 1 January 2008 that relate to misconduct, which AFCA, its predecessor schemes, or the courts have not yet dealt with. AFCA disputes payments are expected to be finalised in 2020-21.

4.2. Administered - Income

2020

2019

Revenue

$'000

$'000

Non-Taxation Revenue

Note 4.2A: Revenue from contracts with customers

GST administration fees - external entities

646,600

599,200

Guarantee of State and Territory borrowing fee

2,462

6,011

Total revenue from contracts with customers

649,062

605,211

Note 4.2B: Interest

Gross IMF remuneration

9,954

10,666

Less: burden sharing

(35)

(39)

Net IMF remuneration

9,919

10,627

Interest on loan to IMF under

New arrangements to borrow

2,259

4,106

Interest on loans to States and Territories

2,168

2,162

Interest on NHFIC AHBA Loans

1,216

38

Total interest

15,597

16,972

Note 4.2C: Dividends

Reserve Bank of Australia

2,562,718

1,684,632

Australian Reinsurance Pool Corporation1

10,000

10,000

International Finance Corporation

498,783

-

Total dividends

3,071,501

1,694,632

Note 4.2D: COAG revenue from Government

DisabilityCare Australia Fund revenue (DSS)2

1,550,529

2,087,755

Interstate Road Transport revenue (DoI)2

-

6,586

Social and Community Services Sector (DSS)2

41,749

165,077

Total COAG receipts from government agencies

1,592,278

2,259,418

Note 4.2E: Other revenue

HIH Group liquidation proceeds

19,196

-

Australian Reinsurance Pool Corporation Fee1

90,000

90,000

Other revenue

3,315

3,818

Total Other revenue

112,511

93,818

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 Section 38(2) of the Terrorism Insurance Act 2003.

2. COAG revenue from Government – refer to Note 4.1A Grants - Accounting Policy for further details.

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 Reserve Bank of Australia 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. Remuneration is paid on a portion of Australia’s IMF quota commitment. This money is 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 Arrangements 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.

International Finance Corporation

On 16 April 2020, the Board of Governors of the International Finance Corporation passed Resolution 270 - Conversion of Retained Earnings and General Capital Increase. Following the passage of the Resolution, retained earnings converted to 16,999,998 additional shares with a par value of $1,000 USD each. Australia was allocated 313,535 shares valued at $498.783 million. This is treated as a non-cash dividend.

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.

5. Assets and Liabilities Administered on Behalf of Government

This section analyses assets used to conduct operations and the operating liabilities incurred as a result, which 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.

5.1. Administered - Financial Assets

2020

2019

$'000

$'000

Note 5.1A: Cash and cash equivalents

Cash held in the OPA - NHFIC Special Account

449,817

239,677

Total cash and cash equivalents

449,817

239,677

Accounting Policy

The Treasury’s administered cash and cash equivalents relate to special account balances held in the OPA. Refer to Note 6.2 Special accounts for more information.

Note 5.1B: Loans and other receivables

Loans

Loans to States and Territories

47,855

47,855

Loans to NHFIC

115,183

15,323

IMF new arrangements to borrow loan

213,060

311,738

Total loans

376,098

374,916

Other receivables

Guarantee of State and Territory

Borrowing contractual fee receivable1

3,658

6,169

Guarantee of State and Territory

Borrowing fee receivable

188

298

Net GST receivable from the ATO

1,397

(5)

IMF related moneys owing

320

2,447

Dividends receivable

2,563,000

1,685,000

Accrued interest - Loans to NHFIC

53

38

GST Revenue allocations and COAG refundable

5,174,947

470,268

Other receivables

2

-

Total other receivables

7,743,565

2,164,215

Total loans and other receivables (gross)

8,119,663

2,539,131

Receivables are expected to be recovered in

No more than 12 months

7,742,101

2,160,478

More than 12 months

377,562

378,653

Total receivables (gross)

8,119,663

2,539,131

Receivables (gross) are aged as follows

Not overdue

8,119,663

2,539,131

Total receivables (gross)

8,119,663

2,539,131

1. Refer to Note 5.2C Unearned income for corresponding liability.

Accounting Policy

Except for financial guarantee contracts, all loans and receivables are classified as amortised cost under AASB 9. Refer to Note 7.4 Administered financial instruments for further details on accounting treatment.

Loans to NHFIC

Loans to NHFIC relate to the Affordable Housing Bond Aggregator (AHBA), which was established by NHFIC to provide loans to registered Community Housing Providers (CHPs). In accordance with the National Housing Finance and Investment Corporation Investment Mandate 2018, each loan allocated to the AHBA must relate to a particular loan to a CHP unless approved by the Treasurer and Minister for Finance. Interest is to be charged on each loan at a rate that covers the Commonwealth’s cost of borrowing over the life of the loan. The interest has been accrued as earned and disclosed in Notes 4.2B and 5.1B.

IMF New Arrangements to Borrow

Through the New Arrangements to Borrow (NAB), Australia and 39 other member countries have committed to lend additional resources to the IMF. The NAB constitutes a second line of funding defence to supplement IMF resources to forestall or cope with an impairment of the international monetary system. The NAB is used in circumstances in which the IMF needs to supplement its quota resources for lending purposes. The NAB is covered by general activation periods of up to six months, with each activation period subject to a specified maximum level of commitments.

Australia has received NAB repayments following past NAB lending however, the NAB is not currently active or being called upon. 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.

GST Revenue allocation and COAG refundable

Under the COAG arrangements, the Treasury records the COAG grants position based on accrual or receivable balance information provided by Commonwealth Agencies for each COAG grant. Historically, the Treasury has reported on a net basis the grants payable under Note 5.2A Grants. From 2018-19, the Treasury reports on a gross basis, separately disclosing grants payable (grants not paid prior to year-end) and receivable (primarily GST revenue allocations and other COAG grants receivable).

GST is paid to the State and Territories based on estimated figures provided in the Budget and revisited in the Mid-Year Economic and Fiscal Outcome (MYEFO) round. The key driver of the calculation of the distribution of GST is population and actual collections. At the end of each financial year, the Australian Bureau of Statistics provides population data and the ATO provides the actual GST collection figures. The difference between the estimated State and Territory payments is recorded as GST revenue allocation.

Current year GST revenue allocation is $5,174.9 million (2019: $470.3 million).

Refer to Note 5.2A Grants for further details.

2020

2019

$'000

$'000

Note 5.1C: Investments

International financial institutions

Asian Development Bank

617,551

608,860

Asian Infrastructure & Investment Bank

1,075,623

842,093

European Bank for Reconstruction

and Development

102,438

101,442

International Bank for Reconstruction

and Development

340,014

332,742

International Finance Corporation

525,811

67,488

Multilateral Investment Guarantee Agency

9,035

8,842

Total international financial institutions

2,670,472

1,961,467

Australian Government entities

Reserve Bank of Australia

29,601,000

28,338,000

Australian Reinsurance Pool Corporation

520,526

461,321

NHFIC

305,225

165,000

Total Australian Government entities

30,426,751

28,964,321

Commonwealth Companies

Financial Adviser Standards and Ethics Authority Ltd

1,436

1,174

Total Commonwealth Companies

1,436

1,174

Other Investments

IMF quota

13,213,510

13,027,552

Total other investments

13,213,510

13,027,552

Total Investments

46,312,169

43,954,514

Investments are expected to be recovered in more than 12 months.

Accounting Policy

Administered investments

Investments are classified as fair value through other comprehensive income. Refer to Note 7.4 Administered Financial Instruments for further details on the Treasury’s accounting policy.

Development banks

Australia holds shares in the World Bank Group (WBG), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD) and the Asian Infrastructure Investment Bank (AIIB).

Principal activities:

The World Bank was established in 1944 and comprises the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank, alongside the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID), form the WBG.

The IBRD provides financing and technical assistance to middle income countries and creditworthy poor countries. The IDA provides grants, concessional finance and technical assistance to low income countries. The IFC supports the development of the private sector by providing direct finance to private sector operations. MIGA provides guarantee services for projects, which reduce the risks for other co-financing partners including the private sector. ICSID provides international facilities for conciliation and arbitration of investment disputes.

The ADB was established in 1966 and has a mandate to reduce poverty and promote economic development in its developing member countries in Asia and the Pacific. The ADB does this by financing (through a mix of loans, grants, guarantees and co-financing activities with both other donors and the private sector) public sector and private sector activities. It also provides technical assistance to developing member countries so they can improve their policy and business investment environments. A significant portion of the ADB’s activities are focused on the infrastructure, transportation and energy sectors.

The EBRD was established in 1991 to assist former communist eastern European countries committed to the principles of multi-party democracy, pluralism and market economies, to develop their private sector and capital markets. The EBRD currently operates in more than 30 countries from Central and Eastern Europe to Central Asia and the Southern and Eastern Mediterranean region. It provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. It also works with publicly owned companies, to support privatisation, restructuring state owned firms and improvement of municipal services.

The AIIB was established on 25 December 2015. The AIIB focuses on the development of infrastructure and other productive sectors in Asia. The AIIB also aims to promote interconnectivity and economic integration in the region by working in close collaboration with other multilateral and bilateral development institutions.

International Monetary Fund

The IMF is an organisation with 189 member countries, working to ensure the stability of the international monetary system - the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The IMF does this through: surveillance, including annual economic assessments of member countries; technical assistance to member countries; and by making resources available (with adequate safeguards) to members experiencing balance of payments difficulties.

Quota subscriptions which are denominated in SDRs represent a member’s shareholding in the IMF and generate most of the IMF’s financial resources.

Australian Government entities

Administered investments in controlled corporate entities are not consolidated because their consolidation is relevant only at the whole of government level.

The Reserve Bank of Australia is Australia's central bank. Its duty is to contribute to the maintenance of price stability, full employment and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet a medium-term inflation target, working to maintain a strong financial system and efficient payments system and issuing the nation's banknotes. The Bank provides selected banking services to the Australian Government and its agencies and to a number of overseas central banks and official institutions. Additionally, it manages Australia's gold and foreign exchange reserves.

The Australian Reinsurance Pool Corporation (ARPC) is a Commonwealth public financial corporation established by the Terrorism Insurance Act 2003 to administer the terrorism reinsurance scheme, providing primary insurers with reinsurance for commercial property and associated business interruption losses arising from a declared terrorist incident.

The National Housing Finance and Investment Corporation (NHFIC) was established under the National Housing Finance and Investment Corporation Act 2018 in June 2018. NHFIC’s purpose is to improve housing outcomes for Australians by providing funding to eligible housing projects through two key financing mechanisms: the National Housing Infrastructure Facility (NHIF), which provides loans, investments and grants for enabling infrastructure to support new housing; and the Affordable Housing Bond Aggregator (AHBA), which provides cheaper, longer-term financing to community housing providers.

Financial Adviser Standards and Ethics Authority Ltd (FASEA) is a Commonwealth entity that was established in April 2017 to set standards for the ethical conduct, educational qualifications and ongoing training of licensed financial advisers in Australia.

The Commonwealth, as represented by the Assistant Minister for Superannuation, Financial Services and Financial Technology, is the sole shareholder. FASEA is funded by contributions from participating financial institutions under FASEA’s Funding agreement. All revenue and any subsequent profits are to be used to fund the operations of FASEA and cannot be distributed to the Commonwealth. Upon winding up, any surplus is returned to the contributing financial institutions and the shareholder is required to contribute $10.00.

5.2. Administered - Payables

2020

2019

$'000

$'000

Note 5.2A: Grants

Public sector

COAG grants payable

126,753

156,033

Other grants payable

-

10

Total grants

126,753

156,043

Grants are expected to be settled in no more than 12 months.

Note 5.2B: Other payables

GST appropriation payable

6,668

3,710

IMF SDR allocation

6,198,575

6,111,340

IMF related monies owing

693

11,294

IMF Maintenance of Value

648,787

406,863

Suppliers

7,992

(62)

Total other payables

6,862,715

6,533,145

Other payables expected to be settled

No more than 12 months

15,353

14,968

More than 12 months

6,847,362

6,518,177

Total other payables

6,862,715

6,533,145

Note 5.2C: Unearned income

Guarantee of State and Territory borrowing

contractual guarantee service obligation1

3,658

6,169

Total unearned income

3,658

6,169

Total unearned income expected to be settled

No more than 12 months

2,194

2,432

More than 12 months

1,464

3,737

Total unearned income

3,658

6,169

1. Refer Note 5.1B Loans and other receivables for corresponding receivable.

COAG grants payable

Historically, COAG grants payable was netted-off against GST revenue allocations receivable and other COAG grants receivable. From 2018-19, these have been separately disclosed on a gross basis, with GST revenue allocations receivable and other COAG grants receivable now disclosed in Note 5.1B Loans and other receivables.

IMF Special Drawing Right Allocation

The SDR allocation liability reflects the current value in AUD of the Treasury’s liability to repay to the IMF the cumulative allocations of SDRs provided to Australia since joining the IMF. This liability is classified as ‘other payables’.

5.3. Administered - Interest Bearing Liabilities

2020

2019

$'000

$'000

Note 5.3A: Promissory notes

IMF promissory notes1

9,986,317

9,899,480

Other promissory notes1

64,705

88,789

Total Promissory notes

10,051,022

9,988,269

Promissory notes expected to be settled

Within 1 year

-

25,468

Between 1 to 5 years

-

-

More than 5 years

10,051,022

9,962,801

Total Promissory notes

10,051,022

9,988,269

1. Promissory notes held by the Treasury are at face value and have no interest rate.

Accounting Policy

Promissory notes

Promissory notes have been issued to the IMF, the International Bank for Reconstruction and Development, the Asian Development Bank and the Multilateral Investment Guarantee Agency.

Where promissory notes have been issued in foreign currencies, they are recorded at their nominal value by translating them at the spot rate at balance date. The promissory notes relate to the undrawn paid-in capital subscriptions and Maintenance of Value adjustments under the direction of the Treasurer. Foreign currency gains and losses are recognised where applicable.

5.4. Administered - Provisions

2020

2019

$'000

$'000

Note 5.4A: Provisions

Small & Medium Enterprises Guarantee Scheme (SMEGS)

93,385

-

NHFIC First Home Loan Deposit Scheme (FHLDS)

6,735

-

DRFA and NDRRA provision

1,880,653

1,392,582

Queensland

872,428

1,050,712

New South Wales

686,071

16,567

Victoria

37,066

52,525

Western Australia

138,906

133,508

Northern Territory

37,582

65,348

Tasmania

51,180

73,721

South Australia

56,586

190

Australian Capital Territory

834

11

Total provisions

1,980,773

1,392,582

Provisions expected to be settled

No more than 12 months

1,197,630

532,379

More than 12 months

783,143

860,203

Total provisions

1,980,773

1,392,582

SMEGS

FHLDS

DRFA and NDRRA

Total

$’000

$’000

$’000

$’000

As at 1 July 2019

-

-

1,392,582

1,392,582

Additional provisions made

93,385

6,735

746,326

846,446

Amounts used

-

-

(499,922)

(499,922)

Amounts reversed

-

-

-

-

Unwinding of discount or change in discount rate

-

-

241,667

241,667

Total as at 30 June 2020

93,385

6,735

1,880,653

1,980,773

Accounting Judgements and Estimates

Disaster Recovery Funding Arrangements (DRFA) and the Natural Disaster Relief and Recovery Arrangements (NDRRA)

Provisions

The DRFA and NDRRA liability represents the Treasury’s best estimate of payments expected to be made to States and Territories as at balance date. The DRFA 2018 Determination applies from 1 November 2018 in respect of eligible events that occur on or after that date. All eligible events occurring up to and including 31 October 2018 are governed by NDRRA Determination 2017. No change to the method of accounting for the provision arises from this change in the determination.

The estimate is based on information provided by the States and Territories to the Department of Home Affairs (Home Affairs), the Commonwealth agency responsible for the administration of disaster relief. The estimates provided by the States and Territories are based on their assessment of the costs expected to be incurred that would be eligible for assistance under the applicable Determination. Home Affairs performs their quality assurance processes in order to assess reasonableness of estimates provided by the States and Territories with regard to estimates eligibility under DRFA and NDRRA.

The Treasury reviews the quality assured estimates to ensure they are consistent with government decisions and then calculates the provision by discounting the future cash flows. Given the nature of disasters, there is a level of uncertainty in the estimated reconstruction costs at the time of a disaster. This uncertainty decreases as reconstruction efforts progress to completion.

Contingent liabilities

The DRFA and NDRRA provision at 30 June 2020 includes estimated payments for disaster events that occurred prior to 1 July 2020, except for new events that occurred during the 2019-20 financial year for which costs cannot yet be quantified reliably. There were seven such events that are included in the DRFA and NDRRA contingent liability. These are:

- Tasmanian East Coast Storm in April 2020;

- East Victorian Coast Storms in April 2020;

- Western NSW Floods in February 2020;

- Western NSW Storms and Floods in April 2020;

- Western NSW Storms and Floods in April 2020;

- Cabonne Shire Storms and Floods in March 2020; and

- South Australian Flood Event between January – February 2020.

Estimates of all natural disasters are regularly reviewed and revised when new information becomes available.

Small & Medium Enterprises (SME) Guarantee Scheme (SMEGS)

Provision

The SMEGS provision represents the Treasury’s best estimate of claims expected from eligible lenders as at balance date. Under the Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Act 2020 and the Australian Government SME Guarantee Scheme- Scheme Rules effective 8 July 2020, the Commonwealth guarantees 50% of reliable new loans issued by eligible lenders to SMEs up to $40 billion. The loans need to meet the eligibility and credit criteria of the eligible lenders (banks, credit unions and ADIs) approved by Treasury.

Eligible lenders are required to upload the approved loans to an Australian Prudential Regulations Authority (APRA) form, complying with the Financial Sector (Collection of Data) Act 2001 Determination No.4 of 2020. The data required is governed by the Reporting Form ARF 920.0 Australian Government SME Guarantee Scheme (Portfolio Information) (ARF 920.0) and Reporting Form ARF 920.1 Australian Government SME Guarantee Scheme (Loan Level Details) (ARF 920.1). These forms are used for the purpose of enabling APRA to assist the Treasury administer SMEGS.

The APRA data provides the basis of the total loans and maturity dates of each loan as at balance date. These data points are multiplied by a determined default rate and discounted using Commonwealth Treasury Bonds rates with a comparable duration. The expected default rate has been determined using a combination of default data from similar international programs and the banking industry.

The impact of the Novel Coronavirus (COVID-19) has resulted in an evolving economic response which impacts upon the SMEGS provision. The Government response to date has been to release an initial phase (Phase 1) and a second phase (Phase 2) on 23 July 2020. As at 30 June 2020, only Phase 1 guarantees have been reflected, as Phase 2 will not be in effect until 1 October 2020

Phase 1 will remain open until 30 September 2020, which guarantees 50% of unsecured loans of up to $250,000 with maximum terms of three years, and a six month repayment holiday.

Contingent liabilities

Refer to Note 7.2 Administered Contingent Assets and Liabilities

NHFIC First Home Loan Deposit Scheme (FHLDS)

Provision

The FHLDS provision represents the Treasury’s best estimate of claims expected from NHFIC as at balance date. FHLDS is an Australian Government initiative launched on 1 January 2020, administered by NHFIC. Under the Scheme, NHFIC guarantees up to 15% of new loans to eligible first home buyers that meet the criteria, capped at 10,000 loans annually up until 2024/25. The Treasury funds valid claims under the National Housing Finance and Investment Corporation Act 2019 and the National Housing Finance and Investment Corporation Investment Mandate Direction 2018.

Each guarantee is issued and tracked by NHFIC, with the lenders entering the data in line with the requirements under the Scheme, into a NHFIC database. This include the purchase price, location/postcode, maturity date and the portion of the 15% being guaranteed. These data points are multiplied by a determined default rate, a determined capital growth (house price) rate and discounted by Commonwealth Treasury Bonds rates with a comparative duration. The determined default rate has been established using a combination of default data from Lenders Mortgage Insurers (LMI) and the banking industry. The determined capital growth rate has been calculated using the market data according to the location and type of property and factoring-in the consumer price index (CPI) over the forward years.

As at 30 June 2020, 9,984 places were used with 6,814 guarantee certificates issued for loans which were settled or pending settlement. 3,169 places were reserved and pending a property purchase or approvals, with 1 place released without guarantee.

6. Funding

This section identifies the Treasury funding structure.

6.1. Appropriations

Note 6.1A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriations for 2020

Appropriation Act

PGPA Act

Total appropriation

Appropriation applied in 2020 (current and prior years)

Annual Appropriation

AFM

Section 74 Receipts

Section 75 Transfers

Variance1

$'000

$'000

$'000

$'000

$'000

$'000

$'000

DEPARTMENTAL

Ordinary annual services

210,135

-

23,877

-

234,012

(211,316)

22,696

Capital Budget2

10,160

-

-

-

10,160

(10,160)

-

Other services

Equity

1,456

-

-

-

1,456

(1,234)

222

Total departmental

221,751

-

23,877

-

245,628

(222,710)

22,918

ADMINISTERED

Ordinary annual services

Administered items

108,399

-

-

14,150

122,549

(113,906)

8,643

Other services

Administered assets and

liabilities

165,000

-

-

-

165,000

(165,000)

-

Total administered

273,399

-

-

14,150

287,549

(278,906)

8,643

1. The variance in Ordinary annual services is largely driven by the timing of cash payments.

2. Departmental and Administered Capital Budgets are appropriated through Appropriations Acts (No.1 and No.3). They form part of the ordinary annual services and are not separately identified in the Appropriation Acts.

Annual Appropriations 2019

Appropriation Act

PGPA Act

Appropriation applied in 2019 (current and prior years)

Annual Appropriation

AFM

Section 74

Section 75

Total appropriation

Variance

$'000

$'000

$'000

$'000

$'000

$'000

$'000

DEPARTMENTAL

Ordinary annual services

185,518

-

25,019

-

210,537

(208,669)

1,868

Capital Budget

8,404

-

-

-

8,404

(8,404)

-

Other services

Equity

728

-

-

-

728

(4,761)

(4,033)

Total departmental

194,650

-

25,019

-

219,669

(221,834)

(2,165)

ADMINISTERED

Ordinary annual services

Administered items

81,996

-

-

-

81,996

(74,504)

7,492

Other services

Administered assets and

liabilities

359,850

-

-

-

359,850

(315,000)

44,850

Total administered

441,846

-

-

-

441,846

(389,504)

52,342

Note 6.1B: Unspent Annual Appropriations ('Recoverable GST exclusive')

Authority

2020

2019

$'000

$'000

Departmental

Appropriation Act (No. 1) 2018-19

-

56,379

Appropriation Act (No. 4) 2018-19 - Equity

-

708

Supply Act (No. 1) 2019-20

-

-

Supply Act (No. 1) 2019-20 - DCB

-

-

Supply Act (No. 2) 2019-20 - Equity

-

-

Appropriation Act (No. 1) 2019-201

56,923

-

Appropriation Act (No. 1) 2019-20 - DCB

-

-

Appropriation Act (No. 2) 2019-20 - Equity

222

-

Appropriation Act (No. 3) 2019-20

16,462

-

Total departmental

73,607

57,087

Authority

2020

2019

$'000

$'000

Administered

Appropriation Act (No. 1) 2016-172

-

11,581

Appropriation Act (No. 2) 2016-172

-

35,000

Supply Act (No.1) 2016-172

-

1,258

Supply Act (No.2) 2016-172

-

25,000

Appropriation Act (No. 1) 2017-182

7

7

Appropriation Act (No. 2) 2017-182

60,000

60,000

Appropriation Act (No. 3) 2017-182

-

2,852

Appropriation Act (No. 1) 2018-19

-

8

Appropriation Act (No. 2) 2018-19

44,850

44,850

Appropriation Act (No. 3) 2018-19

131

7,484

Supply Act (No.1) 2019-20

-

-

Supply Act (No.2) 2019-20

-

-

Appropriation Act (No. 1) 2019-20

7,939

-

Appropriation Act (No. 2) 2019-20

-

-

Appropriation Act (No. 3) 2019-20

5,682

-

Appropriation (Coronavirus Economic Response Package) Act (No. 1) 2019-2020 - Operating

5,030

-

Total administered

123,639

188,040

1. Cash held amounts (2020: $0.651 million, 2019: $2.772 million) are included in Appropriation Act (No.1) for the relevant year.


2. 2017-18 Appropriation Acts have been repealed on 1 July 2020. 2016-17 Appropriations have been repealed on 1 July 2019.

Note 6.1C: Special Appropriations ('Recoverable GST exclusive')

The following table lists current special appropriations contained in legislation that the Treasury is responsible for administering.

Authority

Appropriation applied

2020

2019

$'000

$'000

Asian Development Bank (Additional Subscription) Act 1972, s7

-

-

Asian Development Bank (Additional Subscription) Act 1977, s7

-

-

Asian Development Bank (Additional Subscription) Act 1983, s6

-

-

Asian Development Bank (Additional Subscription) Act 1995, s6

-

-

Asian Development Bank (Additional Subscription) Act 2009, s6

(25,467)

(24,765)

Asian Development Bank Act 1966, s4

-

-

Asian Infrastructure Investment Bank Act 2015, s7

(215,376)

(200,870)

Australian Business Growth Fund (Coronavirus Economic Response Package) Act 2020, s18

-

-

Banking Act 1959, s69(8)

-

-

Commonwealth Places (Mirror Taxes) Act 1998, s23(4)

(593,240)

(607,237)

European Bank for Reconstruction and Development Act 1990, s4

-

-

Federal Financial Relations Act 2009, s22

(93,086,036)

(90,462,218)

Financial Agreements (Commonwealth Liability) Act 1932, s4(3)

-

-

Guarantee of State and Territory Borrowing Appropriation Act 2009, s5

-

-

Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Act 2020, s6

-

-

Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008, s5

-

-

International Bank for Reconstruction and Development (General Capital Increase) Act 1989, s6

-

-

International Bank for Reconstruction and Development (Share Increase) Act 1988, s5(1)

-

-

International Finance Corporation Act 1955

-

-

International Financial Institutions (Share Increase) Act 1982, s7(1)

-

-

International Financial Institutions (Share Increase) Act 1986, s7(1)

-

-

International Monetary Agreements Act 1947, s5a(6)

-

-

International Monetary Agreements Act 1947, s7(3)

(320,000)

-

International Monetary Agreements Act 1947, s7(4)

-

-

International Monetary Agreements Act 1947, s8

(48,204)

(61,823)

International Monetary Agreements Act 1947, s8A

-

-

International Monetary Agreements Act 1947, s8B(2)

-

-

International Monetary Agreements Act 1947, s8C(3)

-

-

International Monetary Agreements Act 1947, s8CAA(2)

-

-

International Monetary Agreements Act 1947, s8CA(4)

-

-

International Monetary Agreements Act 1947, s9

-

-

International Monetary Agreements Act 1960, s4

-

-

International Monetary Agreements Act 1974, s6

-

-

Medicare Guarantee Act 2017, s18

(37,961,055)

(36,233,451)

Multilateral Investment Guarantee Agency Act 1997, S4

-

-

National Housing Finance and Investment Corporation Act 2018, s47A

(311,860)

(15,323)

Papua New Guinea Loans Guarantee Act 1975, s4

-

-

Public Governance, Performance and Accountability Act 2013, s77

(14)

-

State Grants Act 1927, s7

-

-

Superannuation Industry (Supervision) Act 1993, s231(4)

-

-

Terrorism Insurance Act 2003, s37, s42(3)

-

-

Total

(132,561,252)

(127,605,687)

Note 6.1D: Disclosure by agent in relation to Annual and Special Appropriations ('Recoverable GST exclusive')

Department of Education

Department of Agriculture

and Training

and Water Resources

Payments to the States and Territories:

Payments to the States and Territories:

education services

Water for the Environment Special Account

2020

$'000

$'000

Total receipts

23,739,808

5,172

Total payments

23,739,808

5,172

Department of Education

Department of Agriculture

and Training

and Water Resources

Payments to the States and Territories:

Payments to the States and Territories:

education services

Water for the Environment Special Account

2019

$'000

$'000

Total receipts

20,963,520

815

Total payments

20,963,520

815

Total receipts and Total payments are made through the Treasury on behalf of other Commonwealth entities to State and Territory Treasuries under the COAG Arrangements.

6.2. Special Accounts

Note 6.2A: Special Accounts ('Recoverable GST exclusive')

NHFIC Special Account1

Medicare Guarantee Fund (Treasury) Special Account2

Fuel Indexation Special Account3

COAG Reform Fund Special Account4

Services for Other Entities and Trust Money Special Account5

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Balance brought forward from previous period

239,677

-

-

-

-

-

-

-

-

-

Increases

Appropriation for reporting period

310,000

105,000

37,961,055

36,233,451

730,000

557,000

8,647,666

10,161,299

-

-

Other receipts

212,000

150,000

-

-

-

-

2,322,278

2,816,418

-

1,762

Total increases

522,000

255,000

37,961,055

36,233,451

730,000

557,000

10,969,944

12,977,717

-

1,762

Available for payments

761,677

255,000

37,961,055

36,233,451

730,000

557,000

10,969,944

12,977,717

-

1,762

Decreases

Administered

Payments made to States and Territories

-

-

-

-

-

-

(10,969,944)

(12,977,717)

-

-

Payments made to other entities

(311,860)

(15,323)

-

-

-

-

-

-

-

(1,762)

Transfers made to Medicare Guarantee Fund (Health) Special Account

-

-

(37,961,055)

(36,233,451)

-

-

-

-

-

-

Transfer made to COAG Reform Fund Special Account

-

-

-

-

(730,000)

(557,000)

-

-

-

-

Total administered

(311,860)

(15,323)

(37,961,055)

(36,233,451)

(730,000)

(557,000)

(10,969,944)

(12,977,717)

-

(1,762)

Total decreases

(311,860)

(15,323)

(37,961,055)

(36,233,451)

(730,000)

(557,000)

(10,969,944)

(12,977,717)

-

(1,762)

Total balance carried to the next period

449,817

239,677

-

-

-

-

-

-

-

-

Balance represented by

Cash held in Official Public Account

449,817

239,677

-

-

-

-

-

-

-

-

Total balance carried to the next period

449,817

239,677

-

-

-

-

-

-

-

-

1. Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing instrument: National Housing Finance and Investment Corporation Act 2018, section 47.A

Purpose: To secure funding for the establishment and operation of NHFIC’s Affordable Housing Bond Aggregator (AHBA), which is to improve housing outcomes by providing cheaper and longer-term secured loan finance for community housing providers. NHFIC can access this funding through submitting an Utilisation Request to gain access to the funding at the Commonwealth cost of borrowing rate (up to the annual limit as outlined below).

The Commonwealth must credit the Account amounts equal to the following:

(a) $105 million, to be credited on the day this section commences;

(b) $310 million, to be credited on 1 July 2019;

(c) $270 million, to be credited on 1 July 2020;

(d) $165 million, to be credited on 1 July 2021; and

each amount paid to the Commonwealth by the NHFIC (principal), on or after the day this section commences, that:

(i) is a repayment of money debited from the Account, or of other money lent by the Commonwealth to the NHFIC; and

(ii) is paid in accordance with the Investment Mandate.

Any principal repayment to the Commonwealth through this Account, may be “recycled” and the amount re-issued. Interest is used to cover the Commonwealth’s cost of borrowing and cannot be “recycled’.

2. Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing instrument: Medicare Guarantee Act 2017, section 6.

Purpose: 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.

3. Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing instrument: Fuel Indexation (Road Funding) Special Account Act 2015, subsection 8(1).

Purpose: To ensure that amounts equal to the net revenue from indexation on customs and excise duties on fuel are transferred to the COAG Reform Fund in order to provide funding to the States and Territories for expenditure in relation to Australian road infrastructure investment.

4. Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing instrument: COAG Reform Fund Act 2008, section 5.

Purpose: For the making of grants of financial assistance to the States and Territories.

Note: The Treasury makes payments to the States and Territories from the COAG Reform Fund special account based on information provided by other Government departments that have policy and program implementation responsibility.

5. Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing instrument: Establishment of SOTEM Special Account — Treasury Determination 2012/09.

Purpose: To disburse amounts held on trust for the benefit of a person other than the Commonwealth or in connection with services performed on or behalf of other governments and bodies.

Note: Receipt relates to funding received and held on trust for the Global Infrastructure Hub.

Financial System Stability Special Account (Administered)

The Treasury’s ‘Financial System Stability’ special account established under section 70E of the Banking Act 1959 for the making of payments authorised under specified sections of the Banking Act 1959, the Insurance Act 1973 and the Life Insurance Act 1995 and to meet expenses of administering the special account. For the years ended 30 June 2019 and 30 June 2020 this special account had nil balances and no transactions were credited or debited to the account.

7. Managing uncertainties

This section analyses how the Treasury manages financial risks within its operating environment.

7.1 Departmental Contingent Assets and Liabilities

Quantifiable Contingencies

Contingent liabilities are nil in 2020 (2019: $105,026). There were no quantifiable contingent assets in 2020 (2019: nil).

Contingent liabilities and contingent assets
Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when the probability of settlement is greater than remote.

7.2. Administered Contingent Assets and Liabilities

Quantifiable administered contingencies

Quantifiable administered contingencies that are not remote are disclosed in the schedule of administered items as quantifiable administered contingencies.

Commitments under expanded IMF New Arrangements to Borrow (NAB)

Australia has made a line of credit available to the International Monetary Fund (IMF) under its New Arrangements to Borrow (NAB) since 1998. This is a contingent loan to help ensure that the IMF has the resources available to maintain stability and support recovery in the global economy. The value of Australia’s NAB credit arrangement stands at approximately 2.22 billion Special Drawing Rights (SDR, the IMF’s unit of account) (approximately A$4.46 billion at 30 June 2020). In November 2017, the NAB was renewed for an additional five year period until November 2022.

The Fund does not publish annual estimates of the amount it expects to call under the NAB facility. However, to be drawn upon, the NAB needs to be activated by the IMF Executive Board. The last NAB activation period was terminated in February 2016.The IMF did not call on Australia’s NAB facility in 2019-20 and, as at the completion of these statements, has not done so in the current year.

IMF Bilateral Borrowing Arrangement (BBA)

In addition to the NAB credit line as part of a broad international effort to increase the resources available to the IMF, Australia has made available an SDR4.61billion (approximately A$9.27 billion at 30 June 2020) contingent bilateral loan to the IMF. The contingent loan is on terms consistent with separate bilateral loan and note purchase agreements between the IMF and all contributing countries. It will be drawn upon by the IMF only if needed to supplement the IMF’s quota and NAB resources and any loans would be repaid in full with interest. Australia’s three-year bilateral borrowing arrangement with the IMF was created in 2016 and agreed in 2019 to be extended by a year to conclude on 31 December 2020.

International financial institutions — uncalled capital subscriptions

The Australian Government has held an uncalled capital subscription to the International Bank for Reconstruction and Development (IBRD) since 1947. Australia’s uncalled capital subscription to the IBRD totals US$3.6 billion (estimated value A$5.2 billion as at 30 June 2020).

The Australian Government has also held an uncalled capital subscription to the European Bank for Reconstruction and Development (EBRD) since 1991. Australia’s uncalled capital subscription to the EBRD totals EUR237.5 million (estimated value A$388.7 million as at 30 June 2020).

The Australian Government has further held an uncalled capital subscription to the Asian Development Bank (ADB) since 1966. Australia’s uncalled capital subscription to the ADB totals US$7.0 billion (estimated value A$10.3 billion as at 30 June 2020).

The Australian Government has further held an uncalled capital subscription to the Multilateral Investment Guarantee Agency of US$26.5 million (estimated value A$38.5 million as at 30 June 2020).

The Asian Infrastructure Investment Bank (AIIB) was established on 25 December 2015. The Australian Government has subscribed to shares in the AIIB, which includes an uncalled capital subscription. Australia’s uncalled capital subscription to the AIIB totals US$2.9 billion (estimated value A$4.3 billion as at 30 June 2020).

None of these international financial institutions have ever drawn on Australia’s uncalled capital subscriptions.

Loan to New South Wales for James Hardie Asbestos Injuries Compensation Fund

The Commonwealth has agreed to lend up to $160 million to the State Government of New South Wales (NSW) to support the loan facility to top up the James Hardie Asbestos Injuries Compensation Fund. Draw down on the loan is subject to the James Hardie Asbestos Injuries Compensation Fund requiring funds to meet its liabilities and is contingent on NSW meeting a number of conditions under the loan agreement with the Australian Government. The timing and amounts that may be drawn down by NSW cannot be determined accurately. No new loans were provided to the State Government of NSW in respect of the loan facility in 2019-20 (2018-19: nil).

Unquantifiable administered contingencies

Contingent Liabilities

Housing Loans Insurance Corporation (HLIC)

The Australian Government sold HLIC on 12 December 1997 and has assumed all residual contingencies. The contingent liability relates to the HLIC’s contracts of mortgage insurance to the time of sale. Any potential economic outflow cannot be determined accurately given the complexity of any estimation calculation of the economic outflow would be reliant upon numerous unquantifiable variables. Only at the time of the event, can the amount of economic outflow be determined accurately.

Terrorism insurance — Australian Reinsurance Pool Corporation

The Terrorism Insurance Act 2003 established a scheme for terrorism insurance covering damage to commercial property, including associated business interruption and public liability. The Australian Reinsurance Pool Corporation (ARPC) uses reinsurance premiums paid by insurers to meet its administrative expenses, to maintain a pool of funds and to purchase reinsurance to help meet future claims. The Commonwealth guarantees to pay any liabilities of the ARPC, but the Treasurer must declare a reduced payout rate to insured entities if the Government’s liability would otherwise exceed $10 billion.

Guarantee by Commonwealth — NHFIC

NHFIC was established under the National Housing Finance and Investment Corporation Act 2018 to perform the functions under Section 8 of the Act. NHFIC’s operations are funded by the Commonwealth (refer to Notes 4.1.C, 5.1A and 5.1C) and by raising finance through the issuance of bonds into the commercial market. As NHFIC is in the early stages of development, the Commonwealth Government has provided a guarantee capped at $2 billion to further encourage the commercial market to invest in NHFIC-issued bonds. The Treasurer may, by legislative instrument, set a date that the guarantee is effective to, but not earlier than, 1 July 2023. Under the National Housing Finance and Investment Corporation Investment Mandate Direction 2018, the Treasurer and Minister for Finance may also adjust the cap through a legislative act.

Loans to NHFIC’s Affordable Housing Bond Aggregator (AHBA)

The Commonwealth has agreed to make available amounts incrementally over the next 5 years of up to $1 billion to NHFIC’s AHBA via a loan, as outlined in Note 6.2 Special accounts. Under the AHBA Loan Agreement with the Treasury, NHFIC can access the funds by completing a Utilisation Request and providing this to Treasury. Interest is to be charged on each individual loan at the Commonwealth’s cost of borrowing.

The timing and amounts of potential drawdowns by NHFIC cannot be determined accurately. An additional complexity is the ‘recycling’ of funds repaid or prepaid by NHFIC, which can be re-borrowed by NHFIC.

The closing balance of AHBA loan drawdown is disclosed in Note 5.1B and any unused amount available at 30 June 2020 has been recorded in Note 5.1A Cash and cash equivalents and Note 6.2 Special accounts.

Disaster Recovery Funding Arrangements (DRFA) and Natural Disaster Relief and Recovery (NDRRA)

The Australian Government provides funding to States and Territories through the DRFA and NDRRA to assist with natural disaster relief and recovery costs. A State or Territory may claim NDRRA funding if a natural disaster occurs and State or Territory relief and recovery expenditure for that event meets the requirements set out in the respective DRFA and NDRRA Determinations. This combined liability represents the Treasury’s best estimate of payments expected to be made to States and Territories as at balance date. In the event where a natural disaster has occurred but the associated costs cannot be quantified reliably, the event is disclosed as a contingent liability. For a list of natural disasters that are included in the DRFA and NDRRA contingent liability, refer to Note 5.4 Administered – Provisions.

Indemnities for specialised external advisers during the COVID-19 pandemic

The Government has provided indemnities for certain external specialised advisers engaged to provide advice on emerging markets issues related to COVID-19. Indemnities were provided to mitigate personal risk and provide coverage for costs related to any legal proceedings that may arise in relation to the provision of that advice.

The indemnities apply for the period of engagement as advisers and for claims that are notified within 12 years after cessation of the advisers’ engagement. Until the indemnity agreements are varied or expire, they will remain as contingent and unquantifiable liabilities.

Contingent Liabilities

Small & Medium Enterprises (SME) Guarantee Scheme (SMEGS)

The Australian Government provides a Guarantee to eligible lenders to enhance lenders’ willingness and ability to provide credit, supporting many otherwise viable SMEs to access additional funding to continue operating through the outbreak of COVID-19. As the impact of COVID-19 evolves, so does the economic response:

Phase 1:

Eligible lenders are offering SMEs, including sole traders and not-for-profits, guaranteed loans of up to $250,000 from 23 March 2020 to 30 September 2020 on the following terms:

  • SME turnover must be below $50 million.
  • Loans will be for up to three years, with an initial six month repayment holiday.
  • Unsecured finance.

Phase 2:

From 1 October 2020 until 30 June 2021, eligible lenders will be able to offer loans on the same terms as the Phase 1 Scheme with the following enhancements:

  • Loans can be used for a broader range of business purposes, including to support investment in a period of economic recovery.
  • The maximum loan size will be increased to $1 million per borrower.
  • Loans can be up to 5 years and the option of a six month repayment holiday will be at the discretion of the lender.
  • A loan can be either unsecured or secured (excluding commercial or residential property).
  • $90 million of the existing guarantee cap has been re-allocated to the Showstarters Loans Scheme - part of the COVID-19 Creative Economy Support package.

Phase 2 impacts have not been implemented or have any impact upon the 2019-20 financial statements. The SMEGS is still capped at $20 billion overall representing 50% of the eligible loans cap of $40 billion, noting the Showstarters Loan may reduce the cap by $90 million, once determined. Refer to Note 5.4 Other provisions.

Contingent Assets

HIH Claims Support Scheme (HCSS)

As an insured creditor in the liquidation of the HIH Group, the Australian Government is entitled to payments arising from the HCSS’s position in the Proof of Debt of respective HIH companies. The Treasury has received payments from the HIH Estate during 2019-20; however the timing and amount of future payments are unknown and will depend on the outcome of the estimation process and the completion of the liquidation of the HIH Group.

Burden sharing in the International Monetary Fund remuneration

Since 1986, the IMF has used its burden sharing mechanism to make up for the loss of income from unpaid charges on the loans of debtor members. Under burden sharing, temporary financing in equal amounts is obtained from debtor and creditor members by increasing the rate of charge and reducing the rate of remuneration, respectively, to (1) cover shortfalls in the IMF’s regular income from unpaid charges (“deferred charges”) and (2) accumulate precautionary balances against possible credit default in a contingent account, the Special Contingent Account (SCA-1). SCA-1 accumulations were suspended effective November 1, 2006.

Due to the inherent uncertainty around shortfalls in IMF income, burden sharing contributions represent a contingent asset that cannot be reliably measured and as such is recorded as an unquantifiable contingent asset.

7.3 Financial Instruments

2020

2019

$'000

$'000

Note 7.3A: Categories of Financial Instruments

Financial assets at amortised cost

Cash and cash equivalents

651

2,772

Trade and other receivables - Good and services receivables

4,980

2,715

Trade and other receivables - Other receivables

820

424

Total financial assets at amortised cost

6,451

5,911

Financial Liabilities

Financial liabilities measured at amortised cost

Suppliers

10,775

8,498

Other payables

2,920

3,511

Total financial liabilities measured at amortised cost

13,695

12,009

Total financial liabilities

13,695

12,009

Accounting Policy

Financial assets

The Treasury classifies its financial assets in the following categories:

a) financial assets at fair value through profit or loss;

b) financial assets at fair value through other comprehensive income; and

c) financial assets measured at amortised cost.

The classification depends on both the Treasury's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the Treasury becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

1. the financial asset is held in order to collect the contractual cash flows; and

2. the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

Effective Interest Method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Financial Assets at Fair Value Through Other Comprehensive Income (FVOCI)

Financial assets classified as at fair value through other comprehensive income are held with the objective of both collecting contractual cash flows and selling the financial assets and the cash flows meet the SPPI test.

Any gains or losses as a result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

Financial Assets at Fair Value Through Profit or Loss (FVTPL)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets either doesn't meet the criteria of financial assets held at amortised cost or at FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

Impairment of Financial Assets

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 where risk has significantly increased, or an amount equal to 12-month expected credit losses if risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Fair Value Through Profit or Loss

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Financial Liabilities at Amortised Cost

Financial liabilities at amortised cost, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

7.4 Administered - Financial Instruments

2020

2019

$'000

$'000

Note 7.4A: Categories of Financial Instruments

Financial assets at amortised cost

Cash and cash equivalents

449,817

239,677

IMF related monies owing

320

2,447

IMF new arrangements to borrow loan

213,060

311,738

Loans to States and Territories

47,855

47,855

Loans to NHFIC

115,183

15,323

Dividends receivable

2,563,000

1,685,000

Accrued interest - Loans to NHFIC

53

38

GST Revenue allocations and COAG refundable

5,174,947

470,268

Other receivables

190

2

Total assets at amortised cost

8,564,425

2,772,348

Financial assets at fair value through other comprehensive income

International financial institutions

2,670,472

1,961,467

Australian Government entities

30,426,751

28,964,321

Commonwealth companies

1,436

1,174

IMF Quota

13,213,510

13,027,552

Total assets at fair value through other comprehensive income

46,312,169

43,954,514

Financial assets at fair value through profit or loss

Guarantee of State and Territory Borrowing

contractual fee receivable

3,658

6,169

Total assets at fair value through profit or loss

3,658

6,169

Total financial assets

54,880,252

46,733,031

Financial Liabilities

Financial liabilities measured at amortised cost:

Promissory notes

10,051,022

9,988,269

Grant liabilities

126,753

156,043

IMF SDR allocation liability

6,198,575

6,111,340

Other payables

8,685

11,232

IMF Maintenance of Value

648,787

406,863

Total financial liabilities measured at amortised cost

17,033,822

16,673,747

Financial liabilities measured at fair value through profit or loss:

Guarantee of State and Territory Borrowing

contractual guarantee service obligation

3,658

6,169

Total financial liabilities measured at fair value through profit or loss

3,658

6,169

Total financial liabilities

17,037,480

16,679,916

2020

2019

$'000

$'000

Note 7.4B: Net Gains and Losses on Financial Assets

Financial assets at amortised cost

Interest revenue

5,643

6,306

Exchange gains/(loss)

8,112

14,754

Net gains/(losses) on financial assets at amortised cost

13,755

21,060

Financial assets at fair value through other comprehensive income

Interest revenue

9,954

10,666

Exchange gains/(loss)

179,422

622,269

Net gains/(losses) on financial assets at fair value through other comprehensive income

189,376

632,935

Financial assets at fair value through profit and loss

Guarantee of State and Territory Borrowing fee

2,462

6,011

Net gains/(losses) on financial assets at fair value through other comprehensive income

2,462

6,011

Net gains/(losses) on financial assets

205,593

660,006

2020

2019

$'000

$'000

Note 7.4C: Net Gains and Losses on Financial Liabilities

Financial liabilities measured at amortised cost

IMF Charges

37,577

64,000

Exchange gains/(loss)

(736,022)

(657,775)

Net gains/(losses) on financial liabilities measured

(698,445)

(593,775)

at amortised cost

Net gains/(losses) on financial liabilities

(698,445)

(593,775)

Note 7.4D: Credit risk

The maximum exposure to credit risk of the Treasury’s administered financial assets is the carrying

amount of ‘loans and receivables’ (2020: $8.1 billion and 2019: $2.5 billion) and the carrying amount

of ‘equity accounted instruments’ (2020: $47.1 billion and 2019: $44.0 billion – ‘available for sale’ financial assets).

The Treasury has performed assessments using historical data, financial statement data (audited and unaudited) and forward-looking data, including credit ratings, for transactions with other entities within the Commonwealth Government, other State and Territories governments and international financial institutions including the IMF. Based on the assessments, there is no indication that a significant increase in expected credit loss over next 12 months, or the lifetime of these transactions, will occur.

International financial institutions (including the IMF), NHFIC and other Commonwealth entities that the Treasury holds its financial assets with, have a minimum AAA credit rating. The contractual fee receivable from the Guarantee of State and Territory Borrowing relates to State and Territory governments. These entities hold a minimum AA credit rating. Therefore, the Treasury does not consider any of its financial assets to be at risk of default. Further detail is provided in the Accounting Policy for Administered Financial Instruments.

Note 7.4E: Liquidity risk

The Treasury’s administered financial liabilities are promissory notes, grant liabilities and the IMF SDR allocation. The contractual guarantee service obligation arising from the guarantee scheme for State and Territory borrowing is not included as there is no liquidity risk associated with this item. It is contingent on the value of the associated contractual fee receivable. The exposure to liquidity risk is based on the notion that the Treasury will encounter difficulty in meeting its obligations associated with administered financial liabilities. This is highly unlikely due to appropriation funding through special appropriations and non‑lapsing capital appropriations as well as internal policies and procedures put in place to ensure there are appropriate resources for the Treasury to meet its financial obligations.
The following tables illustrate the maturities for non-derivative financial liabilities:

Maturities for financial liabilities in 2020

On

Within 1

1 to 2

2 to 5

> 5

demand

year

years

years

years

Total

$'000

$'000

$'000

$'000

$'000

$'000

Promissory notes

-

-

-

-

10,051,022

10,051,022

Grant liabilities

-

126,753

-

-

-

126,753

IMF SDR allocation liabilities

-

-

-

-

6,198,575

6,198,575

Other payables

649,480

-

-

-

-

649,480

Total

649,480

126,753

-

-

16,249,597

17,025,830

Maturities for financial liabilities in 2019

On

Within 1

1 to 2

2 to 5

> 5

demand

year

years

years

years

Total

$'000

$'000

$'000

$'000

$'000

$'000

Promissory notes

-

25,468

-

-

9,962,801

9,988,269

Grant liabilities

-

156,043

-

-

-

156,043

IMF SDR allocation liabilities

-

-

-

-

6,111,340

6,111,340

Other payables

418,095

-

-

-

-

418,095

Total

418,095

181,511

-

-

16,074,141

16,673,747

7.4F: Market risk

Foreign currency risk refers to the risk that the fair value or future cash flows of a financial instrument

will fluctuate due to changes in foreign exchange rates. The Treasury is exposed to foreign exchange

currency risk primarily through undertaking certain transactions denominated in foreign currency.

The Treasury is exposed to foreign currency denominated in USD, EUR and SDR.

The following table details the effect on profit and equity as at 30 June 2020 from a 8.4 per cent

(30 June 2019 from a 8.7 per cent) favourable/unfavourable change in AUD against the Treasury with all

other variables held constant. The change in the risk variable has been determined by reference to standard parameters provided by the Department of Finance.

Sensitivity analysis of the risk that the entity is exposed to for 2020

Effect on

Risk variable

Change in risk

Net cost of services

Net assets

variable

2020

2020

Risk Variable

%

$'000

$'000

IFI Investments

Exchange rate

8.4

(207,164)

(207,164)

IFI investments

Exchange rate

(8.4)

245,209

245,209

IMF Remuneration Receivable

Exchange rate

8.4

(25)

(25)

IMF Remuneration Receivable

Exchange rate

(8.4)

29

29

IMF new arrangements to borrow loan

Exchange rate

8.4

(16,528)

(16,528)

IMF new arrangements to borrow loan

Exchange rate

(8.4)

19,564

19,564

IMF Quota

Exchange rate

8.4

(1,025,050)

(1,025,050)

IMF Quota

Exchange rate

(8.4)

1,213,294

1,213,294

Promissory notes

Exchange rate

8.4

(5,020)

(5,020)

Promissory notes

Exchange rate

(8.4)

5,941

5,941

IMF SDR allocation liability

Exchange rate

8.4

(480,860)

(480,860)

IMF SDR allocation liability

Exchange rate

(8.4)

569,167

569,167

IMF Charges Payable

Exchange rate

8.4

(54)

(54)

IMF Charges Payable

Exchange rate

(8.4)

64

64

Sensitivity analysis of the risk that the entity is exposed to for 2019

Effect on

Risk variable

Change in Risk

Net cost of services

Net assets

variable

2019

2019

Risk Variable

%

$'000

$'000

IFI Investments

Exchange rate

8.7

(156,990)

(156,990)

IFI investments

Exchange rate

(8.7)

186,909

186,909

IMF Remuneration Receivable

Exchange rate

8.7

(196)

(196)

IMF Remuneration Receivable

Exchange rate

(8.7)

233

233

IMF new arrangements to borrow loan

Exchange rate

8.7

(24,951)

(24,951)

IMF new arrangements to borrow loan

Exchange rate

(8.7)

29,706

29,706

IMF Quota

Exchange rate

8.7

(1,042,684)

(1,042,684)

IMF Quota

Exchange rate

(8.7)

1,241,399

1,241,399

Promissory notes

Exchange rate

8.7

(5,068)

(5,068)

Promissory notes

Exchange rate

(8.7)

6,034

6,034

IMF SDR allocation liability

Exchange rate

8.7

(489,132)

(489,132)

IMF SDR allocation liability

Exchange rate

(8.7)

582,351

582,351

IMF Charges Payable

Exchange rate

8.7

(904)

(904)

IMF Charges Payable

Exchange rate

(8.7)

1,076

1,076

Accounting Policy

Administered financial instruments

AASB 9 identifies three classifications for financial instruments - those measured at (a) amortised cost; (b) fair value through other comprehensive income (FVOCI); and (c) fair value through profit or loss (FVPL).

A financial asset shall be classified as at amortised cost if the financial asset is held within a business model to collect contractual cash flows and that the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

With the exception of dividends receivable, which is measured at fair value, financial assets at amortised cost are initially recognised at fair value and subsequently measured using the effective interest method. Financial assets at amortised cost include:

  • IMF-related monies receivable;
  • Loans to the IMF under the new arrangements to borrow;
  • Loans to NHFIC;
  • Loans to States and Territories; and
  • Dividends receivable.

A financial asset shall be classified as at FVOCI when the financial asset is held within a business model to collect contractual cash flows and to sell the financial asset. In addition, the Department of Finance has mandated that all equity instruments must be recorded as FVOCI.

Financial assets recorded at FVOCI are initially measured at cost and subsequently measured at fair value and include:

  • Investments in development banks;
  • The IMF quota; and
  • Investments in Government entities.

Financial liabilities shall be classified as at amortised cost except for financial guarantee contracts.

Financial liabilities at amortised cost are initially measured at fair value and subsequently measured using the effective interest rate method. Financial liabilities at amortised cost include:

  • SDR allocation;
  • Promissory notes; and
  • IMF related monies payable.

The contractual terms of promissory notes are non-interest bearing making the effective interest rate nil. Therefore, the measurement would be the initial value less any repayments plus or minus movements in exchange rates as a result of translation on the balance date.

The Treasury’s administered financial guarantee contracts relate to components of the Guarantee of State and Territory Borrowings and are classified as financial liabilities at fair value through profit or loss. 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.

Recognition of these amounts only relates to fee revenue aspects of the financial guarantee contracts. These amounts do not reflect any expected liability under the Guarantee Scheme itself as these are considered remote and unquantifiable. Administered contingent liabilities and assets are disclosed at Note 7.2 Administered Contingent Assets and Liabilities.

7.5. Fair Value Measurement

Note 7.5A: Fair value measurement

Fair value measurements at the end of the reporting period

2020

2019

$'000

$'000

Non-financial assets1

Property, plant and equipment - AUC2

2,404

3,304

Property, plant and equipment2

8,077

8,154

Library2

939

939

Buildings - AUC2

920

2,511

Buildings2

18,290

14,202

Total non-financial assets

30,630

29,110

1. The Treasury’s assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all non-financial assets is considered their highest and best use.

2. No non-financial assets were measured at fair value on a non-recurring basis as at 30 June 2020.

Accounting Policy

The Treasury appointed Jones Lang LaSalle (JLL) to conduct a materiality review of the carrying amounts for all tangible property, plant and equipment assets as at 30 June 2020. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from fair value. Comprehensive valuations are generally carried-out on a three year cycle, with the previous valuation conducted as at 30 June 2017. A comprehensive valuation in 2020 was deferred, due to the restrictions associated with the outbreak of the Novel Coronavirus (COVID-19). Based on advice provided by JLL, the Treasury is of the view that all tangible property, plant and equipment assets are materially held at fair value at 30 June 2020 in compliance with AASB 13.

Where possible, asset valuations are based upon observable inputs to the extent they are available. Where this information is not available, valuation techniques rely upon unobservable inputs. The methods utilised to determine and substantiate the unobservable inputs are derived and evaluated as follows:

All Asset Classes - Physical Depreciation and Obsolescence

Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the Depreciated Replacement Cost approach. Under the Depreciated Replacement Cost approach the estimated cost to replace the asset is calculated and then adjusted to take into physical depreciation and obsolescence. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration. For all leasehold improvement assets, the consumed economic benefit / asset obsolescence deduction is determined based on the term of the associated lease.

Library - Replacement cost

The value of the library was determined on the basis of the average cost for items within each collection. The replacement cost has considered purchases over recent years and these have been evaluated for reasonableness against current market prices.

The Treasury's policy is to recognise transfers in and out of the fair value hierarchy levels as at the end of the reporting period. There have been no transfers between level 1 and level 2 of the hierarchy during the year.

7.6. Administered - Fair Value Measurement

The following tables provide an analysis of assets and liabilities that are measured at fair value.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Note 7.6A: Fair Value Measurements, Valuation Techniques and Inputs Used

Recurring fair value measurements at the end of the reporting period by hierarchy for assets and liabilities in 2020

Fair value measurements at the end of the reporting period using

2020

2019

Category (Level 1, 2 or 3)

Valuation technique(s) and inputs used1,2

$'000

$'000

Financial assets:

International financial institutions:

2,670,472

1,961,467

3

Value of shares held

Asian Development Bank

617,551

608,860

Asian Infrastructure and Investment Bank

1,075,623

842,093

European Bank for Reconstruction

and Development

102,438

101,442

International Bank for

Reconstruction and Development

340,014

332,742

International Finance Corporation

525,811

67,488

Multilateral Investment Guarantee Agency

9,035

8,842

Australian Government entities:

30,426,751

28,964,321

3

Net assets

Reserve Bank of Australia

29,601,000

28,338,000

Australian Reinsurance Pool Corporation

520,526

461,321

NHFIC

305,225

165,000

Commonwealth Companies:

1,436

1,174

3

Net assets

Financial Adviser Standards and Ethics Authority Ltd

1,436

1,174

Other Investments:

13,213,510

13,027,552

3

Value of quota held

IMF quota

13,213,510

13,027,552

Total financial assets

46,312,169

43,954,514

Total fair value measurements

46,312,169

43,954,514

1. No change in valuation techniques occurred during the period.

2. Significant observable inputs only.

Fair value measurements

The highest and best use of Treasury's investments in Australian Government entities does not differ because the fair value is based on the net asset position of the entity.

The highest and best use of Treasury's investments in International Financial Institutions does not differ because the fair value is based on the value of shares held in the relevant institution.

Note 7.6B: Level 1 and Level 2 transfers for recurring fair value measurements

No assets were transferred between Level 1 and Level 2.

Note 7.6C: Reconciliation for recurring Level 3 fair value measurements

Recurring Level 3 fair value measurements - reconciliation for assets

Financial assets

Investments

Total

2020

2019

2020

2019

$'000

$'000

$'000

$'000

As at 1 July

43,954,514

39,551,532

43,954,514

39,551,532

Opening adjustment for AASB 9

-

2,309

-

2,309

Total gains/(losses) recognised in other comprehensive income

1,462,692

3,574,293

1,462,692

3,574,293

Total gains/(losses) recognised in net cost of services

IMF Quota foreign exchange gain/(loss)

185,958

534,870

185,958

534,870

International Financial Institutions foreign exchange gain/(loss)

(5,154)

90,639

(5,154)

90,639

Restructuring1

-

-

-

-

Share Purchases

-

-

-

-

Increase in investments in the International Financial Institutions

714,159

200,871

714,159

200,871

Sales

-

-

-

-

IMF general review Quota Payments

-

-

-

-

Issues

-

-

-

-

Settlements

-

-

-

Transfers into Level 3

-

-

-

-

Transfers out of Level 3

-

-

-

-

Total as at 30 June

46,312,169

43,954,514

46,312,169

43,954,514

Changes in unrealised gains/(losses) recognised in net cost of services for the year ended 30 June

2,357,655

4,402,982

2,357,655

4,402,982

8. Other information

8.1. Aggregate Assets and Liabilities

2020

2019

$'000

$'000

Note 8.1A: Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

84,043

69,765

More than 12 months

164,184

39,463

Total assets

248,227

109,228

Liabilities expected to be settled in:

No more than 12 months

34,304

23,056

More than 12 months

169,594

45,992

Total liabilities

203,898

69,048

Assets expected to be recovered in:

No more than 12 months

8,191,918

2,400,155

More than 12 months

46,689,731

44,333,167

Total assets

54,881,649

46,733,322

Liabilities expected to be settled in:

No more than 12 months

1,341,930

731,290

More than 12 months

17,682,991

17,344,918

Total liabilities

19,024,921

18,076,208

9. Budgetary Reports and Explanation of Major Variances

9.1. Departmental Budgetary Reports

Statement of Comprehensive Income

for the period ended 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$'000

$'000

$'000

NET COST OF SERVICES

Expenses

Employee benefits

152,138

147,557

4,581

Suppliers

57,411

57,845

(434)

Grants

609

1,958

(1,349)

Depreciation and amortisation

17,188

6,349

10,839

Write-down and impairment of assets

740

-

740

Finance costs

1,664

-

1,664

Act of grace payments

220

-

220

Foreign exchange losses

8

-

8

Total expenses

229,978

213,709

16,269

Own-source income

Own-source revenue

Sale of goods and rendering of services

9,750

11,651

(1,901)

Other revenues

6,016

772

5,244

Total own-source revenue

15,766

12,423

3,343

Gains

Gains

96

4,133

(4,037)

Total gains

96

4,133

(4,037)

Total own-source income

15,862

16,556

(694)

Net cost of services

(214,116)

(197,153)

(16,963)

Revenue from Government

206,298

190,804

15,494

Surplus / (Deficit)

(7,818)

(6,349)

(1,469)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation reserves

-

-

-

Total other comprehensive income

-

-

-

Total comprehensive income/(loss) attributable to the Australian Government

(7,818)

(6,349)

(1,469)

1. The Treasury’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Treasury’s 2019-20 Portfolio Budget Statements (PBS)).

2. Between the actual and original budgeted amounts for 2020. Explanations of major variances (that are greater than +/- 10% of the original budget for a line item and greater than +/- $1 million) are provided below.

Explanations of major variances

Affected line items

Grants expenditure is $1.3 million (69%) less than the original budget due to the reclassification of the International Financial Reporting Standards Foundation annual contribution of $1 million from departmental to administered at MYEFO 2019-20.

Grants

Depreciation and amortisation is $10.8 million (171%) more than the original budget as a result of the implementation of AASB 16, requiring recognition of depreciation on right of use assets, which was not in the original budget.

Depreciation and amortisation

Finance costs primarily relate to the recognition of interest on lease liabilities in accordance with AASB 16, which was not considered when the original budget was set.

Finance costs

Sale of goods and rendering of services is $1.9 million (16%) less than the original budget, primarily driven by the reduction in shared services provided by the Treasury to other agencies.

Sale of goods and rendering of services

Other revenues is $5.2 million (679%) more than the original budget due to the reclassification of services received free of charge from Other Gains to Other Revenue subsequent to the finalisation of the original budget. Services received free of charge were higher than expected as a result of Treasury's use of additional secondments this year compared to the original budget. The remaining total is materially consistent with the original budget estimate.

Other revenues

Other gains is $4.0 million (98%) less than the original budget as a result of the reclassification of services received free of charge from Other Gains to Other Revenue subsequent to the finalisation of the original budget.

Other gains

Statement of Financial Position

as at 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$'000

$'000

$'000

ASSETS

Financial assets

Cash and cash equivalents

651

640

11

Trade and other receivables

80,052

63,385

16,667

Total financial assets

80,703

64,025

16,678

Non-financial assets

Buildings

137,650

16,526

121,124

Plant and equipment

11,447

13,700

(2,253)

Intangibles

13,163

12,575

588

Prepayments

5,264

4,644

620

Total non-financial assets

167,524

47,445

120,079

Total assets

248,227

111,470

136,757

LIABILITIES

Payables

Suppliers

10,775

11,326

(551)

Other payables

2,920

4,709

(1,789)

Total payables

13,695

16,035

(2,340)

Interest bearing liabilities

Leases

122,800

-

122,800

Total interest bearing liabilities

122,800

-

122,800

Provisions

Employee provisions

63,174

48,474

14,700

Provision for restoration

4,229

3,508

721

Total provisions

67,403

51,982

15,421

Total liabilities

203,898

68,017

135,881

Net assets

44,329

43,453

876

EQUITY

Asset revaluation reserve

12,676

12,676

-

Contributed equity

97,890

93,200

4,690

Retained earnings

(66,237)

(62,423)

(3,814)

Total equity

44,329

43,453

876

1. The Treasury’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Treasury’s 2019-20 Portfolio Budget Statements (PBS)).

2. Between the actual and original budgeted amounts for 2020. Explanations of major variances (that are greater than +/- 10% of the original budget for a line item and greater than +/- $1 million) are provided below.

Explanations of major variances

Affected line items

Trade and other receivables is $16.7 million (26%) more the original budget, reflecting timing differences in receipts from customers and revenue receivable from Government relating to measures announced in the 2019-20 Budget.

Trade and other receivables

Buildings was $121.1 million (733%) more than the original budget, driven by the recognition of right of use assets from the adoption of AASB 16 that were not in the original budget.

Buildings

Plant and equipment is $2.3 million (16%) less than the original budget, reflecting more depreciation expense recorded in 2019-20 than estimated.

Plant and equipment

Other payables is $1.8 million (38%) less than the orignal budget, due to the timing of payments to suppliers.

Other payables

Leases is $122.8 million more than the original budget, driven by the recognition of lease liabilities from the adoption of AASB 16 that were not in the original budget.

Leases

Employee provisions is $14.7 million (30%) more than the original budget, explained by an increase in the present value of annual and long service leave balances, reflecting a decrease in the underlying discount rates applied to the long service leave provision since 30 June 2019.

Employee provisions

Statement of Changes in Equity

for the period ended 30 June 2020

Retained earnings

Asset revaluation surplus

Contributed equity/capital

Total equity

Actual

Budget estimate

Actual

Budget estimate

Actual

Budget estimate

Actual

Budget estimate

Original1

Variance2

Original1

Variance2

Original1

Variance2

Original1

Variance2

2020

2020

2020

2020

2020

2020

2020

2020

2020

2020

2020

2020

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Opening balance as at 1 July

(58,770)

(56,074)

(2,696)

12,676

12,676

-

86,274

81,532

4,742

40,180

38,134

2,046

Adjustments to opening balance

351

-

351

-

-

-

-

351

-

351

Comprehensive income

-

-

-

Surplus (Deficit) for the period

(7,818)

(6,349)

(1,469)

-

-

-

-

-

-

(7,818)

(6,349)

(1,469)

Total comprehensive income

(7,818)

(6,349)

(1,469)

-

-

-

-

-

-

(7,818)

(6,349)

(1,469)

Transactions with owners

Contributions by owners

Equity injection appropriation

-

-

-

-

-

-

1,456

1,456

-

1,456

1,456

-

Departmental capital budget appropriation

-

-

-

-

-

-

10,160

10,212

(52)

10,160

10,212

(52)

Total transactions with owners

-

-

-

-

-

-

11,616

11,668

(52)

11,616

11,668

(52)

Closing balance as at 30 June

(66,237)

(62,423)

(3,814)

12,676

12,676

-

97,890

93,200

4,690

44,329

43,453

876

1. The Treasury’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Treasury’s 2019-20 Portfolio Budget Statements (PBS)).

2. Between the actual and original budgeted amounts for 2020. Explanations of major variances (that are greater than +/- 10% of the original budget for a line item and greater than +/- $1 million) are provided below.

Explanations of major variances

Affected line items

Increased deficit of $1.5m (23%) relates directly to the Statement of Comprehensive Income variances

Surplus (Deficit) for the period

Cash Flow Statement

for the period ended 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$'000

$'000

$'000

OPERATING ACTIVITIES

Cash received

Appropriations

214,885

191,483

23,402

Sale of goods and rendering of services

6,783

11,651

(4,868)

GST received

5,690

-

5,690

Other

2,227

772

1,455

Total cash received

229,585

203,906

25,679

Cash used

Employees

141,734

148,236

(6,502)

Suppliers

47,988

53,712

(5,724)

Grants

609

1,958

(1,349)

Section 74 receipts transferred to OPA1

23,877

-

23,877

GST paid

5,659

-

5,659

Interest payments on lease liabilities

1,579

-

1,579

Total cash used

221,446

203,906

17,540

Net cash from/(used by) operating activities

8,139

-

8,139

INVESTING ACTIVITIES

Cash used

Purchase of Buildings

5,974

-

5,974

Purchase of plant and equipment

2,321

11,668

(9,347)

Purchase of intangibles

6,797

-

6,797

Total cash used

15,092

11,668

3,424

Net cash from/(used by) investing activities

(15,092)

(11,668)

(3,424)

FINANCING ACTIVITIES

Cash received

Contributed equity - departmental capital budget

10,160

10,212

(52)

Contributed equity - equity injections

1,942

1,456

486

Total cash received

12,102

11,668

434

Cash used

Principal payments of lease liabilities

7,270

-

7,270

Total cash used

7,270

-

7,270

Net cash from/(used by) financing activities

4,832

11,668

(6,836)

Net increase/(decrease) in cash held

(2,121)

-

(2,121)

Cash at the beginning of the reporting period

2,772

640

2,132

Cash at the end of the reporting period

651

640

11

1. The Treasury’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Treasury’s 2019-20 Portfolio Budget Statements (PBS)).

2. Between the actual and original budgeted amounts for 2020. Explanations of major variances (that are greater than +/- 10% of the original budget for a line item and greater than +/- $1 million) are provided below.

Explanations of major variances

Affected line items

The primary driver for the variance in operating activities is the inclusion of lease payments in the original budget for supplier payments - these were accounted for in accordance with AASB 16 and classified as cash used by financing activities for actual reporting purposes.

Net Cash from/(used by) operating activities

The original budget cash flow statement did not split the purchases of property, plant and equipment (PP&E) and intangibles between each asset class, but presented the purchases at an aggregate level and has been analysed as such. The net cash used during 2019-20 was $15.1 million, driven by:
- $6.0 million invested in fitouts to new office premises in Melbourne and Sydney and the continued Treasury Building Block and Stack project; and
- $9.1 million used for upgrades to Treasury's information technology systems and infrastructure and security upgrades.

Net Cash from/(used by) investing activities

The $6.8 million cash inflow variance from the original budget is primarly driven by the reclassification of the $7.2 million in cash used for principal lease payments from supplier expenses as a result of the adoption of AASB 16.

Net Cash from/(used by) financing activities

9.2 Administered Budgetary Reports

Statement of Comprehensive Income

for the period ended 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$'000

$'000

$'000

NET COST OF SERVICES

Expenses

Grants

100,458,412

104,623,398

(4,164,986)

Interest

37,577

109,823

(72,246)

Medicare Guarantee Fund

37,961,055

36,567,354

1,393,701

NHFIC Operating funding

61,762

61,762

-

Foreign exchange losses

548,488

40,774

507,714

Suppliers

158,365

1,069

157,296

Total expenses

139,225,659

141,404,180

(2,178,521)

Income

Revenue

Non-taxation revenue

Sale of goods and rendering of services

649,062

649,257

(195)

Interest

15,597

31,128

(15,531)

Dividends

3,071,501

1,500,358

1,571,143

COAG revenue from government agencies

1,592,278

1,752,481

(160,203)

Other

112,511

93,650

18,861

Total non-taxation revenue

5,440,949

4,026,874

1,414,075

Total revenue

5,440,949

4,026,874

1,414,075

Gains

Foreign exchange

-

101,465

(101,465)

Total gains

-

101,465

(101,465)

Total income

5,440,949

4,128,339

1,312,610

Net cost of (contribution by) services

(133,784,710)

(137,275,841)

3,491,131

Surplus/(Deficit)

(133,784,710)

(137,275,841)

3,491,131

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

1,297,692

-

1,297,692

Total comprehensive income

1,297,692

-

1,297,692

Total comprehensive income/(loss)

(132,487,018)

(137,275,841)

4,788,823

1. Treasury’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Treasury’s 2019-20 Portfolio Budget Statements (PBS)).

2. Between the actual and original budgeted amounts for 2020. Explanations of major variances (that are greater than +/- 10% of the original budget for a line item and greater than +/- $1 billion) are provided below.

Explanations of major variances

Affected line items

Dividend income is $1.6 billion (105%) more than the original budget due to higher than anticipated dividends from the RBA, as a result of additional gains realised from foreign exchange sales and higher interest income.

Dividends

Changes in asset revaluation surplus for 2019-20 totalled $1.3 billion. The changes are driven by the movement in the net assets positions of the Reserve Bank of Australia.

Changes in asset revaluation surplus

Administered Schedule of Assets and Liabilities

as at 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$'000

$'000

$'000

ASSETS

Financial assets

Cash and cash equivalents

449,817

365,000

84,817

Loans and other receivables

8,119,663

1,603,140

6,516,523

Investments

46,312,169

41,179,568

5,132,601

Total financial assets

54,881,649

43,147,708

11,733,941

Non-financial assets

Other

-

336,575

(336,575)

Total non-financial assets

-

336,575

(336,575)

Total assets administered on behalf of

Government

54,881,649

43,484,283

11,397,366

LIABILITIES

Payables

Grants

126,753

59,065

67,688

Other payables

6,862,715

11,491

6,851,224

Unearned income

3,658

10,328

(6,670)

Total payables

6,993,126

80,884

6,912,242

Interest bearing liabilities

Promissory notes

10,051,022

10,340,570

(289,548)

Other

-

6,013,598

(6,013,598)

Total interest bearing liabilities

10,051,022

16,354,168

(6,303,146)

Provisions

Provisions

1,980,773

110,118

1,870,655

Total provisions

1,980,773

110,118

1,870,655

Total liabilities administered on behalf of

19,024,921

16,545,170

2,479,751

government

Net assets

35,856,728

26,939,113

8,917,615

1. Treasury’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Treasury’s 2019-20 Portfolio Budget Statements (PBS)).

2. Between the actual and original budgeted amounts for 2020. Explanations of major variances (that are greater than +/- 10% of the original budget for a line item and greater than +/- $1 billion) are provided below.

Explanations of major variances

Affected line items

Loans and other receivables is $6.5 billion (404%) more than the original budget primarily due to the recognition at 30 June 2020 of GST revenue allocation receivable of $5.2 billion.

Loans and other receivables

Investments increase of $5.1 billion (12%) is mainly driven by the change in the net assets position of the Reserve Bank of Australia, the conversion of retained earnings into shares for the investment in the International Financial Corporation, movements in the value of the IMF quota and other investments in international financial institutions as a result of changes in foreign exchange rates.

Investments

Liabilities of $6.0 billion had a reclassification from 'Other interest bearing liabilities' to 'Other payables' as a reporting change between Budget and the Financial Statements.

Liabilities - Other payables/Other interest bearing liabilities