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Financial Statements

Statement by the Inspector-General of Taxation and Taxation Ombudsman and Chief Finance Officer

In our opinion, the attached financial statements for the period ended 30 June 2020 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Inspector-General of Taxation will be able to pay its debts as and when they fall due.

Statement of Comprehensive Income for the period ended 30 June 2020

2020

2019

Notes

$

$

NET COST OF SERVICES

Expenses

Employee benefits

1.1A

4,653,930

4,497,617

Suppliers

1.1B

1,390,971

1,802,327

Depreciation and amortisation

2.2A

919,764

450,828

Finance costs

1.1C

15,330

7,300

Total expenses

6,979,995

6,758,072

Own-source revenue

ANAO audit services received free of charge

58,000

60,000

Total own-source revenue

58,000

60,000

Net cost of services

(6,921,995)

(6,698,072)

Revenue from Government

1.2A

6,449,000

6,451,000

Surplus / (Deficit)

(472,995)

(247,072)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation reserves

(58,900)

-

Total other comprehensive income / (loss)

(58,900)

-

Total comprehensive income / (loss)

(531,895)

(247,072)

This statement should be read in conjunction with the accompanying notes.

Statement of Financial Position as at 30 June 2020

2020

2019

Notes

$

$

ASSETS

Financial assets

Cash and cash equivalents

41,842

61,634

Trade and other receivables

2.1A

5,617,272

5,404,313

Total financial assets

5,659,114

5,465,947

Non-financial assets1

Plant and equipment

2.2A

271,649

191,137

Leasehold improvements

2.2A

2,067,801

995,614

Computer software

2.2A

-

138,638

Prepayments

53,528

83,549

Total non-financial assets

2,392,978

1,408,938

Total assets

8,052,092

6,874,885

LIABILITIES

Payables

Suppliers

2.3A

216,547

54,126

Other payables

2.3B

75,252

152,951

Total payables

291,799

207,077

Interest bearing liabilities

Leases

2.4A

1,358,642

-

Total interest bearing liabilities

1,358,642

-

Provisions

Employee provisions

3.1A

1,655,423

1,567,283

Other provisions

2.5A

232,000

169,300

Total provisions

1,887,423

1,736,583

Total liabilities

3,537,864

1,943,660

Net assets

4,514,228

4,931,225

EQUITY

Contributed equity

1,321,573

1,290,573

Reserves

394,158

453,058

Retained surplus

2,798,497

3,187,594

Total equity

4,514,228

4,931,225

This statement should be read in conjunction with the accompanying notes.

1. Right-of-use assets are included in Leasehold improvements.

Statement of Changes in Equity for the period ended 30 June 2020

2020

2019

$

$

CONTRIBUTED EQUITY

Opening balance

Balance carried forward from previous period

1,290,573

1,260,573

Transactions with owners

Contributions by owners

Departmental capital budget appropriation

31,000

30,000

Total transactions with owners

31,000

30,000

Closing balance as at 30 June

1,321,573

1,290,573

RETAINED EARNINGS

Opening balance

Balance carried forward from previous period

3,187,594

3,434,666

Adjustment on initial application of AASB 16

83,898

-

Adjusted opening balance

3,271,492

3,434,666

Comprehensive income

Surplus/(deficit) for the period

(472,995)

(247,072)

Closing balance as at 30 June

2,798,497

3,187,594

ASSET REVALUATION RESERVES

Opening balance

Balance carried forward from previous period

453,058

453,058

Comprehensive income

Revaluations

(58,900)

-

Closing balance as at 30 June

394,158

453,058

TOTAL EQUITY

Opening balance

Balance carried forward from previous period

4,931,225

5,148,297

Adjustment on initial application of AASB 16

83,898

-

Adjusted opening balance

5,015,123

5,148,297

Comprehensive income

Surplus/(deficit) for the period

(472,995)

(247,072)

Revaluations

(58,900)

-

Total comprehensive income

(531,895)

(247,072)

Transactions with owners

Contributions by owners

Departmental capital budget appropriation

31,000

30,000

Total transactions with owners

31,000

30,000

Closing balance as at 30 June

4,514,228

4,931,225

This statement should be read in conjunction with the accompanying notes.

Accounting Policy

Equity injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.

Cash Flow Statement for the period ended 30 June 2020

2020

2019

Notes

$

$

OPERATING ACTIVITIES

Cash received

Appropriations

6,475,914

6,373,867

GST received

109,697

83,664

Total cash received

6,585,611

6,457,531

Cash used

Employees

4,559,594

4,364,939

Suppliers

1,137,909

1,794,731

Interest payments on lease liabilities

11,530

-

GST paid

115,327

60,948

Section 74 receipts transferred to OPA

236,860

188,867

Total cash used

6,061,220

6,409,485

Net cash from operating activities

524,391

48,046

INVESTING ACTIVITIES

Cash used

Purchase of plant and equipment

157,642

6,364

Purchase of computer software

-

66,101

Total cash used

157,642

72,465

Net cash used by investing activities

(157,642)

(72,465)

FINANCING ACTIVITIES

Cash received

Contributed equity - departmental capital budget

31,000

30,000

Total cash received

31,000

30,000

Cash used

Principal payments of lease liabilities

417,541

-

Total cash used

417,541

-

Net cash from (used by) financing activities

(386,541)

30,000

Net increase (decrease) in cash held

(19,792)

5,581

Cash and cash equivalents at the beginning of the reporting period

61,634

56,053

Cash and cash equivalents at the end of the reporting period

41,842

61,634

This statement should be read in conjunction with the accompanying notes.

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

1. Departmental Financial Performance

86

1.1. Expenses

86

1.2. Income

87

2. Departmental Financial Position

88

2.1. Financial Assets

88

2.2. Non-Financial Assets

89

2.3. Payables

92

2.4. Interest Bearing Liabilities

92

2.5. Provisions

92

3. People and relationships

93

3.1. Employee Provisions

93

3.2. Key Management Personnel Remuneration

94

3.3. Related Party Disclosures

94

4. Funding

96

4.1. Appropriations

96

4.2. Net Cash Appropriation Arrangements

97

5. Managing uncertainties

98

5.1. Contingent Assets and Liabilities

98

5.2. Financial Instruments

98

6. Other Information

100

6.1. Aggregate Assets and Liabilities

100

7. Budgetary Reports and Explanation of Major Variances

101

7.1. Departmental Budgetary Reports

101

Overview
Objectives of the Inspector-General of Taxation

The Inspector-General of Taxation (IGT) is an Australian Government controlled entity. It is a not-for-profit entity. The objective of the entity is to improve tax administration through investigation of complaints, conducting reviews, public reporting and independent advice to Government and its relevant entities.

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 (FRR); and
  • Australian Accounting Standards – Reduced Disclosure Requirements and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and are 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.

Significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, the IGT has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

  • The liability for long service leave has been determined by reference to FRR 24 Employee benefits, which allows the use of the shorthand method for entities with less than 1,000 full-time equivalent employees.
  • The employee provision has been determined with reference to the IGT’s expected tenure of staff and future salary movements and standard parameters (future discount rates) provided by the Department of Finance.
  • 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.

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

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 Inspector-General of Taxation and Taxation Ombudsman and Chief Finance Officer, were applicable to the current reporting period, and had a material effect on the IGT’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 and AASB 1058 Income of
Not-For-Profit Entities

AASB 15 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. This includes Revenue from Government and Resources Received Free of Charge.

The two standards have no material impact on IGT’s 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 16 Leases

The IGT adopted AASB 16 as at 1 July 2019 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings. 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 IGT 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 IGT 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; and
  • 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.

As a lessee, the IGT 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 IGT recognises right-of-use assets and lease liabilities for most of its leases. The IGT 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 IGT recognised a right-of-use asset and lease liability in relation to office space lease, which had previously been classified as an operating lease.

The lease liability was measured at the present value of the remaining lease payments including abatement, discounted using the IGT’s incremental borrowing rate as at 1 July 2019. The IGT’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 1.05%.

The right-of-use asset was measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

Impact on Transition of AASB 16

$

Departmental

1 July 2019

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

1,776,183

Lease liabilities

(1,776,183)

Rent payable

83,895

Retained earnings

(83,895)

The adjustment to retained earnings reflects the de-recognition of the operating lease payable, previously recognised under AASB 117, which is no longer required under AASB 16 due to the recognition of the lease liability.

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

$

1 July 2019

Minimum operating lease commitment at 30 June 2019

1,994,062

Less: removal of GST component on adoption

(181,278)

Less: removal of non-lease components

(10,402)

Undiscounted lease payments

1,802,382

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

(26,199)

Lease liabilities recognised at 1 July 2019

1,776,183

Taxation

The IGT is exempt from all forms of taxation except for Fringe Benefits Tax and Goods and Services Tax (GST).

Events after the reporting period

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

1. Departmental Financial Performance

This section analyses the financial performance of the Inspector-General of Taxation for the period ended 30 June 2020.

1.1. Expenses

2020

2019

$

$

Note 1.1A: Employee benefits

Wages and salaries

3,589,612

3,307,309

Superannuation:

Defined contribution plans

467,873

410,071

Defined benefit plans

115,045

126,566

Leave and other entitlements

466,209

633,198

Other employee expenses

15,191

20,473

Total employee benefits

4,653,930

4,497,617

Accounting Policy

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

2020

2019

$

$

Note 1.1B: Suppliers

Goods and services supplied or rendered

Consultants, contractors and secondees

110,395

135,210

Travel

135,115

110,354

Service level agreement with Treasury

611,250

611,249

Fees - audit, membership and other

79,237

69,816

Property operating expenses

178,537

152,213

Advertising and printing

6,688

4,829

Seminars and conferences

31,886

60,218

Subscriptions and periodicals

16,784

23,138

Information communication technology

141,591

38,445

Other

68,635

143,539

Total goods and services supplied or rendered

1,380,118

1,349,011

Goods supplied

27,475

49,368

Services rendered

1,352,643

1,299,643

Total goods and services supplied or rendered

1,380,118

1,349,011

Other suppliers

Operating lease rentals1

-

440,434

Workers compensation expenses

10,853

12,882

Total other suppliers

10,853

453,316

Total suppliers

1,390,971

1,802,327

1. The IGT 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 1.1C, 2.2A and 2.4A.

2020

2019

$

$

Note 1.1C: Finance costs

Interest on lease liabilities1

11,530

-

Unwinding of discount

3,800

7,300

Total finance costs

15,330

7,300

1. The IGT 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, 2.2A and 2.4A.

1.2. Income

Accounting Policy

Resources received free of charge

Resources received free of charge are recognised as other 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.

2020

2019

$

$

Note 1.2A: Revenue from Government

Appropriations

Departmental appropriations

6,449,000

6,451,000

Total revenue from Government

6,449,000

6,451,000

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 IGT 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 Inspector-General of Taxation 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

$

$

Note 2.1A: Trade and other receivables

Appropriations receivable:

From operational funding

5,608,172

5,398,226

Total appropriations receivable

5,608,172

5,398,226

Other receivables:

GST receivable from the Australian Taxation Office

9,100

6,087

Total other receivables

9,100

6,087

Total trade and other receivables

5,617,272

5,404,313

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 of principal and interest that are not provided at below-market interest rates, are classified as 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 intangibles

Plant and equipment

Leasehold improvements

Computer Software

Total

$

$

$

$

As at 1 July 2019

Gross book value

324,508

1,502,951

471,505

2,298,964

Accumulated depreciation, amortisation and impairment

(133,371)

(507,337)

(332,867)

(973,575)

Total as at 1 July 2019

191,137

995,614

138,638

1,325,389

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

-

1,776,183

-

1,776,183

Adjusted total as at 1 July 2019

191,137

2,771,797

138,638

3,101,572

Additions

157,642

-

-

157,642

Depreciation and amortisation expense

(77,130)

(250,543)

(138,638)

(466,311)

Depreciation on right-of-use assets

-

(453,453)

-

(453,453)

Total as at 30 June 2020

271,649

2,067,801

-

2,339,450

Total as at 30 June 2020 represented by:

Gross book value

482,150

3,279,134

471,505

4,232,789

Accumulated depreciation, amortisation and impairment

(210,501)

(1,211,333)

(471,505)

(1,893,339)

Total as at 30 June 2020

271,649

2,067,801

-

2,339,450

Carrying amount of right-of-use assets

-

1,322,730

-

1,322,730

No indicators of impairment were found for property, plant and equipment or computer software.

No plant and equipment and computer software are expected to be sold or disposed of in the next 12 months.

All revaluations are independent and are conducted in accordance with the revaluation policy stated below. On 30 June 2017, an independent valuer conducted the revaluations. On 30 June 2020, a review was undertaken by an independent valuer, who confirmed that property, plant and equipment assets are materially held at their fair value at 30 June 2020 in accordance with AASB 13.

As at 30 June 2020, the IGT had no contractual commitments for either the acquisition of property, plant and equipment or for the acquisition of intangible assets (2018-19: nil).

Accounting Policy

Acquisition of assets

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 entity’s accounts immediately prior to the restructuring.

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. As noted in the overview to the financial statements, the date of commencement for the lease ROU asset disclosed in Note 2.2A is 1 July 2019, which reflects the adoption of AASB 16 in 2019-20. Further information on how the initial value of the ROU was measured ($1,776,183) can be found in the AASB 16 transition note in the overview.

These assets are accounted for by Commonwealth lessees 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. The IGT did not identify any indicators of impairment.

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $2,000 and computer equipment of less than $1,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

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.

Revaluations

Following initial recognition at cost, property plant and equipment (excluding ROU assets) are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Cost is considered an acceptable fair value proxy for assets under construction. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially with 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 were 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 or deficit. Revaluation decrements for a class of assets are recognised directly through surplus or deficit except to the extent that they reverse a previous revaluation increment for that class.

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

Depreciation

Depreciable property, plant and equipment assets are written off to their estimated residual values over their estimated useful lives to the IGT using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.

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

2020

2019

Plant and equipment

1-15 years

1-15 years

Leasehold improvements

Lease term

Lease term

Impairment

All assets were assessed for impairment as 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. No indicators of impairment were found for non-financial assets as at 30 June 2020 (2019: nil).

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 IGT were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Intangibles

The IGT’s intangibles comprise purchased software for internal use. These assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life, being 5 years (2019: 5 years).

All software assets were assessed for indications of impairment at 30 June 2020. No indicators of impairment were identified as at 30 June 2020 (2019: none).

Fair value measurements — validation processes

The IGT engaged the service of the Jones Lang LaSalle Incorporated (JLL) to conduct a fair value confirmation of all non-financial assets at 30 June 2020 and has relied upon those outcomes to determine that carrying amounts do not materially differ from fair value. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from the 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 Novel Coronavirus (COVID-19).

There has been no change in the valuation method.

2.3. Payables

2020

2019

$

$

Note 2.3A: Suppliers

Trade creditors

216,547

54,126

Total suppliers

216,547

54,126

Note: The above suppliers are expected to be paid within 12 months.

Note 2.3B: Other payables

Wages and salaries

53,029

57,359

Superannuation

8,725

9,187

Rent payable1

-

83,895

Other payables

13,498

2,510

Total other payables

75,252

152,951

Settlement is usually made within 20 days.

1. The IGT 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.

2.4. Interest Bearing Liabilities

2020

2019

$

$

Note 2.4A: Leases

Lease liabilities1

1,358,642

-

Total finance leases

1,358,642

-

1. The IGT 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 $429,071 ($417,541 in principal repayments and $11,530 in interest payments).

Accounting Policy

Refer Overview section for accounting policy on leases.

2.5. Provisions

Note 2.5A: Other provisions

Provision for make good1

$

As at 1 July 2019

169,300

Additional provisions made

58,900

Unwinding of discount or change in discount rate

3,800

Total as at 30 June 2020

232,000

1. Relates to the lease agreement for Kent Street, Sydney.

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

$

$

Note 3.1A: Employee provisions

Leave

1,655,423

1,567,283

Total employee provisions

1,655,423

1,567,283

Accounting Policy

Employee benefits

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

Other 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 IGT’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

Provision is made for separation and redundancy benefit payments. The IGT 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 IGT in general are members of the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap).

The PSS is a defined benefit scheme for 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 by the Department of Finance’s administered schedules and notes.

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

The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.

3.2. Key Management Personnel Remuneration

Key management personnel are those having authority and responsibility for planning, directing and controlling the activities, directly or indirectly, of the IGT. The IGT has determined the key management personnel to be the Portfolio Ministers, Inspector-General of Taxation and Taxation Ombudsman and Deputy Inspector-General of Taxation and Taxation Ombudsman. Key management personnel remuneration is reported in the table below:

2020

2019

$

$

Short-term employee benefits

804,565

697,251

Post-employment benefits

68,856

68,243

Other long-term benefits

22,192

22,991

Total key executive remuneration expenses

895,613

788,485

The total number of key management personnel that are included in the above table is 2 (2019: 4). The number of key management personnel in the prior year (2019) was a temporary increase due to the transition in the position of Inspector-General of Taxation and Taxation Ombudsman during the reporting period (which included a period of acting arrangements).

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

3.3. Related Party Disclosures
Related party relationships:

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

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

Significant transactions with related parties can include:

  • the payments of grants or loans;
  • purchases of goods and services;
  • asset purchases, sales transfers or leases;
  • debts forgiven; and
  • guarantees.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the IGT, it has been determined that there are no related party transactions to be separately disclosed. (2019: none)

4. Funding

This section identifies the Inspector-General of Taxation funding structure.

4.1. Appropriations

Note 4.1A: Annual appropriations ('recoverable GST exclusive')

Annual appropriations for 2020

Appropriation Act

PGPA Act

Annual Appropriation

Section 74

Total appropriation

Appropriation applied in 2020 (current and prior years)

Variance

$

$

$

$

$

Departmental

Ordinary annual services

6,449,000

132,064

6,581,064

(6,386,009)

195,055

Capital budget1

31,000

-

31,000

(31,000)

-

Total departmental

6,480,000

132,064

6,612,064

(6,417,009)

195,055

1. Departmental Capital Budget is appropriated through Appropriations Act (No.1). It forms part of the ordinary annual services, and is not separately identified in the Appropriation Acts.

Annual appropriations for 2019

Appropriation Act

PGPA Act

Annual Appropriation

Section 74

Total appropriation

Appropriation applied in 2019 (current and prior years)

Variance1

$

$

$

$

$

Departmental

Ordinary annual services

6,451,000

74,351

6,525,351

(6,284,622)

240,729

Capital budget2

30,000

-

30,000

(30,000)

-

Total departmental

6,481,000

74,351

6,555,351

(6,314,622)

240,729

1. Departmental funds were not fully utilised for 2018–19.

2. Departmental Capital Budget is appropriated through Appropriations Act (No.1). It forms part of the ordinary annual services, and is not separately identified in the Appropriation Acts.

Note 4.1B: Unspent annual appropriations

2020

2019

$

$

Departmental

Appropriation Act (No. 1) 2018-191

-

5,459,860

Appropriation Act (No. 1) 2019-201

5,650,014

-

Total departmental

5,650,014

5,459,860

1. Cash held amounts (2020: $41,842, 2019: $61,634) are included in Appropriation Act (No. 1) for the relevant year.

4.2. Net Cash Appropriation Arrangements

2020

2019

$

$

Total comprehensive income (loss) as per the statement of comprehensive income

(531,895)

(247,072)

Plus: depreciation/amortisation expenses previously funded through

revenue appropriation

466,311

450,828

Plus: depreciation right-of-use assets

453,453

-

Less: principal repayments – leased assets

(417,541)

-

Total comprehensive income (loss) less expenses previously funded through revenue appropriations

(29,762)

203,756

Changes in asset revaluation reserve

58,900

-

Surplus (deficit) attributable to the Australian Government less expenses previously funded through revenue appropriations

29,228

203,756

From 2010–11, the Government introduced net cash appropriation arrangements where revenue appropriations for depreciation/amortisation expenses ceased. Entities now receive a separate capital budget provided through equity appropriations. Capital budgets are to be appropriated in the period when cash payment for capital expenditure is required.

The inclusion of depreciation/amortisation expenses related to ROU leased assets and the lease liability principle repayment amount reflects the cash impact on implementation of AASB 16 Leases, it does not directly reflect a change in appropriation arrangements.

5. Managing uncertainties

This section analyses how the Inspector-General of Taxation manages financial risks within its operating environment.

5.1. Contingent Assets and Liabilities

There were no quantifiable contingent assets or liabilities in 2020 (2019: $0).

Accounting Policy

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 recognised when settlement is greater than remote.

5.2. Financial Instruments

2020

2019

$

$

Note 5.2A: Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents

41,842

61,634

Total financial assets at amortised cost

41,842

61,634

Total financial assets

41,842

61,634

Financial Liabilities

Financial liabilities measured at amortised cost

Payables – suppliers

216,547

54,126

Other payables

13,498

86,405

Total financial liabilities measured at amortised cost

230,045

140,531

Total financial liabilities

230,045

140,531

There was no interest income from financial assets not at fair value through profit and loss in 2020 (2019: nil).

Accounting Policy

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 measured 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, 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).

All payables are expected to be settled within 12 months except where indicated.

6. Other Information
6.1. Aggregate Assets and Liabilities

2020

2019

$

$

Note 6.1A: Aggregate assets and liabilities

Assets expected to be recovered in:

No more than 12 months

5,712,642

5,549,496

More than 12 months

2,339,450

1,325,389

Total assets

8,052,092

6,874,885

Liabilities expected to be settled in:

No more than 12 months

1,113,169

485,937

More than 12 months

2,424,695

1,457,723

Total liabilities

3,537,864

1,943,660

7. Budgetary Reports and Explanation of Major Variances
7.1. Departmental Budgetary Reports

Note 7.1A: Departmental budgetary reports

Statement of Comprehensive Income

for the period ended 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$

$

$

NET COST OF SERVICES

Expenses

Employee benefits

4,653,930

4,718,000

(64,070)

Suppliers

1,390,971

1,731,000

(340,029)

Depreciation and amortisation

919,764

346,000

573,764

Finance costs

15,330

-

15,330

Total expenses

6,979,995

6,795,000

184,995

LESS:

Own-source revenue

ANAO audit services received free of charge

58,000

-

58,000

Total own-source revenue

58,000

-

58,000

Net cost of services

(6,921,995)

(6,795,000)

(126,995)

Revenue from Government

6,449,000

6,449,000

-

Surplus / (Deficit)

(472,995)

(346,000)

(126,995)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net
cost of services

Changes in asset revaluation reserves

(58,900)

-

(58,900)

Total other comprehensive income

(58,900)

-

(58,900)

Total comprehensive income / (loss)

(531,895)

(346,000)

(185,895)

1. The IGT’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 are provided for variances that are greater than +/- 10 per cent of the original budget for a line item and greater than +/- $250,000.

Explanations of major variances

Affected line items

Variance relates to principal payments for lease liabilities being moved to the balance sheet from supplier expenses as a result of the adoption of AASB 16, which was not reflected in the original budget.

Suppliers

Variance driven by total depreciation on right of use assets first recognised on 1 July 2019 according to AASB 16, which were not included in the original budget.

Depreciation and amortisation

Statement of Financial Position

as at 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$

$

$

ASSETS

Financial assets

Cash and cash equivalents

41,842

56,000

(14,158)

Trade and other receivables

5,617,272

5,166,000

451,272

Total financial assets

5,659,114

5,222,000

437,114

Non-financial assets

Land and buildings

2,067,801

754,000

1,313,801

Infrastructure, plant and equipment

271,649

248,000

23,649

Intangibles

-

81,000

(81,000)

Other non-financial assets

53,528

83,000

(29,472)

Total non-financial assets

2,392,978

1,166,000

1,226,978

Total assets

8,052,092

6,388,000

1,664,092

LIABILITIES

Payables

Suppliers

216,547

141,000

75,547

Other payables

75,252

84,000

(8,748)

Total payables

291,799

225,000

66,799

Interest bearing liabilities

Leases

1,358,642

-

1,358,642

Total interest bearing liabilities

1,358,642

-

1,358,642

Provisions

Employee provisions

1,655,423

1,474,000

181,423

Other provisions

232,000

162,000

70,000

Total provisions

1,887,423

1,636,000

251,423

Total liabilities

3,537,864

1,861,000

1,676,864

Net assets

4,514,228

4,527,000

(12,772)

EQUITY

Contributed equity

1,321,573

1,322,000

(427)

Reserves

394,158

453,000

(58,842)

Retained surplus

2,798,497

2,752,000

46,497

Total equity

4,514,228

4,527,000

(12,772)

1. The IGT’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 are provided for variances that are greater than +/- 10 per cent of the original budget for a line item and greater than +/- $250,000.

Explanations of major variances

Affected line items

Variance due to the recognition of right of use assets on the adoption of
AASB 16, which were not included in the original budget.

Land and buildings

Variance relates to the recognition of lease liabilities on adoption of AASB 16, which was not reflected in the original budget.

Leases

Statement of Changes in Equity

for the period ended 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$

$

$

CONTRIBUTED EQUITY

Opening balance

Balance carried forward from previous period

1,290,573

1,291,000

(427)

Transactions with owners

Contributions by owners

Departmental capital budget appropriation

31,000

31,000

-

Total transactions with owners

31,000

31,000

-

Closing balance as at 30 June

1,321,573

1,322,000

(427)

RETAINED EARNINGS

Opening balance

Balance carried forward from previous period

3,187,594

3,098,000

89,594

Adjustment on initial application of AASB 16

83,898

-

83,898

Adjusted opening balance

3,271,492

3,098,000

173,492

Comprehensive income

Surplus/(deficit) for the period

(472,995)

(346,000)

(126,995)

Closing balance as at 30 June

2,798,497

(346,000)

(126,995)

ASSET REVALUATION RESERVES

Opening balance

Balance carried forward from previous period

453,058

453,000

58

Closing balance as at 30 June

53,058

453,000

58

TOTAL EQUITY

Opening balance

Balance carried forward from previous period

4,931,225

4,842,000

89,225

Adjustment on initial application of AASB 16

83,898

-

83,898

Adjusted opening balance

5,015,123

4,842,000

173,123

Comprehensive income

Surplus/(deficit) for the period

(472,995)

(346,000)

(126,995)

Revaluations

(58,900)

-

(58,900)

Total comprehensive income

(531,895)

(346,000)

(185,895)

Transactions with owners

Contributions by owners

Departmental capital budget appropriation

31,000

31,000

-

Total transactions with owners

31,000

31,000

-

Closing balance as at 30 June

4,514,228

4,527,000

(12,772)

1. The IGT’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 are provided for variances that are greater than +/- 10 per cent of the original budget for a line item and greater than +/- $250,000.

Cash Flow Statement

for the period ended 30 June 2020

Actual

Budget estimate

Original1

Variance2

2020

2020

2020

$

$

$

OPERATING ACTIVITIES

Cash received

Appropriations

6,475,914

6,449,000

26,914

Net GST received

109,697

-

109,697

Total cash received

6,585,611

6,449,000

136,611

Cash used

Employees

4,559,594

4,718,000

(158,406)

Suppliers

1,137,909

1,731,000

(593,091)

Interest payments on lease liabilities

11,530

-

11,530

GST paid

115,327

-

115,327

Section 74 receipts transferred to OPA

236,860

-

236,860

Total cash used

6,061,220

6,449,000

(387,780)

Net cash from (used by) operating activities

524,391

-

524,391

INVESTING ACTIVITIES

Cash used

Purchase of plant and equipment

157,642

31,000

126,642

Total cash used

157,642

31,000

126,642

Net cash from (used by) investing activities

(157,642)

(31,000)

(126,642)

FINANCING ACTIVITIES

Cash received

Contributed equity

31,000

31,000

-

Total cash received

31,000

31,000

-

Cash used

Principal payments of lease liabilities

417,541

-

417,541

Total cash used

417,541

-

417,541

Net cash from (used by) financing activities

(386,541)

31,000

(417,541)

Net increase (decrease) in cash held

(19,792)

-

(19,742)

Cash at the beginning of the reporting period

61,634

56,000

5,634

Cash at the end of the reporting period

41,842

56,000

(14,158)

1. The IGT’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 are provided for variances that are greater than +/- 10 per cent of the original budget for a line item and greater than +/- $250,000.

Explanations of major variances

Affected line items

Variance from the original budget is due to the reclassification of cash used for principal lease payments from operating activities (suppliers) to financing activities as a result of the adoption of AASB 16.

Suppliers (Operating activities)

Principal payments of lease liabilities (Financing activities)

Variance relates to the purchase of laptops for IGT staff due to the requirement to move to remote working arrangements following the outbreak of the Novel Coronavirus (COVID-19).

Purchase of plant and equipment (Investing activities)