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Part 4: Financial statements

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Inspector-General of Taxation

Statement by the Chief Executive Officer and Chief Finance Officer

In our opinion, the attached financial statements for the year ended 30 June 2013 are based on properly maintained financial records and give a true and fair view of the matters required by the Finance Minister’s Orders made under the Financial Management and Accountability Act 1997, as amended.

Statement of comprehensive income
for the period ended 30 June 2013

Notes 2013
$
2012
$
EXPENSES
Employee benefits 3A 1,645,744 1,402,220
Suppliers 3B 879,441 819,781
Depreciation and amortisation 3C 74,410 116,168
Finance costs 3D 1,657 2,754
Write-down and impairment of assets 3E 245 1,061
Total expenses 2,601,497 2,341,984
LESS:
OWN-SOURCE INCOME
Own-source revenue
Other revenue 4A 4,746
Total own-source revenue 4,746
Gains
Other gains 4B 32,800 25,000
Total gains 32,800 25,000
Total own-source income 32,800 29,746
Net cost of services 2,568,697 2,312,238
Revenue from Government 4C 2,622,000 2,686,000
Surplus on continuing operations 53,303 373,762
OTHER COMPREHENSIVE INCOME
Changes in asset revaluation reserve 138,478
Total other comprehensive income 138,478
Total comprehensive income 191,781 373,762

The above statement should be read in conjunction with the accompanying notes.

Balance sheet
as at 30 June 2013

Notes 2013
$
2012
$
ASSETS
Financial assets
Cash and cash equivalents 5A 98,052 37,479
Trade and other receivables 5B 3,071,018 2,939,220
Total financial assets 3,169,070 2,976,699
Non-financial assets
Property, plant and equipment 6A,6C 34,382 48,490
Leasehold improvements 6B,6C 154,344 59,518
Other non-financial assets 6D 22,900 26,876
Total non-financial assets 211,626 134,884
Total assets 3,380,696 3,111,583
LIABILITIES
Payables
Suppliers 7A 27,434 39,297
Other payables 7B 38,873 37,637
Total payables 66,307 76,934
Provisions
Employee provisions 8A 302,541 246,237
Other provisions 8B 86,931 94,323
Total provisions 389,472 340,560
Total liabilities 455,779 417,494
Net assets 2,924,917 2,694,089
EQUITY
Contributed equity 107,573 77,573
Reserves 441,663 294,138
Retained surplus 2,375,681 2,322,378
Total equity 2,924,917 2,694,089

The above statement should be read in conjunction with the accompanying notes.

Cash flow statement
for the period ended 30 June 2013

Notes 2013
$
2012
$
OPERATING ACTIVITIES
Cash received
Appropriations 2,504,360 2,231,910
Other cash received 311
Net GST received 82,632 70,953
Total cash received 2,586,992 2,303,174
Cash used
Employees (1,575,005) (1,290,681)
Suppliers (934,518) (941,974)
Section 31 receipts transferred to OPA (36,427)
Total cash used (2,509,523) (2,269,082)
Net cash from (used by) operating activities 9 77,469 34,092
INVESTING ACTIVITIES
Cash used
Purchase of property, plant and equipment (16,896) (17,782)
Total cash used (16,896) (17,782)
Net cash from (used by) investing activities (16,896) (17,782)
FINANCING ACTIVITIES
Cash received
Contributed equity
Total cash received
Net cash from (used by) financing activities
Net increase in cash held 60,573 16,310
Cash and cash equivalents at the beginning of the reporting period 37,479 21,169
Cash and cash equivalents at the end of the reporting period 5A 98,052 37,479

The above statement should be read in conjunction with the accompanying notes.

Statement of changes in equity
for the period ended 30 June 2013

Retained earnings Asset revaluation surplus Contributed equity Total equity
2013
$
2012
$
2013
$
2012
$
2013
$
2012
$
2013
$
2012
$
Opening balance
Balance carried forward from previous period 2,322,378 1,948,616 294,138 294,138 77,573 39,573 2,694,089 2,282,327
Adjustment to prior year entitlements
Adjusted opening balance 2,322,378 1,948,616 294,138 294,138 77,573 39,573 2,694,089 2,282,327
Comprehensive income
Revaluations 138,478 138,478
Re-statement of ‘Make Good’ 9,047 9,047
Surplus for the period 53,303 373,762 53,303 373,762
Total comprehensive income 53,303 373,762 147,525 200,828 373,762
Transactions with owners
Contributions by owners
Departmental capital budget 30,000 38,000 30,000 38,000
Sub-total transactions with owners 30,000 38,000 30,000 38,000
Closing balance at 30 June 2,375,681 2,322,378 441,663 294,138 107,573 77,573 2,924,917 2,694,089

The above statement should be read in conjunction with the accompanying notes.

Schedule of commitments
as at 30 June 2013

2013
$
2012
$
BY TYPE
Commitments receivable
Net GST recoverable on commitments 132,921 155,928
Total commitments receivable 132,921 155,928
Commitments payable
Other commitments
Operating leases1 1,462,136 1,715,215
Other commitments2
Total other commitments 1,462,136 1,715,215
Total commitments payable 1,462,136 1,715,215
Net commitments by type 1,329,215 1,559,287
BY MATURITY
Commitments receivable
Other commitments receivable
One year or less 21,059 22,753
From one to five years 95,855 91,283
Over five years 16,007 41,892
Total other commitments receivable 132,921 155,928
Total commitments receivable 132,921 155,928
Commitments payable
Operating lease commitments
One year or less 231,644 250,286
From one to five years 1,054,416 1,004,118
Over five years 176,076 460,811
Total operating lease commitments 1,462,136 1,715,215
Other commitments
One year or less
From one to five years
Over five years
Total other commitments
Total commitments payable 1,462,136 1,715,215
Net commitments by maturity 1,329,215 1,559,287

Note: Commitments are GST inclusive where relevant.

Note Nature of lease General description of leasing arrangements
1 Leases for office accommodation The agreement allows annual fixed rental increases. The agency has entered into a further lease at the current premises in 2013.
Note Description General description of the agreement
2 Service Agreement for the provision of office services The agreement is a fixed rate over the term. This agreement is currently undergoing renewal for a further period.

The above schedule should be read in conjunction with the accompanying notes.

Schedule of contingencies
as at 30 June 2013

2013
$
2012
$
Contingent assets
Contingent liabilities
Net contingent assets (liabilities)

The above schedule should be read in conjunction with the accompanying notes.

Notes to and forming part of the financial statements for the year ended 30 June 2013

Note 1: Summary of significant accounting policies

1.1 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 Inspector-General of Taxation is to improve the administration of the tax laws for the benefit of all taxpayers. The IGT is structured to meet one outcome:

‘Improved tax administration through community consultation, review, and independent advice to Government’.

Agency activities contributing toward this outcome are classified as departmental. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by the agency in its own right.

The Inspector-General of Taxation Act 2003 (the Act) established an independent statutory agency on 7 August 2003 to review:

for the purpose of reporting and making recommendations to Government on how those systems could be improved.

The IGT’s departmental activities are identified under Outcome 1 by one program, Program 1.1 Inspector-General of Taxation.

The continued existence of the agency in its present form, and with its present program, is dependent on Government policy and on continuing funding by Parliament for the agency’s administration and programs.

1.2 Basis of preparation of financial statements

The financial statements are general purpose financial statements and are required by section 49 of the Financial Management and Accountability Act 1997.

The financial statements have been prepared in accordance with:

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

The financial statements are presented in Australian dollars and values are expressed in whole dollars.

Unless an alternative treatment is specifically required by an Accounting Standard or the FMOs, assets and liabilities are recognised in the Balance Sheet when and only when it is probable that future economic benefits will flow to the Entity or a future sacrifice of economic benefits will be required and the amounts of assets or liabilities can be reliably measured. However, assets and liabilities arising under Executory Contracts are not recognised unless required by an Accounting Standard. Liabilities and assets that are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than unquantifiable or remote contingencies, which are reported at Note 10).

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

1.3 significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, there are no judgements that have a significant impact on the amounts recorded in the financial statements.

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.

1.4 New Australian Accounting Standards

Adoption of new Australian Accounting Standard requirements

No accounting standard has been adopted earlier than the application date as stated in the standard. No new accounting standards, amendments to standards and interpretations issued by the Australian Accounting Standards Board prior to the sign-off date that are applicable to the current period have had a material financial impact on the agency.

Future Australian Accounting Standard requirements

No new standards, amendments to standards or interpretations that have been issued by the Australian Accounting Standards Board prior to the sign-off date and are effective for future reporting periods are expected to have a material financial impact on the agency.

1.5 Revenue

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 Agency 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.

Other types of revenue

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

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

Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement.

1.6 Gains

Resources received free of charge

Resources received free of charge are recognised as gains 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 agency as a consequence of a restructuring of administrative arrangements.

Sale of assets

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

1.7 Transactions with the Government as owner

Equity injections

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

1.8 Employee benefits

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of the end of the reporting period are measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

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. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the agency is estimated to be less than the annual entitlement for sick 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 agency’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 agency 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 agency 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 and Deregulation’s administered schedules and notes.

The agency 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 agency 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.

1.9 Leases

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased non-current assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits.

Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability recognised at the same time and for the same amount.

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a straight line basis which is representative of the pattern of benefits derived from the leased assets.

1.10 Borrowing costs

All borrowing costs are expensed as incurred.

1.11 cash

Cash is recognised at its nominal amount.

Cash and cash equivalents includes cash on hand, cash held with outsiders and demand deposits in bank accounts with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

1.12 Financial assets

The IGT classifies its financial assets in the following categories:

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon ‘trade date’.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets are assessed for impairment at each balance date.

1.13 Financial liabilities

Financial liabilities are classified as other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

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).

1.14 Contingent liabilities and contingent assets

Contingent liabilities and contingent assets are not recognised in the Balance Sheet but are reported in the relevant schedules and 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.

1.15 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 incomes 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 agency’s accounts immediately prior to the restructuring.

1.16 Property, plant and equipment (PP&E)

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the Balance Sheet, except for purchases costing less than $2000 and computer equipment of less than $1000, 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. This is particularly relevant to restoration provisions in property leases taken up by the IGT where there exists an obligation to restore the property to its original condition. These costs are included in the value of the IGT’s leasehold improvements with a corresponding provision for the present value of the restoration recognised.

Revaluations

Fair values for each class of asset are determined as shown below:

Asset class: Fair value measured at:
Leasehold improvements Depreciated replacement cost
Property, plant and equipment Market selling price

Following initial recognition at cost, property plant and equipment are carried at 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 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 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 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 revaluation date is 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 agency using, in all cases, the straightline method of depreciation. Leasehold improvements are depreciated on a straightline 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:

2012-13 2011-12
Property, plant and equipment 3-10 years 3-10 years
Leasehold improvements Lease term Lease term
Impairment

All assets were assessed for impairment at 30 June 2013. 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 to sell 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.

No indicators of impairment were found for assets at fair value.

1.17 Taxation

The agency is exempt from all forms of taxation except for Fringe Benefits Tax and Goods and Services Tax (GST). Revenues, expenses and assets are recognised net of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office, and except for receivables and payables.

1.18 Williams v Commonwealth

The Australian Government continues to have regard to developments in case law, including the High Court’s most recent decision on Commonwealth expenditure in Williams v Commonwealth (2012) 288 ALR 410, as they contribute to the larger body of law relevant to the development of Commonwealth programs. In accordance with its general practice, the Government will continue to monitor and assess risk and decide on any appropriate actions to respond to risks of expenditure not being consistent with constitutional or other legal requirements.

Note 2: Events after the reporting period

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

Note 3: Expenses

2013
$
2012
$
Note 3A: Employee benefits
Wages and salaries 1,306,571 1,106,359
Superannuation:
Defined contribution plans 92,606 74,140
Defined benefit plans 86,832 66,331
Leave and other entitlements 150,425 148,099
Other employee expenses 9,310 7,291
Total employee benefits 1,645,744 1,402,220
Note 3B: Suppliers
Goods and services
Consultants and contractors 156,482 137,484
Travel 108,447 142,358
Service Level Agreement with Treasury 117,107 116,450
Advertising and printing 41,434 28,660
Seminars and conferences 6,020 9,867
Subscriptions and periodicals 8,861 10,191
Other 146,118 77,138
Total goods and services 584,469 522,148
Goods and services are made up of:
Provision of goods – related entities 959 6,492
Provision of goods – external parties 221,593 37,391
Rendering of services – related entities 39,583 159,989
Rendering of services – external parties 322,334 318,276
Total goods and services 584,469 522,148
Other supplier expenses
Operating lease rentals – external parties
Minimum lease payments 289,681 292,342
Workers compensation expenses 5,291 5,291
Total other supplier expenses 294,972 297,633
Total supplier expenses 879,441 819,781
Note 3C: Depreciation and Amortisation
Depreciation:
Property, plant and equipment 40,525 58,485
Total depreciation 40,525 58,485
Amortisation:
Leasehold improvements – Make Good provision 33,885 57,683
Total amortisation 33,885 57,683
Total depreciation and amortisation 74,410 116,168
Note 3D: Finance costs
Unwinding of discount 1,657 2,754
Total finance costs 1,657 2,754
Note 3E: Write-down and impairment of assets
Asset write-downs 245 1,061
Total write-down of assets 245 1,061

Note 4: Income

2013
$
2012
$
Own-Source Revenue
Note 4A: Other revenue
Other revenue 4,746
Total other revenue 4,746
Gains
Note 4B: Other gains
Lease incentive received
Resources received free of charge 32,800 25,000
Total other gains 32,800 25,000
Revenue from Government
Note 4C: Revenue from Government
Appropriations:
Departmental appropriations 2,622,000 2,686,000
Total revenue from Government 2,622,000 2,686,000

Note 5: Financial assets

2013
$
2012
$
Note 5A: Cash and cash equivalents
Cash on hand or on deposit 98,052 37,479
Total cash and cash equivalents 98,052 37,479
Note 5B: Trade and other receivables
Goods and services:
Goods and services – related entities
Total receivables for goods and services
Appropriations receivable:
Section 31 appropriations receivable 97,125 97,125
For existing programs 2,964,973 2,817,332
Total appropriations receivable 3,062,098 2,914,457
Other receivables:
GST receivable from the Australian Taxation Office 8,920 20,328
Other 4,435
Total other receivables 8,920 24,763
Total trade and other receivables (gross) 3,071,018 2,939,220
Less impairment allowance account:
Goods and services
Total impairment allowance account
Total trade and other receivables (net) 3,071,018 2,939,220
Receivables are expected to be recovered in:
No more than 12 months 3,071,018 24,763
More than 12 months 2,914,456
Total trade and other receivables (net) 3,071,018 2,939,220
Receivables are aged as follows:
Not overdue 3,071,018 24,763
Overdue by:
0 to 30 days
31 to 60 days
61 to 90 days
more than 90 days 2,914,456
Total receivables (gross) 3,071,018 2,939,220

Note 6: Non-financial assets

2013
$
2012
$
Note 6A: Property, plant and equipment
Property, plant and equipment:
Fair value 34,382 63,033
Accumulated depreciation (14,543)
Total property, plant and equipment 34,382 48,490
Note 6B: Leasehold improvements
Leasehold improvements:
Fair value 154,344 161,143
Accumulated amortisation (101,625)
Total leasehold improvements 154,344 59,518

No indications of impairment were found for property, plant and equipment.

No property, plant and equipment were expected to be sold or disposed of in the next 12 months.

All property, plant and equipment are at valuation as at 30 June 2013 in accordance with the agency’s revaluation policy (note 1.16). The revaluation to ‘Fair Value’ was conducted by an independent qualified valuer.

Note 6C: Reconciliation of the opening and closing balances of property, plant and equipment 2013

Plant and
equipment
$
Leasehold
improvement
$
Total
$
As at 1 July 2012
Gross book value 63,032 161,143 224,175
Accumulated depreciation and amortisation (14,543) (101,625) (116,168)
Net book value 1 July 2012 48,489 59,518 108,007
Additions:
By purchase 16,896 16,896
Revaluations (143) 138,621 138,478
Depreciation and amortisation expense (13,719) (60,691) (74,410)
Asset write-downs (245) (245)
Disposals:
Other
Net book value 30 June 2013 34,382 154,344 188,726
Net book value as of 30 June 2013 represented by
Gross book value 34,382 154,344 188,726
Accumulated depreciation and amortisation
Net book value 30 June 2013 34,382 154,344 188,726
As at 1 July 2011
Gross book value 46,311 161,143 207,454
Accumulated depreciation and amortisation
Net book value 1 July 2011 46,311 161,143 207,454
Additions: 17,782 17,782
By purchase
Revaluations
Depreciation and amortisation expense (14,543) (101,625) (116,168)
Asset write-downs (1,061) (1,061)
Disposals:
Other
Net book value 30 June 2012 48,489 59,518 108,007
Net book value as of 30 June 2012 represented by:
Gross book value 63,032 161,143 224,175
Accumulated depreciation and amortisation (14,543) (101,625) (116,168)
Net book value 30 June 2012 48,489 59,518 108,007
2013
$
2012
$
Note 6D: Other non-financial assets
Prepayments 22,900 26,876
Total other non-financial assets 22,900 26,876
All other non-financial assets are current assets.
Total other financial assets – are expected to be recovered in:
No more than 12 months 22,900 26,876
Total other non-financial assets 22,900 26,876

No indicators of impairment were found for other non-financial assets.

Note 7: Payables

2013
$
2012
$
Note 7A: Suppliers
Trade creditors and accruals 27,434 39,297
Total supplier payables 27,434 39,297
Supplier payables expected to be settled within 12 months:
Related entities 101 988
External parties 27,333 38,309
Total supplier payables 27,434 39,297
Settlement was usually made within 30 days.
Note 7B: Other payables
Wages and salaries 33,864 21,895
Superannuation 5,009 2,539
Lease incentive 13,203
Total other payables 38,873 37,637
Total other payables are expected to be settled in:
No more than 12 months 38,873 37,637
More than 12 months
Total other payables 38,873 37,637

Note 8: Provisions

2013
$
2012
$
Note 8A: Employee provisions
Leave 302,541 246,237
Total employee provisions 302,541 246,237
Employee provisions are expected to be settled in:
No more than 12 months 115,207 69,973
More than 12 months 187,334 176,264
Total employee provisions 302,541 246,237
Note 8B: Other provisions
Provision for restoration obligations 86,931 94,323
Total other provisions 86,931 94,323
Other provisions are expected to be settled in:
No more than 12 months 86,931 94,323
Total other provisions 86,931 94,323
2013
$
2012
$
Provision for restoration obligations
Carrying amount at 1 July 94,322 91,568
Re-statement of ‘Make Good’ (9,047)
Unwinding of discount 1,657 2,754
Closing balance 30 June 86,931 94,322

The agency renewed the lease agreement for the current premises in 2013. The lease has a provision requiring restoration of the premises to its original condition at the conclusion of the lease. The agency has made a provision to reflect the present value of this obligation.

Note 9: Cash flow reconciliation

2013
$
2012
$
Reconciliation of cash and cash equivalents as per Balance
Sheet to Cash Flow Statement
Cash and cash equivalents as per:
Cash Flow Statement 98,052 37,479
Balance Sheet 98,052 37,479
Difference
Reconciliation of net cost of services to net cash from
operating activities:
Net cost of services 2,568,697 2,312,238
Add revenue from Government 2,622,000 2,686,000
53,303 373,762
Adjustments for non-cash items
Depreciation and amortisation 74,410 116,168
Finance costs 1,657 2,754
Net write-down of non-financial assets 245 1,061
Changes in assets/liabilities
(Increase)/decrease in net receivables (101,797) (504,164)
(Increase)/decrease in prepayments 3,976 (1,122)
Increase/(decrease) in supplier payables (11,863) (33,814)
Increase/(decrease) in other payables 1,235 (31,277)
Increase/(decrease) in employee provisions 57,655 110,721
Increase/(decrease) in other provisions (1,351)
Net cash from (used by) operating activities 77,469 34,091

Note 10: Contingent assets and liabilities

There are no unquantifiable or significant remote contingencies.

Note 11: Senior executive remuneration

Note 11A: Senior Executive Remuneration Expenses for the Reporting Period

2013
$
2012
$
Short-term employee benefits:
Salary 634,294 598,525
Annual leave accrued 50,811 45,694
Total short-term employee benefits 685,105 644,219
Post-employment benefits:
Superannuation 54,767 52,300
Total post-employment benefits 54,767 52,300
Other long-term employee benefits:
Long-service leave 21,870 11,787
Total other long-term employee benefits 21,870 11,787
Termination benefits
Total senior executive remuneration expense 761,742 708,306

Notes:

1. Note 11A was prepared on an accruals basis (therefore the performance bonus expenses disclosed above may differ from the cash ‘Bonus paid’ in Note 11B).

2. Note 11A excludes acting arrangements and part-year service where total remuneration expensed as a senior executive was less than $180,000.

Note 11B: Average Annual Reportable Remuneration Paid to Substantive Senior Executives during the Reporting Period.

Average annual reportable remuneration paid to substantive senior executives in 2013
Average annual reportable remuneration1 Substantive senior
executive
No.
Reportable
salary2
$
Contributed
superannuation3
$
Reportable
allowances4
$
Bonus
paid5
$
Total
reportable
remuneration
$
Total reportable remuneration (including part-time arrangements):
$270,000 to $299,999 1 248,065 36,874 284,939
$360,000 to $389,999 1 280,000 16,451 88,808 385,260
Total number of substantive senior executives 2
Average annual reportable remuneration paid to substantive senior executives in 2012
Average annual reportable remuneration1 Substantive
senior executive
No.
Reportable
salary2
$
Contributed
superannuation3
$
Reportable
allowances4
$
Bonus
paid5
$
Total
reportable
remuneration
$
Total reportable remuneration (including part-time arrangements):
$270,000 to $299,999 1 240,978 35,548 276,526
$360,000 to $389,999 1 254,580 15,762 92,546 362,888
Total number of substantive senior executives 2

Notes:

1. This table reports substantive senior executives who received remuneration during the reporting period. Each row is an averaged figure based on headcount for individuals in the band.

2. ‘Reportable salary’ includes the following: a) gross payments (less any bonuses paid, which are separated out and disclosed in the ‘bonus paid’ column); b) reportable fringe benefits (at the net amount prior to ‘grossing up’ for tax purposes); c) exempt foreign employment income; and d) salary sacrificed benefits.

3. The ‘contributed superannuation’ amount is the average cost to the entity for the provision of superannuation benefits to substantive senior executives in that reportable remuneration band during the reporting period.

4. ‘Reportable allowances’ are the average actual allowances paid.

5. ‘Bonus paid’ represents average actual bonuses paid during the reporting period in that reportable remuneration band. The ‘bonus paid’ within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the entity during the financial year.

Note 11C: Average Annual Reportable Remuneration paid to Other Highly Paid Staff during the Reporting Period

Average annual reportable remuneration paid to other highly paid staff in 2013
Average annual reportable remuneration1 Other highly
paid staff
No.
Reportable
salary2
$
Contributed
superannuation3
$
Reportable
allowances4
$
Bonus
paid5
$
Total
reportable
remuneration
$
Total reportable remuneration (including part-time arrangements): 1 164,685 25,186 189,871
Total number of highly paid staff 1
Average annual reportable remuneration paid to other highly paid staff in 2012
Average annual reportable remuneration1 Other highly
paid staff
No.
Reportable
salary2
$
Contributed
superannuation3
$
Reportable
allowances4
$
Bonus
paid5
$
Total
reportable
remuneration
$
Total reportable remuneration (including part-time arrangements):
Total number of highly paid staff

Notes:

1. This table reports staff; a) who were employed by the entity during the reporting period; b) whose reportable remuneration was $180,000 or more for the reporting period; and c) were not required to be disclosed in Table B. Each row is an averaged figure based on headcount for individuals in the band.

2. ‘Reportable salary’ includes the following: a) gross payments (less any bonuses paid, which are separated out and disclosed in the ‘bonus paid’ column); b) reportable fringe benefits (at the net amount prior to ‘grossing up’ for tax purposes); and c) exempt foreign employment income; and d) salary sacrificed benefits.

3. The ‘contributed superannuation’ amount is the average cost to the entity for the provision of superannuation benefits to other highly paid staff in that reportable remuneration band during the reporting period.

4. ‘Reportable allowances’ are the average actual allowances paid as per the ‘total allowances’ line on individuals’ payment summaries.

5. ‘Bonus paid’ represents average actual bonuses paid during the reporting period in that reportable remuneration band. The ‘bonus paid’ within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the entity during the financial year.

Note 12: Remuneration of auditors

2013
$
2012
$
Financial statement audit services were provided free of charge to the agency by the Australian National Audit Office (ANAO).
Fair value of the services provided
Financial statement audit services 32,800 25,000
Total 32,800 25,000

No other services were provided by the auditors of the financial statements.

Note 13: Financial instruments

2013
$
2012
$
Note 13A: Categories of financial instruments
Financial assets
Loans and receivables:
Cash and cash equivalents 98,052 37,479
Trade and other receivables
Carrying amount of financial assets 98,052 37,479
Financial liabilities
At amortised cost:
Other liabilities
Payables – suppliers 27,434 39,297
Carrying amount of financial liabilities 27,434 39,297
Note 13B: Net income and expense from financial assets
Loans and receivables
Interest revenue
Net gain/(loss) from loans and receivables
Net gain/(loss) from financial assets
There was no interest income from financial assets not at fair value through profit and loss in the year ending 2013 (2012: NIL).
Note 13C: Net income and expense from financial liabilities
Financial liabilities – at amortised cost
Interest expense
Net gain/(loss) from financial liabilities – at amortised cost
Net gain/(loss) from financial liabilities

There was no interest expense from financial liabilities not at fair value through profit and loss in the year ending 2013 (2012: NIL).

Note 13D: Fair value of financial instruments

Notes 2013 2012
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
Financial assets
Cash and cash equivalents 5A 98,052 98,052 37,479 37,479
Receivables 5B
Total financial assets 98,052 98,052 37,479 37,479
Financial liabilities
Supplier payables 7A 27,434 27,434 39,297 39,297
Total financial liabilities 27,434 27,434 39,297 39,297

The carrying amounts of the agency’s financial instruments is a reasonable approximation of fair value.

Fair value measurements categorised by fair value hierarchy

The following table provides an analysis of financial instruments that are measured at fair value, by valuation method. The different levels are defined below:

Level 1: Fair value obtained from unadjusted quoted prices in active markets for identical instruments.

Level 2: Fair value derived from inputs other than quoted prices included within Level 1 that are observable for the instrument, either directly or indirectly.

Level 3: Fair value derived from inputs that are not based on observable market data.

Fair value heirarchy for financial assets
Level 3 Total
2013 2012 2013 2012
Financial assets at fair value
Total

There was no transfer between levels.

Fair value heirarchy for financial liabilities
Level 3 Total
2013 2012 2013 2012
Financial liabilities at fair value
Total

There was no transfer between levels.

Reconciliation of Level 3 fair value heirarchy for financial assets
Financial assets at fair value Total
2013
$
2012
$
2013
$
2012
$
Opening balance
Purchases
Closing balance

1. No gains or losses for the period have been recognised resulting from the Level 3 financial assets.

Reconciliation of Level 3 fair value heirarchy for financial liabilities
Financial liabilities at fair value Total
2013
$
2012
$
2013
$
2012
$
Opening balance
Purchases
Closing balance

1. No gains or losses for the period have been recognised resulting from the Level 3 financial liabilities.

Note 13E: Credit risk

The agency is exposed to minimal credit risk as receivables are cash and trade receivables. The maximum exposure to credit risk is the risk that arises from the potential default of a debtor. This amount is equal to the total amount of the trade receivables (2013: $0, and 2012: $0). The agency has assessed the risk of the default on payment and has made no allocations to doubtful debts in 2013 (2012: NIL).

The following table illustrates the entity’s gross exposure to credit risk, excluding any collateral or credit enhancements
2013
$
2012
$
Financial assets
Cash and cash equivalents 5A 98,052 37,479
Receivables 5B
Total financial assets 98,052 37,479
Financial liabilities
Supplier payables 7A 27,434 39,297
Total financial liabilities 27,434 39,297

The agency holds no collateral to mitigate against the credit risk.

Credit quality of financial instruments not past due or individually determined as impaired
Not past due
nor
impaired
2013
$
Not past due
nor
impaired
2012
$
Past due
or
impaired
2013
$
Past due
or
impaired
2012
$
Loans and receivables
Cash and cash equivalents 98,052 37,479
Trade receivables
Total 98,052 37,479
Ageing of financial assets that were past due but not impaired for 2013
0 to
30 days
$
31 to
60 days
$
61 to
90 days
$
90+
days
$
Total
$
Loans and receivables
Trade receivables
Total
Ageing of financial assets that were past due but not impaired for 2012
0 to
30 days
$
31 to
60 days
$
61 to
90 days
$
90+
days
$
Total
$
Loans and receivables
Trade receivables
Total

Note 13F: Liquidity risk

The agency’s financial liabilities are payables. The exposure to liquidity risk is based on the notion that the agency will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely due to the appropriation funding and mechanisms available to the agency and interim policies and procedures put in place to ensure that there are appropriate resources to meet its financial obligations.

Maturities for non-derivative financial liabilities 2013
On
Demand
$
Within
1 year
$
1 to 2
years
$
2 to 5
years
$
> 5
years
$
Total
$
Other liabilities
Payables – suppliers 27,434 27,434
Total 27,434 27,434
Maturities for non-derivative financial liabilities 2012
On
Demand
$
Within
1 year
$
1 to 2
years
$
2 to 5
years
$
> 5
years
$
Total
$
Other liabilities
Payables – suppliers 39,297 39,297
Total 39,297 39,297

The agency is appropriated funding from the Australian Government. The agency manages its budgeted funds to ensure that it has adequate funds to meet payments as they fall due. In addition, the agency has policies in place to ensure timely payments are made when due and has no past experience of default.

The agency had no derivative financial liabilities in either 2013 or 2012.

Note 13G: Market risk

IGT holds basic financial instruments that do not expose the agency to certain market risks. The agency is not exposed to currency risk, other price risk, or interest rate risk.

Note 14: Financial assets reconciliation

Financial assets Notes 2013
$
2012
$
Total financial assets as per balance sheet 3,169,070 2,976,699
Less: non-financial instrument components
Appropriations receivable 5B 3,062,098 2,914,457
Other receivables 5B 8,920 24,763
Total non-financial instrument components 3,071,018 2,939,221
Total financial assets as per financial instruments note 98,052 37,477

Note 15: Appropriations

Table A: Annual appropriations (recoverable GST exclusive)
2013 Appropriations
Appropriation Act FMA Act Total
appropriation
$
Appropriation
applied in 2013
(current and
prior years)
$
Variance
$
Annual
Appropriation
$
Appropriations
reduced1
$
Section 30
$
Section 31
$
DEPARTMENTAL
Ordinary annual services 2,664,000 82,632 2,746,632 2,504,360 242,272
Total departmental 2,664,000 82,632 2,746,632 2,504,360 242,272

Notes:

1. Appropriations reduced under Appropriation Acts (No. 1, 3 & 5) 2012-13: sections 10, 11, and 12 and under Appropriation Acts (No. 2, 4 & 6) 2012-13: sections 12, 13 and 14. Departmental appropriations do not lapse at financial year-end. However, the responsible Minister may decide that part or all of a departmental appropriation is not required and request the Finance Minister to reduce that appropriation. The reduction in the appropriation is effected by the Finance Minister’s determination and is disallowable by Parliament. In 2013, there was no reduction in departmental and non-operating departmental appropriations.

2. In 2012-13, there were no adjustments that met the recognition criteria of a formal addition or reduction in revenue (in accordance with FMO Div 101). On 29 June 2013, the Parliamentary Secretary to the Prime Minister sent a letter to the Finance Minister requesting a reduction to 2012-13 appropriations in almost all Government agencies. This letter is evidence of an adjustment made as a consequence of a decision of the Cabinet or Prime Minister under FMO 101.6 and is a formal reduction which reduces Appropriation Revenue. As at 26 July the determination is not on Com law, therefore at law the appropriation has not been amended during 2012-13 and the appropriation figures in the Tables are not amended.

2012 Appropriations
Appropriation Act FMA Act Total
appropriation
$
Appropriation
applied in 2012
(current and prior
years)
$
Variance
$
Annual
Appropriation
$
Appropriations
reduced1
$
Section 30
$
Section 31
$
DEPARTMENTAL
Ordinary annual services 2,724,000 91,281 311 2,815,592 2,231,910 583,682
Total departmental 2,724,000 91,281 311 2,815,592 2,231,910 583,682

Notes:

1. Appropriations reduced under Appropriation Acts (No. 1 & 3) 2011-12: sections 10, 11, 12 and 15 and under Appropriation Acts (No. 2 & 4) 2011-12: sections 12, 13, 14 and 17. Departmental appropriations do not lapse at financial year-end. However, the responsible Minister may decide that part or all of a departmental appropriation is not required and request the Finance Minister to reduce that appropriation. The reduction in the appropriation is effected by the Finance Minister’s determination and is disallowable by Parliament. In 2012, there was no reduction in departmental and non-operating departmental appropriations.

2. In 2011-12, there were no adjustments that met the recognition criteria of a formal addition or reduction in revenue (in accordance with FMO Div 101).

Table B: Departmental Capital Budgets (recoverable GST exclusive)
2013 Capital Budget Appropriations Capital Budget Appropriations applied in 2013
(current and prior years)
Appropriation Act FMA Act Total Capital
Budget
Appropriations
$
Payments for
non-financial
assets3
$
Payments
for other
purposes
$
Total
payments
$
Variance
$
Annual Capital
Budget
$
Appropriations
reduced2
$
Section 32
$
DEPARTMENTAL
Ordinary annual services –
Departmental Capital Budget1 30,000 30,000 16,896 16,896 13,104

Notes:

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3 & 5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. For more information on ordinary annual services appropriations, please see Table A: Annual appropriations.

2. Appropriations reduced under Appropriation Acts (No. 1, 3 & 5) 2012-13: sections 10, 11, 12 and 15 or via a determination by the Finance Minister.

3. Payments made on non-financial assets include purchases of assets, expenditure on assets which have been capitalised, costs incurred to make good an asset to its original condition, and the capital repayment component of finance leases.

2012 Capital Budget Appropriations Capital Budget Appropriations applied in 2012 (current
and prior years)
Appropriation Act FMA Act Total Capital
Budget
Appropriations
$
Payments for
non-financial
assets3
$
Payments
for other
purposes
$
Total
payment
$
Variance
$
Annual Capital
Budget
$
Appropriations
reduced2
$
Section 32
$
DEPARTMENTAL
Ordinary annual services –
Departmental Capital Budget1 38,000 38,000 17,782 17,782 20,218

Notes:

1. Departmental Capital Budgets are appropriated through Appropriation Acts (No. 1, 3 & 5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. For more information on ordinary annual services appropriations, please see Table A: Annual appropriations.

2. Appropriations reduced under Appropriation Acts (No. 1, 3 & 5) 2011-12: sections 10, 11, 12 and 15 or via a determination by the Finance Minister.

3. Payments made on non-financial assets include purchases of assets, expenditure on assets which has been capitalized, costs incurred to make good an asset to its original condition, and the capital repayment component of finance leases.

Table C: Unspent departmental annual appropriations (recoverable GST exclusive)
Authority 2013
$
2012
$
DEPARTMENTAL
Appropriation Act (No. 1) 2004/05
Appropriation Act (No. 1) 2005/06 729,000
Appropriation Act (No. 1) 2006/07 360,776
Appropriation Act (No. 1) 2007/08 285,335
Appropriation Act (No. 1) 2008/09 243,249
Appropriation Act (No. 1) 2009/10
Appropriation Act (No. 1) 2010/11 175,937 194,315
Appropriation Act (No. 1) 2011/12 1,701,933 1,101,782
Appropriation Act (No. 1) 2012/13 1,184,226
Total 3,062,096 2,914,457

Note 16: Compensation and Debt Relief

2013
$
2012
$
Compensation and Debt Relief – Departmental
No ‘Act of Grace’ payments were expended during the reporting period.
No waivers of amounts owing to the Australian Government were made pursuant to subsection 34(1) of the Financial Management and Accountability Act 1997.
No payments were provided under the Compensation for Detriment caused by Defective Administration (CDDA) Scheme during the reporting period.
No ex-gratia payments were provided for during the reporting period.
No payments were provided in special circumstances relating to APS employment pursuant to section 73 of the Public Service Act 1999 (PS Act) during the reporting period.

Note 17: Reporting of outcomes

The Inspector-General of Taxation has one outcome:

‘Improved tax administration through community consultation, review, and independent advice to Government’.

Note 17A: Net cost of outcome delivery

2013
$
2012
$
Departmental
Expenses 2,601,497 2,341,984
Own-source income 4,746
Gains 32,800 25,000
Net cost of outcome delivery 2,568,697 2,312,238

Note 17B: Major classes of departmental expenses, income, assets and liabilities by outcome

Outcome 1 2013
$
2012
$
Expenses
Employees 1,645,744 1,402,220
Suppliers 879,441 819,781
Finance costs 1,657 2,754
Depreciation and amortisation 74,410 116,168
Write down of assets 245 1,061
Total 2,601,497 2,341,984
Income
Income from Government 2,622,000 2,686,000
Other revenue 4,746
Gains 32,800 25,000
Total 2,654,800 2,715,746
Assets
Financial assets:
Cash and cash equivalents 98,052 37,479
Receivables 3,071,018 2,939,221
Non-financial assets:
Property, plant and equipment 188,726 108,008
Other non-financial assets 22,900 26,877
Total 3,380,696 3,111,585
Liabilities
Payables 66,307 76,934
Provisions 389,472 340,560
Total 455,779 417,494

Outcome 1 is described in Note 1.1. Net costs shown include intra-government costs that are eliminated in calculating the actual Budget outcome.

Note 18: Net Cash Appropriation Arrangements

2013
$
2012
$
Total comprehensive income less depreciation/amortisation expenses previously funded through revenue appropriations1 266,191 489,930
Plus: depreciation/amortisation expenses previously funded through revenue appropriation (74,410) (116,168)
Total comprehensive income – as per the Statement of Comprehensive Income 191,781 373,762

1. 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.

Note 19: Constitutional matters — section 83 advice

Compliance with Statutory Conditions for Payments from Consolidated Revenue Fund

During 2012-13 additional legal advice was received that indicated there could be breaches of Section 83 under certain circumstances with payments for long service leave, goods and services tax and payments under determinations of the Remuneration Tribunal. The agency will review its processes and controls over payments for these items to minimise the possibility for future breaches as a result of these payments. The agency has determined that there is a low risk of the certain circumstances mentioned in the legal advice applying to the agency. The agency is not aware of any specific breaches of Section 83 in respect of these items.