The Inspector-General of Taxation

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

In our opinion, the attached financial statements for the year ended 30 June 2016 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.

  • [SIGNED]


    Ali Noroozi
    Inspector-General of Taxation
    20 September 2016

  • [SIGNED]


    Andrew McLoughlin
    Chief Finance Officer
    20 September 2016

 

Statement of Comprehensive Income
for the period ended 30 June 2016

Notes 2016
$
2015
$
NET COST OF SERVICES      
Expenses      
Employee benefits 1.1A 3,089,685 1,774,824
Suppliers 1.1B 2,600,420 866,787
Depreciation and amortisation   245,571 43,261
Finance costs 1.1C - 5,814
Total Expenses   5,935,676 2,690,686
       
LESS:      
Own-source income      
Own-source revenue      
ANAO audit services received free of charge   60,000 60,000
Total own-source revenue   60,000 60,000
Gains      
Resources received free of charge   - 39,368
Gains from reversal of make-good   - 99,232
Total gains   - 138,600
Total own-source income   60,000 198,600
Net cost of services   (5,875,676) (2,492,086)
       
Revenue from Government 1.2A 6,503,000 2,788,000
Surplus/(Deficit) attributable to the Australian Government   627,324 295,914
       
OTHER COMPREHENSIVE INCOME      
Items not subject to subsequent reclassification to net cost of services      
Changes in asset revaluation reserves   15,126 (55,524)
Total other comprehensive income   15,126 (55,524)
       
Total comprehensive income/(loss) attributable to the Australian Government   642,450 240,390

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

Statement of Financial Position
as at 30 June 2016

Notes 2016
$
2015
$
ASSETS      
Financial assets      
Cash and cash equivalents   109,063 113,832
Trade and other receivables 2.1A 5,417,003 4,216,071
Total financial assets   5,526,066 4,329,903
Non-financial assets      
Property, plant and equipment 2.2A 169,050 13,664
Leasehold improvements 2.2A 169,276 44,948
Intangibles 2.2A 248,698 247,561
Other non-financial assets 2.2B - 25,135
Total non-financial assets   587,024 331,308
Total assets   6,113,090 4,661,221
       
LIABILITIES      
Payables      
Suppliers 2.3A 35,192 71,306
Other payables 2.3B 10,923 57,780
Total payables   46,115 129,086
Provisions      
Employee provisions 3.1A 1,035,185 489,466
Other provisions 2.4A 119,681 -
Total provisions   1,154,866 489,466
Total liabilities   1,200,981 618,552
Net assets   4,912,109 4,042,659
       
EQUITY      
Contributed equity   1,202,573 975,573
Reserves   397,535 382,409
Retained surplus   3,312,001 2,684,677
Total equity   4,912,109 4,042,659

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

Accounting Policy

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.

 

Statement of Changes in Equity
for the period ended 30 June 2016

2016 2015
  $ $
CONTRIBUTED EQUITY    
Opening balance    
Balance carried forward from previous period 975,573 137,573
Adjusted opening balance 975,573 137,573
Transactions with owners    
Contributions by owners    
Departmental capital budget appropriation 29,000 30,000
Equity injection appropriation 198,000 808,000
Total transactions with owners 227,000 838,000
Closing balance as at 30 June 1,202,573 975,573
RETAINED EARNINGS    
Opening balance    
Balance carried forward from previous period 2,684,677 2,354,472
Adjustment to prior year entitlements - 34,291
Adjusted opening balance 2,684,677 2,388,763
Comprehensive income    
Surplus/(deficit) for the period 627,324 295,914
Total comprehensive income 627,324 295,914
Closing balance as at 30 June 3,312,001 2,684,677
ASSET REVALUATION RESERVES    
Opening balance    
Balance carried forward from previous period 382,409 437,933
Adjusted opening balance 382,409 437,933
Comprehensive income    
Other comprehensive income    
Revaluations 15,126 (55,524)
Total comprehensive income 15,126 (55,524)
Closing balance as at 30 June 397,535 382,409
TOTAL EQUITY    
Opening balance    
Balance carried forward from previous period 4,042,659 2,929,978
Adjustment to prior year entitlements - 34,291
Adjusted opening balance 4,042,659 2,964,269
Comprehensive income    
Surplus/(deficit) for the period 627,324 295,914
Other comprehensive income    
Revaluations 15,126 (55,524)
Total comprehensive income 642,450 240,390
Transactions with owners    
Contributions by owners    
Departmental capital budget appropriation 29,000 30,000
Equity injection appropriation 198,000 808,000
Total transactions with owners 227,000 838,000
Closing balance as at 30 June 4,912,109 4,042,659

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 2016

    2016 2015
  Notes $ $
OPERATING ACTIVITIES      
Cash received      
Appropriations   5,018,018 2,528,902
s74 receipts received   494,365 644
Other cash received   6,058 -
Net GST received   98,738 56,829
Total cash received   5,617,179 2,586,375
Cash used      
Employees   2,860,584 1,709,107
Suppliers   2,767,051 808,455
Total cash used   5,627,635 2,517,562
Net cash from (used by) operating activities 4.3 (10,456) 68,813
       
INVESTING ACTIVITIES      
Cash used      
Purchase of property, plant and equipment   511,296 256,098
Total cash used   511,296 256,098
Net cash from (used by) investing activities   (511,296) (256,098)
       
FINANCING ACTIVITIES      
Cash received      
Contributed equity   516,983 256,098
Total cash received   516,983 256,098
Net cash from (used by) financing activities   516,983 256,098
       
Net increase (decrease) in cash held   (4,769) 68,813
Cash at the beginning of the reporting period   113,832 45,019
Cash at the end of the reporting period   109,063 113,832

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

 

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 IGT 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 investigation of complaints, conducting reviews, public reporting and independent advice to Government and its relevant entities'.

Entity 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 entity in its own right.

The Inspector-General of Taxation Act 2003 as amended (the Act) established an independent statutory entity to:

  • improve the administration of taxation laws for the benefit of all taxpayers, tax practitioners and other entities; and
  • provide independent advice to the government on the administration of taxation laws; and
  • investigate complaints by taxpayers, tax practitioners or other entities about the administration of taxation laws; and
  • investigate administrative action taken under taxation laws, including systemic issues, that affect taxpayers, tax practitioners or other entities.

The IGT's departmental activities are identified under Outcome 1 by one program, Program 1.1 Inspector-General of Taxation. IGT has no administered activities.

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

Basis of preparation of the financial statements

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

The financial statements and notes have been prepared in accordance with:

  • Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FPR) for reporting periods ending on or after 1 July 2015; and
  • Australian Accounting Standards 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 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.

Significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, 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 FFR 24 using the shorthand method.
  • the employee provision has been determined with reference to standard parameters provided by the Department of Finance, expected tenure of staff, future salary movements and the future discount rates.
  • the fair value of leasehold improvements and 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.

Changes in 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. There have been no new accounting standards, amendments to standards and interpretations issued prior to the signing of the statement and were applicable to the current period have had a material effect on the IGT's financial statements.

Future Australian Accounting Standard requirements

The following revised standards were issued by the Australian Accounting Standards Board prior to the signing of the statement by the accountable authority and chief finance officer, which are expected to have a material impact on the entity's financial statements for the future reporting period(s):

Standard Application date for the entity Nature of impending changes in accounting policy and likely impact on initial application
AASB 124 – Related Party Disclosures & AASB 1049 – Whole of Government and General Government Sector Financial Reporting 1 July 2016 Extending related party disclosures to not-for-profit public sector entities. The amendments are applied prospectively as of the beginning of the annual reporting period in which the standard is initially applied.
AASB 9 – Financial Instruments 1 January 2018 Key changes are: - requirements for impairment of financial assets based on a three-stage 'expected loss' approach; - addition of a third measurement category for debt instruments 'fair value through other comprehensive income'; - expansion of disclosures required in relation to credit risk.
AASB 16 – Leases 1 January 2019 Requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months. Leases will be initially measured on a present value basis and includes non-cancellable lease payments.

Taxation

The entity 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.

Breach of Section 83 of the Constitution

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. The Department of Finance provided information to all agencies in 2011 regarding the need for risk assessments in relation to compliance with statutory conditions on payments from special appropriations, including special accounts.

The IGT has continued to review its exposure to risks of not complying with statutory conditions on payments from appropriations and testings have identified no payments were made in contravention of section 83 of the Constitution.

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 year ended 2016

1.1. Expenses

2016 2015
  $ $
Note 1.1A: Employee Benefits    
Wages and salaries 2,310,978 1,376,193
Superannuation:    
Defined contribution plans 209,908 102,992
Defined benefit plans 136,489 96,627
Leave and other entitlements 414,621 192,315
Other employee expenses 17,689 6,697
Total employee benefits 3,089,685 1,774,824

Accounting Policy

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

 

2016 2015
  $ $
Note 1.1B: Suppliers    
Goods and services supplied or rendered    
Consultants, contractors and secondees 247,450 42,314
Travel 128,673 86,107
Service level agreement with Treasury 509,944 247,885
Fees - Audit, Membership and Other 72,372 66,525
Property operating expenses 171,305 20,013
Advertising and printing 13,979 4,905
Seminars and conferences 69,939 19,219
Subscriptions and periodicals 12,393 9,485
Information communication technology 709,326 40,875
Other 320,158 28,000
Total goods and services supplied or rendered 2,255,539 565,328
     
Goods supplied 333,551 13,330
Services rendered 1,921,988 551,998
Total goods and services supplied or rendered 2,255,539 565,328
     
Other suppliers    
Operating lease rentals    
External parties    
Minimum lease payments 329,497 293,263
Workers compensation expenses 15,384 8,196
Total other suppliers 344,881 301,459
Total suppliers 2,600,420 866,787
     

 

Lease commitments

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within 1 year 490,012 27,642
Between 1 to 5 years 122,503 -
Total operating lease commitments 612,515 27,642

Accounting Policy

Leases

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

The IGT does not currently hold any assets under finance lease.

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

 

Note 1.1C: Finance costs    
Unwinding of discount - 5,814
Total finance costs - 5,814

Accounting Policy

All borrowing costs are expensed as incurred.

 

1.2. Income

  2016 2015
  $ $
Note 1.2A: Revenue from Government    
Appropriations    
Departmental appropriations 6,503,000 2,788,000
Total revenue from Government 6,503,000 2,788,000
     

Accounting Policy

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 entity 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.

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 entity 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.

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

2016 2015
  $ $
Note 2.1A: Trade and other receivables    
Appropriations Receivable:    
From operational funding 5,051,307 3,566,324
From capital funding 351,919 641,902
Total appropriations receivable 5,403,226 4,208,226
     
Other receivables:    
GST receivable from the Australian Taxation Office 13,777 7,845
Total other receivables 13,777 7,845
     
Total trade and other receivables (gross) 5,417,003 4,216,071
     
Total trade and other receivables (net)1 5,417,003 4,216,071
     

1. All receivables are expected to be recovered within 12 months.

2.2. Non-Financial Assets

Note 2.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles (2016)
         
  Plant and equipment Leasehold improvements Computer software Total
  $ $ $ $
As at 1 July 2015        
Gross book value 34,382 63,304 256,098 353,784
Accumulated depreciation and impairment (20,718) (18,356) (8,537) (47,611)
Total as at 1 July 2015 13,664 44,948 247,561 306,173
Additions        
By purchase 198,790 258,193 54,313 511,296
Revaluations 20,810 (5,684) - 15,126
Depreciation expense (64,214) (125,792) (55,565) (245,571)
Transfers - (2,389) 2,389 -
Total as at 30 June 2016 169,050 169,276 248,698 587,024
         
Total as at 30 June 2016 represented by:        
Gross book value 169,050 169,276 315,572 653,898
Accumulated depreciation and impairment - - (66,874) (66,874)
Total as at 30 June 2016 169,050 169,276 248,698 587,024

No indicators of impairment were found for leasehold improvements, plant and equipment or computer software.
No leasehold improvements, 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 at Note 5.3.

Note 2.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles (2015)
         
  Plant and equipment Leasehold improvements Computer software Total
  $ $ $ $
As at 1 July 2014        
Gross book value 34,382 156,274 - 190,656
Accumulated depreciation and impairment (14,023) (27,773) - (41,796)
Total as at 1 July 2014 20,359 128,501 - 148,860
Additions        
By purchase - - 256,098 256,098
Revaluations - (55,524) - (55,524)
Depreciation expense (6,695) (28,029) (8,537) (43,261)
Total as at 30 June 2015 13,664 44,948 247,561 306,173
         
Total as at 30 June 2014 represented by:        
Gross book value 34,382 63,304 256,098 353,784
Accumulated depreciation and impairment (20,718) (18,356) (8,537) (47,611)
Total as at 30 June 2015 13,664 44,948 247,561 306,173

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 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 entity's accounts immediately prior to the restructuring.

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 are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations were 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. A fair value review was undertaken by the independent valuer at 30 June 2016 who confirmed that the carrying amount of non-financial assets has not materially changed since the last valuation.

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 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 entity 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:

  2016 2015
Property, plant and equipment 1-15 years 3-10 years
Leasehold improvements Lease term Lease term
Impairment

All assets were assessed for impairment as at 30 June 2016. 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 2016 (2015: 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 (2015: 5 years).

All software assets were assessed for indications of impairment at 30 June 2016. No indicators of impairment were identified as at 30 June 2016 (2015: none).

2016 2015
  $ $
Note 2.2B: Other non-financial assets    
Prepayments - 25,135
Total other non-financial assets - 25,135
     

2.3. Payables

2016 2015
  $ $
Note 2.3A: Suppliers    
Trade creditors 35,192 71,306
Total suppliers 35,192 71,306
     
Note 2.3B: Other payables    
Wages and salaries 9,420 49,067
Superannuation 1,503 6,535
Rent payable - 2,178
Total other payables1 10,923 57,780
     

Settlement is usually made within 30 days.
1. All payables are expected to be settled within 12 months.

2.4. Provisions

2016 2015
  $ $
Note 2.4A: Other provisions    
Provision for lease incentive 119,681 -
Total other provisions 119,681 -
     
Other provisions expected to be settled    
No more than 12 months 95,745 -
More than 12 months 23,936  
Total other provisions 119,681 -
Provision for restoration obligation    
As at 1 July 2015 - 93,418
Re-statement of 'Make Good' - (99,232)
Unwinding of discount or change in discount rate - 5,814
Total as at 30 June 2016 - -

1. Provision for lease incentive will be spread evenly over the remaining life of the leased premises.

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

2016 2015
  $ $
Note 3.1A: Employee provisions    
Leave 1,035,185 489,466
Total employee provisions 1,035,185 489,466
     
Employee provisions expected to be settled    
No more than 12 months 464,092 216,375
More than 12 months 571,093 273,091
Total employee provisions 1,035,185 489,466
     

Accounting Policy

Employee benefits

Liabilities for 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 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 entity 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 entity'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 entity 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 entity 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 entity 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 entity 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. Senior Management Personnel Remuneration

  2016 2015
  $ $
Short-term employee benefits    
Salary 819,690 782,219
Allowances 796 1,814
Total short-term employee benefits 820,486 784,033
     
Post-employment benefits    
Superannuation 96,961 92,289
Total post-employment benefits 96,961 92,289
     
Other long-term benefits    
Annual leave accrued 97,254 69,314
Long-service leave 33,913 39,703
Total other long-term benefits 131,167 109,017
     
Total senior executive remuneration expenses 1,048,614 985,339

The total number of senior management personnel that are included in the above table is three (2015: 3).

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 2016          
  Appropriation Act PGPA Act      
  Annual Appropriation Section 74 Receipts Section 75 Transfers Total appropriation Appropriation applied in 2016 (current and prior years) Variance1
  $ $ $ $ $ $
Departmental            
Ordinary annual services 6,503,000 494,365 - 6,997,365 (5,517,151) 1,480,214
Capital Budget 29,000 - - 29,000 (90,000) (61,000)
Other Services            
Equity 198,000 - - 198,000 (426,983) (228,983)
Total departmental 6,730,000 494,365 - 7,224,365 (6,034,134) 1,190,231

Notes:
1. Variance due to lower than anticipated expenditure relating to the Tax Complaints Handling Function.
Prior year capital budget and equity funds were applied in 2015-16.

Annual appropriations for 2015            
  Appropriation Act PGPA Act      
  Annual Appropriation Section 74 Receipts Section 75 Transfers Total appropriation Appropriation applied in 2015 (current and prior years) Variance
  $ $ $ $ $ $
Departmental            
Ordinary annual services 3,329,000 644 - 3,329,644 (2,460,089) 869,555
Capital Budget 30,000 - - 30,000 - 30,000
Other Services            
Equity 808,000 - - 808,000 (256,098) 551,902
Total departmental 4,167,000 644 - 4,167,644 (2,716,187) 1,451,457

Notes:
1. Variance reflects the permanently withheld funding and lower than anticipated expenditure concerning the transfer of the Tax Complaints Handling function from the Commonwealth Ombudsman.
2. The original budget provided for increased funding ($0.7 million) associated with the transfer of the Tax Complaints Handling function from the Commonwealth Ombudsman. As at 30 June 2015, the legislation required to effect this change had not passed Parliament and as a result, the associated funding was permanently withheld ($0.5 million).

Note 4.1B: Unspent annual appropriations
  2016 2015
$ $
Departmental    
Appropriation Act (No. 1) 2012-13 - 30,000
Appropriation Act (No. 1) 2013-14 2 1,000 1,477,226
Appropriation Act (No. 1) 2014-151,3 541,000 2,803,930
Appropriation Act (No. 3) 2014-15 - 551,902
Appropriation Act (No. 6) 2014-15 124,919 -
Appropriation Act (No. 1) 2015-16 1 5,159,370 -
Appropriation Act (No. 1) 2015-16 (DCB) 29,000 -
Appropriation Act (No. 2) 2015-16 198,000 -
Total departmental 6,053,289 4,863,058

1. Cash held amounts (2016: $109,063, 2015:$113,832) are included in Appropriation Act (No. 1) for the relevant year.
2. Includes quarantined funds of $1,000.
3. Includes funds of $541,000 that have been permanently withheld under s51 of the PGPA Act.

4.2. Net Cash Appropriation Arrangements

2016 2015
  $ $
Total comprehensive income (loss) less depreciation/amortisation expenses previously funded through revenue appropriations and other comprehensive income1 888,021 283,651
Plus: depreciation/amortisation expenses previously funded through revenue appropriation (245,571) (43,261)
Total comprehensive income (loss) - as per the Statement of Comprehensive Income 642,450 240,390

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.

4.3 Cash Flow Reconciliation

2016 2015
  $ $
Reconciliation of cash and cash equivalents as per    
Statement of Financial Position to Cash Flow Statement    
     
Cash and cash equivalents as per:    
Cash flow statement 109,063 113,832
Statement of financial position 109,063 113,832
Discrepancy - -
     
Reconciliation of net cost of services to net cash from operating activities:    
Net cost of services (5,875,676) (2,492,086)
Add revenue from Government 6,503,000 2,788,000
     
Adjustments for non-cash items    
Depreciation / amortisation 245,571 43,261
Finance costs - 5,814
Re-measurement of lease payable - 47,555
     
Movements in assets and liabilities    
Assets    
(Increase) / decrease in net receivables (1,490,915) (258,416)
(Increase) / decrease in prepayments 25,135 12,709
Liabilities    
Increase / (decrease) in employee provisions 545,719 61,740
Increase / (decrease) in other payables (46,857) (43,579)
Increase / (decrease) in supplier payables (36,114) 3,047
increase / (decrease) in other provisions 119,681 (99,232)
Net cash from / (used by) operating activities (10,456) 68,813

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 2016 (2015: $0).

Accounting Policy

Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position 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.

5.2. Financial Instruments

2016 2015
  $ $
Note 5.2A: Categories of Financial Instruments    
Financial Assets    
Loans and receivables    
Cash and cash equivalents 109,063 113,832
Total loans and receivables 109,063 113,832
Total financial assets 109,063 113,832
     
Financial Liabilities    
Liabilities at amortised cost    
Payables - suppliers 35,192 71,306
Total liabilities at amortised cost 35,192 71,306
Total financial liabilities 35,192 71,306
   

There was no interest income from financial assets not at fair value through profit and loss in 2016
(2015: nil).

Accounting Policy

Financial assets

The IGT classifies its financial assets as loans and receivables.

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.

Financial assets held at amortised cost — If there is objective evidence that an impairment loss has been incurred for loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.

Accounting Policy

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. These 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).

Note 5.2B: Fair value of financial instruments    
    Carrying Fair Carrying Fair
    amount value amount value
    2016 2016 2015 2015
  Notes $ $ $ $
Financial Assets          
Cash and cash equivalents   109,063 109,063 113,832 113,832
Total   109,063 109,063 113,832 113,832
           
Financial Liabilities          
Suppliers payable 2.3A 35,192 35,192 71,306 71,306
Total   35,192 35,192 71,306 71,306

Note 5.2C: Credit risk          
           
The agency is exposed to minimal credit risk as financial assets only include cash and trade receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of trade receivables (2016: $0 and 2015: $0). The agency has assessed the risk of default on payment and has made no allocations to doubtful debts in 2016 (2015: $0).
 
The following table illustrates the entity's gross exposure to credit risk, excluding any collateral or credit enhancements
        2016 2015
        $ $
Financial assets carried at amount not best representing maximum exposure to credit risk    
Cash and cash equivalents       109,063 113,832
Total financial assets carried at amount not best representing maximum exposure to credit risk 109,063 113,832
           
Financial liabilities carried at amount not best representing maximum exposure to credit risk    
Supplier payables       35,192 71,306
Total financial liabilities carried at amount not best representing maximum exposure to credit risk 35,192 71,306

Credit quality of financial instruments not past due or individually determined
as impaired          
    Not past Not past Past due Past due
    due nor due nor or or
    impaired impaired impaired impaired
    2016 2015 2016 2015
    $ $ $ $
Loans and receivables          
Cash and cash equivalents   109,063 113,832 - -
Total   109,063 113,832 - -
           
Note 5.2D: 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 mechanisms available to the agency and internal policies and procedures put in place to ensure there are appropriate resources to meet its financial obligations.
 
The agency is appropriated funding from the Australian Government. The agency manages its budgeted funds to ensure 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 2016 or 2015.
             
Maturities for non-derivative financial liabilities 2016        
  On Within 1 1 to 2 2 to 5 > 5  
  demand year years years years Total
  $ $ $ $ $ $
Liabilities at amortised cost          
Payables - suppliers - 35,192 - - - 35,192
Total - 35,192 - - - 35,192
             
Maturities for non-derivative financial liabilities 2015        
  On Within 1 1 to 2 2 to 5 > 5  
  demand year years years years Total
  $ $ $ $ $ $
Liabilities at amortised cost          
Payables - suppliers - 71,306 - - - 71,306
Total - 71,306 - - - 71,306

Note 5.2E: 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.

5.3. Fair Value Measurements

The following tables provide an analysis of assets and liabilities that are measured at fair value.  
The different levels of the fair value hierarchy are defined below.    
           
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.      
           
Note 5.3A: Fair Value Measurements, Valuation Techniques and Inputs Used  
           
  Fair value measurements at the end of the reporting period For Levels 2 and 3 fair value measurements
  2016 2015 Category
(Level 1, 2 or 3)
Valuation technique(s)1 Inputs used
  $ $
Non-financial assets          
Property, plant and equipment 28,250 - Level 2 Market Prices and other relevant information generated by market transactions involving furniture assets were considered.
Property, plant and equipment 140,800 13,664 Level 3 Depreciated Replacement Cost Current prices for substitute assets. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the assets under consideration.
Leasehold improvements 169,276 44,948 Level 3 Depreciated Replacement Cost Current costs per square metre of floor area relevant to the location of the asset. Physical depreciation and obsolescence has been determined based on the term of the associated lease.
Total non-financial assets 338,326 58,612      

1. Valuations are based on advice from independent certified practicing valuers. There has been no change in this method from prior years.
2. There have been transfers of plant and equipment and leasehold improvements assets into level 2 during the year. This is due to a change in their valuation technique from depreciated replacement cost to the market approach.
3. A reconciliation of movements in leasehold improvements and plant and equipment has been included in Note 2.2A: Non-Financial Assets.

Note 5.3B: Reconciliation for recurring Level 3 fair value measurements    
       
Recurring Level 3 fair value measurements - reconciliation for assets    
  Non-financial assets
  Plant and equipment Leasehold improvements Total
  2016 2016 2016
  $ $ $
Opening balance 13,664 44,948 58,612
Purchases 155,386 124,328 279,714
Transfers out of Level 3 (28,250) - (28,250)
Closing balance 140,800 169,276 310,076
       

Accounting Policy

Fair value measurements - valuation processes

IGT engaged the service of the Australian Valuation Solutions (AVS) to conduct a detailed external valuation of all non-financial assets at 30 June 2016 and has relied upon those outcomes to establish carrying amounts. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from the fair value. Comprehensive valuations are carried out at least once every three years. AVS has provided written assurance to IGT that the models developed are in compliance with AASB 13.

Fair Value Measurement

The entity deems transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period.

6. Other Information

6.1. Reporting of Outcomes

Outcome 1
  2016 2015
  $ $
Departmental    
Expenses 5,935,676 2,690,686
Own-source income 60,000 60,000
Gains - 138,600
Net cost/(contribution) of outcome delivery 5,875,676 2,492,086
Assets 6,113,090 4,661,211
Liabilities 1,200,981 618,552
Net assets 4,912,109 4,042,659

Net costs shown include intra-government costs that are eliminated in calculating the actual Budget outcome

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 2016      
  Actual Budget estimate
    Original Variance
  2016 2016 2016
  $ $ $
NET COST OF SERVICES      
Expenses      
Employee benefits 3,089,685 5,207,000 (2,117,315)
Suppliers 2,600,420 1,296,000 1,304,420
Depreciation and amortisation 245,571 29,000 216,571
Total Expenses 5,935,676 6,532,000 (596,324)
       
LESS:      
Own-Source Income      
Own-source revenue      
ANAO audit services received free of charge 60,000 - 60,000
Total own-source revenue 60,000 - 60,000
Total own-source income 60,000 - 60,000
Net cost of services (5,875,676) (6,532,000) 656,324
       
Revenue from Government 6,503,000 6,503,000 -
Surplus / (Deficit) attributable to the Australian Government 627,324 (29,000) 656,324
       
OTHER COMPREHENSIVE INCOME      
Items not subject to subsequent reclassification to net cost of services      
Changes in asset revaluation reserves 15,126 - 15,126
Total other comprehensive income 15,126 - 15,126
       
Total comprehensive income / (loss) attributable to the Australian Government 642,450 (29,000) 671,450

Explanations of major variances Affected line items
The original budget provided for increased funding associated with the Tax Complaints Handling function. A phased approach to implementing the function resulted in lower than anticipated employee numbers as at 30 June 2016. Employee benefits
 
Increased supplier expenditure in 2015-16 related to a focus on enhancing IGT's capabilities and operational efficacy throughout the year. Supplier expenses
 
Increased expenditure on infrastructure to implement and operate the tax complaints handling function resulted in higher than anticipated depreciation for the year. Depreciation and amortisation

Statement of Financial Position      
as at 30 June 2016      
  Actual Budget estimate
    Original Variance
  2016 2016 2016
  $ $ $
ASSETS      
Financial assets      
Cash and cash equivalents 109,063 45,000 64,063
Trade and other receivables 5,417,003 3,376,000 2,041,003
Total financial assets 5,526,066 3,421,000 2,105,066
Non-financial assets      
Land and Buildings 169,276 217,000 (47,724)
Infrastructure, plant and equipment 169,050 937,000 (767,950)
Intangibles 248,698 - 248,698
Other non-financial assets - 38,000 (38,000)
Total non-financial assets 587,024 1,192,000 (604,976)
Total assets 6,113,090 4,613,000 1,500,090
       
LIABILITIES      
Payables      
Suppliers 35,192 68,000 (32,808)
Other payables 10,923 36,000 (25,077)
Total payables 46,115 104,000 (57,885)
Provisions      
Employee provisions 1,035,185 480,000 555,185
Other provisions 119,681 93,000 26,681
Total provisions 1,154,866 573,000 581,866
Total liabilities 1,200,981 677,000 523,981
Net assets 4,912,109 3,936,000 976,109
       
EQUITY      
Contributed equity 1,202,573 1,201,000 1,573
Reserves 397,535 438,000 (40,465)
Retained surplus 3,312,001 2,297,000 1,015,001
Total equity 4,912,109 3,936,000 976,109

Explanations of major variances Affected line items
The original budget provided for increased funding associated with the Tax Complaints Handling function. A phased approach to implementing the function, along with the higher than expected operating surplus, resulted in appropriation receivables being higher than expected for 2015-16. Trade and other receivables
Retained surplus
   
The value of infrastructure, plant and equipment is less than budgeted due to lower than anticipated expenditure on office fitout following the commencement of a new lease in 2015-16. Infrastructure, plant and equipment
   
Employee provisions were higher than budgeted as a result of changes in the bond rate. Employee provisions

Cash Flow Statement      
for the period ended 30 June 2016      
  Actual Budget estimate
    Original Variance
  2016 2016 2016
  $ $ $
       
OPERATING ACTIVITIES      
Cash received      
Appropriations 5,018,018 6,503,000 (1,484,982)
Other cash received 500,423 - 500,423
Net GST received 98,738 - 98,738
Total cash received 5,617,179 6,503,000 (885,821)
Cash used      
Employees 2,860,584 5,207,000 (2,346,416)
Suppliers 2,767,051 1,296,000 1,471,051
Total cash used 5,627,635 6,503,000 (875,365)
Net cash from (used by) operating activities (10,456) - (10,456)
       
INVESTING ACTIVITIES      
Cash used      
Purchase of plant and equipment 511,296 227,000 284,296
Total cash used 511,296 227,000 284,296
Net cash from (used by) investing activities (511,296) (227,000) (284,296)
       
FINANCING ACTIVITIES      
Cash received      
Contributed equity 516,983 - 516,983
Capital injection - 227,000 (227,000)
Total cash received 516,983 227,000 289,983
Net cash from (used by) financing activities 516,983 227,000 289,983
       
Net increase (decrease) in cash held (4,769) - (4,769)
Cash at the beginning of the reporting period 113,832 45,000 68,832
Cash at the end of the reporting period 109,063 45,000 64,063

Explanations of major variances Affected line items
The original budget provided for increased funding associated with the Tax Complaints Handling function. A phased approach to implementing the function resulted in higher than anticipated appropriation receivable as at 30 June 2016. Appropriations
Employees
   
Other cash received was higher than budgeted due to the receipt of a lease incentive contribution and the transfer of entitlements for employees who commenced with IGT in
2015-16.
Other cash received
   
Increased supplier expenditure in 2015-16 related to a focus on enhancing IGT's capabilities and operational efficacy throughout the year. Suppliers
   
Prior year equity reserves were used to fund increased purchases of plant and equipment in 2015-16. Net cash from (used by) investing activities
Net cash from (used by) financing activities