Notes to the financial statements
Note 9: Net revaluation increases/(decreases)
General Government
Australian Government
2015
2014
2015
2014
$m
$m
$m
$m
Financial assets
Equity investments
Non-financial assets
Land
Buildings
Other infrastructure, plant and equipment
Heritage and cultural assets
Provision for restoration, decommissioning and
makegood
Total non-financial assets
Total revaluation increases/(decreases)
116
3,201
7,679
383
282
679
272
169
518
496
139
260
239
638
329
107
518
498
230
244
239
9
1,647
24
1,158
9
1,601
24
1,235
4,848
8,837
1,984
1,517
Notes to the financial statements
Note 10: Reconciliation of cash
Cash and deposits
Cash includes: cash at bank and on hand, short term deposits at call and investments
in short-term money market instruments that are used in the cash management
function on a day-to-day basis, net of outstanding bank overdrafts. Cash and
cash equivalents includes notes and coins held and any 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. Deposits at call,
which are held for longer-term investment purposes, are classified as investments.
Cash is recognised at its nominal amount.
A: Reconciliation of net operating balance to net cash flows from operating
activities
General Government Australian Government
2015
2014
2015
2014
$m
$m
$m
$m
(37,415)
(40,587)
(40,821)
(34,259)
Net operating balance
less Revenues not providing cash
Other
Total revenues not providing cash
plus Expenses not requiring cash
Increase in employee entitlements
Depreciation/amortisation expense
Mutually agreed w ritedow ns
Other non-cash expenses
Total expenses not requiring cash
plus Cash provided by w orking capital items
(Increase)/Decrease in receivables
(Increase)/Decrease in inventories
(Increase)/Decrease in other financial assets
(Increase)/Decrease in other non-financial
assets
Increase/(Decrease) in benefits, subsidies
and grants payable
Increase/(Decrease) in supplier payables
Increase/(Decrease) in other
provisions and payables
Total cash provided/(used) by w orking
capital item s
equals Net cash from /(used by) operating
activities
745
745
554
554
579
579
384
384
8,382
6,804
1,857
1,881
18,924
16,301
6,340
2,627
(6,867)
18,401
8,636
8,099
1,857
1,882
20,474
16,500
7,422
2,477
(6,863)
19,536
(6,067)
(489)
1,280
(8,858)
(474)
99
(3,668)
(498)
1,200
(7,469)
(491)
154
(1,479)
(319)
(1,472)
(363)
(189)
2,417
(2,410)
(506)
(189)
2,098
(2,410)
(447)
(967)
(1,760)
(1,412)
(1,347)
(5,494)
(14,228)
(3,941)
(12,373)
(24,730)
(36,968)
(24,867)
(27,480)
B: Reconciliation of cash at the end of the reporting period as shown in
the cash flow statement to the related items in the balance sheet.
Cash at the end of the reporting period as shown in the Australian Government and
GGS cash flow statement is equal to ‘cash and deposits’ as reported in the Australian
Government and GGS balance sheet.
117
as at 30 June 2015
General
government
2015
2014
$m
$m
118
Capital com m itm ents
Land and buildings
Infrastructure, plant and equipment
Specialist military equipment
Investments
Other capital commitments
Total capital com m itm ents
Other com m itm ents
Operating leases
Grant commitments
Other commitments
Total other com m itm ents
Total com m itm ents
less Commitments receivable
Net com m itm ents by type
Capital - One year or less
Capital - From one to five years
Capital - Over five years
Operating leases - One year or less
Operating leases - From one to five years
Operating leases - Over five years
Other - One year or less
Other - From one to five years
Other - Over five years
Net com m itm ents by m aturity
Public non-financial
corporations
2015
2014
$m
$m
Public financial
corporations
2015
2014
$m
$m
Australian
Government
2015
2014
$m
$m
1,948
853
9,848
33,362
1,309
47,320
1,480
1,218
10,252
33,747
986
47,683
34
7,652
1
7,687
96
1,676
1,772
82
12
94
37
2
39
1,979
8,570
9,848
17,047
1,322
38,766
1,568
2,923
10,252
12,665
988
28,396
17,285
109,189
50,621
177,095
224,415
1,834
222,581
17,489
101,500
39,082
158,071
205,754
4,527
201,227
1,711
2,423
4,134
11,821
16,898
(5,077)
1,658
4,384
6,042
7,814
21,682
(13,868)
1
68
69
163
14
149
342
1
343
382
10
372
18,908
109,189
52,698
180,795
219,561
2,091
217,470
19,398
101,500
43,165
164,063
192,459
4,774
187,685
30,338
16,581
393
47,312
2,323
6,904
5,980
15,207
52,511
97,351
10,200
160,062
222,581
22,340
23,164
1,036
46,540
2,268
6,630
6,561
15,459
48,207
81,252
9,769
139,228
201,227
1,689
2,410
3,587
7,686
286
714
705
1,705
(7,001)
(7,412)
(55)
(14,468)
(5,077)
1,539
233
1,772
241
700
707
1,648
(3,902)
(14,333)
947
(17,288)
(13,868)
60
33
93
(2)
(10)
(2)
(14)
1
69
70
149
38
2
40
45
155
137
337
(2)
(3)
(5)
372
24,246
10,548
3,980
38,774
2,607
7,609
6,683
16,899
53,328
98,371
10,098
161,797
217,470
18,716
7,517
1,036
27,269
2,554
7,485
7,405
17,444
49,464
83,884
9,624
142,972
187,685
Notes to the financial statements
Note 11: Commitments
Commitments are obligations or undertakings to make future payments to other entities that exist at the end of the reporting period
but which have not been recognised as liabilities in the balance sheet. The above does not include commitments for grants payable to
the states and territories under the Federal Financial Relations Act 2009 (for the current and comparative years). The budgeted
information for payment of grants to states and territories can be found in Budget Paper No. 3.
Operating leases comprise the following:
Nature of lease
General description of leasing arrangement
Leases for computer
equipment
Most entities lease computer equipment and software.
Computer leases are generally for three to five years with an option to renew for one to two further periods of two to three years each. In
some cases there are no renewal or purchase options available to the agencies.
Leases are effectively non-cancellable. No contingent rentals exist.
Leases for office
accommodation
Entities may lease office accommodation from parties outside the Australian Government.
Leases for office accommodation generally range from one to 15 years (although they can be longer). They may be extended for up to
three to five years from the originally specified expiry date. In some cases there are no renewal or purchase options available to the entities.
119
Leases are effectively non-cancellable.
In most cases lease payments are subject to increases in accordance with terms as negotiated under the lease (generally subject to annual
increase in accordance with upwards movements in the consumer price index, a set annual increase agreed to in the lease or an
annual/bi-annual review).
Most entities lease motor vehicles as part of the senior executive officers’ remuneration packages and also for general office use.
Leases for office
equipment
Most entities lease office equipment.
Vehicle leases are generally for a minimum period of three months and typically extend from two to four years. They may be extended for up
to three months from the originally specified expiry date. In some cases there are no renewal or purchase options available to the agencies.
Leases are effectively non-cancellable. No contingent rentals exist. Lease payments are fixed for the term of the lease.
Office equipment leases are generally for three to five years. In some cases there are no renewal or purchase options available to the
agencies. Leases are effectively non-cancellable. No contingent rentals exist.
In some cases there are additional costs based on usage of the equipment.
Leases for
transportation and
support facilities for
Antarctic operations
Lease payments are subject to increases in accordance with terms as negotiated under the lease.
The transportation leases generally have options for renewal. Future options not yet exercised are not included as commitments.
Leases are effectively non-cancellable and no contingent rentals exist.
Notes to the financial statements
Agreements for the
provision of motor
vehicles
Notes to the financial statements
Note 12: Risks
The assets and liabilities in the 2014-15 CFS incorporate assumptions and judgements
based on the best information available at the date of signing. The judgements and
estimates made by Australian Government entities that have the most significant
impact on the amounts recorded in the financial statements are disclosed in Note 1.
In addition to these, there are a range of factors that may influence the amounts
ultimately realised or settled in future years that relate to past events. The disclosure of
these factors increases the transparency of the risks to the Government’s financial
position. These risks have been grouped into the following disclosures:
• Contingencies (refer Note 12A) comprising possible obligations or assets arising
from past events and whose existence will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events. The Australian Government
has issued a number of guarantees, such as those relating to guarantee schemes for
the banking and financial sector, while other significant contingent liabilities relate
to uncalled capital subscriptions and credit facilities to international financial
institutions and legal cases concerning the Australian Government.
The Government has robust and conservative strategies in place to reduce its
potential exposure to these contingent liabilities.
• Financial Instrument disclosures (refer Note 12B) concerning the contractual
arrangements that the Australian Government has entered into for policy, liquidity
or financing purposes. To varying degrees, Australian Government entities are
exposed to the following risks arising from financial instruments:
– Market risk
– Credit risk; and
– Liquidity risk.
• Defined benefit superannuation plans (refer Note 12C) comprise the
Government’s largest liability after public debt. Under these schemes, the
Australian Government’s obligation is to provide the agreed benefits to current and
former employees, for which it bears actuarial risk (the risk that benefits will cost
more than expected). Given the significance of these obligations, Note 12C explains
the characteristics of the major defined benefit plans and risks associated with
them, and describes how the plans may affect the amount, timing and uncertainty
of the Australian Government’s future cash flows. The Future Fund is a long-term
investment fund that is designed to enhance the ability of the
Australian Government to discharge unfunded superannuation liabilities expected
after 2020, when an ageing population is likely to place significant pressures on the
Government’s finances.
Consistent with the amounts recognised in the financial statements, the disclosures are
based on the policies, events and arrangements up to the reporting date and do not
include policy decisions announced in the 2015-16 Budget Papers which have not yet
been enacted or implemented.
120
Note 12A: Contingencies
Reconciliation of movement in quantifiable contingent liabilities and contingent assets
Contingent Liabilities
Guarantees
Item
Opening balance as at 1 July 2013
Increases
Re-measurement
Liabilities/Assets crystallised
(a)(e)
$m
16,714
Indemnities
Uncalled shares
Claims for
Other
or capital
damages or
quantifiable
(b) subscriptions(c)
$m
$m
447
costs contingencies
$m
$m
13,251
228
7,263
Total
Net
quantifiable Contingent
Total
Contingent
liabilities
$m
assets
$m
Liabilities
$m
37,903
332
37,571
35
1
-
94
1,232
1,362
141
1,221
(77)
(89)
223
7
(1,161)
(1,097)
(20)
(1,077)
-
-
-
(43)
(1)
(44)
(248)
204
(33)
(27)
-
(105)
(1,891)
(2,056)
(2,041)
As at 30 June 2014
16,639
332
13,474
181
5,442
36,068
(15)
190
Opening balance as at 1 July 2014
16,639
332
13,474
181
5,442
36,068
190
35,878
39
3
-
81
256,453
256,576
10
256,566
1,362
(2)
2,095
(53)
829
4,231
28
4,203
-
-
-
(38)
(1)
(39)
(51)
12
(26)
(18)
-
(20)
(2,798)
(2,862)
Expired
121
Increases (d)
Re-measurement
Liabilities/Assets crystallised
(49)
(2,813)
As at 30 June 2015
128
18,014
315
15,569
151
259,925
293,974
293,846
(a) A guarantee is where one party promises to be responsible for the debt or performance obligations of another party should that party default in some way.
(b) An indemnity is a legally binding promise whereby a party undertakes to accept the risk of loss or damage another party may suffer.
(c) Uncalled shares/capital subscriptions include uncalled shares of $15,504 million (2014: $13,415 million) in the European Bank for Reconstruction and Development,
the International Bank for Reconstruction and Development, the Multilateral Investment Guarantee Agency and the Asian Development Bank.
(d) From 1 January 2015, the RBA has provided a Committed Liquidity Facility (CLF) to eligible authorised deposit-taking institutions (ADIs) as part of Australia’s
implementation of the Basel III liquidity requirements. The CLF provides ADIs with a contractual commitment to funding under repurchase agreements with the RBA,
subject to certain conditions.
(e) The comparatives have been updated to align with current year classifications and for prior period adjustments. This includes Export Finance and Insurance
Corporation guarantees which were previously recognised as remote contingencies. The reclassification more appropriately reflects the nature of the contingency.
Notes to the financial statements
Expired
35,878
Notes to the financial statements
Contingent liabilities and assets are not recognised in the balance sheet but are
disclosed in the relevant notes. They are classified as contingent due to:
• uncertainty as to the existence of a liability or asset which will only be confirmed by
the occurrence or non-occurrence of one or more future events not wholly within
the control of the Australian Government,
• an existing liability in respect of which settlement is not probable or, for a
contingent asset, where the inflow of economic benefits is not virtually certain, or
• an existing liability or asset where the amount cannot be reliably measured.
Quantifiable contingencies by sector(a)(b)
as at 30 June 2015
General
Public non-financial Public financial
Government
corporations
corporations
2015
2014
2015
2014
2015
2014
$m
$m
$m
$m
$m
$m
Quantifiable contingent liabilities
Guarantees
Indemnities
Uncalled shares/capital subscriptions
Claims for damages/costs
Other contingencies
Total quantifiable contingent liabilities
less Quantifiable contingent assets
16,506
415
15,504
113
4,901
37,439
14,827
332
13,415
174
5,441
34,189
389
39
428
389
7
1
397
1,180
66
255,024
256,270
1,423
59
1,482
117
145
12
15
-
30
Net quantifiable contingencies
37,322 34,044
416
382 256,270 1,452
(a) Refer to the Australian Government contingency disclosures for further details on quantifiable and
non-quantifiable contingencies.
(b) Transactions between sectors are included in this table but eliminated in the consolidated statements to
avoid double counting. Accordingly, the sum of the amounts for each line item may exceed or be less
than the equivalent amount in the consolidated statements.
Non-quantifiable contingencies
The following pages list unquantifiable contingencies. Those identified and reported in
the 2014-15 CFS for the first time have been identified as ‘new’.1
Further detail on individual contingencies may be included in the annual report for the
respective Commonwealth entity.
1
A number of the new contingent liabilities have previously been reported in the Statement of
Risks included in the Australian Government budget documentation.
122
Notes to the financial statements
Guarantees, indemnities and undertakings
A range of guarantees, indemnities and undertakings have been provided by
Australian Government entities in relation to various agreements, deeds and other
matters and some of these guarantees, indemnities and undertakings are unlimited.
Guarantees, indemnities and undertakings include, but are not limited to:

Emergency pest and disease response arrangements (administered by the
Department of Agriculture). The Australian Government is typically liable for
50 per cent of total government funding to respond to a disease or pest outbreak.
The Australian Government may be expected to contribute bilaterally in situations
where an incursion is not covered by a cost sharing agreement or where the
relevant industry body is not party to an agreement. The Australian Government
may also provide financial assistance to an industry party by funding its initial
share of the response. These contributions may subsequently be recovered from the
industry over a period of up to ten years, usually by a levy;

Native title agreements — access to geospatial data (administered by the
Attorney-General’s Department) whereby indemnities have been provided against
third-party claims arising from errors in the data. Under the Native Title Act 1993,
the Australian Government will be liable for any compensation found to be payable
in respect of compensable acts for which the Commonwealth is responsible;

Australian Victims of Terrorism Overseas Payment (administered by the
Attorney-General’s Department). The Australian Government manages a scheme
for providing financial assistance to Australians who are victims of an overseas
terrorist act that has been declared by the Prime Minister. Under the scheme,
Australians harmed (primary victims) and Australians who are close family
members of a person who dies as a direct result of a declared terrorist act
(secondary victims) will be able to claim payments of up to $75,000. As acts of
terrorism are unpredictable, the cost of the scheme is unquantifiable.

Additionally the Terrorism Insurance Scheme is managed by the Australian
Reinsurance Pool Corporation (ARPC) for replacement terrorism insurance
covering damage to commercial property including associated business
interruption and public liability under the Terrorism Insurance Act 2003. The
Australian Government guarantees to pay any liabilities of the ARPC, but the
Treasurer must declare a reduced payout rate to insured parties if the Australian
Government’s liability would otherwise exceed $10 billion. A declared terrorist
incident was announced by the Treasurer on 15 January 2015 relating to the
incident at the Lindt Café in Martin Place on 15 and 16 December 2014. Claims have
been submitted by affected reinsurers, however, the quantum of claims have not
exceeded their individual retentions;
123
Notes to the financial statements

Australian Red Cross Society — blood and blood products (administered by the
Department of Health). The Australian Government, states and territories jointly
provide indemnity for the Australian Red Cross Blood Service regarding personal
injury and loss or damages suffered by a recipient of certain blood and blood
products where other available mitigation or cover is not available;

CSL Ltd (administered by the Department of Health). The Australian Government
has indemnified CSL Ltd for a specific range of events that occurred during the
Plasma Fractionation Agreement from 1 January 1994 to 31 December 2004, where
alternative cover was not arranged by CSL Ltd. Indemnities relate to certain
existing and potential claims made for personal injury, loss or damage suffered
through therapeutic and diagnostic use of certain products manufactured by
CSL Ltd;

Vaccines (administered by the Department of Health). Indemnities have been
provided to the manufacturers of smallpox and influenza vaccines held by the
Australian Government, covering possible adverse events that could result from the
use of the vaccines in an emergency situation;

The Australian Medical Association Ltd (AMA) (administered by the Department
of Health). The AMA, the Commonwealth, Australian Private Hospitals
Association Ltd, Australian Health Insurance Association and Beyond Blue Ltd
have agreed to indemnify each other in respect of any loss, liability, cost, claim or
expense due to misuse of confidential information or breach of the Privacy Act 1988
in relation to participation in and support of the Private Mental Health Alliance;

New South Wales Health Administration Council (NSW HAC) (administered by
the National Health Funding Body (NHFB)). An indemnity has been provided to
the New South Wales Government through the NSW HAC, in relation to a state
funding pool account with the RBA. The indemnity includes liabilities or claims
arising from acts or omissions of NHFB staff as users of pool account information,
liabilities or claims arising from unauthorised access to the banking services or
system from NHFB premises. NSW HAC has provided a reciprocal indemnity for
the actions of staff of the NHFB to the RBA;

Medical Indemnity (administered by the Department of Health). The Incurred But
Not Reported Scheme is designed to fund the incurred but not reported liabilities of
Medical Defence Organisations where they do not have adequate reserves to cover
their liabilities. Eligibility for claim payments under this scheme is dependent on
whether the Medical Indemnity Insurer is deemed to be a participating Medical
Defence Organisation under the Medical Indemnity Act 2002 and the Midwife
Professional Indemnity (Commonwealth Contribution) Scheme Act 2010;

Medical Indemnity Exceptional Claims Scheme (MIECS) (administered by the
Department of Health). The MIECS assumes liability for 100 per cent of any
damages payable against a doctor that exceeds a specified level of cover provided
by that doctor’s medical indemnity insurer (currently $20 million);
124
Notes to the financial statements

Asian Football Confederation Cup (new) (administered by the Department of
Health). The Australian Government has agreed to pay a percentage of any amount
payable by a state beyond an agreed threshold for hosting the Asian Football
Confederation Cup 2015, given by that state under or in connection with the
Competition Agreement;

Northern Maritime Patrol and Response — Triton (administered by the
Department of Immigration and Border Protection). The Government has entered
into a contractual arrangement with Gardline Australia Pty Ltd for the provision of
a vessel to strengthen enforcement activities in Australia’s northern waters.
The contract with Gardline Australia Pty Ltd contains unquantifiable indemnities
relating to the use, or other operations, of armaments and the presence of
armaments on the vessel. It also contains unquantifiable indemnities relating to
damage to any property or injury to any person caused by apprehended or escorted
persons or their vessel;

Immigration detention services — Serco (new) (administered by the Department
of Immigration and Border Protection). On 11 December 2014, the
Australian Government entered into a contract with Serco Australia Pty Ltd (Serco)
to deliver immigration detention services in Australia on behalf of the Australian
Government at immigration detention facilities. The contract terms limit Serco’s
liability to the Australian Government to a maximum of any insurance proceeds
recovered by Serco up to a value of $330 million. Serco’s liability is unlimited for
specific events defined under the contract;

Immigration detention services — state and territory governments (administered
by the Department of Immigration and Border Protection). The
Australian Government has negotiated arrangements with a number of state and
territory governments for the provision of health, education, corrections and
policing services to immigration detention facilities and people in immigration
detention. Some jurisdictions are seeking indemnification by the Australian
Government for the provision of those services;

Snowy Hydro Limited water releases (administered by the Department of
Industry
and
Science).
The
Australian,
New
South
Wales
and
Victorian governments have indemnified Snowy Hydro Limited for liabilities
arising from water releases in the Snowy River below Jindabyne Dam, where these
releases are in accordance with the water licence and related regulatory
arrangements agreed between the three governments. The indemnity applies to
liabilities for which a claim is notified within 20 years from 28 June 2002;

Maralinga clean-up (administered by the Department of Industry and Science).
Fourteen unlimited indemnities have been given in relation to the clean-up of the
former British atomic test site at Maralinga;
125
Notes to the financial statements

Gorgon liquefied natural gas and carbon dioxide storage project (new)
(administered by the Department of Industry and Science). On 13 February 2015,
the Australian and Western Australian governments signed an agreement to
provide an indemnity to the Gorgon Joint Venture Partners (GJV) to indemnify the
GJV against independent third-party claims (relating to stored carbon dioxide)
following closure of the carbon dioxide sequestration project. The
Western Australian Government will indemnify the GJV, and the Australian
Government will indemnify the Western Australian Government for 80 per cent of
any amount determined to be payable;

Liquid Fuel Emergency Act 1984 (administered by the Department of Industry and
Science). The Australian Government and state and territory governments have
entered into an inter-governmental agreement in relation to a national liquid fuel
emergency. Under the agreement, the Australian Government may incur the direct
costs of managing a liquid fuel emergency and includes the possibility of the
Australian Government reimbursing the state and territory governments for costs
arising from their responses, and potential compensation for industry arising from
Australian Government directions under the Act;

Maritime incident clean-up (administered by the Department of Infrastructure and
Regional Development). The Australian Maritime Safety Authority is responsible
for the provision of funds necessary to meet the clean-up costs arising from
ship-sourced marine pollution and, in all circumstances, is responsible for making
appropriate efforts to recover the costs of any such incidents. The
Australian Government meets costs that cannot be recovered from such incidents;

Accommodation Payment Guarantee Scheme (administered by the Department of
Social Services). The Australian Government guarantees the repayment of aged care
residents’ accommodation bonds, entry contribution balances and, from 1 July 2014,
refundable accommodation deposits and contributions if the approved provider
becomes insolvent or bankrupt and defaults on its refund obligations. From the
latest available information, the maximum contingent liability, in the highly
unlikely event that all providers defaulted, is $15.6 billion. For the 2014-15 financial
year, the scheme was activated twice with total payments of $8.6 million. Since the
scheme was introduced it has been activated a total of eight times requiring
payment of $42.7 million;

National Disability Insurance Scheme (NDIS) (new) (administered by the
Department of Social Services). The Australian Government has committed to
provide temporary, untied financial assistance to some jurisdictions that expect to
have their GST entitlements adversely affected during the transition to the NDIS.
Any impact on the Australian Government is not expected to occur before 2016-17;

IMF New Arrangements to Borrow (NAB) (administered by the Department of the
Treasury). Australia has made a line of credit available to the IMF under its NAB
since 1998. During 2014-15, Australia met three calls under the NAB totalling
A$40.8 million (special drawing rights 23 million);
126
Notes to the financial statements

Loan to New South Wales for James Hardie Asbestos Injuries Compensation
Fund
(administered
by
the
Department
of
the
Treasury).
The
Australian Government has agreed to lend up to $160 million to the
New South Wales Government to support the loan facility to top up the
James Hardie Asbestos Injuries Compensation Fund. The loan agreement is subject
to a number of conditions; and

Officers and Directors assisting the Commonwealth in relation to asset sales,
reviews and other arrangements (administered by various entities). From time to
time, the Australian Government has provided warranties, undertakings and
indemnities (indemnities) to directors, committee members, advisers, officers
and/or staff of organisations for activities undertaken in good faith in assisting the
Commonwealth in relation to asset sales, reviews and other arrangements.
This includes indemnities in relation to the: Directors of NBN Co Ltd (NBN Co);
Export Finance Insurance Corporation board members and senior management;
former Directors of the Australian Submarine Corporation Pty Ltd; directors and
delegates of the board of the Commonwealth Superannuation Corporation,
Future Fund Board of Guardians (Board members); officers and employees of
ADI Limited; Maritime Industry Finance Company Ltd board members;
Moorebank Intermodal Company Limited board members; Directors of
National Rail Corporation; certain specified members of the review into the
Australian Human Pituitary Hormone Programme; and certain specified members
of
the
review
into
the
Diagnostics
Products
Agreement.
The
Australian Government has also indemnified the boards and/or acquirers of certain
entities against certain claims and costs arising from the sales of the Government
entities. The probability of these indemnities being called upon is generally
considered remote but is included for completeness.
Claims and proceedings
At any time various Australian Government entities are subject to claims and legal
actions that are pending court or other processes. These include, but are not limited to:

Suspension of livestock exports to Indonesia (administered by the Department of
Agriculture). Proceedings have commenced against the Australian Government for
losses due to the temporary suspension of exports of live animals to Indonesia that
was put in place on 7 June 2011. Currently the amount of the claims remains
unquantified;

Equine influenza outbreak (administered by the Department of Agriculture).
Proceedings have commenced against the Australian Government in relation to the
outbreak of equine influenza in 2007. The final quantum of damages sought cannot
be calculated;
127
Notes to the financial statements

Termination of the funding agreement with OPEL Network Pty Ltd
(administered by the Department of Communications). As at 30 June 2015, the
Australian Government is a party to legal action brought against it in relation to an
agreement under the Broadband Connect Infrastructure Programme. The outcome
of that litigation cannot be predicted;

Australian Government general insurance fund — Comcover (administered by
the Department of Finance). Comcover’s liability for outstanding claims, which
includes the expected future cost of claims notified and claims incurred but not
reported, is subject to inherent uncertainty in the estimation process. The
Australian Government’s potential liability cannot be quantified at this time;

Tobacco Plain Packaging (administered by the Department of Health) The
Government will continue to fund the defence of legal challenges to the tobacco
plain packaging legislation in international forums;

Medicare Locals (administered by the Department of Health). Due to the
Government’s commitment to cease all Commonwealth funding to Medicare Locals
from 30 June 2015, the Commonwealth is terminating the Medicare Locals Deed for
Funding and Program Schedules under clause 22.1(i). The Commonwealth is
therefore liable for any reasonable costs incurred by Medicare Locals which are
directly attributable to the termination. Some funds are also expected to be
recovered from a number of sites as a result of the termination, which would
partially offset the liability. Neither costs nor potential recoveries can be estimated
at present; and

Business Services Wage Assessment Tool (BSWAT) (administered by the
Department of Social Services). The Australian Government may potentially
become liable for a significant range of costs following the full Federal Court ruling
(21 December 2012) that the use of the BSWAT to assess the wages of
two intellectually disabled employees constituted unlawful discrimination under
the Disability Discrimination Act 1992. The Australian Government’s potential
liability cannot be quantified at this time.
Property remediation — Defence and other sites
From time to time, the Australian Government may have ownership of properties that
have a potential or possible environmental and associated concern. Where this is the
case, further reviews may be undertaken to determine the extent, nature and estimated
costs of remediation, if required. Specifically:
• Defence has made financial provision for the estimated costs involved in restoring,
decontaminating and decommissioning property where a legal or constructive
obligation has arisen. For cases where there is a legal or constructive obligation, but
the potential cost could not be quantified, the obligations have been assessed as
unquantifiable contingencies; and
128
Notes to the financial statements
• Under the Googong Dam lease agreement with the Australian Capital Territory
Government, the Australian Government is required to undertake rectification of
easements or any defects in title, and remediation of any contamination it may have
caused to the site. It also gives an indemnity in relation to acts or omissions by the
Australian Government.
Non-quantifiable contingent assets
Contingent assets include but are not limited to:

HIH Claims Support Scheme (HCSS) (administered by the Department of the
Treasury). As an insured creditor in the liquidation of the HIH Group, the
Australian Government is entitled to payments arising from the HCSS’s position in
the Proof of Debt of respective HIH companies. The Australian Government has
received payments from the HIH Estate during 2014-15, however, the timing and
amount of future payments are unknown and will depend on the outcome of the
estimation process and the completion of the liquidation of the HIH Group;

International Monetary Fund (IMF) (administered by the Department of the
Treasury). Since 1986, the IMF has used its burden sharing mechanism to make up
for the loss of income from unpaid interest charges on the loans of debtor members
and to accumulate precautionary balances in a Special Contingent Account to
protect the IMF against losses arising from the failure of a member to repay its
overdue principal obligations. As there is considerable and inherent uncertainty
around the timing and amounts of burden sharing to be refunded to Australia this
contingent asset cannot be reliably measured and as such is recorded as an
unquantifiable contingent asset;

Wireless local area network. The Commonwealth Scientific and Industrial
Research Organisation (CSIRO) has ongoing patent infringement proceedings in the
United States of America in relation to CSIRO’s invention of a wireless local area
network. The final amount of the damages awarded is presently unknown; and

Coal Mining Industry (Long Service Leave) Legislation Amendment Act 2011. The
Coal Mining Industry (Long Service Leave Funding) Corporation (Corporation) is
currently undertaking a Transitional Service Review. The provision in the Act
provides that ‘Eligible Employees’ and ‘Former Employees’ can make application to
the Corporation for recognition of period or periods of employment service
between 1 January 2000 and December 2011 in the Black Coal Mining Industry that
may not be presently recognised and recorded by the Corporation. The Corporation
has not recognised levies attributable to those employers of ‘Eligible Employees’
and ‘Former Employees’ that previously did not contribute to the Corporation.
At balance date, the amounts that would be receivable are not reliably measurable.
Additionally, at any time various Australian Government entities are pursuing various
other claims and legal actions that are pending court or other processes.
129
Notes to the financial statements
Contingent liabilities excluded on the basis of remoteness
A significant remote contingent liability is a possible obligation that would be material
to the CFS, but where the probability of settlement is considered very low (less than
five per cent).
The disclosure of remote contingencies is not required under AAS but is listed below
for transparency. Further detail on individual remote contingencies may be included in
the annual report for the respective Commonwealth entity:

Research and Development (administered by the Department of Agriculture).
Under several Acts, the Commonwealth provides contributions to a number of
nominated entities responsible for undertaking research and development activities
in respect of portfolio industries. These contributions are typically made on a
matching basis. At 30 June 2015, the Commonwealth had a maximum potential
liability in respect of matching payments of approximately $444 million
(30 June 2014: $401 million). The likelihood of meeting the eligibility requirements
and the amount of future payments is uncertain. Hence, the total liability is
considered unquantifiable.

Foreign currency denominated loans (administered by the Australian Office of
Financial Management). Indemnifies agents of foreign currency denominated loans
issued by the Australian Government outside Australia against any loss, liability,
costs, claims, charges, expenses, actions, or demands due to any misrepresentation
by the Australian Government and any breach of warranties. The
Australian Government is not aware of any event that has occurred that may
trigger action under the indemnities.

Financial Claims Scheme — Deposits (administered by the Australian Prudential
Regulation Authority (APRA)). Provides depositors of authorised deposit-taking
institutions and general insurance policyholders with timely access to their funds in
the event of a financial institution failure. Authorised under the Banking Act 1959
and available from 1 February 2012, deposits up to $250,000 at eligible authorised
deposit-taking institutions are covered under the Financial Claims Scheme. This
$250,000 cap has no expiry date. When last estimated as at 31 December 2014,
deposits eligible for coverage under the Financial Claims Scheme were
approximately $766 billion (2014: $722.8 billion);
• Financial Claims Scheme — Insurance (administered by APRA). The Policyholder
Compensation Facility established under the Insurance Act 1973 provides a
mechanism for making payments to eligible beneficiaries with a valid claim against
a failed general insurer. Amounts available to meet payments and administer both
facilities, in the event of activation, are capped at $20.1 billion under the legislation.
Any payments made under the Financial Claims Scheme would be recovered
through the liquidation of the failed institution. If there were a shortfall, a levy
would be applied to industry to recover the difference between the amount
expended and the amount recovered in the liquidation;
130
Notes to the financial statements

Telstra Financial Guarantee (administered by the Department of
Communications). Provides a guarantee to Telstra in respect of NBN Co’s financial
obligations to Telstra under the Definitive Agreements (as amended on
14 December 2014). The liabilities under the agreements between Telstra and
NBN Co arise progressively during the roll out of the National Broadband Network
as Telstra’s infrastructure is accessed and Telstra’s customers are disconnected from
its copper and hybrid-fibre coaxial cable networks. The Australian Government is
only liable in the event NBN Co does not pay an amount under the Definitive
Agreements when due. As at 30 June 2015, NBN Co had generated liabilities which
it had not paid and that were covered by the guarantee estimated at $3.9 billion.
The guarantee will terminate when NBN Co achieves specified credit ratings for a
period of two continuous years and either: the company is capitalised by the
Commonwealth to the agreed amount; or the Communications Minister declares
that the National Broadband Network should be treated as built and fully
operational. The Australian Government also provides a guarantee to Optus of
NBN Co’s financial obligations to Optus under the Optus HFC Subscriber. As at
30 June 2015, the liabilities covered by the guarantee were not material to the CFS;

Equity Funding Agreement with NBN Co (administered by the Department of
Communications). The Australian Government (GGS) has an Equity Funding
Agreement with NBN Co (which is consolidated into the PNFC sector). Under the
agreement, the Australian Government is committed, in the event of a termination
of the national broadband network roll out, to provide sufficient funds to NBN Co
to meet its direct costs arising from that termination. As at 30 June 2015, NBN Co’s
termination liabilities were estimated at $8.5 billion (2014: $6.7 billion). This
cross-sector guarantee is internal to the Australian Government;

Space Activities Act 1998 (administered by the Department of Industry and
Science). The Australian Government is liable under the UN Convention on
International Liability for Damage Caused by Space Objects for damage caused to third
party States, including persons and property of that State, by space objects
launched from, or by, Australia or Australian nationals. The Space Activities
Act 1998 requires the launch operator to insure against liability up to a prescribed
amount, with the Australian Government bearing any liability above this amount.
The Australian Government also accepts liability for damage suffered by Australian
nationals, to a maximum value of $3 billion above the insured level;

Tripartite deeds relating to the sale of core regulated airports (administered by
the Department of Infrastructure and Regional Development). The tripartite deeds
between the Australian Government, the airport lessee companies and financiers
amend the airport (head) leases to provide for limited step-in-rights for financiers
in circumstances where the Australian Government terminates the head lease to
enable the financiers to correct the circumstances that triggered such a termination
event. The tripartite deeds may require the Australian Government to pay
financiers compensation as a result of its termination of the (head) lease;
131
Notes to the financial statements

New South Wales Rural Fire Fighting Service (NSW RFS) in relation to the Jervis
Bay Territory (new) (administered by the Department of Infrastructure and
Regional Development). An uncapped indemnity has been provided for any
damage caused as a result of the actions of the NSW RFS in the Jervis Bay Territory
while fighting a fire. The likelihood of an event occurring has been assessed as very
remote and the risks are currently mitigated through the training and professional
qualifications of the NSW RFS staff;

Indian Ocean Territories Service Delivery Arrangement (administered by the
Department of Infrastructure and Regional Development). Indemnities have been
provided to the Western Australian Government, their respective officers, agents,
contractors and employees against civil claims relating to their employment and
conduct as officers as part of the Service Delivery Arrangement in the Indian Ocean
Territories. The likelihood has been assessed as remote and the risks are currently
mitigated through the training and professional qualifications of the staff of these
agencies;

Defence-related remote contingencies. At 30 June 2015, Defence had
1,437 (2013-14: 1,597) instances of quantifiable remote contingent liabilities valued
at $3.8 billion (2013-14: $3.7 billion) and another nine unquantifiable remote
contingent liabilities. A significant remote contingency includes proceedings in
relation to Cockatoo Island Dockyard (CODOCK). Following a final court decision
in 2006, CODOCK was awarded a complete indemnity from the Australian
Government for its uninsured exposure to asbestos damages claims
(plus 7.5 per cent profit);

Export Finance Insurance Corporation (EFIC) Commercial Account (administered
by the Department of Foreign Affairs and Trade). Under the Export Finance and
Insurance Corporation Act 1991, the Australian Government (GGS) guarantees EFIC’s
(which is consolidated into the PFC sector) creditors. The guarantee covers the EFIC
Commercial Account and has a $200 million callable capital facility available for
this purpose. This guarantee has never been utilised. As at 30 June 2015, the
guarantee covered estimated liabilities of $3.5 billion (2014: $3.3 billion). This
cross-sector guarantee is internal to the Australian Government;

Commonwealth Bank of Australia and Commonwealth Bank of Australia
Officers’ Super Fund (administered by the Department of the Treasury). Under the
terms of the Commonwealth Bank Sale Act 1995, the Australian Government has
guaranteed various liabilities of the Commonwealth Bank of Australia (CBA), and
the Commonwealth Bank Officers’ Superannuation Corporation (CBOSC). The
guarantee of the covered CBA liabilities was estimated at $4.4 billion at
30 June 2015 (2014: $4.4 billion) and the covered CBOSC liabilities were estimated at
$0.5 billion at 30 June 2015 (2014: $0.7 billion);
132
Notes to the financial statements

Guarantee of large deposits in authorised deposit taking institutions
(administered by the Department of the Treasury). Available to eligible deposits
above $1 million issued between 12 October 2008 and 31 March 2010. Eligible term
deposits were guaranteed for up to five years and at-call deposits until
October 2015. As at 30 June 2015, total liabilities covered by the Scheme were
estimated at $1.45 billion. The guarantee also operated for wholesale funding issued
between the above dates. This funding has all since matured;

Guarantee of state and territory borrowing (administered by the Department of
the Treasury). Available to state and territory governments on a voluntary basis for
borrowings issued between 24 July 2009 and 31 December 2010.
Australian Government expenditure would arise under the guarantee only in the
unlikely event that a state or territory failed to meet its obligations with respect to a
commitment that was subject to the guarantee and the guarantee was called upon.
The Government would likely be able to recover any such expenditure through a
claim on the relevant state or territory at a future date. As at 30 June 2015, the face
value of borrowings covered by the guarantee was $11.7 billion (2014: $15.7 billion);
and

Reserve Bank of Australia (RBA) liabilities (administered by the Department of
the Treasury). Under the Reserve Bank of Australia Act 1959, the
Australian Government (GGS) guarantees the RBA’s (which is consolidated into the
PFC sector) liabilities. As at 30 June 2015, the guarantee was valued at $65.5 billion
(2014: $60.8 billion). This cross-sector guarantee is internal to the Australian
Government.
133