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  • Contingent Asset and Liabilities

    Contingent Asset and Liabilities
     

    Indemnities

    Claims for Compensation/Damages or costs

    Total

      2017$'000 2016$'000 2017$'000 2016$'000 2017$'000 2016$'000
    Contingent liabilities
    Balance from previous period 2,912 3,227 7,975 17,982 10,887 21,209
     
    New contingent liabilities recognised 2,882   - 3,726 596 6,608 596
    Re-measurement (184) - (385) (956) (568) (956)
    Liabilities realised (500) (150) (6,416) (490) (6,916) (640)
    Obligations expired (392) (165) (1,173) (9,157) (1,565) (9,322)
    Total contingent liabilities 4,718 2,912 3,727 7,975 8,445 10,887
    Net contingent liabilities 4,718 2,912 3,727 7,975 8,445 10,887

    Quantifiable contingencies

    Indemnities

    An indemnity may be granted to a trustee/liquidator to help fund recovery action where the ATO is a creditor in an insolvency administration. An adverse costs component may form part of an indemnity where it is possible that litigation may occur as a result of the indemnified recovery action.

    Claims for Compensation/Damages or Costs

    At any point in time, the ATO has claims associated with actions brought against for unfair dismissal, unlawful termination, alleged breach of general protections provisions of the Fair Work Act, unlawful discrimination and claims for compensation unrelated to the employment. This also includes claims under 'Scheme for Compensation for Detriment Caused by Defective Administration' (CDDA) which provide for compensation to individuals and other bodies adversely affected by the maladministration by a Government body, but who have no legal means to seek redress, such as a legal claim.

    Unquantifiable contingencies

    Claims and legal actions

    At any time, the ATO is subject to claims and legal actions. It is not possible to estimate the amounts, and in some cases the timing, of any eventual payments that may be required in relation to these claims.

    Court awarded legal costs

    A party successful in a legal action may be compensated for their expenses through a court award of legal costs against the opposing party. Due to the uncertainty over the outcome of outstanding and pending court cases, duration of court cases and the legal costs of the opposing party, the ATO is unable to reliably estimate either its potential payments to, or potential cost recoveries from, opposing litigants. The recoverability of certain costs awarded to the ATO remains improbable and a corresponding contingent asset is unquantifiable.

    Contingent gain - indemnities

    If the indemnity is paid and the action is successful, the ATO may recover the indemnity. The ATO is not able to reliably estimate potential recoveries from outstanding indemnities because of the duration and uncertainty of cases and the fluctuation in the number of indemnities granted each year.

    Accounting Policy

    Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position, but are reported in the relevant note. They may arise from uncertainty as to the existence of a liability or asset, or represent an obligation in respect of which the settlement is not probable or where the amount cannot be reliably measured. Significant remote contingencies form part of this disclosure.

    Disclosure of amounts in the note is neither an admission nor acceptance of responsibility by the ATO in advance of any court decisions or other relevant determinations.

      Last modified: 30 Oct 2017QC 53691