Income
Taxation revenue levied through the Crown's sovereign power
The Government provides many services and benefits that do not give rise to revenue. Further, payment of tax does not of itself entitle a taxpayer to an equivalent value of services or benefits, since there is no relationship between paying tax and receiving Crown services and transfers. Such revenue is received through the exercise of the sovereign power of the Crown in Parliament.
Where possible, taxation revenue is recognised at the time the debt to the Crown arises.
| Revenue type | Revenue recognition point |
|---|---|
| Source deductions | When an individual earns income that is subject to PAYE |
| Resident withholding tax (RWT) | When an individual is paid interest or dividends subject to deduction at source |
| Fringe benefit tax (FBT) | When benefits are provided that give rise to FBT |
| Provisional tax | When taxable income is earned |
| Terminal tax | Assessment filed date |
| Goods and services tax (GST) | When the liability to the Crown is incurred |
| Customs and excise duty | When goods become subject to duty |
| Road user charges and motor vehicle fees | When payment of the fee or charge is made |
| Stamp, cheque and credit card duties | When the liability to the Crown is incurred |
| Exhaustible resources levy | When the resource is extracted |
| Other indirect taxes | When the debt to the Crown arises |
| Levies (eg, ACC levies) | When the obligation to pay the levy is incurred |
Revenue earned through operations
Revenue from the supply of goods and services to third parties is measured at the fair value of consideration received. Revenue from the supply of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from the supply of services is recognised on a straight-line basis over the specified period for the services unless an alternative method better represents the stage of completion of the transaction.
Interest income
Interest income is accrued using the effective interest rate method.
The effective interest rate exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. The method applies this rate to the principal outstanding to determine interest income each period.
Dividend income
Dividend income from investments is recognised when the Government's rights as a shareholder to receive payment have been established.
Rental income
Rental income is recognised in the statement of financial performance on a straight-line basis over the term of the lease. Lease incentives granted are recognised evenly over the term of the lease as a reduction in total rental income.
Donated or subsidised assets
Where an asset is acquired for nil or nominal consideration, the fair value of the asset received is recognised as income in the statement of financial performance.
