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A Guide to Appropriations - November 2013

Appendix 1: Examples

This appendix provides some examples of transactions and events and indicates the type of appropriation required, if any. The section references in the table refer to the PFA 1989.

Transaction or event

Appropriation required?
Yes/No

Explanation
Payment of GST on purchases No GST is not an expense and therefore does not require appropriation. Authority to pay GST is provided by s6(b).
Purchase of a departmental asset Yes. but refer s24(1) The purchase of a departmental asset is capital expenditure.  Capital expenditure must not be incurred unless it is in accordance with appropriation or statutory authority. The purchase or development of assets does not require annual appropriation if the expenditure is funded by the proceeds of sale or disposal of the department's assets or from working capital (s24(1)).
Cash settlement of an existing liability No Cash settlement of a liability does not involve the creation of an expense - this occurs when a liability is created or increased.  Hence an appropriation is required when a liability is established or increased but no appropriation is required when a liability is settled. Authority to settle existing liabilities is provided by s6(d) and s24(2).
Capital contribution to a department (other than an intelligence and security department) No, but an authorisation in an Appropriation Act is required A capital contribution to a department does not result in the incurrence of an expense or a capital expenditure. However, capital injections to departments (other than an intelligence and security department) are required to be authorised by Parliament in an Appropriation Bill (s12A).
Departmental provision for  restructuring Yes

Departmental other expenses where the expense relates to a decision to cease production of certain outputs.

Departmental output expenses where no such decision.

SOE or Crown entity makes loss for year No Excluded from the definition of an expense (s4(2)).
Depreciation of departmental asset Yes Departmental output expenses
Depreciation of non-departmental asset Yes Generally non-departmental other expenses.
Loss on revaluation of asset (departmental and non-departmental) No As long as the loss met the criteria for being a remeasurement (that is, it was not the result of a government decision), no appropriation would be required.
Foreign exchange loss - departmental No Remeasurement
Foreign exchange loss - non-departmental No Remeasurement
Crown land with a market value of $10m and a carrying value of $5m sold for $7m Yes Crown assets are to be revalued to fair value prior to sale.  Therefore an appropriation for $3m (amount sale price is less than market value) would be required (other expense).
Crown land with a market value of $10m and a carrying value of $5m sold for $2m Yes Crown assets are to be revalued to fair value prior to sale.  Therefore an appropriation for $8m (amount sale price is less than market value) would be required (other expense).
Crown land with a market value of $4m and a carrying value of $5m sold for $2m Yes Crown assets are to be revalued to fair value prior to sale. The change to $4m would not require appropriation because it is a remeasurement. The $2m loss on sale would require an appropriation (other expense).
Write-off or forgive a Crown debt Yes Non-departmental other expense
Reduce a Crown debt to its recoverable amount No Remeasurement
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