7     Assets and Liabilities

Key Issues

·       General Government Net Worth is estimated to be $6 012.7 million as at 30 June 2021. Net Worth is estimated to increase over the Forward Estimates period to $6 594.5 million by 30 June 2024.

·       In accordance with the Australian Bureau of Statistics’ Government Finance Statistics reporting framework General Government GFS Net Debt excludes the impact of lease liabilities. GFS Net Debt is estimated to be $1 432.8 million as at 30 June 2021. GFS Net Debt is expected to be $4 048.8 million as at 30 June 2024.

·       General Government Net Debt is estimated to be $1 854.8 million as at 30 June 2021.

·       The General Government Superannuation liability is estimated to be $11 481 million as at 30 June 2021.

·       The Government continues to meet the cash cost of the defined benefit superannuation schemes on an emerging basis ($302.2 million in 2020‑21). While forecast to be manageable, a key ongoing Budget risk is that the cash cost to the Budget will increase significantly, with cash payments anticipated to increase over the next 14 years, peaking in 2034‑35 ($475.6 million).

·       The present value of superannuation liabilities is particularly sensitive to discount rate movements, although these movements do not impact on the emerging cash costs that require funding. The 2020‑21 Budget projections are based on a discount rate of 1.0 per cent.


 

Balance Sheet

The Balance Sheet presented in this chapter provides assets and liabilities estimated as at 30 June 2021 to 2024 and reports key indicators for the same period. Due to the timing of the 2020-21 Budget, this chapter includes an actual outcome as at 30 June 2020 rather than Estimated Outcomes, as has been provided in previous years. By providing information on the nature of assets and liabilities held by the Government, this Statement gives an indication of the State’s financial strength.

The key measures presented in the Balance Sheet are Net Worth, Net Financial Worth, Net Financial Liabilities, Net Debt and GFS Net Debt.

Table 7.1 details the estimated General Government Sector Balance Sheet as at 30 June from 2021 to 2024.


 

Table 7.1:         General Government Balance Sheet as at 30 June

 

2020 

2020 

2021 

2022 

2023 

2024 

Forward 

Forward 

Forward 

 

Budget 

Actual

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

Assets

Financial assets

Cash and deposits

926.6 

1 180.5 

1 160.4 

1 138.6 

913.3 

911.1 

Investments

158.8 

 218.3 

420.3 

457.1 

252.7 

241.3 

Equity investment in PNFC and PFC sectors1

5 451.5 

4 556.8 

4 721.8 

4 759.4 

5 082.0 

5 190.1 

Other equity investments

71.5 

 69.3 

124.8 

180.3 

245.8 

251.3 

Receivables

307.8 

 331.3 

326.5 

323.9 

321.1 

318.4 

Other financial assets

822.9 

 492.4 

585.3 

620.8 

631.3 

679.1 

7 739.1 

6 848.7 

7 339.1 

7 480.1 

7 446.1 

7 591.2 

 

 

 

 

 

Non-financial assets

 

 

 

 

 

Land and buildings

6 953.3 

7 150.2 

7 470.8 

7 737.3 

7 839.7 

7 980.3 

Infrastructure

6 115.9 

5 833.8 

6 405.0 

6 922.6 

7 482.8 

8 157.3 

Plant and equipment

270.9 

 270.3 

291.9 

289.9 

291.0 

290.2 

Heritage and cultural assets

486.5 

 439.7 

452.0 

464.3 

476.6 

488.9 

Investment property

4.1 

 3.0 

3.3 

3.7 

4.0 

4.3 

Intangibles

51.4 

 63.1 

71.9 

97.0 

116.2 

121.4 

Assets held for sale

6.6 

 13.6 

16.7 

15.0 

15.7 

14.6 

Lease - right‑of‑use assets2

333.4 

 348.4 

412.1 

375.6 

344.7 

316.9 

Other non-financial assets

41.6 

 55.4 

48.2 

48.0 

47.8 

47.6 

14 263.7 

14 177.5 

15 171.9 

15 953.3 

16 618.4 

17 421.5 

 

 

 

 

 

Total Assets

22 002.7 

21 026.1 

22 510.9 

23 433.4 

24 064.5 

25 012.7 

 

 

 

 

 

Liabilities

 

 

 

 

 

Borrowings

1 035.0 

 867.8 

3 013.5 

4 061.9 

4 535.9 

5 201.2 

Lease liabilities2

334.9 

 355.5 

422.1 

388.2 

359.1 

331.7 

Superannuation3

7 007.8 

10 280.3 

11 481.0 

11 426.9 

11 350.1 

11 252.3 

Employee entitlements

665.2 

 775.2 

800.0 

818.6 

837.3 

856.4 

Payables

164.7 

 194.3 

191.7 

194.2 

195.9 

197.5 

Other liabilities

464.4 

 690.2 

590.0 

585.2 

571.5 

579.1 

Total Liabilities

9 671.9 

13 163.3 

16 498.3 

17 475.0 

17 849.8 

18 418.2 

 

 

 

 

 

NET ASSETS

12 330.8 

7 862.8 

6 012.7 

5 958.4 

6 214.7 

6 594.5 

 

 

 

 

 

 

 


 

Table 7.1:         General Government Balance Sheet as at 30 June (continued)

 

2020 

2020 

2021 

2022 

2023 

2024 

Forward

Forward

Forward

 

Budget

Actual

Budget

Estimate

Estimate

Estimate

$m 

$m 

$m 

$m 

$m 

$m 

Equity

Accumulated funds

5 830.6 

3 769.1 

1 550.5 

1 310.2 

1 310.4 

1 346.9 

Asset revaluation reserve

6 500.2 

5 076.1 

5 296.3 

5 576.7 

5 858.7 

6 176.1 

Other revaluation reserves4

.... 

(982.4)

(834.1)

(928.4)

(954.5)

(928.5)

Total Equity

12 330.8 

7 862.8 

6 012.7 

5 958.4 

6 214.7 

6 594.5 

 

 

 

 

 

NET WORTH5

12 330.8 

7 862.8 

6 012.7 

5 958.4 

6 214.7 

6 594.5 

 

 

 

 

 

NET FINANCIAL WORTH6

(1 932.9)

(6 314.7)

(9 159.2)

(9 994.9)

(10 403.7)

(10 827.0)

 

 

 

 

 

NET FINANCIAL LIABILITIES7

7 384.4 

10 871.4 

13 881.0 

14 754.2 

15 485.7 

16 017.2 

 

 

 

 

 

NET DEBT8

284.5 

(175.5)

1 854.8 

2 854.4 

3 729.1 

4 380.5 

 

 

 

 

 

 

 

GFS NET DEBT9

(50.4)

(531.1)

1 432.8 

2 466.2 

3 370.0 

4 048.8 

 

 

 

 

 

 

 

Notes:

1.    The reduction in net assets is largely driven by the revaluation of Hydro Tasmania generation assets at 30 June 2020, reflecting a reduction in the forecast of long term electricity prices.

2.    As a result of the Australian Accounting Standard AASB 16 Leases, all leases are recognised on the Balance Sheet as a liability and right‑of‑use asset from 2019-20.

3.    The increase in 2020 actual and changes across the Budget and Forward Estimates primarily reflect a change in discount rate based on the latest actuarial valuation of the defined benefit superannuation liability.

4.    From 1 July 2019, Other revaluation reserves have been established in the General Government Sector to recognise the revaluation increments/(decrements) for the Equity investment in PNFC and PFC sectors.

5.    Net Worth represents Total Assets (both Financial and Non‑financial) less Total Liabilities.

6.    Net Financial Worth represents Total Financial assets less Total Liabilities.

7.    Net Financial Liabilities represents Total Liabilities less Financial assets, excluding Equity investment in PNFC and PFC sectors.

8.    Net Debt represents Borrowings plus Lease liabilities, less the sum of Cash and deposits and Investments. This measure incorporates the impact of recognising Lease liabilities on the Balance Sheet as a result of the changes under AASB 16 which was effective from 2019‑20.

9.    GFS Net Debt represents Borrowings less the sum of Cash and deposits and Investments. This is equivalent to Net Debt based on the Australian Bureau of Statistics Government Finance Statistics reporting framework, and excludes the impact of lease liabilities.


 

Assets

Total Assets are estimated to be $22 510.9 million as at 30 June 2021, an increase of $1 484.8 million from the actual balance of $21 026.1 million as at 30 June 2020. The increase primarily reflects an increase in Land and buildings of $320.6 million, Infrastructure assets of $571.2 million and Lease - right‑of‑use assets of $63.7 million.

Equity Investment in PNFC and PFC Sectors

This consists of the Government’s investment in the net assets of the Public Non‑Financial Corporations and Public Financial Corporations sectors.

The Government’s equity investment is estimated to be $4 721.8 million as at 30 June 2021, an increase of $165 million from the actual balance of $4 556.8 million as at 30 June 2020. This reflects an increase in the net assets of the PNFC Sector of $214.5 million. This increase is primarily the result of an increase in net assets held by electricity entities. The increase is partly offset by a decrease in net assets of the PFC Sector of $49.5 million. This decrease is primarily due to the Mersey Community Hospital Dividend of $86.6 million to be paid by the PFC Sector in 2020-21.

Chart 7.1 illustrates the components of the Government’s equity investment holdings.

Chart 7.1:         Equity Investment in PNFC and PFC Sectors as at 30 June 2021

Title: Equity Investment in PNFC and PFC Sectors as at 30 June 2021 - Description: The chart shows that the largest component of the Government's Equity Investment holdings is in the Electricity sector (56.4%), followed by the Financial sector (21.8%) and the Transport sector (9.2%).


 

Other Financial Assets

Other financial assets includes Income tax equivalents receivable and Prepayments as outlined in Table 7.2.

The increase in Prepayments over the Forward Estimates period reflects the payments made in relation to the Service Concession Asset for the development of the Tasmanian Government Radio Network.

Table 7.2:         Other Financial Assets as at 30 June

 

2020 

2020 

2021 

2022 

2023 

2024 

 

Forward 

Forward 

Forward 

 

Budget 

Actual 

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Income tax equivalents receivable

  796.5 

432.8 

523.9 

555.7 

544.2 

566.6 

Prepayments

  26.4 

45.4 

47.2 

50.9 

72.8 

98.2 

Other

.... 

14.2 

14.2 

14.2 

14.2 

14.2 

  822.9 

492.4 

585.3 

620.8 

631.3 

679.1 

 

 

 

 

 

 

 

 

Non‑Financial Assets

Non‑financial assets include the value of Crown Land and other land holdings, including national parks and conservation areas, schools, hospitals and other buildings held by the Government for the provision of goods and services. Non‑financial assets also includes Plant and equipment, Intangibles, Assets held for sale, Lease - right‑of‑use assets and Other non‑financial assets.

Land and buildings is estimated to be $7 470.8 million as at 30 June 2021, an increase of $320.6 million on the actual balance of $7 150.2 million as at 30 June 2020. Land and buildings is estimated to increase by $509.5 million to $7 980.3 million as at 30 June 2024. This primarily reflects increased capital expenditure on schools, housing, hospital and prison assets undertaken by the Department of Education, Department of Communities Tasmania, Department of Health and Department of Justice.

Infrastructure is estimated to be $6 405 million as at 30 June 2021, an increase of $571.2 million on the actual balance of $5 833.8 million as at 30 June 2020. Infrastructure is estimated to increase by $1 752.3 million to $8 157.3 million as at 30 June 2024, which primarily reflects capital expenditure on road and bridge infrastructure assets by the Department of State Growth.

The increase in Land and buildings and Infrastructure over the 2020‑21 Budget and Forward Estimates period reflects the implementation of the Government’s infrastructure investment program. Further information on infrastructure investment is provided in chapter 6 of this Budget Paper.


 

Leases

Australian Accounting Standard AASB 16 Leases came into effect from 1 July 2019. The Standard results in the recognition of a right‑of‑use asset together with a corresponding lease obligation on the GGS Balance Sheet.

Table 7.3 outlines leases by category. A corresponding liability is recognised which means there is minimal impact on GGS Net Worth.

Lease - right‑of‑use assets is estimated to be $412.1 million as at 30 June 2021. This consists of $379.7 million for Land and buildings which primarily represents the leasing of Government office accommodation held by Finance‑General and $32.4 million for Plant and equipment which primarily represents the leasing of medical equipment by the Department of Health.

Table 7.3:         Leases by Category as at 30 June1

 

2020 

2020 

2021 

2022 

2023 

2024 

 

Forward 

Forward 

Forward 

 

Budget 

Actual

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

Lease - right‑of‑use assets

 

 

 

 

 

 

Land and buildings

  280.4 

317.4

379.7

345.7

317.2

291.7

Plant and equipment

  53.0 

30.9

32.4

29.9

27.5

25.2

  333.4 

348.4

412.1

375.6

344.7

316.9

Lease liabilities

 

 

 

 

 

 

Land and buildings

  279.2 

305.9

367.1

335.0

307.9

282.5

Plant and equipment

  55.7 

49.6

54.9

53.3

51.2

49.1

  334.9 

355.5

422.1

388.2

359.1

331.7

 

 

 

 

 

 

 

Note:

1.    While the value of the right-of-use assets will equal lease liabilities on initial recognition, differences arise over the term of the lease, as lease liabilities decrease based on the principal component of the cash-based lease repayment, while right-of-use assets are generally depreciated on a straight line basis over the term of the lease.

Liabilities

Total Liabilities is estimated to be $16 498.3 million as at 30 June 2021, increasing over the Forward Estimates period, with estimated Total Liabilities of $18 418.2 million as at 30 June 2024.

The increase in Liabilities over the Forward Estimates period is primarily due to an increase in Borrowings of $2 187.7 million, partly offset by a decrease in the Superannuation liability of $228.8 million.


 

Borrowings

The level of Borrowings is estimated to be $3 013.5 million as at 30 June 2021, which is an increase of $2 145.7 million from the actual balance of $867.8 million as at 30 June 2020. The increase is primarily due to the borrowings undertaken to fund the estimated General Government Sector cash deficit. As a result of estimated General Government Sector cash deficits over the Forward Estimates, Borrowings is expected to increase by $2 187.7 million to a balance of $5 201.2 million as at 30 June 2024. The breakdown of borrowings is outlined below in Table 7.4.

Table 7.4:         Borrowings by Category as at 30 June

 

2020 

2020 

2021 

2022 

2023 

2024 

Forward 

Forward 

Forward 

 

Budget 

Actual

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

Borrowings

 

 

 

 

 

 

Australian Government Debt

190.3 

43.9 

36.4 

33.4 

30.4 

27.4 

Other borrowings

844.7 

823.8 

2 977.0 

4 028.5 

4 505.5 

5 173.7 

1 035.0 

867.8 

3 013.5 

4 061.9 

4 535.9 

5 201.2 

 

 

 

 

 

 

 

General Government Superannuation Liability

The Government’s superannuation liability is an estimate of the obligations of the State with respect to liabilities arising from the current and former members of unfunded or partially funded Public Sector defined benefit superannuation schemes, which were closed to new members with effect from May 1999.

The superannuation liability is an estimate of the net present value of the Government’s share of meeting current and future benefit payments for scheme members. The superannuation liability differs from many other financial liabilities, such as Borrowings, which can be called on for repayment in full at any point in time.

The superannuation liability has arisen over many decades because benefits are funded on an emerging basis when scheme members become entitled to a pension or lump sum benefit. That is, the Government’s portion of the final benefit is paid when it falls due, with the remaining part of the benefit being funded from the scheme’s assets. The major schemes currently operating in the General Government Sector that have an unfunded liability are those established under the Public Sector Superannuation Reform Act 2016, the former Parliamentary Superannuation Act 1973, the former Parliamentary Retiring Benefits Act 1985 and the Judges’ Contributory Pensions Act 1968.

While these schemes have been closed to new members, because of the long‑term nature of superannuation benefits, the superannuation liability continues to increase as existing members accrue additional years of service as they approach retirement age. The liability is projected to increase until 2020-21 and then gradually decline over the following six to seven decades.

The Government recognises that superannuation is a significant liability and will continue to ensure that it manages this critical ongoing funding task in the most prudent way and in accordance with the recommendations of the State Actuary.

General Government Superannuation Liability is estimated to be $11 481 million as at 30 June 2021, which is comprised of the estimated present value of the liability of $13 323.5 million less the estimated fair value of plan assets of $1 824.4 million.

Table 7.5:         General Government Superannuation Liability as at 30 June

 

2020 

 

  Budget 

2020 

 
Actual 

2021 

 

  Budget 

2022 

Forward 
Estimate 

2023 

Forward 
 Estimate 

2024 

Forward 
Estimate 

 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Present value of superannuation liability

8 855.7 

12 196.1 

13 323.5 

13 182.9 

13 015.9 

12 823.3 

Fair value of plan assets

(1 847.9)

(1 915.8)

(1 842.4)

(1 756.0)

(1 665.7)

(1 571.0)

 

 

 

 

 

 

 

Total

7 007.8 

10 280.3 

11 481.0 

11 426.9 

11 350.1 

11 252.3 

 

 

 

 

 

 

 

 

Chart 7.2 projects the General Government Superannuation liability (net of plan assets) over the total life of the defined benefit schemes to 30 June 2081.

Chart 7.2:         General Government Superannuation Liability Projection 30 June 2021 to 30 June 2081

Title: General Government Superannuation Liability Projection, 30 June 2021 to 30 June 2081 - Description: The chart shows that the General Government Superannuation Liability gradually declines over the total life of the defined benefit scheme to 30 June 2081.

Independent actuarial assessments are prepared by the State Actuary to provide reporting and disclosure information, relating to the General Government Superannuation liability, in respect of current and former employees who have defined benefits arising from membership of the closed defined benefit superannuation schemes.


 

The actuarial assumptions are used for the variables that will determine the ultimate cost of providing long‑term superannuation benefits. Actuarial assumptions must be unbiased (i.e. neither imprudent nor excessively conservative) and should reflect the economic relationships between factors such as inflation, rates of salary increase, the return on scheme assets and discount rates.

Key assumptions used by the State Actuary in preparing the most recent actuarial estimate of the General Government Superannuation liability are:

·       Discount rate ‑ 1.0 per cent;

·       Salary increase rate ‑ 3.0 per cent;

·       Pension increase rate ‑ 2.25 per cent; and

·       Investment earnings ‑ 1.0 per cent.

It is important to recognise that the actuarial estimate is a snapshot of a scheme’s estimated financial position at a particular point in time, and that the actuarial results do not predict a scheme’s future financial position or its ability to pay benefits in the future. Over time, a scheme’s total cost will depend on a number of factors, including the amount of benefits the scheme pays, the number of people paid benefits (for example mortality and marital status are estimated), scheme expenses and the amount earned on any assets invested to pay the benefits. These variables will change over the life of the liability. The variables are uncertain at the valuation date and are estimated by the State Actuary.

The 2019-20 Budget projection was based on a discount rate of 4.25 per cent, which was calculated using the mid-point of the 10 and 15 year average yield on the 10 year Government Bond rate at the time of Budget development. Bond rates have been falling and more recently the COVID-19 pandemic and central bank responses have seen bond rates decline further. As a result, the discount rate applied to determine the Superannuation Liability has been reduced. The 2020‑21 Budget projections are based on a discount rate of 1.0 per cent.

There is a strong inverse relationship between the discount rate and the valuation of the liability. Chart 7.3 shows the impact of an increase or decrease of 0.5 per cent in the average discount rate used to value the General Government Superannuation liability. The base rate column represents the estimated present value of the superannuation liability (gross) as at 30 June in each year valued by the State Actuary using a discount rate of 1.0 per cent.

Chart 7.3:         Sensitivity Analysis of the General Government Superannuation Liability as at 30 June

Title: Sensitivity Analysis of the General Government Superannuation Liability as at 30 June - Description: The chart demonstrates that there is a strong inverse relationship between the discount rate and the valuation of the liability and shows the impact of an increase or decrease of 0.5 per cent in the average discount rate used to value the General Government Superannuation Liability.

Currently, the emerging cash cost of defined benefit superannuation payments is met from the Public Account, funded partly by agency contributions and by a Reserved by Law contribution, which comprises the balance of the Government’s share of pension and lump sum benefit costs.

Chart 7.4 shows the estimated employer contribution payments, made up of both pension and lump sum benefit costs, over the period 2020-21 to 2080-81.

Chart 7.4:         Defined Benefit Superannuation Costs, 2020-21 to 2080‑81

Title: Defined Benefit Superannuation Costs, 2020-21 to 2080-81 - Description: The chart shows that estimated employer contribution payments, made up of lump sum and pension payments, are predicted to peak in 2035-36 and then gradually decline to 2080-81.


 

A key budget risk is that the cost to the Budget will increase significantly in coming years, increasing by 57.4 per cent over the next 15 years and peaking in 2034‑35. The estimated cost to the Budget is based on the most recent actuarial estimates. The change from the projections in the 2019-20 Budget reflects a 5.4 per cent increase in the expected peak cost to $475.6 million ($451.4 million in the 2019-20 Budget).

In 2020‑21, defined benefit superannuation costs are estimated to be 4.6 per cent of Cash receipts from operating activities in the General Government Sector. Defined benefit superannuation costs, as a percentage of General Government cash receipts, is estimated to peak at 4.9 per cent in nine years (2028‑29), followed by a decrease to 4.3 per cent in 15 years (2034-35) and 3.3 per cent in 20 years (2039-40).

While movements in discount rates have a significant impact on the valuation of the superannuation liability at any point of time, those discount rate movements do not impact on the nominal cash flows required to meet the emerging cost of benefits paid to members.

Table 7.6 shows the estimated nominal cash flows required to meet the emerging cost of superannuation benefits payable to members. This represents the estimated total cost of benefits payable and includes the General Government share, together with the share of benefits that are funded from plan assets.

Table 7.6:         Undiscounted Defined Benefit Obligations Payable to Employees of the General Government Sector

 

2020 

 

Estimate 

 

$m 

Estimated total benefit payments to be made in the period

 

No later than 1 year

 435.7 

Later than 1 year and no later than 2 years

 439.9 

Later than 2 years and no later than 5 years

1 384.5 

Later than 5 years and no later than 10 years

2 581.0 

Later than 10 years and no later than 15 years

2 761.5 

Later than 15 years and no later than 20 years

2 598.9 

Later than 20 years and no later than 25 years

2 276.2 

Later than 25 years and no later than 30 years

1 896.4 

Later than 30 years and no later than 35 years

1 441.0 

Later than 35 years and no later than 40 years

 958.0 

Later than 40 years and no later than 45 years

 532.1 

Later than 45 years and no later than 50 years

 231.6 

Undiscounted defined benefit obligation

17 536.8 

 

 

After 50 years there is expected to be a reducing level of cash for a further 25 years totalling approximately:

85.4 

 

 

 

 

 

Total State Superannuation Liability

Total State Superannuation as at 30 June 2021 is estimated to be $12 314.6 million, which is comprised of the estimated present value of the liability of $14 284.9 million less the estimated fair value of plan assets of $1 970.4 million. Total State Superannuation includes government businesses.

Table 7.7:         Total State Superannuation Liability as at 30 June

 

2020 

 

  Budget 

2020 

 

Actual 

2021 

 

  Budget 

2022 

Forward 
Estimate 

2023 

Forward 
Estimate 

2024 

Forward 
Estimate 

 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Present value of superannuation liability

9 531.4 

13 146.2 

14 284.9 

14 134.8 

13 956.1 

13 749.9 

Fair value of plan assets

(1 984.0)

(2 038.0)

(1 970.4)

(1 878.2)

(1 781.5)

(1 680.0)

 

 

 

 

 

 

 

Total

7 547.4 

11 108.2 

12 314.6 

12 256.6 

12 174.5 

12 069.9 

 

 

 

 

 

 

 

 

Chart 7.5 shows the impact of an increase or decrease of 0.5 per cent in the discount rate used to value the Total State Superannuation Liability. The base rate column represents the estimated present value of the superannuation liability (gross) as at 30 June in each year valued by the State Actuary using a discount rate of 1.0 per cent.

Chart 7.5:         Sensitivity Analysis of the Total State Superannuation Liability as at 30 June

Title: Sensitivity Analysis of the Total State Superannuation Liability as at 30 June - Description: The chart demonstrates that there is a strong inverse relationship between the discount rate and the valuation of the liability and shows the impact of an increase or decrease of 0.5 per cent in the average discount rate used to value the Total State Superannuation Liability.

Table 7.8 shows the estimated nominal cash flows required to meet the emerging cost of superannuation benefits payable to members. This represents the estimated total cost of benefits payable and includes the Total State share, together with the share of benefits that are funded from plan assets.

Table 7.8:         Undiscounted Defined Benefit Obligations Payable to Employees of the Total State Sector

 

2020 

 

Estimate 

 

$m 

Estimated total benefit payments to be made in the period

 

No later than 1 year

 466.5 

Later than 1 year and no later than 2 years

 471.0 

Later than 2 years and no later than 5 years

1 483.0 

Later than 5 years and no later than 10 years

2 765.4 

Later than 10 years and no later than 15 years

2 960.1 

Later than 15 years and no later than 20 years

2 786.2 

Later than 20 years and no later than 25 years

2 441.0 

Later than 25 years and no later than 30 years

2 034.2 

Later than 30 years and no later than 35 years

1 546.2 

Later than 35 years and no later than 40 years

1 028.0 

Later than 40 years and no later than 45 years

 570.9 

Later than 45 years and no later than 50 years

 248.5 

Undiscounted defined benefit obligation

18 801.1 

 

 

After 50 years there is expected to be a reducing level of cash for a further 25 years totalling approximately:

 91.6 

 

 

 


 

Tasmanian Risk Management Fund

Purpose of the Fund

The Tasmanian Risk Management Fund was established on 1 January 1999 to provide a whole‑of‑government approach to funding and managing the insurable liabilities of inner‑Budget agencies.

Agencies are covered for the majority of insurable risks to which they are exposed or for which they choose to accept responsibility and the Fund agrees to cover, including:

·       personal injury (including workers’ compensation and personal accident);

·       property (including buildings and contents, business interruption, motor vehicles, machinery, marine hull, transit and fraud);

·       liability (including public and products, professional, and directors’ and officers’ liability);

·       medical liability; and

·       travel.

All classes are self‑insured by the Fund apart from marine hull and travel. These classes remain insured through the private sector, as this is more cost-effective than self‑insurance for these two categories of risk. From 1 July 2015, an Industrial Special Risks insurance policy has been purchased in the external market to cover catastrophe risk for property claims above $6.3 million.

Performance of the Fund

The Fund operates on a cost recovery basis with all inner‑Budget agencies making contributions each year in order to build up reserves to meet current and emerging costs. Contributions are based on advice from an independent actuary and are adjusted over time according to the claims experience of agencies.

Overall, total agency contributions increased from $77.9 million in 2019-20 to $82.6 million in 2020‑21. The increase in workers’ compensation contributions in 2020-21 is primarily as a result of higher claim costs in recent years, a lower discount rate, the increasing size of the public sector and inflationary factors. The contribution for general property also increased reflecting cost developments in respect of the 2018‑19 bushfires and an increase in asset values, including the completion of K-Block at the Royal Hobart Hospital. These increases are partly offset by decreases in contributions for both medical liability and general liability risks, which is mainly due to the continued favourable funding positions of these risk categories.

The Fund’s Actuary takes into account the level of assets and liabilities in each risk category when determining annual contributions. The net assets of the Fund are expected to increase over the Forward Estimates, mainly reflecting improvement in the funding position for the workers’ compensation risk and a rebuilding of the large claim funding reserve for property risk. There is also a significant pre-2001 medical liability risk provision. The provision is being maintained for medical liability risk as claims can take many years to be reported and many more years to reach a settlement. These reporting and settlement delays mean that the outstanding claims liability in this risk category is subject to considerable uncertainty.


 

Table 7.9:         Financial Position of the Tasmanian Risk Management Fund
as at 30 June

 

2020 

2020 

2021 

2022 

2023 

2024 

 

Budget 

Actual 

Budget 

Forward 

Estimate 

Forward 

 Estimate 

Forward 

 Estimate 

 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

271.1 

276.5 

281.9 

288.8 

301.9 

311.9 

Receivables

1.5 

2.4 

2.4 

2.4 

2.4 

2.4 

 

272.6 

278.9 

284.2 

291.2 

304.3 

314.3 

Liabilities1

 

 

 

 

 

 

Personal injury

117.8 

122.9 

130.7 

 137.0 

142.4 

147.1 

Property

2.9 

10.6 

6.9 

1.8 

3.6 

3.8 

Motor vehicle

0.2 

0.2 

0.2 

0.2 

0.3 

0.3 

Liability

4.2 

4.3 

4.5 

4.6 

4.8 

4.9 

Medical

123.8 

120.0 

123.0 

126.3 

129.7 

134.1 

Payables

0.7 

1.6 

1.6 

1.6 

1.6 

1.6 

 

249.6 

259.6 

267.0 

271.6 

282.4 

291.8 

 

Net Assets

23.0 

19.2 

17.3 

19.7 

21.9 

22.5 

 

 

 

 

 

 

 

Note:

1.    Liabilities are calculated by the Fund’s Actuary as at 30 June 2020.