annual report/2006 - University of Melbourne

Notes to and forming part of the Financial Statements
Note 34 Contingent Assets and Contingent Liabilities
The University and its subsidiaries have the following contingent assets and contingent liabilities as at 31 December 2006.
34.1 Contingent Assets
34.1.1 As at 31 December 2006 The University did not have any contingent assets (Nil 2005).
34.2 Contingent Liabilities
34.2.1 Indemnity
(a) The University has issued a Letter of Indemnity to the National Australia Bank to cover the Bank’s guarantee to the Victorian
WorkCover Authority under the University’s WorkCover Self Insurance Scheme. The amount of the guarantee in place is
$7,062,000 (2005 $7,156,500) and the actuarial assessment of claims liability as at 31 December 2006 is $5,062,000 (2005
$5,042,000).
(b) In addition, the University has provided an indemnity to cover National Australia Bank guarantee to the City of Melbourne
in respect of a 50-year lease (signed in 2000) over a site on which the University has constructed, and is operating, as a car
park ($600,000).
34.2.2 Student Accommodation
(a) College Square on Swanston Street
The University has agreed to provide a rental guarantee to the purchasers of student apartments in the College Square
development on Swanston Street, Carlton. The rental guarantee is for a period of one year for the first year after settlement
with a guarantee for the second year being provided by Becton (the developers). The University’s obligation applies over
2006-2008 as the project is being delivered in two stages. Stage 1 was delivered in 2006 with settlements occurring from
the end of May while Stage 2 was completed by January 2007 with settlements extending from that date. The maximum
exposure for 2007 is estimated at $1,425,000 ($635,873 in 2006).
34.2.3 Tax Exempt Status – UMEE Ltd (formerly Melbourne University Private Ltd)
Pursuant to the transfer of the activities of Melbourne Enterprises International Ltd to Melbourne University Private Ltd (now
know as UMEE Ltd) in 2002, Melbourne Enterprises International Ltd lodged a tax ruling request with the Australian Tax Office
with respect to confirming Melbourne Enterprises International Ltd’s tax exempt status. On 18 December 2003 the Australian
Taxation Office provided the determination that, based on Melbourne Enterprises International Ltd’s making of donations
of $51,000,000 to the University of Melbourne, Melbourne Enterprises International Ltd was not entitled to an exemption
from income tax from 1 July 1999. Based on the advice of Senior Counsel, Melbourne Enterprises International Ltd lodged a
submission on the 30 June 2004 responding to the Australian Taxation Office’s (ATO) determination.
The Australian Taxation Office responded to the submission on 3 April 2006, reiterating its view that Melbourne Enterprises
International Ltd was not entitled to an exemption from income tax. Based on further advice of Senior Counsel, Melbourne
Enterprises International Ltd lodged a further submission disagreeing with the ATO’s view. The submission is being considered
by the ATO’s Senior tax Counsel, however at balance date no response has been received.
As at the balance date the final outcome of this matter remains uncertain and it is not feasible to quantify with any certainty
the potential financial impact on the consolidated entity of the possible loss of tax exempt status for Melbourne Enterprises
International Ltd.
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The University of Melbourne Annual Report 2006