Requirements of AASB 16
AASB 16 Leases became effective on 1 July 2019 (transition date) for 30 June year-end reporters. Subsequent to the transition date, a lessee shall recognise a right-of-use asset and a lease liability at the lease commencement date for all leases, except for leases of short-term or low-value assets.
To calculate the present value of a lease liability, the interest rate implicit in the lease should be used in accordance with AASB 16.26, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate.
Incremental borrowing rates
The incremental borrowing rate is defined as “the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment.” [AASB 16 Appendix A].
Agencies, including State Owned Corporations (SOCs), that borrow from the market should use the rate they would expect to pay based on borrowings with a similar term.
The majority of agencies within the State, particularly in the General Government sector do not borrow funds in the market. Instead they receive appropriations from the Crown and where the Crown needs additional funding, Treasury Corporation (TCorp) will go to market to obtain these funds. Therefore, agencies that do not borrow from the market should use TCorp rates as their incremental borrowing rates.
TCorp rates for AASB 16 lease valuation purpose are updated bi-annually on 1 January and 1 July (the next day if it’s a public holiday), unless a significant change has incurred during the intervals.
The latest TCorp rates for AASB 16 lease valuation were updated on 1 Jul 2023 as below. Please use them for new leases (including replacement leases), applicable lease liability re-assessment and lease modifications from 1 Jul 2023 onwards until these rates are updated again in due course. For SOCs that use these rates, the Government Guarantee Fee (GGF) is required to be added to these issued rates.
|Lease Term||Rates updated on 1 Jul 2023|
|For leases up to 5 years||4.43%|
|For leases > 5 years up to 10 years||4.84%|
|For leases > 10 years||5.27%|
Historical TCorp rates
|For leases up to 5 years||For leases > 5 years up to 10 years||For leases > 10 years|
|Rates updated on 1 Jul 2019||1.42%||2.00%||2.42%|
|Rates updated on 2 Jan 2020||1.41%||1.87%||2.30%|
|Rates updated on 1 Jul 2020||0.78%||1.52%||2.33%|
|Rates updated on 1 Jan 2021||0.51%||1.26%||2.11%|
|Rates updated on 1 Jul 2021||0.94%||1.76%||2.44%|
|Rates updated on 1 Jan 2022||1.57%||2.11%||2.79%|
|Rates updated on 1 Jul 2022||3.78%||4.26%||4.44%|
|Rates updated on 1 Jan 2023||3.70%||4.05%||4.38%|
If you have any questions, please contact [email protected].