Volumes The TGA estimates demand for its services based on prior years' volumes which are adjusted for forecast changes in the industry operations and changes in the regulatory framework and/or service delivery models.

Estimates for the number of products on the register incorporate expected cancellations and new additions. Due to changes in the LVT scheme it is expected that there will be a reduction in ARTG entries in 2015-16 as opposed to 2014-15.

Costs of the activity

Fees and charges are established to cover the cost of all direct and indirect costs for the sector. The costing methodology allows costs to be allocated to activities based on their resource consumption at each stage of the process through to the final product or service.

In line with the Australian Government's CRGs total costs are categorised into the following groups for cost allocation and transparency purposes.

• Direct costs: can be easily traced to a cost object with a high degree of accuracy. The allocation of direct costs to a cost object is relatively straightforward if the entity's financial system is able to generate relevant information. The most common direct costs are staff salaries (including oncosts, such as training, superannuation and leave) and supplier costs (e.g. office supplies and workers compensation premiums).
• Indirect costs: are the costs that cannot be easily linked to a cost object or for which the costs of tracking this outweigh the benefits. Indirect costs should be apportioned to a cost object using the entity's documented internal costing methodology. Common indirect costs include overhead costs such as salaries of staff in corporate (e.g. finance, human resources) and technical support (e.g. legal) areas, or accommodation costs (e.g. rent, maintenance, utilities).

A new software solution is being installed to improve TGA's ABC capability. Staff work effort surveys will be undertaken periodically and they will identify the time regulatory staff spend on our activities. A review of the results against current fees and charges will be carried out in 2015-16.