Explanatory Memorandum
Circulated By the Authority of the Treasurer, the Hon Wayne Swan MpChapter 2 - Other general revenue assistance
Outline of chapter
2.1 The Commonwealth will provide general purpose financial assistance to be used by the States for any purpose.
Context of amendments
2.2 On 29 November 2008, COAG agreed to a new framework for federal financial relations. As part of its implementation of the new framework for federal financial relations, the Commonwealth committed to the provision of on-going financial support for the States' service delivery efforts through general revenue assistance, other than GST payments, to be used by the States for any purpose.
Summary of new law
2.3 The Bills provide for the Minister, through a written determination, to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of general purpose financial assistance.
Comparison of key features of new law and current law
| New law | Current law |
| The Bills provide for the Minister, through a written determination, to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of general purpose financial assistance.
The maximum amount that the Minister may credit to the COAG Reform Fund in a particular financial year will be specified in an annual Appropriation Act related to that year. |
General purpose financial assistance payments are appropriated through annual Appropriation Acts or standing appropriations. |
Detailed explanation of new law
2.4 The Bills provide for the Minister, through a written determination, to credit amounts to the COAG Reform Fund for the purpose of making a grant of general purpose financial assistance to the States [subsection 9(1)].
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- The COAG Reform Fund Act 2008 established the COAG Reform Fund and specifies that it is a Special Account for the purposes of the Financial Management and Accountability Act 1997 .
2.5 The Government intends that payments of general purpose financial assistance are transparent and subject to parliamentary scrutiny.
2.6 To improve transparency, the Minister's determinations are legislative instruments and will be registered on the Federal Register of Legislative Instruments, but will not be disallowable.
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- Determinations made by the Minister under subsection 9(1) would not otherwise be legislative instruments within the meaning of section 5 of the Legislative Instruments Act 2003 .
2.7 The Minister has an obligation under the Intergovernmental Agreement to make payments of general purpose financial assistance in a prescribed manner. Exemption from the disallowance provisions will allow the Minister to meet this obligation.
2.8 Parliamentary scrutiny is provided by requiring that the Minister gain approval for the maximum amount he may credit to the COAG Reform Fund for the purpose of providing financial assistance in a particular financial year.
2.9 While the annual Appropriation Acts will not appropriate amounts to be paid as general purpose revenue assistance, the maximum amount that the Minister may credit to the COAG Reform Fund, and the total amount covered by drawing rights authorising debits from the Fund, under subsection 9(1) in a particular financial year will be specified in an annual Appropriation Act related to that year [subsection 9(3)].
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- Subsection 9(3) provides for the annual Appropriation Acts to declare that a specified amount is a general drawing rights limit in relation to a particular financial year.
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- The general drawing rights limit will operate by restricting the total amount that may be covered by drawing rights under the Financial Management and Accountability Act 1997 , and hence, the amount that can be paid out from the COAG Reform Fund in a financial year.
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- Limiting the ability to issue drawing rights is an effective mechanism because the Financial Management and Accountability Act 1997 does not permit expenditure without the person making the payment having been issued with a valid drawing right.
2.10 This ensures that the Parliament's role in approving Commonwealth expenditure is preserved.
2.11 The COAG Reform Fund Act 2008 requires that the terms and conditions on which financial assistance is granted through the COAG Reform Fund are set out in a written agreement between the Commonwealth and the State.
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- The terms and conditions on which general purpose financial assistance is granted will be set out in the Intergovernmental Agreement.
2.12 The maximum amount that the Minister may credit to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form general purpose financial assistance in the 2008-09 financial year is $500,000,000.
Application and transitional provisions
2.13 This measure applies from 1 April 2009.
Consequential amendments
2.14 The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill 2009 provides for the Offshore Petroleum and Greenhouse Gas Act 2006 to be amended to remove the appropriation for royalty payments to Western Australia. The royalty payments will be made using provisions in the Federal Financial Relations Act.