Senate

Revised Supplementary Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 4 - Transitional arrangements

Overview

4.1 The proposed amendments to Schedule 1 of the Bill provide for the distribution of GST revenue grants in accordance with the principle of horizontal fiscal equalisation after 2001-02 and for transitional assistance to be in the form of grants and short term loans in 2000-01.

Summary of the amendment

Purpose of the amendment

4.2 To reflect the terms of the Intergovernmental Agreement in relation to transitional arrangements.

Date of effect

4.3 Clause 2 of the Bill provides that this Bill, once enacted, will commence when it has received Royal Assent or after the A New Tax System (Goods and Services Tax Act) 1999 ; the GST Imposition Acts; and the A New Tax System (Goods and Services Tax Act Administration) Act 1999 have commenced, whichever is later. The Intergovernmental Agreement will commence between the Commonwealth, States and the Territories on 1 July 1999 unless otherwise agreed by the Parties.

Background to the amendment

4.4 At the 9 April 1999 Premiers' Conference, it was agreed that the transitional arrangements agreed at the 13 November 1998 Special Premiers' Conference and subsequently proposed in Schedule 1 to the Bill should be amended. The agreement reached by all Parties and reflected in the Intergovernmental Agreement was that the distribution of GST revenue grants should be solely on the basis of horizontal fiscal equalisation after 2001-02 rather than 2002-03.

4.5 Changes to the tax reform package announced by the Prime Minister on 28 May 1999 required amendments to the Intergovernmental Agreement, including the provision of additional amounts of transitional assistance to the States and Territories in 2000-01 which will be paid in the form of grants of financial assistance rather than short term loans.

Explanation of the amendment

4.6 Amendments are made to clause 3 of Schedule 1 of the Bill to provide for grants of transitional assistance to a State in 2000-01. These amendments include the addition of sub clause 3(5A) which requires the Treasurer to determine in writing the amounts of transitional assistance to be provided to a State or Territory as a short term loan or grant.

4.7 Amendments are made to clauses 4, 5 and 6 of Schedule 1 of the Bill to provide that the distribution of GST revenue grants will be in accordance with the horizontal fiscal equalisation in each year after 2001-02.