A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 - Determination of the Final Per Capita Relativities for 2007-08

Overview

The "A New Tax System (Commonwealth-State Financial Arrangements) Act 1999" was enacted to reform Commonwealth-State financial relations, in line with the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations signed in 1999. This Act addresses the need to establish a fair and efficient distribution of GST revenue and other grants to the states, ensuring that each state has the capacity to provide public services at an average standard. The Parliament of Australia, through the enactment of this Act, aimed to implement measures that support horizontal fiscal equalisation, a principle whereby states receive funding to enable them to deliver public services effectively despite variations in their fiscal capacity. The Act mandates the Treasurer to determine the per capita relativities for each state before 10 June each year, based on the recommendations of the Commonwealth Grants Commission, which align with the principle of horizontal fiscal equalisation. This legislative framework ensures that the distribution of GST revenue and other grants is both equitable and based on objective criteria.

Scope and Application

The A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 applies to the Australian Government, State and Territory governments, and their respective entities. The Act is concerned with the financial arrangements between the Commonwealth and the States, particularly in relation to the distribution of GST revenue. It mandates the determination of final per capita relativities for each State and Territory before 10 June in the current GST year, as per Section 9 of the Act. These relativities are used to calculate the share of GST revenue each State receives, based on their population and the principle of horizontal fiscal equalisation, ensuring that each State has the capacity to provide average standards of public services. The Act also requires the Treasurer to consult with the States before making these determinations. The geographic reach of the Act is national, impacting all States and Territories within Australia. The Act is administered through subordinate instruments that detail the specific calculations and distributions, adhering to the recommendations of the Commonwealth Grants Commission.

Key Provisions

The A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 (the Act) mandates that the Treasurer must determine, in writing, the per capita relativities for each State and Territory before 10 June of the current GST year, as stipulated in section 9 of the Act. This determination is crucial for calculating the GST revenue distribution among the States for the fiscal year. The relativities factor is derived based on recommendations from the Commonwealth Grants Commission, which are aligned with the principle of horizontal fiscal equalisation. This principle ensures that each State receives funding from the pool of GST revenue and Health Care Grants to enable them to provide an average standard of state-type public services, assuming they operate efficiently and make average efforts to raise revenue from their own sources. The obligations imposed on the Treasurer under the Act are significant. Firstly, the Treasurer must make the determination of the per capita relativities before the specified deadline. This requires careful consideration and consultation with the States and Territories to ensure that the recommended relativities are accurately applied. The Treasurer must also ensure that the process is transparent and aligns with the principles set out in the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (the IGA), which is Schedule 2 to the Act. Additionally, the Treasurer is required to consult with the States and Territories to gather their input on the recommended relativities, as was done at the Ministerial Council for Commonwealth-State Financial Relations meeting on 30 March 2007. Failure to comply with the requirements of the Act could have serious legal consequences. Although the Act does not explicitly detail specific offences or penalties for non-compliance with the relativities determination process, any breach of the Act's provisions could lead to legal challenges or administrative actions. The impact of such non-compliance could extend to the equitable distribution of GST revenue among the States, potentially leading to financial imbalances and disputes. It is essential for the Treasurer to adhere to the procedural and substantive requirements of the Act to avoid any adverse legal or financial repercussions.