Federal Financial Relations (General Purpose Financial Assistance) Determination No.106 (January 2018)

Overview

The Federal Financial Relations (General purpose financial assistance) Determination No. 106, issued in January 2018, establishes the terms and conditions for the allocation of general purpose financial assistance to the states from the Commonwealth, in accordance with the Intergovernmental Agreement on Federal Financial Relations. This legislation is enacted by the Commonwealth of Australia under the Federal Financial Relations Act 2009, which provides a framework for the distribution of general purpose financial assistance to states through the COAG Reform Fund. The determination outlines specific payment conditions, including the requirement that financial assistance be granted through a written agreement between the Commonwealth and the states, as stipulated in the COAG Reform Fund Act 2008. The primary policy objective is to ensure compliance with the Commonwealth's obligations under the IGA by facilitating timely and structured payments of general purpose financial assistance to the states, while adhering to the debit limits set forth in the Federal Financial Relations Act 2009. The determination also highlights the distribution of funds for particular purposes, such as compensating Western Australia for the loss of royalty revenue due to the removal of the condensate excise exemption, and assisting the Australian Capital Territory in meeting additional municipal costs associated with its role as the national capital. These payments are intended to support various human rights by promoting service delivery across multiple policy areas at the discretion of each state. Overall, the determination aims to uphold the integrity of federal financial relations by ensuring that general purpose financial assistance is provided in a transparent and accountable manner, in line with the objectives of the IGA.

Scope and Application

The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 106, made in January 2018, governs the distribution of general purpose financial assistance to the states and territories of Australia under the Federal Financial Relations Act 2009. This legislation applies to the Commonwealth of Australia and the states and territories, regulating the crediting of funds to the COAG Reform Fund and subsequent disbursement to states for various purposes as agreed in the Intergovernmental Agreement on Federal Financial Relations. The scope of this determination is defined by the obligations under the IGA, which ensures collaboration on policy and service delivery between the Commonwealth and the states, and the COAG Reform Fund Act 2008, which establishes the fund as a special account under the Public Governance, Performance and Accountability Act 2013. Notably, this determination exempts from disallowance provisions, ensuring compliance with the Commonwealth’s obligation to provide general purpose financial assistance. The debit limit for the 2017-18 financial year is set at $5 billion, with the total payments for that year amounting to approximately $398.6 million, leaving a remaining limit of $4.6 billion.

Key Provisions

The Federal Financial Relations (General purpose financial assistance) Determination No. 106 (January 2018) outlines the conditions under which the Commonwealth provides general purpose financial assistance to the States and Territories through the COAG Reform Fund. According to subsection 7(2) of the COAG Reform Fund Act 2008, the terms and conditions of such financial assistance are detailed in a written agreement between the Commonwealth and the States (section 7(2)). The determination itself specifies that the total amount credited to the COAG Reform Fund for the financial year starting 1 July 2017 must not exceed $5,000,000,000.00 as per subsection 9(3) of the Federal Financial Relations Act 2009. The cumulative payments made under this determination for the 2017-18 financial year totalled $398,589,892.24, well within the specified limit of $5,000,000,000.00. The obligations imposed by this determination include ensuring that the financial assistance provided adheres to the terms set out in the written agreement between the Commonwealth and the States. This involves not only the disbursement of funds but also the adherence to the specific conditions outlined in the Intergovernmental Agreement on Federal Financial Relations, such as compensating Western Australia for lost royalty revenue due to the removal of the condensate excise exemption and assisting the Australian Capital Territory with municipal costs related to its role as the national capital. The determination also stipulates that the payments must be made in accordance with the Offshore Petroleum and Greenhouse Gas Storage Act 2006, which governs the sharing of royalties from the North West Shelf oil and gas project. Breach of the conditions specified in the determination could have legal repercussions. However, the Explanatory Statement notes that it is difficult to assess any detrimental impact on human rights due to the general nature of the financial assistance. Nevertheless, any failure to comply with the specific terms and conditions agreed upon could lead to legal challenges and potential financial penalties. The maximum penalties for such breaches are not explicitly stated in the Explanatory Statement, but they would typically be determined by the relevant legislation governing the financial assistance agreements and the COAG Reform Fund Act 2008.