EXPLANATORY STATEMENT
Federal Financial Relations (General Purpose Financial Assistance) Determination No. 117 (November 2018)
Background
The Intergovernmental Agreement on Federal Financial Relations (the IGA) provides a foundation for collaboration on policy development and service delivery between the Commonwealth and the States and Territories (the States).
Consultation
The IGA was subject to extensive consultation with the States before it was agreed by the Council of Australian Governments on 29 November 2008. The IGA and individual National Partnership agreements are publicly available on the Council for Federal Financial Relations website.
General purpose financial assistance
The Federal Financial Relations Act 2009 (FFR Act) provides for the Minister to credit an amount to the COAG Reform Fund for the purpose of providing general purpose financial assistance to the States. Once the amount is credited to the COAG Reform Fund it is debited from the Fund to make the grants to the States.
The COAG Reform Fund Act 2008 (COAG Act) establishes the COAG Reform Fund and specifies that it is a special account for the purposes of the Public Governance, Performance and Accountability Act 2013.
The Treasurer’s determinations in respect of general purpose financial assistance are legislative instruments and are registered on the Federal Register of Legislation, but are not disallowable. The Commonwealth has an obligation under the IGA to make payments of general purpose financial assistance in a prescribed manner. Exemption from the disallowance provisions of the Legislation Act 2003 allows the Treasurer to ensure that this obligation is met.
Payment conditions
Subsection 7(2) of the COAG Act requires that the terms and conditions on which financial assistance is granted through the COAG Reform Fund are to be set out in a written agreement between the Commonwealth and the States. The terms and conditions for general purpose financial assistance are set out in Schedule D to the IGA.
Debit limits
Under subsection 9(3) of the Federal Financial Relations Act 2009, the total amount credited to the COAG Reform Fund for the purpose of making a grant of general purpose financial assistance in the financial year starting on 1 July 2018 must not exceed $5,000,000,000.00.
The amounts specified in Table 1 are the total amounts determined in the 2018-19 financial year in respect of general purpose financial assistance, including this determination.
The total amount determined for general purpose financial assistance payments to date in the 2018-19 financial year does not exceed the debit limit.
Table 1: Total cumulative general purpose financial assistance payments in 2018-19
Commencement
The determination commenced on the day it was made.
Summary of relevant agreements for general purpose financial assistance
Payment title | Purpose | Relevant agreement |
Compensation for impact on royalties of excise amendment | The Commonwealth provides general purpose financial assistance to compensate Western Australia for the loss of royalty revenue resulting from the removal in the 2008-09 Budget of the exemption of condensate from crude oil excise. | Schedule D – Payment arrangements of the Intergovernmental Agreement |
ACT Municipal Services | The Commonwealth provides general purpose financial assistance to the Australian Capital Territory to: • assist in meeting the additional municipal costs which arise from Canberra's role as the national capital; and • compensate the Australian Capital Territory for additional costs resulting from the national capital planning influences on the provision of water and sewerage services. | Schedule D – Payment arrangements of the Intergovernmental Agreement |
Royalty payments | | |
— Offshore Petroleum and Greenhouse Gas Storage Act 2006 | The Commonwealth provides general purpose financial assistance to Western Australia from royalties payable under the Offshore Petroleum (Royalty) Act 2006 in respect of the North West Shelf oil and gas project off the coast of Western Australia. The Commonwealth collects these royalties because it has jurisdiction over off‑shore areas. These royalties will be shared between the Commonwealth (approximately one third) and Western Australia (approximately two thirds). These payment arrangements are in accordance with section 75 of the Offshore Petroleum and Greenhouse Gas Storage Act 2006. | Schedule D – Payment arrangements of the Intergovernmental Agreement |
Amounts of general purpose financial assistance on 21 November 2018 ($)
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
It is difficult to assess the human rights compatibility of either the determination or the making of payments of general purpose financial assistance, as the amounts paid to each State can be used for any purpose. Generally, payments will promote multiple human rights by supporting service delivery in a range of policy areas, at the discretion of each State. Consequently, neither this determination nor the making of general purpose financial assistance payments more generally could be said to have a detrimental impact on any human right.
Overview
The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 117, made in November 2018 under the Federal Financial Relations Act 2009, addresses the need for providing general purpose financial assistance to the States and Territories in accordance with the Intergovernmental Agreement on Federal Financial Relations. The determination was introduced to ensure compliance with the obligations under the IGA regarding the provision of financial assistance, facilitating collaboration between the Commonwealth and the States on policy development and service delivery. The determination was made by the Treasurer, as the Minister responsible for the COAG Reform Fund, and is not subject to disallowance to maintain the Commonwealth’s commitment to the IGA. The determination outlines specific payment arrangements for general purpose financial assistance, including compensation for the impact on royalties due to excise amendments, support for municipal services in the ACT, and payments from royalties related to offshore petroleum and greenhouse gas storage in Western Australia. The objective is to support service delivery across various policy areas, thereby promoting multiple human rights indirectly by enhancing the capacity of States to deliver services.
Scope and Application
The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 117 applies to the Commonwealth, the States, and the Australian Capital Territory under the framework established by the Intergovernmental Agreement on Federal Financial Relations (IGA). This determination outlines the terms and conditions for the allocation and distribution of general purpose financial assistance, which is intended to support the states and territories in meeting various costs and obligations, including those arising from specific policy initiatives or geographic roles. The legislation specifies that the total amount credited to the COAG Reform Fund for general purpose financial assistance in any financial year must not exceed $5,000,000,000.00, ensuring fiscal responsibility in the distribution of funds. The assistance is directed towards specific purposes such as compensating Western Australia for the loss of royalty revenue from excise amendments, supporting municipal services in the Australian Capital Territory, and sharing royalties from offshore petroleum projects. The determination ensures that these payments comply with the conditions set out in Schedule D of the IGA, and it commenced on the day it was made, reflecting the immediate implementation of the agreed financial assistance terms.
Key Provisions
The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 117, which was issued in November 2018, outlines the key provisions for the provision of general purpose financial assistance to the States and Territories under the Federal Financial Relations Act 2009 (FFR Act) (s.7). The determination is grounded in the Intergovernmental Agreement on Federal Financial Relations (IGA), which was agreed upon by the Council of Australian Governments on 29 November 2008 after extensive consultation with the States (Explanatory statement). The terms and conditions for these grants are detailed in Schedule D of the IGA, and the financial assistance is provided through the COAG Reform Fund, which is established under the COAG Reform Fund Act 2008 (COAG Act) (s.9(3)). The determination itself is a legislative instrument that is registered on the Federal Register of Legislation but is exempt from disallowance provisions to ensure that the Commonwealth's obligation under the IGA to provide these payments is met (Explanatory statement).
The obligations imposed by this determination on the Commonwealth and the States include adhering to the terms and conditions outlined in the IGA for the provision of general purpose financial assistance (COAG Act s.7(2)). The Commonwealth must ensure that the total amount credited to the COAG Reform Fund for these grants does not exceed $5,000,000,000.00 in the financial year starting on 1 July 2018 (FFR Act s.7(2)). The States, in turn, must use the financial assistance provided in accordance with the agreed-upon terms and conditions as specified in Schedule D of the IGA. The determination also specifies the purposes for which the general purpose financial assistance is provided, including compensating Western Australia for the loss of royalty revenue from the removal of the exemption of condensate from crude oil excise, assisting the Australian Capital Territory in meeting the additional municipal costs arising from Canberra's role as the national capital, and compensating the Australian Capital Territory for additional costs resulting from national capital planning influences on the provision of water and sewerage services (Schedule D, IGA).
Breach of the terms and conditions outlined in the IGA or failure to adhere to the provisions of this determination could potentially lead to civil or criminal consequences, although the Explanatory Statement does not specify any particular offences, penalties, or consequences for non-compliance (Explanatory statement). Given that the amounts paid to each State can be used for any purpose, it is generally accepted that these payments promote multiple human rights by supporting service delivery in a range of policy areas at the discretion of each State. Consequently, neither this determination nor the making of general purpose financial assistance payments more generally could be said to have a detrimental impact on any human right (Statement of Compatibility with Human Rights).