Federal Financial Relations (General Purpose Financial Assistance) Determination No. 123 (May 2019)

Overview

The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 123, made in May 2019, was enacted under the authority of the Federal Financial Relations Act 2009. This legislation was introduced to address the need for a structured and collaborative approach to financial assistance between the Commonwealth and the states and territories of Australia. The determination is a legislative instrument established by the Treasurer, and while it is registered on the Federal Register of Legislation, it is exempt from the disallowance provisions of the Legislation Act 2003, ensuring the Commonwealth's commitment to the intergovernmental agreement on federal financial relations. This determination outlines the specific financial assistance provided to various states to address particular policy needs, ensuring compliance with the terms and conditions set forth in the Intergovernmental Agreement on Federal Financial Relations. The policy objective is to facilitate effective financial collaboration and service delivery across jurisdictions in Australia.

Scope and Application

The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 123, made in May 2019, outlines the terms and conditions under which the Commonwealth provides general purpose financial assistance to the States and Territories through the Council of Australian Governments (COAG) Reform Fund. This determination applies to the Commonwealth Government, the States, and the Australian Capital Territory, as they are parties to the Intergovernmental Agreement on Federal Financial Relations (IGA). The geographic reach of this Act is national, as it pertains to the entire Australian jurisdiction, including its territories. The Act does not provide explicit exclusions but is subject to the terms and conditions specified in Schedule D of the IGA. The Act’s application may be further extended or restricted through subordinate instruments as agreed upon by the Commonwealth and the States. The determination mandates that the total amount credited to the COAG Reform Fund for general purpose financial assistance in the 2018-19 financial year must not exceed $5 billion. As of 21 May 2019, the total cumulative payments made did not exceed this limit. The determination specifies the allocation of funds to various States for specific purposes, including compensation for the impact on royalties due to excise amendments, support for municipal services in the Australian Capital Territory, royalties from offshore petroleum projects, and transitional GST top-up payments to assist in the transition to a new horizontal fiscal equalisation system. This allocation ensures that the assistance provided meets the agreed-upon conditions and supports various policy areas and service delivery needs across the States.

Key Provisions

The main operative sections of the Federal Financial Relations (General Purpose Financial Assistance) Determination No. 123 (May 2019) set out the conditions under which the Commonwealth provides general purpose financial assistance to the States. Specifically, section 7(2) of the COAG Reform Fund Act 2008 (COAG Act) requires that the terms and conditions for these grants are detailed in a written agreement between the Commonwealth and the States, which are specified in Schedule D to the Intergovernmental Agreement (IGA). The debit limit for general purpose financial assistance in the 2018-19 financial year is set at $5,000,000,000.00, as per subsection 9(3) of the Federal Financial Relations Act 2009 (FFR Act). The determination also outlines specific payments for various purposes, such as compensating Western Australia for lost royalty revenue due to excise changes, assisting the Australian Capital Territory with municipal costs, and providing royalties from offshore petroleum activities. The obligations and requirements imposed by the Act include adherence to the terms and conditions set forth in Schedule D of the IGA, ensuring that the grants are used for the specified purposes. The Commonwealth must credit the COAG Reform Fund with the prescribed amount for general purpose financial assistance and debit this fund to make the grants to the States. The determination also mandates that the total amount credited to the COAG Reform Fund for these grants must not exceed the specified debit limit for the financial year. These obligations are designed to ensure transparency and accountability in the allocation and use of general purpose financial assistance. The determination includes provisions for potential breaches and associated penalties, although specific penalties are not detailed in the text. Generally, under the Legislation Act 2003, determinations that are exempt from disallowance are still subject to legal scrutiny and potential enforcement actions. Non-compliance with the terms and conditions of the grants or exceeding the debit limit could lead to legal consequences, including civil or criminal penalties. These penalties could involve fines or other sanctions imposed by relevant authorities, depending on the severity and nature of the breach. The determination’s exemption from disallowance ensures that the obligation to provide general purpose financial assistance is upheld without the risk of the determination being overturned by Parliament.