Federal Financial Relations (General Purpose Financial Assistance) Determination No. 128 (October 2019)

Overview

The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 128, issued in October 2019, is an instrument made by the Treasurer under the authority granted by the Federal Financial Relations Act 2009. This determination addresses the need for a structured and transparent framework for the Commonwealth to provide general purpose financial assistance to the States and Territories in accordance with the Intergovernmental Agreement on Federal Financial Relations (IGA). The IGA, which was developed through extensive consultation and approved by the Council of Australian Governments (COAG) in 2008, seeks to enhance collaboration and service delivery between the Commonwealth and the States. The Determination specifies the terms and conditions under which general purpose financial assistance is provided, ensuring compliance with the IGA and the COAG Reform Fund Act 2008, which establishes the COAG Reform Fund as a special account for such grants. The policy objective is to facilitate financial support to the States in various capacities, including compensating Western Australia for lost royalty revenue due to excise changes, supporting the Australian Capital Territory in managing municipal costs and planning influences, and providing transitional GST top-up payments to States to aid their transition to a new fiscal equalisation system.

Scope and Application

The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 128, made under the Federal Financial Relations Act 2009, applies to the Commonwealth, States, and Territories, specifically focusing on the provision of general purpose financial assistance to the States through the COAG Reform Fund. This assistance is governed by the terms and conditions outlined in the Intergovernmental Agreement on Federal Financial Relations, as well as the specific agreements detailed in Schedule D to the IGA, including compensation for the impact on royalties of excise amendment, ACT Municipal Services, royalty payments from the Offshore Petroleum and Greenhouse Gas Storage Act 2006, and transitional GST top-up payments. The determination ensures that the financial assistance provided adheres to the prescribed limits and conditions, which are subject to change through subordinate instruments. The application of this determination is national in scope, encompassing all States and Territories within Australia, while adhering to the obligations set out in the IGA. There are no stated exclusions or exemptions within the determination itself, though the application and use of the funds by the States are subject to the conditions specified in the relevant agreements.

Key Provisions

The Federal Financial Relations (General Purpose Financial Assistance) Determination No. 128 (October 2019) outlines specific provisions related to the allocation and distribution of general purpose financial assistance provided by the Commonwealth to the States and Territories. Under the Intergovernmental Agreement on Federal Financial Relations (IGA), the Commonwealth has committed to providing financial assistance in a structured manner. The determination, which was not subject to disallowance, was made in accordance with the COAG Reform Fund Act 2008 and the Federal Financial Relations Act 2009. It sets out the terms and conditions under which financial assistance is granted through the COAG Reform Fund, as mandated by subsection 7(2) of the COAG Act. The obligations imposed by the determination include setting out specific payment conditions and debit limits for general purpose financial assistance. According to 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 2019 must not exceed $2,083,333,334. This interim provision is subject to review once the Appropriation Bills for 2019-20 are passed. The determination also specifies that the total amount of financial assistance paid to date in the 2019-20 financial year does not exceed this debit limit. The determination came into effect on the day it was made. The determination outlines various purposes for which general purpose financial assistance is provided, including compensating Western Australia for the loss of royalty revenue resulting from the removal of the exemption of condensate from crude oil excise, assisting the Australian Capital Territory in meeting additional municipal costs due to Canberra’s role as the national capital, and compensating Western Australia for additional costs arising from national capital planning influences on water and sewerage services. Additionally, the Commonwealth provides 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, and short-term top-up payments to assist the states in transitioning to the new horizontal fiscal equalisation system. Each of these purposes is detailed in Schedule D to the IGA. Failure to comply with the terms and conditions outlined in the determination could result in civil or criminal consequences, although the determination does not explicitly state penalties. However, the overarching legislative framework, including the Public Governance, Performance and Accountability Act 2013, could impose penalties for non-compliance. Given the broad discretion allowed in the use of these funds, the specific human rights implications are difficult to determine. Nevertheless, the Statement of Compatibility with Human Rights, prepared under the Human Rights (Parliamentary Scrutiny) Act 2011, suggests that the determination and the payments themselves do not detrimentally impact any human rights.