EXPLANATORY STATEMENT
Federal Financial Relations ACt
Federal Financial Relations (General Purpose Financial Assistance) No. 44 (November 2012)
The Intergovernmental Agreement on Federal Financial Relations (the IGA) provides a robust foundation for collaboration on policy development and service delivery, and facilitates the implementation of economic and social reforms in areas of national importance.
In agreeing the new framework for federal financial relations, the Commonwealth committed to the provision of on‑going financial support for the States’ service delivery efforts through:
• general purpose financial assistance, including the on‑going provision of GST payments, to be used by the States for any purpose;
• National Specific Purpose Payments to be spent in the key service delivery sectors; and
• National Partnership payments to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms.
The new federal financial framework commenced on 1 January 2009. The payment provisions of the Intergovernmental Agreement are implemented through the Federal Financial Relations Act 2009.
General purpose financial assistance
The Federal Financial Relations Act 2009 provides for the Minister to credit amounts to the COAG Reform Fund for the purpose of providing general purpose financial assistance to the States in the form of general revenue assistance other than GST revenue grants.
• The COAG Reform Fund Act 2008 established the COAG Reform Fund and specifies that it is a Special Account for the purposes of the Financial Management and Accountability Act 1997.
To improve transparency, the Minister’s determinations in respect of general purpose financial assistance are legislative instruments and will be registered on the Federal Register of Legislative Instruments, but will not be disallowable.
• This clarifies that determinations made by the Minister under subsection 9(1) would not otherwise be legislative instruments within the meaning of section 5 of the Legislative Instruments Act 2003.
• The Minister has an obligation under the Intergovernmental Agreement to make payments of general purpose financial assistance in a prescribed manner. Exemption from the disallowance provisions will allow the Minister to meet this obligation.
Consultation
The IGA was subject to extensive consultation with the States and was signed by all jurisdictions in December 2008. The IGA is publicly available on the Ministerial Council for Federal Financial Relations website. There is also extensive ongoing consultation with the States on general revenue assistance arrangements.
Commencement
The determination commences on the day it was made.
Overview
The Federal Financial Relations Act 2009 was enacted to implement the new federal financial framework agreed under the Intergovernmental Agreement on Federal Financial Relations (IGA), which commenced on 1 January 2009. This Act was introduced by the Commonwealth Parliament to address the need for a structured and transparent approach to financial assistance to the States for their service delivery efforts. The Act facilitates the ongoing provision of general purpose financial assistance, including GST payments, and other specified payments such as National Specific Purpose Payments and National Partnership payments. This framework was designed to enhance collaboration between the Commonwealth and the States, thereby supporting economic and social reforms in areas of national importance. The Act ensures that the Minister's determinations regarding general purpose financial assistance are legislative instruments and are registered on the Federal Register of Legislative Instruments, thus promoting transparency, while also exempting these determinations from disallowance to allow the Minister to meet obligations under the IGA.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Minister for Finance, who is responsible for making determinations concerning the provision of general purpose financial assistance to the States. This assistance is to be credited to the COAG Reform Fund, a Special Account established under the COAG Reform Fund Act 2008. The Act facilitates the implementation of the Intergovernmental Agreement on Federal Financial Relations, which aims to support States in their service delivery efforts through various financial means. These include general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments, all designed to support key service sectors and specified outputs or projects. The Act ensures that the Minister's determinations regarding general purpose financial assistance are legislative instruments, registered on the Federal Register of Legislative Instruments, but exempt from disallowance provisions, thereby enabling the Minister to meet obligations under the Intergovernmental Agreement. The Act's provisions commenced on 1 January 2009, and the agreement was subject to extensive consultation with the States before being signed in December 2008.
Key Provisions
The Federal Financial Relations Act 2009, specifically sections 9 and 10, outlines the key provisions for the provision of general purpose financial assistance to the States. Section 9 allows the Minister to credit amounts to the COAG Reform Fund for the purpose of providing this assistance, while Section 10 requires the Minister to make payments in a prescribed manner as outlined in the Intergovernmental Agreement on Federal Financial Relations (IGA). This assistance is intended to be used by the States for any purpose, providing them with flexibility in managing their budgets and service delivery efforts.
The Act imposes several obligations on the parties involved. The Minister is required to credit the COAG Reform Fund as specified in Section 9 and make payments in accordance with Section 10. This ensures that the financial assistance is provided in a transparent and accountable manner. Additionally, the Minister's determinations regarding these payments must be legislative instruments and registered on the Federal Register of Legislative Instruments. However, these determinations are exempt from the disallowance provisions, allowing the Minister to meet the obligations set out in the IGA.
The Act does not explicitly outline specific offences or penalties for breaches of its provisions. However, breaches of the Intergovernmental Agreement, which is integral to the operation of the Act, could potentially lead to civil or political consequences. The IGA, having been signed by all jurisdictions, represents a binding agreement between the Commonwealth and the States. Failure to comply with the terms of the IGA could result in disputes or a breakdown in the collaborative framework intended to support service delivery and economic and social reforms.
The IGA, which underpins the Act, was the subject of extensive consultation with the States and was signed by all jurisdictions in December 2008. This comprehensive consultation process, along with the public availability of the IGA on the Ministerial Council for Federal Financial Relations website, ensures transparency and accountability in the federal financial relations framework. The Act's provisions, therefore, operate within a well-established and consultative environment aimed at facilitating effective and efficient service delivery across Australia.