EXPLANATORY STATEMENT
Issued by authority of the Treasurer/Assistant Treasurer/Minister for Financial Services and SuperannuationFederal Financial Relations ACt 2009
Federal Financial Relations (General Purpose Financial Assistance) No. 76 (July 2015)
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 IGA 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.
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 General purpose financial assistance payments, as the amounts paid to each state can be used for any purpose. Generally, payments such as these will promote multiple human rights by facilitating the provision of additional funding to the States, which will invariably support service delivery in a range of areas at the discretion of each State. As such, neither this determination nor the making of General purpose financial assistance payments could be said to have a detrimental impact on any human rights.
Commencement
The determination commences on the day it was made.
Overview
The Federal Financial Relations Act 2009 was enacted to provide a structured and transparent framework for financial assistance between the Commonwealth and the States, as outlined in the Intergovernmental Agreement on Federal Financial Relations. This legislation was introduced to ensure that the new federal financial framework, which commenced on 1 January 2009, is implemented effectively through the provision of general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments. The Act aims to support the States in their service delivery efforts and to facilitate economic and social reforms in areas of national importance. The enacting body responsible for this legislation is the Australian Parliament, with the policy objective clearly stated as enhancing collaboration and transparency in federal financial relations. The Minister for Financial Services and Superannuation has the authority to credit amounts to the COAG Reform Fund for the purpose of providing general purpose financial assistance, which is subject to legislative instruments and registered on the Federal Register of Legislative Instruments.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Commonwealth, the states, and the territories, facilitating the implementation of the intergovernmental agreement on federal financial relations. This act provides for the provision of general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments to support the states in their service delivery efforts. It outlines the framework for ongoing financial support through the Minister crediting amounts to the COAG Reform Fund, with payments made in accordance with the Intergovernmental Agreement. Determinations made by the Minister regarding general purpose financial assistance are legislative instruments and are registered on the Federal Register of Legislative Instruments, although they are exempt from disallowance provisions to allow the Minister to meet their obligations under the IGA. The Act applies nationally, covering all states and territories within Australia, and aims to enhance transparency and consultation in the financial assistance process.
Key Provisions
The Federal Financial Relations Act 2009, particularly in sections 9(1) and related provisions, outlines the framework for the Minister to provide general purpose financial assistance to the states. This assistance, credited to the COAG Reform Fund, is intended to support states in their service delivery efforts. Importantly, this assistance is separate from GST revenue grants and is designed to be flexible in its application, allowing states to use the funds for any purpose they deem necessary (sections 9(1) and 9A).
In terms of obligations, the Minister is required to make these payments in a manner prescribed by the Intergovernmental Agreement on Federal Financial Relations (IGA). This obligation is critical to maintaining the integrity of the federal financial support system. Additionally, the Minister's determinations regarding these payments are legislative instruments and must be registered on the Federal Register of Legislative Instruments (section 9A). This requirement ensures transparency and accountability in the process of determining and distributing financial assistance.
Failure to comply with the requirements of the Act could lead to various consequences. While the Explanatory Statement does not detail specific offences or penalties, non-compliance with the obligations under the IGA could potentially lead to disputes or legal challenges between the Commonwealth and the states. The IGA itself, and the legislative framework within which it operates, aims to provide a robust and transparent system for federal financial relations. Any breach of these provisions might undermine the trust and cooperation necessary for effective governance and service delivery at both federal and state levels.
The Act also includes provisions for the Minister to exempt certain determinations from disallowance, ensuring that the Minister can fulfill their obligations under the IGA without unnecessary procedural hindrances. This exemption from disallowance provisions is intended to streamline the process of making financial assistance payments while maintaining sufficient oversight and accountability.
In summary, the Federal Financial Relations Act 2009 establishes a clear framework for the provision of general purpose financial assistance to the states, outlines the Minister's obligations in making these payments, and ensures transparency through the registration of legislative instruments. While the Act does not specify detailed penalties for non-compliance, the importance of adhering to the IGA and the legislative requirements is underscored by the potential for broader governance and service delivery implications.