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. 81 (December 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 establish a new framework for the provision of financial assistance between the Commonwealth and the States, underpinning the Intergovernmental Agreement on Federal Financial Relations (IGA). This Act was introduced to address the need for a more structured and transparent approach to the distribution of funds to support state service delivery, economic and social reforms, and specific national initiatives. The Act was enacted by the Parliament of Australia, reflecting a commitment to ongoing financial support for the states through various forms of assistance, including general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments. The policy objective is to enhance collaboration and improve the efficiency and effectiveness of service delivery across jurisdictions, ultimately promoting economic and social reforms in areas of national importance.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Commonwealth Minister for Financial Services and Superannuation in their role of providing financial assistance to the States. This assistance includes general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments, all designed to support state-level service delivery and reform efforts in areas of national importance. The Act establishes the framework under which these payments are made, ensuring alignment with the Intergovernmental Agreement on Federal Financial Relations. The Act’s provisions extend across Australia, as it governs the financial relationships between the Commonwealth and the States. However, the Act does not apply to GST revenue grants, which are specifically excluded from the general revenue assistance provided under the Act. The Act also allows for the exemption of the Minister’s determinations regarding general purpose financial assistance from disallowance provisions, ensuring that the Commonwealth can meet its obligations under the IGA without legislative hindrance. The Act’s application is further refined through subordinate instruments, which detail the specific mechanisms and conditions of financial assistance.
Key Provisions
The Federal Financial Relations Act 2009 encompasses various provisions designed to facilitate the distribution of financial assistance from the Commonwealth to the States. Section 9, for instance, mandates 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, excluding GST revenue grants (section 9). This fund is established under the COAG Reform Fund Act 2008 and is classified as a Special Account under the Financial Management and Accountability Act 1997. The payments are intended to support the States in their service delivery efforts, providing them with the flexibility to use the funds for any purpose.
The Act imposes several obligations on the parties involved. The Minister is required to make payments of general purpose financial assistance in a prescribed manner as stipulated by the Intergovernmental Agreement on Federal Financial Relations (IGA) (section 9). To ensure transparency and accountability, the Minister’s determinations regarding these payments are legislative instruments and must be registered on the Federal Register of Legislative Instruments. However, it is crucial to note that these determinations are exempt from disallowance provisions, allowing the Minister to meet the obligations set forth in the IGA without the risk of their decisions being overturned (section 9(1)).
Failure to comply with the requirements of the Federal Financial Relations Act 2009 could result in various consequences. While specific offences and penalties are not detailed in the explanatory statement, the Act does highlight the importance of adhering to the prescribed payment methods and the need for ongoing consultation with the States. Non-compliance could potentially undermine the framework for federal financial relations and affect the delivery of services across the nation. The Act’s provisions are designed to ensure that the financial assistance provided is used effectively to support the States in their service delivery efforts, thereby promoting collaboration and cooperation between the Commonwealth and the States.