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. 83 (February 2016)
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 implement the provisions of the Intergovernmental Agreement on Federal Financial Relations, which establishes a framework for collaboration and the provision of financial assistance between the Commonwealth and the States. This Act was introduced to address the need for a structured and transparent system of financial support for the States to facilitate policy development and service delivery in areas of national importance. The Federal Financial Relations Act 2009 was enacted by the Parliament of Australia and its policy objective is to ensure ongoing financial support for the States’ service delivery efforts through various forms of assistance including general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments. The Act clarifies the legislative framework for these payments and aims to improve transparency by making the Minister’s determinations in respect of general purpose financial assistance legislative instruments that are registered on the Federal Register of Legislative Instruments, although they are exempt from disallowance provisions to allow the Minister to meet obligations under the IGA.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Commonwealth government and the states and territories of Australia, facilitating the provision of financial support as outlined in the Intergovernmental Agreement on Federal Financial Relations. This Act specifically governs the distribution of general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments. It ensures that funds are allocated to states for any purpose, key service delivery sectors, and specific outputs or projects, respectively. The Minister for Financial Services and Superannuation is responsible for crediting amounts to the COAG Reform Fund, which is a Special Account under the Financial Management and Accountability Act 1997. Determinations made by the Minister regarding general purpose financial assistance are legislative instruments and are subject to registration on the Federal Register of Legislative Instruments, though they are exempt from disallowance provisions to ensure compliance with the IGA. The Act commenced on 1 January 2009, and its provisions are intended to enhance transparency and accountability in federal financial relations.
Key Provisions
The Federal Financial Relations Act 2009 includes key provisions that implement the new framework for federal financial relations, as agreed in the Intergovernmental Agreement on Federal Financial Relations (IGA). Section 9(1) of the Act provides the Minister with the authority to credit amounts to the COAG Reform Fund for the purpose of providing general purpose financial assistance to the States. This assistance, which is other than GST revenue grants, is intended to support the States' service delivery efforts. The Act also specifies that the Minister's determinations regarding general purpose financial assistance are legislative instruments and will be registered on the Federal Register of Legislative Instruments. Importantly, these determinations are exempt from the disallowance provisions, which ensures the Minister can meet their obligations under the IGA.
The obligations imposed by the Act on the Minister and the States are primarily centred around the provision and use of financial assistance. The Minister is required to make payments of general purpose financial assistance in a prescribed manner, as outlined in the IGA. This obligation is facilitated by the exemption from disallowance provisions, which allows for the seamless implementation of the Minister’s determinations. The States, in turn, are expected to use the financial assistance provided for any purpose that supports their service delivery needs. This arrangement is intended to foster collaboration and support the implementation of economic and social reforms.
Breach of the obligations under the Act can lead to various consequences. While the Act does not explicitly outline specific offences or penalties for non-compliance with its provisions, the failure to meet the obligations under the IGA could potentially result in legal challenges or disputes between the Commonwealth and the States. Additionally, the use of financial assistance in a manner inconsistent with the IGA could lead to scrutiny and review by the relevant authorities. The Act’s focus on transparency and the registration of legislative instruments is aimed at minimising such risks by ensuring that all actions are clearly documented and publicly available.