EXPLANATORY STATEMENT

Federal Financial Relations Act 2009

Federal Financial Relations (National Health Reform Payments) Determination 2012-13

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 framework for federal financial relations, the Commonwealth committed to the provision of financial support for the States’ service delivery efforts through:

•                 general purpose financial assistance, including the ongoing provision of GST payments, to be used by the States for any purpose;

•                 National Specific Purpose Payments (SPPs) to be spent in key service delivery sectors;

•                 National Health Reform Funding; 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 federal financial framework commenced on 1 January 2009.  The payment provisions of the IGA are implemented through the Federal Financial Relations Act 2009 (the FFR Act). 

National Health Reform Payments

Under the IGA, the Commonwealth provides National SPPs to the States and Territories as a financial contribution to support State and Territory service delivery in the areas of schools, skills and workforce development, disability and housing (and, until 30 June 2012, healthcare). 

Under the National Health Reform Agreement (NHR Agreement), national health reform funding arrangements commenced from 1 July 2012, replacing the former National Healthcare SPP.  Clause A32 of the NHR Agreement provides that for 2012-13, the Commonwealth will provide funding equivalent to the amount that would otherwise have been payable through the former National Healthcare SPP.

Part 3A of the FFR Act provides for the Minister, by legislative instrument, to determine the amount of National Health Reform funding to be paid to the States and Territories.  The Federal Financial Relations (National Health Reform Payments) Determination 2012-13 (the Determination) has been made in accordance with these provisions.

The FFR Act also requires the Minister have regard to the IGA and the NHR Agreement when making a determination for National Health Reform payments.  The indexation methodology used to calculate total National Health Reform funding for 2012-13 is in accordance with the relevant growth factor for the former National Healthcare SPP as outlined in ‘Schedule D — Payment Arrangements’ to the IGA. 

Section 238 of the National Health Reform Act 2011 (the NHR Act) provides the functions of the Administrator of the National Health Funding Pool, for the purposes of administering Commonwealth funding under the NHR Agreement.  In accordance with paragraph 238(1)(a) of the NHR Act, the Administrator has calculated and advised the Treasurer of the amounts required to be paid by the Commonwealth into each State Pool Account of the National Health Funding Pool under the NHR Agreement. These amounts include the reconciliation of actual service delivery in 2012-13, including cross-border services on a provider basis.  The Determination reflects the Administrator’s advice regarding the amounts to be paid to each State and Territory for 2012-13.

Advance payments in respect of National Health Reform funding are provided throughout the financial year based on estimates of each jurisdiction’s anticipated entitlement.  In accordance with clause A32 of the NHR Agreement, any adjustment between the advances paid to a jurisdiction and the jurisdiction’s determined entitlement will be spread equally across payments for a subsequent quarter.  

In accordance with subsection 15A(3) of the FFR Act, the amounts specified in the Determination are to be paid to the States on condition that the financial assistance is spent in accordance with the NHR Agreement.

The Minister’s determination in respect of National Health Reform payments is a legislative instrument and will be registered on the Federal Register of Legislative Instruments.

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 website for the Council for Federal Financial Relations.  Consultation with the States and Territories on National SPPs also occurs regularly, principally through meetings between Heads of Treasuries.

Disallowance of the legislative instrument

This Determination is exempt from disallowance in accordance with Section 44(1) of the Legislative Instruments Act 2003, as the enabling legislation facilitates the operation of an intergovernmental scheme involving the Commonwealth and all States and Territories, through the provision of financial assistance under the framework established by the IGA.  The Act also authorises the instrument to be made for the purposes of the scheme.

Commencement

The Determination commenced on the day it was made.