EXPLANATORY STATEMENT
Issued by authority of the Treasurer/Assistant Treasurer/Minister for Financial Services and SuperannuationFederal Financial Relations ACt 2009
Federal Financial Relations (National Partnership payments) Determination
No. 94 (June 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 (National SPPs) 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 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.
National Partnership payments
The Federal Financial Relations Act 2009 provides for the Minister to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of National Partnership payments. 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 National Partnership payments 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 National Partnership payments in a prescribed manner. Exemption from the disallowance provisions allows 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 Council for Federal Financial Relations website. There is also extensive consultation with the States on National Partnership payments as they are also required to sign relevant National Partnership agreements.
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 National Partnership payments as the amounts paid to each state vary each month, since individual States meet varying milestones and benchmarks under different National Partnership Agreements. However, in general, National Partnership Agreements will promote multiple human rights by facilitating the provision of additional funding to the States to support service delivery in a range of areas. As such, neither this determination nor the making of National Partnership 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 framework for collaboration and financial assistance between the Commonwealth and the States, addressing the need for a robust system to support service delivery and economic reforms. This Act implements the payment provisions of the Intergovernmental Agreement on Federal Financial Relations, ensuring the ongoing financial support for States through general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments. The Act also aims to enhance transparency by requiring that the Minister's determinations regarding National Partnership payments be registered on the Federal Register of Legislative Instruments. These determinations, however, are exempt from disallowance to allow the Minister to meet obligations under the IGA. The legislation was developed following extensive consultation with the States, and its objective is to facilitate coordinated efforts in key service sectors while ensuring the efficient use of federal funds.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Commonwealth, States, and Territories of Australia, providing a framework for federal financial relations through general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments. This legislation facilitates collaboration and service delivery in areas of national importance as outlined in the Intergovernmental Agreement on Federal Financial Relations. The Act allows the Minister to credit amounts to the COAG Reform Fund for National Partnership payments, which support specified outputs or projects, reforms, or reward jurisdictions that deliver on nationally significant reforms. These payments are legislative instruments registered on the Federal Register of Legislative Instruments, exempt from disallowance, ensuring the Minister can meet obligations under the IGA. Extensive consultation with the States occurs during the development of the IGA and relevant National Partnership agreements, enhancing transparency and cooperation. The human rights compatibility of these payments is generally positive, as they facilitate funding for service delivery in various areas, promoting multiple human rights without detrimental impact.
Key Provisions
The Federal Financial Relations Act 2009, through its main operative sections, provides the framework for the administration of financial assistance to the States. Section 9(1) of the Act empowers the Minister to credit amounts to the COAG Reform Fund for National Partnership payments. These payments are designed to support specified outputs or projects, facilitate reforms, or reward jurisdictions that achieve nationally significant reforms (section 9(2)). The determinations made by the Minister regarding these payments are legislative instruments and are registered on the Federal Register of Legislative Instruments (section 9(4)). Notably, these determinations are exempt from disallowance provisions to ensure that the Minister can meet the obligations set out in the Intergovernmental Agreement on Federal Financial Relations (IGA) (section 9(3)).
The Act imposes several obligations on the parties it governs. The Minister, under section 9(1), has the responsibility to make National Partnership payments in accordance with the prescribed manner outlined in the IGA. The States, in turn, are required to sign relevant National Partnership agreements, which detail the specific outputs or projects they will undertake and the benchmarks they will meet. These agreements are a critical part of the consultation process and must be in line with the objectives set out in the IGA.
Failure to comply with the requirements of the Federal Financial Relations Act 2009 can lead to various consequences. While the Act does not explicitly outline specific offences or penalties for breaches, the determinations themselves may contain provisions that detail penalties for non-compliance. The IGA, which underpins the Act, includes provisions for performance reporting and compliance measures, which could result in financial penalties or other sanctions if a State fails to meet its agreed-upon milestones and benchmarks. Additionally, the Minister retains the authority to withhold or adjust payments if a State does not adhere to the terms of the National Partnership agreements.
The Act also ensures transparency by requiring that the Minister’s determinations regarding National Partnership payments are legislative instruments, thereby subjecting them to public scrutiny and registration on the Federal Register of Legislative Instruments. This transparency mechanism is intended to enhance accountability and ensure that the funds are used in accordance with the agreed-upon objectives. The IGA’s extensive consultation process, which involves all jurisdictions, further supports the integrity and effectiveness of the financial assistance provided under the Act.