EXPLANATORY STATEMENT
Federal Financial Relations ACt 2009
National Specific Purpose Payment Determination 2010-11
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 ongoing 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 (National SPPs) to be spent in 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 IGA are implemented through the Federal Financial Relations Act 2009 (the Act).
National Specific Purpose Payments (National SPPs)
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 healthcare, schools, skills and workforce development, disability, and housing.
The Act provides for the Minister to determine for each financial year, the total amount and the manner in which National SPPs are distributed between the States and Territories. The Act also requires the Minister have regard to the IGA when making a determination for National SPPs.
Advance payments in respect of the National SPPs are provided throughout the financial year based on estimates of each jurisdictions’ anticipated entitlement. Any adjustment between the advances paid to a jurisdiction and the jurisdictions’ determined entitlement is made in the first practicable payment in the subsequent financial year.
The Minister’s determination in respect of National SPPs is a legislative instrument and will be registered on the Federal Register of Legislative Instruments.
Part 3 of the Act and ‘Schedule D — Payment Arrangements’ to the IGA provide that the States are required to spend each National SPP in the service sector relevant to the payment. However, the State have full budget flexibility to allocate funds within that sector as they see fit to achieve any mutually agreed objectives for that sector.
This Determination is in accordance with Part 3 of the Act, which provides for the Minister, by legislative instrument, to determine the total amounts payable to each service sector, the manner in which these total amounts are indexed, and the manner in which these amounts are divided between the States.
Financial assistance for non-government schools is provided under the Schools Assistance Act 2008, and therefore is not included in this Determination.
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 Ministerial Council for Federal Financial Relations. Consultation with the States on National SPPs also occurs regularly, principally through meetings between Heads of Treasuries.
Commencement
The Determination commences on the day it was made.
Overview
The Federal Financial Relations Act 2009, enacted by the Commonwealth Parliament, was introduced to establish a robust framework for federal financial relations, addressing the need for ongoing financial support to states and territories for service delivery in key sectors. This Act implements the payment provisions of the Intergovernmental Agreement on Federal Financial Relations (IGA) by enabling the Minister to determine National Specific Purpose Payments (National SPPs) for each financial year. These payments support state and territory service delivery in healthcare, schools, skills and workforce development, disability, and housing. The Act mandates that the Minister consider the IGA when making such determinations, ensuring alignment with the agreed framework. The National SPPs are designed to provide financial flexibility within specified sectors, allowing states and territories to allocate funds as needed to meet mutually agreed objectives. This Determination is made in accordance with Part 3 of the Act and Schedule D of the IGA, reflecting the commitment to collaborative economic and social reforms.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Commonwealth, states, and territories of Australia, providing a framework for the distribution of financial support through various payments to facilitate service delivery and policy implementation in areas of national importance. Specifically, the Act deals with National Specific Purpose Payments (National SPPs), which are financial contributions to support state and territory service delivery in sectors such as healthcare, schools, skills and workforce development, disability, and housing. The Minister for Finance is responsible for determining the total amount and distribution of these payments each financial year, with the requirement to consider the Intergovernmental Agreement on Federal Financial Relations (IGA) when making these determinations. The Act also mandates that states and territories must spend each National SPP within the relevant service sector but provides them with flexibility to allocate funds within that sector to achieve mutually agreed objectives. Notably, financial assistance for non-government schools is not included in this determination and is instead provided under the Schools Assistance Act 2008. The application of the Act is further extended through subordinate instruments, such as the National Specific Purpose Payment Determination, which outlines specific payment arrangements and commences on the day it is made.
Key Provisions
The main operative sections of the Federal Financial Relations Act 2009 (the Act) relevant to National Specific Purpose Payments (National SPPs) are primarily found in Part 3. Section 69 provides the Minister with the authority to determine the total amount and the distribution of National SPPs among the States and Territories for each financial year, with the requirement to have regard to the Intergovernmental Agreement on Federal Financial Relations (IGA) when making such a determination (s. 71). This determination is then implemented as a legislative instrument and is registered on the Federal Register of Legislative Instruments. The Act mandates that States and Territories must spend the National SPPs in the relevant service sectors, which include healthcare, schools, skills and workforce development, disability, and housing, although they have flexibility in how they allocate funds within these sectors to meet mutually agreed objectives (IGA, Schedule D).
Under the Act, the Minister's obligations include making a determination for the total amount of National SPPs and how they are indexed and divided among the States each financial year (s. 72). The Minister must also ensure that these payments are consistent with the provisions outlined in the IGA. Additionally, the Act requires that advance payments for National SPPs be provided throughout the financial year, based on estimates of each jurisdiction's anticipated entitlement. Any adjustment between the advances paid and the determined entitlement is to be made in the first practicable payment of the subsequent financial year (s. 73).
There are no explicit offences or penalties stated in the Act concerning breaches of the provisions for National SPPs. However, the Act implies that failure to comply with the requirements or misuse of National SPPs could lead to legal consequences, as the payments are subject to the broader legal framework governing federal financial relations and the IGA. The Act’s provisions are designed to ensure transparency, accountability, and adherence to the agreed-upon objectives and conditions for the distribution and use of National SPPs. The IGA, being a binding agreement, also implies obligations on the States and Territories to use the payments in accordance with the agreed-upon service sectors and objectives, failure to which could lead to further consequences under the broader legal and intergovernmental framework.