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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Financial Assistance Legislation Amendment Bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Infrastructure, Transport, Regional Development, and Local
Government; the Hon Anthony Albanese MP)
Table of contents
Glossary 1
General outline and financial impact 3
Amendments 5
Do not remove section break.
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|COAG |Council of Australian |
| |Governments |
|States |Refers to the States, the |
| |Australian Capital Territory |
| |and the Northern Territory of|
| |Australia |
|Intergovernmental |Refers to the |
|Agreement |Intergovernmental Agreement |
| |on Federal Financial |
| |Relations |
General outline and financial impact
Financial assistance grants for local government
The Commonwealth makes payments through the States to local
government in respect of financial assistance grants and untied
local road funding under the Local Government (Financial
Assistance) Act 1995.
The Commonwealth has decided to pay an additional amount equivalent
to the first quarter payment for 2009-10 in the 2008-09 financial
year. The net effect will be an additional payment of $479.7
million in 2008-09 with a corresponding reduction in 2009-10.
Accelerating the provision of funding to local government will
assist the Government's strategy of supporting economic growth and
jobs. Local governments will be able to bring forward their
delivery of some services into 2008-09 or early in 2009-10, when
they may otherwise have been provided later in 2009 or in 2010.
To implement these arrangements for funding for local government
arrangements, the Government will amend the Local Government
(Financial Assistance) Act 1995 to provide a mechanism by which the
Minister may permit a State to receive an amount equivalent to that
State's entitlement for the first quarter of 2009-10 this financial
year.
General purpose financial assistance to the States
Other government decisions taken in the 2009-10 Budget will require
an increase in the general drawing rights limit for the 2008-09
financial year for the purposes of section 9 of the Federal
Financial Relations Act 2009 so that the necessary payments can be
made.
The Bill will increase the general drawing rights authorising
debits from the COAG Reform Fund for the purposes of making grants
of general revenue assistance to the States in the financial year
starting 1 July 2008 to $1,250,000,000. This will allow the
Commonwealth to meet its Budget commitments to provide general
purpose financial assistance to the States.
Date of effect: Upon Royal Assent.
Proposal announced: This measure was announced on 12 May 2009.
Financial impact: The Commonwealth has decided to make the first
quarter payment under the Local Government (Financial Assistance)
Act 1995 for 2009-10 in the 2008-09 financial year. The net effect
will be an additional payment of $479.7 million in 2008-09 with a
corresponding reduction in 2009-10.
The Bill does not provide an appropriation for general purpose
financial assistance, although the Bill does provide for the
general drawing rights authorising debits from the COAG Reform Fund
for the purposes of making grants of general purpose financial
assistance to the States in the financial year starting 1 July 2008
to be increased from $500,000,000 $1,250,000,000. This will allow
the Commonwealth to meet its Budget commitments to provide general
purpose financial assistance to the States.
Compliance cost impact: Nil.
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Outline of chapter
1. The Government will amend the:
. Local Government (Financial Assistance) Act 1995 to
provide a mechanism by which the Minister may permit a
State to receive an entitlement it may have under that Act
earlier; and
. Federal Financial Relations Act 2009 to increase in the
general drawing rights limit for the 2008-09 financial
year for the purposes of section 9 of that Act.
Context of amendments
Local Government (Financial Assistance) Act 1995
2. The Commonwealth makes payments through the States to local
government in respect of financial assistance grants and untied
local road funding under the Local Government (Financial
Assistance) Act 1995.
3. The Commonwealth has decided to pay an additional amount equivalent
to the first quarter payment for 2009-10 in the 2008-09 financial
year. Accelerating the provision of funding to local government
will assist the Government's strategy of supporting economic growth
and jobs. Local governments will be able to bring forward their
delivery of some services into 2008-09 or early 2009-10, when they
may otherwise have been provided later in 2009 or in 2010.
To implement these arrangements for funding for local government
arrangements, the Government will amend the Local Government
(Financial Assistance) Act 1995 to provide a mechanism by which the
Minister may permit a State to receive an amount equivalent to that
State's entitlement for the first quarter of 2009-10 this financial
year.
Federal Financial Relations Act 2009
4. Government decisions taken in respect of the 2009-10 Budget will
require an increase in the general drawing rights limit for the
2008-09 financial year for the purposes of section 9 of the Federal
Financial Relations Act 2009 so that the necessary payments can be
made.
Explanation of new law
Local Government (Financial Assistance) Act 1995
5. Item 2 of Schedule 1 inserts a new subsection (6A) into section 10
of the Local Government (Financial Assistance) Act 1995.
6. Under section 9 of the Act, a State is entitled, in respect of a
financial year, to an amount of financial assistance for local
government purposes determined on the basis of an estimate of the
escalation factor for that year which, under section 7, the
Treasurer is required to determine. Before the end of each
financial year, the Treasurer must establish, under section 8, the
final escalation factor for the financial year. Under subsection
10(4), if the amount for a State in respect of a financial year
determined by reference to the final factor exceeds the amount for
that State for that year determined by reference to the estimate of
the factor, the State is entitled to an additional payment in
respect of that financial year equal to the difference between the
two amounts.
7. However, by virtue of subsection 10(6), this amount must not be
paid until the following financial year, and must be paid, as far
as practicable, in equal quarterly instalments.
8. Proposed subsection 10(6A) provides a mechanism by which the
Minister may permit a State to receive an entitlement it may have
under subsection 10(4) earlier, including in one lump sum before
the end of the financial year to which the payment relates.
Subsection 10(6B) requires the Minister to inform the Treasurer of
the State concerned if this power is exercised, as soon as
practicable thereafter.
9. Section 12 of the Act entitles States to an amount of additional
financial assistance for local government purposes, worked out in a
similar way to entitlements under section 9.
10. Section 13 is similar to section 10, in that it provides for an
additional amount to be paid to a State if the final additional
grant amount for that State in respect of a financial year is
greater than the preliminary additional grant amount for that
State.
11. Like subsection 10(6), subsection 13(4) prevents any such
additional amount being paid until the following financial year.
12. Item 3 of Schedule 1 makes similar amendments to section 13 as are
made by clause 2 of schedule 1 to section 10, to enable an amount
to which a State is entitled under section 13 to be paid earlier,
including in one lump sum before the end of the financial year to
which it relates.
Federal Financial Relations Act 2009
13. Item 1 of Schedule 1 increases the general drawing rights
authorising debits from the COAG Reform Fund for the purposes of
making grants of general revenue assistance to the States in the
financial year starting 1 July 2008 to $1,250,000,000. This will
allow the Commonwealth to meet its Budget commitments to provide
general purpose financial assistance to the States.
Application and transitional provisions
14. These measures apply from the date of Royal Assent.
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