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Local Government (Financial Assistance) Amendment Bill 1991



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House: House of Representatives

Portfolio: Local Government

Purpose

To provide for funds for local government roads to be provided as untied grants; to remove amounts associated with the transfer of the debits tax from the calculation of local government grants; and to give the Treasurer a discretion in the determination of the final factor for setting grants.

Background

Under the Local Government (Financial Assistance) Act 1986 (the Principal Act), the Commonwealth provides funding to local government through grants to the States and Territories which are then passed on. The amount available to local government is based on the growth in general purpose grants to the States. This amount is then allocated to the States and Territories on the basis of the proportion of the population in the State or Territory. The allocation of the funds within the State is determined by the relevant Local Government Grants Commission of the State. The actual amount payable is determined by reference to the State's percentage of the base figure. The base figure is adjusted to take account of price movements at the start of the year by reference to the estimated factor, which is determined by the Treasurer. Towards the end of the year, a final factor is determined and where this exceeds the estimated factor, there is an adjustment.

In November 1990, a special Premiers' Conference was held to discuss, amongst other matters, Australia's transport infrastructure. As part of the land transport package, it was agreed that funding currently provided under the Australian Land Transport Development Act 1988 would in future be provided as untied grants. However, for a State to be eligible to receive the untied funds it must satisfy certain conditions relating to funding for local roads. A major effect of the change will be to tie future funding for local roads to movements in the level of general assistance grants. At the June 1990 Premiers' Conference, a guarantee of maintaining general assistance grants at their real level was given, subject to change if there was a major deterioration in economic circumstances. The Bill provides for an allocation of $296.1 million for local roads in 1991-92 and this will be indexed during 1991-2 and 1992-3.

Main Provisions

The base figure for the year commencing on 1 July 1992 will be inserted into the Principal Act by clause 3 which will amend section 3 of the Principal Act. The amount will be calculated on the adjusted previous years figure and the amounts payable under proposed section 10A (see below). This is then multiplied by the `estimated factor' which is to be determined in accordance with section 5 (see below). In future years, it will be based on the adjusted previous years base figure multiplied by the estimated factor. These provisions reflect the transfer of local road funding to untied grants.

A new section 5, dealing with the determination of the estimated factor, will be inserted into the Principal Act by clause 5. Before 15 August in each financial year from 1991, the Treasurer is to estimate a factor to four decimal places. The Treasurer must, as soon as practicable, give each State a notice of the factor and an explanation of the basis for the factor.

Under section 6 of the Principal Act, the Treasurer is to determine the final factor. This is, in part,

Local Government (Financial Assistance) Amendment Bill 1991based on the yearly difference in the level of financial assistance grants to the States. The level of financial assistance grants to the States is determined in accordance with section 5 of the States Grants (General Purpose) Act 1990, which provides that the amount of grant is to be reduced by the States share of funds foregone by the Commonwealth due to the transfer of the debits tax to the States. Section 6 of the Principal Act will be amended to provide that any funds in respect of the debits tax transfer are not to be considered when determining the level of change in financial assistance for the purposes of local government assistance (clause 6). This will apply for the 1990-91 and later financial years.

The day after the amendment contained in clause 6 comes into effect, section 6 will be repealed and a new section will be substituted into the Principal Act by clause 7. The proposed section will provide for the determination of the final factor for 1991-92 and later years. The final factor will be determined by the relativity of the current years adjusted grants to the previous years. These will be the relevant financial and special revenue assistance grants increased or decreased as determined by the Treasurer.

A new section 7, dealing with the entitlement of the States for local government purposes in 1991-2 and later years, will be substituted into the Principal Act by clause 9. The entitlement will be based on the States base figure for the year multiplied by the States proportion of the population. This will extend current practice to this and future years.

Clause 14 will insert provisions dealing with the allocation of local road funds to the States on an untied basis. Basically, proposed section 10A provides for grants to the States, for local government purposes, of the amounts listed in the Tables that appear in the Bill multiplied by the estimated factor. Proposed section 10B deals with adjustments where the estimated and final factors differ, while proposed section 10C deals with the conditions under which proposed section 10A payments may be subject to. These include that the State has a Local Government Grants Commission and this body has made recommendations for the allocation of grants within the State; that allocations under proposed section 10A have been made in accordance with the relevant Federal guidelines and that the Minister is satisfied that the State has had regard to the recommendations. For the additional amounts available under proposed sub-section 10A(2), which deals with additional grants for special purposes, the amount will not be payable unless an officer of the relevant State Department, the peak local government association or a roads authority has given advise to the Commission and the Commission has had regard to the advice when making its decision.

Bills Digest Service 3 June 1991

Parliamentary Research Service

For further information, if required, contact the Economics and Commerce Group on 06 2772460.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1991

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Published by the Department of the Parliamentary Library, 1991.