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Financial Assistance Legislation Amendment Bill 2009

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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)

 



T able of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Amendments........................................................................................................... 5

 

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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 Agreement

Refers to the Intergovernmental Agreement on Federal Financial Relations



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

1.1                   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

1.2                   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 .

1.3                   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

1.4                   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

1.5                   Item 2 of Schedule 1 inserts a new subsection (6A) into section 10 of the Local Government (Financial Assistance) Act 1995 .

1.6                   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. 

1.7                   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. 

1.8                   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.

1.9                   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.

1.10               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. 

1.11               Like subsection 10(6), subsection 13(4) prevents any such additional amount being paid until the following financial year. 

1.12               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

1.13               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

1.14               These measures apply from the date of Royal Assent.

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