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Thursday, 16 September 1971
Page: 1507

Mr Les Johnson (HUGHES, NEW SOUTH WALES) asked the Treasurer, upon notice:

(I)   Can he give the text of the resolution adopted by State Ministers for Local Government at Hobart on 23rd April 1971 concerning the financial needs of local government.

(2)   At which level ot Government have these proposals been considered and with what results.

Mr Snedden - The answer to the honourable member's question is as follows:

(1)   At the Premiers' Conference on 16th June 1971 the Premier of New South Wales referred to the resolution in question as follows.

The Ministers of all States unanimously carried a resolution that because (a) the cost of local government services is rapidly increasing; (b) the sources of revenue to local government authorities are limited; and (c) many rural areas are in a critical condition and no increases in rates are likely to be practicable in the foreseeable future, the Ministers believed firstly that additional financial resources are essential to local government and secondly that as local government is the responsibility of State governments, the annual reimbursement grants from income tax from the Common wealth to the States should include an additional element of contribution for local government finances.'

(2)   The proposals in the resolution were discussed at that Premiers' Conference. The Commonwealth reiterated its attitude that it is a responsibility of State Governments to ensure that the revenue resources available to such authorities are sufficient to enable them to provide the various community services for which they have been made responsible under State laws. The Commonwealth explained that it provides financial assistance to State Governments to help them meet all their financial responsibilities, including their responsibility for local authority finances.

As a result of the discussions at the Premiers' Conference additional Commonwealth assistance is to be provided to the States to assist both their revenue budgets generally and local government authorities specifically. Briefly, the Commonwealth is to transfer pay-roll tax to the States on a date to be agreed in 1971-72 on the basis that the States' financial assistance grants will be reduced to help offset the loss to Commonwealth revenue resulting from the transfer. However, the Commonwealth has agreed that the reduction in the States' grants will be somewhat less than the full loss to Commonwealth revenue. In particular, the reduction in the grants will be smaller than the loss to Commonwealth revenue by an amount equal to the pay-roll tax payable at the existing rate of 2.5 per cent in respect of non-business activities of local authorities. By this means the Commonwealth will, in effect, be bearing the cost which would otherwise be incurred by State Governments in exempting non-business activities of local authorities from payment of pay-roll tax as from the date of transfer of the tax to the States. The relief that the States will thus be able to provide to local authorities is estimated at about {6m in 1971-72 and about $8m in a full year.

The Commonwealth also agreed at the Premiers' Conference to make the reduction in the States' grants in 1971-72 smaller than the loss to Commonwealth revenue resulting from the transfer of the tax by a further amount now estimated at about $22.4m, and, as well, to provide $40m special revenue assistance by way of a nonrecurring grant in 1971-72. The smaller reduction of about $22.4m, like that in respect of pay-roll tax on non-business activities of local authorities, will also be made to the 'base' used to determine the formula grants for 1972-73 and subsequent years, so that States will continue to benefit from both these factors in those years.

The Commonwealth Government believes that, with the substantially improved arrangements for the payment of financial assistance grants settled at the June 1970 Premiers' Conference, with access now to a new field of taxation which they have already moved to exploit, and with the additional financial assistance provided as a result of the June 1971 Premiers' Conference, the State Governments are well placed to meet their financial responsibilities, including their responsibility for local authority finances.

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