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Thursday, 21 February 1980
Page: 261

Mr HOWARD (Bennelong) (Treasurer)

That the Bill be now read a second time.

The purpose of this Bill is to increase the annual percentage of net personal income tax collections allocated to local government authorities in the States under the Local Government (Personal Income Tax Sharing) Act 1976 from 1.75 per cent of collections in the preceding year to 2 per cent. Last year the Local Government (Personal Income Tax Sharing) Act 1976 was amended to increase the share of net personal income tax collections allocated to local government in 1 979-80 from 1.52 per cent to 1.75 per cent. The increase proposed in the Bill will apply as from 1980-81 and fulfils the undertaking given by the Prime Minister (Mr Malcolm Fraser) in his election policy speech in November 1977 that the share would be increased to 2 per cent in the lifetime of this Parliament.

Since this Government took office at the end of 1975, the total level of all Commonwealth funds flowing to local government in the States has increased considerably- from $235m in 1975-76 to $333m in 1978-79, the last year for which comprehensive figures are available. This represents an annual average increase of over 12 per cent. I might add, for the information of honourable members, that the figures I have quoted exclude funds provided under the Regional Employment Development Scheme and employment grants passed on to local authorities by the

States. Under those schemes which were terminated by the previous Government in 1975- 76, local authorities were merely used as a channel for the disbursement of funds to assist employment.

The Government has not only increased the level of total Commonwealth assistance to local government, but also it has, under the federalism policy, increased the flexibility available to that sphere of government to determine its own expenditure priorities. This has been done by changing the structure of the assistance by giving local government a share of net personal income tax collections, and by making the funds available as general purpose or untied assistance. Untied funds represented about one-third of total Commonwealth assistance to local authorities in 1975-76 compared with about one-half now.

This remarkable growth in untied funds provided to local government has occurred since the introduction of the tax sharing arrangements in 1976- 77. Untied funds for local authorities in 1975-76 amounted to $79.9 lm; in 1979-80, they amounted to $22 1.74m. On the basis of the Budget estimate of personal income tax collections in 1979-80, a 2 per cent share would provide local government with almost $303m in 1980-81. This represents an average increase of no less than 30 per cent per year since 1975-76 The $22 1.74m provided in 1979-80 represented a substantial increase- 23.6 per cent- over the amount allocated in 1978-79. An allocation of $303m for 1980-81 would imply a further, and even more substantial, increase of about 36 per cent in 1980-81.

In considering the Commonwealth Government's assistance to local government, two particular aspects need to be borne in mind: Firstly, since the Government took office in December 1975, it has continued a fight against inflation. Because of its efforts inflation is lower than it would otherwise have been and this has benefitted all sectors of the economy including local government. Secondly, the tax sharing arrangements have been designed so as to provide each and every local authority in the country with some assistance. Under previous arrangements, some local authorities did not receive any united assistance from the Commonwealth. All in all, local authorities are far better off since the introduction of the tax sharing arrangements than before. Enactment of the Bill in this session of the Parliament will ensure that there is no delay in making payments based on the increased percentage allocation to the States for on-passing to local government.

The Commissioner of Taxation is required to make his determination of personal income tax collections in 1 979-80 by 3 1 July this year; and in early August it is expected that the Commonwealth will be in a position to make the payments. Actual payment of the funds will await completion by the States grants commissions of their' assessments, and the Prime Minister being informed of the allocation of the assistance among local authorities. I commend the Local Government (Personal Income Tax Sharing) Amendment Bill 1 980 to the House.

Debate (on motion by Mr Scholes) adjourned.

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