1998-1999-2000

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

LOCAL GOVERNMENT (FINANCIAL ASSISTANCE) AMENDMENT BILL 2000

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Regional Services, Territories and Local Government, the Senator the Honourable Ian Macdonald)

LOCAL GOVERNMENT (FINANCIAL ASSISTANCE) AMENDMENT BILL 2000

 

 

OUTLINE

 

 

The Local Government (Financial Assistance) Amendment Bill 2000 makes tax reform related amendments and procedural amendments to the Local Government (Financial Assistance) Act 1995 .

 

Tax Reform Amendments

 

Section 8 of the Local Government (Financial Assistance) Act 1995 specifies the formula to be applied by the Treasurer each year to determine the increase in the level of local government financial assistance grants. The formula is based on the annual increase in States’ financial assistance grants and special revenue assistance. Since 1994-95 the State grants, and hence grants to local government, have generally increased annually in line with population and CPI movements.

 

The Act is amended to remove the nexus between the local government financial assistance grants and States’ financial assistance grants, as the latter are to be abolished from 1 July 2000 under the terms of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (the Agreement).

 

The amendment continues the escalation factor for local government financial assistance on a real per capita basis from previous year grants. As with the existing provisions, the amendments provide the Treasurer with discretion to increase or decrease the escalation factor in special circumstances.

 

The Act is also amended to implement the Commonwealth’s undertaking in clause 18 of the Agreement. The amendment will require the States and the Northern Territory to withhold from any local government authority in breach of clause 17 of the Agreement, a sum representing the amount of any unpaid voluntary or notional GST payments, from their financial assistance grant.  Amounts withheld by the States and the Northern Territory are to be paid to the Commonwealth.

 

Procedural Amendments

 

The Act is amended to remove the requirement that the Minister and Statistician must agree to the assumptions used in projecting the population of the States and of Australia. This is to be replaced with a requirement that the Statistician provide estimates on the basis of assumptions specified by the Minister after consulting the Statistician.

 

Various definitions regarding projected populations, used in calculating the escalation factor, are also to be amended to reflect this change.

 

 

 

 

 

FINANCIAL IMPACT STATEMENT

 

The Local Government (Financial Assistance) Act 1995 is the basis upon which Commonwealth financial assistance is provided to local government through the States and Territories. This financial assistance has two components:

§   general purpose funding (section 9 payments); and

§   local roads funding (section 12 payments).

 

Under this Act local government is expected to be entitled to receive around $1.32 billion in financial assistance grants in 2000-01. Each year, the Treasurer determines the escalation of local government assistance by having regard to movements in the level of the financial assistance grants and special revenue assistance paid to the States.

 

Under the terms of the Agreement, the Commonwealth retains responsibility for providing financial assistance grants to local government. Subject to adjustment by the Treasurer in special circumstances, these amendments will maintain the growth of these grants on a real per capita basis.

 

Under clause 18 of the Agreement , the Commonwealth has agreed to legislate to require the States and the Northern Territory to withhold from any local government authority that does not pay voluntary or notional GST payments, a sum representing the amount of unpaid voluntary or notional GST payments. Amounts withheld will form part of the GST revenue pool which will be distributed to the States.

 

 

Local Government (Financial Assistance) Amendment Bill 2000

 

Notes on Clauses

 

 

Clause 1 - Short Title

 

This clause specifies the Short Title of the Act as the Local Government (Financial Assistance) Amendment Act 2000 .

 

Clause 2 - Commencement

 

This clause provides that the Act commences on the day on which it receives the Royal Assent.

 

Clause 3 - Schedule(s)

 

This clause provides for the Act to be amended or repealed according to the terms set out in the Schedule, and that any other items in a Schedule to the Act will have effect according to their terms.

 

Schedule 1 - Amendment of the Local Government (Financial Assistance) Act 1995

 

Clause 1 - After section 4

 

Subsection 4A(1) provides new definitions for the terms “population of a State” and “population of Australia” to be used when causing an escalation factor to be calculated under subsection 8(1) and when applying section 10 in respect of the current year mentioned in that section.

Subsection 4A(2) requires the Statistician when making a population estimate to have regard to the latest statistics in relation to population available on the day the estimate is made.

Subsection 4A(3) requires the Minister to, as soon as practicable after receiving population estimates from the Statistician, provide the Treasurer of each State a written notice setting out the population of the State and the total population of all States.

Subsections 4A(2) and (3) are similar to the current subsections 10(2) and (3) which are being repealed. (see clause 13)

 

Clause 2 - At the end of section 6

 

Inserted subsection 6(8) ensures that where there is a possibility of a reduction in the amount to be allocated to a local governing body when complying with section 15 (aa), then the amount withheld cannot be taken into account by the State when determining the allocation to be made to the local authority.

 

Clause 3 - After subsection 7(3)

 

Subsection 7(3A) requires the Treasurer when making estimates regarding Australia’s population to consult the Statistician.

 

Clause 4 - Paragraph 8(1)(a)

 

The amended paragraph provides the formula to be used to calculate the escalation factor for increasing local government financial assistance on a real per capita basis.

 

Clause 5 - At the end of subsection 8(1)

 

The new paragraph (c) gives the Treasurer discretion, where he considers there are special circumstances, and subject to subsection 8(2), to increase or decrease the factor obtained under paragraph (a), by such amount as he considers appropriate. This discretion to adjust the factor is currently included in the formula in paragraph 8(1)(a) of the Act.

 

Clause 6 - After subsection 8(1)

 

Subsection 8(1A) requires that where the reference base for an index number is changed, then only index numbers published in terms of the new base are to be used after the change has been made. This allows the current year to be compared with the previous year on a comparable basis where a change has been made to the index reference base.

 

Clause 7 - Subsection 8(2)

 

The amendment replaces the reference to repealed paragraph 1(a) with the new paragraph 1(c).

 

Clause 8 - Paragraphs 8(2)(a) to (c)

 

This amendment repeals some of the existing factors the Treasurer must have regard to when calculating the escalation factor. These matters will be nullified by reforms to Commonwealth-State financial relations under the Agreement. The new paragraph 8(2)(a) replaces these factors with a requirement for the Treasurer to consider the objects of the Act in section 3.

 

Clause 9 - Subsection 9(1) (definition of Projected population of the State )

 

The amendment to this definition removes the requirement for the Minister and Statistician to agree on assumptions used in estimating population, and replaces this with a requirement for estimates to be made by the Statistician on the basis of assumptions specified by the Minister after consulting the Statistician.

 

Clause 10 - Subsection 9(1) (definition of Projected population of Australia )

 

The amendment to this definition removes the requirement for the Minister and Statistician to agree on assumptions used in estimating population, and replaces this with a requirement for estimates to be made by the Statistician on the basis of assumptions specified by the Minister after consulting the Statistician.

 

Clause 11 - Subsection 10(1) (definition of Projected population of the State )

 

This definition is to be repealed and replaced by a new definition in paragraph 4A(1)(c).

 

Clause 12 - Subsection 10(1) (definition of Projected population of Australia )

 

This definition is to be repealed and replaced by the new definition in paragraph 4A(1)(d).

 

Clause 13 - Subsection 10(2) and (3)

 

These two subsections are repealed and similar wording is included in the new subsections 4A(2) and 4A(3).

 

Clause 14 - At the end of section 11

 

Subsection 11(3) provides that any withholding of financial assistance under paragraph 15(aa) is not to be taken into account by State Grants Commissions when making allocations to local government under section 9.

 

Clause 15 - At the end of section 14

 

Subsection 14(3) provides that any withholding of financial assistance under paragraph 15(aa) is not to be taken into account by State Grants Commissions when making allocations to local government under section 12.

 

Clause 16 - Paragraph 15(a)

 

The amendment to this paragraph makes reference to the extra condition under paragraph 15(aa) which the States are subject to when receiving financial assistance grants, to withhold financial assistance grants from local government authorities to the value of unpaid notional or voluntary GST amounts.

 

Clause 17 - After paragraph 15(a)

 

The new paragraph 15(aa) requires the States and the Northern Territory to withhold financial assistance grants from local government authorities of an amount that represents voluntary GST payments that should have, but have not been paid, by the bodies. The amount withheld is to be paid to the Commonwealth.

 

Clause 18 - Paragraph 15(c)

 

This amendment includes paragraph 15(aa) as one of the matters to be considered by the Minister when determining if, under paragraph 15(c), he requires the States to repay to the Commonwealth any amounts they have received.

 

Clause 19 - Application

 

This clause provides that the amendments contained in this Bill apply where the year mentioned in definitions, population estimates and payment clauses is the year beginning on 1 July 2000 or any later year.  Amendments relating to the withholding of voluntary GST amounts apply to the year beginning 1 July 2001 or any later year.

 

Clause 20 - Transitional

 

Where a factor is calculated under subsection 8(1) of the amended Act in relation to a year beginning on 1 July 2000, the definition of “previous population of Australia” is to be replaced by a definition relating population to the year beginning on 1 July 1999.