Commonwealth Grants Commission

Last updated

Commonwealth Grants Commission
Statutory authority overview
Formed1933 (1933)
Jurisdiction Commonwealth of Australia
Minister responsible
Statutory authority executive
  • Michael Callaghan AM PSM , Chairperson (until 24 June 2025) [1]
Key document
Website www.cgc.gov.au

The Commonwealth Grants Commission is an Australian independent statutory body that advises the Australian Government on financial assistance to the states and territories of Australia under section 96 of the Australian Constitution. The commission was established in July 1933 by the Lyons government during the Great Depression to provide impartial advice on the distribution of federal government grants to the states. [2] The commission operates under the Commonwealth Grants Commission Act 1973, and is responsible for measuring the relative fiscal capacity of each state and territory.

Contents

The Commission recommends how the revenues raised from the goods and services tax (GST) should be distributed to each state and territory to achieve horizontal fiscal equalisation, a central feature of the Australian federation.

References to Commission

The Commission responds to a reference from the Australian Treasurer, which are generally requests for calculating appropriate ratios of per capita grants for distributing general revenue assistance from the Australian government to the states and territories. The details of these references are usually negotiated between the Commonwealth, state and territory treasury departments before being formally issued by the Treasurer.

The Commission reports to the Australian government and then provides copies to the states and territories. The recommendations are then considered at the annual meetings of the Treasurers of the Commonwealth, states and territories. [3]

On 31 March 2016, the commission received a reference to inquire into and report by 7 April 2016 on the per capita relativities to be used to distribute GST revenue among the states and the territories in 2016–17. [4]

Every five years, the Commission undertakes a review of the methodology underlying the commission's advice to the government on the relative fiscal capacity of each state and territory. The last reference was given on 29 November 2016 and the review was completed in March 2020. [5] The purpose of reviews is to determine the most appropriate methods and data for measuring the relative fiscal capacity of states and territories. [5]

See also

General:

Federal budget:

Related Research Articles

Equalization payments are cash payments made in some federal systems of government from the federal government to subnational governments with the objective of offsetting differences in available revenue or in the cost of providing services. Many federations use fiscal equalisation to reduce the inequalities in the fiscal capacities of sub-national governments arising from the differences in their geography, demography, natural endowments and economies. The level of equalisation sought can vary, however.

<span class="mw-page-title-main">Transfer payment</span> Governmental wealth redistribution

In macroeconomics and finance, a transfer payment is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government subsidies for certain businesses.

<span class="mw-page-title-main">Treasurer of Australia</span> Australian government minister in charge of economic policy

The treasurerof Australia, also known as the Federaltreasurer or simply the treasurer, is the minister of state of the Commonwealth of Australia charged with overseeing government revenue collection, federal expenditure and economic policy as the head of the Department of the Treasury. The current treasurer is Jim Chalmers, who was appointed by Prime Minister Anthony Albanese in May 2022 following the 2022 Australian federal election.

<span class="mw-page-title-main">Goods and services tax (Australia)</span> Type of value added tax used in Australia

Goods and Services Tax (GST) in Australia is a value added tax of 10% on most goods and services sales, with some exemptions and concessions. GST is levied on most transactions in the production process, but is in many cases refunded to all parties in the chain of production other than the final consumer.

<span class="mw-page-title-main">Council of Australian Governments</span> Defunct Australian intergovernmental forum

The Council of Australian Governments (COAG) was the primary intergovernmental forum in Australia from 1992 to 2020. Comprising the federal government, the governments of the six states and two mainland territories and the Australian Local Government Association, it managed governmental relations within Australia's federal system within the scope of matters of national importance.

Fiscal imbalance is a mismatch in the revenue powers and expenditure responsibilities of a government.

An Australian federal budget is a document that sets out the estimated revenues and expenditures of the Australian Treasury in the following financial year, proposed conduct of Australian government operations in that period, and its fiscal policy for the forward years. Budgets are called by the year in which they are presented to Parliament and relate to a financial year that commences on the following 1 July and ends on 30 June of the following year, so that the 2023 budget brought down in May 2023 relates to the 2023/24 financial year.

<span class="mw-page-title-main">Federalism in Australia</span> Overview of federalism in Australia

Federalism was adopted, as a constitutional principle, in Australia on 1 January 1901 – the date upon which the six self-governing Australian Colonies of New South Wales, Queensland, South Australia, Tasmania, Victoria, and Western Australia federated, formally constituting the Commonwealth of Australia. It remains a federation of those six original States under the Constitution of Australia.

The constitutional basis of taxation in Australia is predominantly found in sections 51(ii), 90, 53, 55, and 96, of the Constitution of Australia. Their interpretation by the High Court of Australia has been integral to the functioning and evolution of federalism in Australia.

Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office. Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.

<span class="mw-page-title-main">Finance Commission</span> Agency in India

The Finance Commissions are commissions periodically constituted by the President of India under Article 280 of the Indian Constitution to define the financial relations between the central government of India and the individual state governments. The First Commission was established in 1951 under The Finance Commission Act, 1951. Fifteen Finance Commissions have been constituted since the promulgation of Indian Constitution in 1950. Individual commissions operate under the terms of reference which are different for every commission, and they define the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission. As per the constitution, the commission is appointed every five years and consists of a chairman and four other members.

<span class="mw-page-title-main">Treasury (Australia)</span> Federal treasury department of the Australian Government

The Department of the Treasury, also known as The Treasury, is the national treasury and financial department of the federal government of the Commonwealth of Australia. The treasury is responsible for executing economic and fiscal policy, market regulation and the delivery of the federal budget with the department overseeing 16 agencies. The Treasury is one of only two departments that have existed continuously since Federation in 1901, the other being the Department of the Attorney-General.

The Historic Preservation Fund (HPF) provides financial support for historic preservation projects throughout the United States. The fund is administered by the National Park Service (NPS), pursuant to the National Historic Preservation Act of 1966 (NHPA). The fund provides state historic preservation agencies with matching funds to implement the act.

The Loan Council is an Australian Commonwealth-state ministerial council that coordinates public sector borrowing, comprising the Commonwealth of Australia and the states and self-governing territories, New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania the Australian Capital Territory, and the Northern Territory. The Loan Council now operates under the Financial Agreement between the Commonwealth, States and Territories of 25 February 1994, which is incorporated as a schedule to the Financial Agreement Act 1994, which came into effect on 1 July 1995. The 1994 arrangements made significant changes to the previous arrangements, the main changes being:

The fiscal imbalance in Australia is the disparity between the revenue generation ability of the three levels of governments in Australia relative to their spending obligations; but in Australia the term is commonly used to refer more specifically to the vertical fiscal imbalance, the discrepancy between the federal government's extensive capacity to raise revenue and the responsibility of the States to provide most public services, such as physical infrastructure, health care, education etc., despite having only limited capacity to raise their own revenue. In Australia, vertical fiscal imbalance is addressed by the transfer of funds as grants from the federal government to the states and territories.

The Gadgil formula is named after Dhananjay Ramchandra Gadgil, a social scientist and the first critic of Indian planning. It was evolved in 1969 for determining the allocation of central assistance for state plans in India. Gadgil formula was adopted for distribution of plan assistance during Fourth and Fifth Five Year Plans.

Section 96 of the Constitution of Australia authorises the Australian (Commonwealth) Parliament to grant financial assistance to any state on the terms and conditions that it sees fit, subject to acceptance by the state(s) concerned. The expanded use of the power under section 96 has added to Australia's vertical fiscal imbalance and enabled the Commonwealth to have a significant influence over matters that would otherwise be constitutionally State responsibilities.

The National Commission of Audit was a commission formed by the Abbott government on 22 October 2013 as an independent body to review and report on the performance, functions and roles of the Commonwealth government. The chair of the Commission was Tony Shepherd AO who is a former head of the Business Council of Australia. The other Commissioners were Peter Boxall AO, Tony Cole AO, Robert Fisher AM and Amanda Vanstone.

The Fourteenth Finance Commission of India was a finance commission constituted on 2 January 2013. The commission's chairman was former Reserve Bank of India governor Y. V. Reddy and its members were Sushma Nath, M. Govinda Rao, Abhijit Sen, Sudipto Mundle, and AN Jha. The recommendations of the commission entered force in April 2015; they take effect for a five-year period from that date.

The GST distribution dispute is an ongoing political controversy concerning the distribution of goods and services tax (GST) revenue amongst the Australian states and territories and the federal government. The dispute was originally based upon Western Australia's (WA) dissatisfaction with its low returns, which led to reform in 2018. The 2018 reform guarantees all states and territories a minimum return on their contribution.

References

  1. Our Commissioners
  2. Henderson, Anne (2011). Joseph Lyons: The People's Prime Minister. University of New South Wales Press Limited. p. 329. ISBN   978-1-74224-099-2.
  3. "Commonwealth Grants Commission". Commonwealth Grants Commission. Retrieved 29 August 2007.
  4. "2016 Update". Archived from the original on 19 March 2016. Retrieved 3 April 2016.
  5. 1 2 2020 Review - Terms of Reference