Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 4 - Other payments
Overview
1.33 The States and Territories will continue to receive competition payments and any franchise fees windfall tax reimbursement payments.
Summary of the legislation
1.34 To provide a State or Territory with a continuing entitlement to competition payments and franchise fees windfall tax reimbursement payments.
1.35 States and Territories will continue to be entitled to competition payments and franchise fees windfall tax reimbursement payments from 1 July 2000 following the repeal of the existing States Grants (General Purposes) Act 1994 .
Background to the legislation
1.36 These payments are currently provided to the States and Territories under the States Grants (General Purposes) Act 1994 which is to be repealed from the date of commencement of this Bill.
1.37 Competition payments are provided to the States and Territories in accordance with the April 1995 Agreement to Implement the National Competition Policy and Related Reforms (the Agreement). Under the Agreement, the States and Territories are scheduled to receive competition payments (1994-95 prices) of $400 million in 2000-01 and $600 million in each following year. The Agreement specifies that competition payments be paid quarterly and be distributed on an equal per capita basis. Each State or Territorys competition payments are subject to satisfactory progress with the implementation of the reform conditions in the Agreement.
1.38 The Franchise Fees Windfall Tax (Collection) Act 1997 was enacted to protect State and Territory budgets from any repayment of revenues which were collected through the past imposition of business franchise fees. This Act is an ongoing part of the safety net arrangements which were established by the Commonwealth following the August 1997 High Court decision which cast into doubt the Constitutional validity of States and Territory business franchise fees. The Commonwealth has an undertaking to reimburse the States and Territories for any remittances of franchise fees windfall tax.
Explanation of the legislation
1.39 Clause 14 specifies the maximum amount of a State or Territorys entitlement to competition payments in each year. The base amount of competition payments is indexed on the basis of year average CPI growth to the March quarter (as specified in clause 8 ) and the per capita share of a State or Territory is based on the Statisticians determination of populations as at 31 December. The base amount is also indexed by a factor of 1.5 in 2001-02 to increase the maximum amount of competition payments from $400 million to $600 million (1994-95 prices).
1.40 Clauses 16 and 17 provide the Treasurer with the authority to determine the frequency and amount of the payments during a year. This will enable the Treasurer to make quarterly competition payments in accordance with the Agreement to Implement the National Competition Policy and Related Reforms.
1.41 Clause 15(1) requires the Treasurer to deduct any overpayments from payments to a State or Territory in the following year. Clause 15(2) requires the Treasurer to add the amount of any underpayments to payments to a State or Territory in the following year.
1.42 Clause 13 provides a State or Territory with an entitlement to a payment which is equal to the amount of revenue that the Commissioner of Taxation determines to have been collected and remitted to the Commonwealth by a State or Territory under the Franchise Fees Windfall Tax (Collection) Act 1997 .
Regulation Impact Statement
1.43 No impacts are expected as the amount appropriated to the State and Territory Governments will be freely available for use for any purpose. No Regulation Impact Statement is required.