Supplementary Explanatory Memorandum
Outline and Financial impacts
Outline
These Government amendments will amend the A New Tax System (Commonwealth-State Financial Arrangements) Bill 1999 . This Bill was introduced in the Senate on 31 March 1999.
Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations
The proposed amendments create a new part (Part 1A) of the Bill which adds a schedule (Schedule 2) comprising the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations and also records the intention of the Commonwealth to comply with the Intergovernmental Agreement.
Changing the GST rate and base
The proposed amendments to Part 2 of the Bill add a definition of the "changes of an administrative nature" which are mentioned in clause 10 of the Bill and provide that Ministerial Determinations under the A New Tax System (Goods and Services Tax) Act 1999 that affect the Goods and Services (GST) base will be made in accordance with a procedure agreed by the States and Territories.
The proposed amendments to Schedule 1 of the Bill provide for the distribution of GST revenue grants in accordance with the principle of horizontal fiscal equalisation after 2001-02.
The proposed additions to Part 3 of the Bill will provide the States and Territories with an entitlement to revenue replacement payments in 2000-01 which will be equal to the amount of business franchise fee safety net revenues (less administrative costs) collected after 30 June 2000 with respect to 1999-2000.
Financial impacts
The proposed amendments to the transitional arrangements involve a cost to the Commonwealth budget of around $153 million in 2002-03 on the basis of the estimates at the time of the 9 April 1999 Premiers' Conference. Of this amount $147 million will benefit Queensland and $6 million will benefit the Australian Capital Territory.
The safety net arrangements added to Part 3 of the Bill will not affect the Commonwealths budgetary position as revenue replacement payments return to the States and Territories amounts raised on their behalf (after allowing for administration costs).