General revenue assistance
General revenue assistance is a broad category of payments that are provided to the States to spend according to their own budget priorities. They include budget balancing assistance, compensation payments in respect of GST policy decisions and National Competition Policy payments.
Budget balancing assistance
The Australian Government has guaranteed that, in each of the transitional years following the introduction of The New Tax System, each State's budget position will be no worse than had the federal financial reforms not been implemented. The guaranteed minimum amount is an estimate of the revenue that each State would have received under the previous system of financial assistance grants and if their own inefficient state taxes had not been abolished as part of the reforms. This is given effect by the payment of transitional assistance in the form of budget balancing assistance.
The Australian Government will pay budget balancing assistance to a State during the transitional period (which will expire on 30 June 2009) if that State's share of GST revenue in a financial year is less than its guaranteed minimum amount for that year.
No State required budget balancing assistance in 2006-07, as each State's share of GST revenue exceeded its guaranteed minimum amount. In 2006-07, total GST revenue payments to the States exceeded their combined guaranteed minimum amounts by $2.1 billion. Detailed calculations of each State's guaranteed minimum amount and budget balancing assistance entitlements for 2006-07 are shown in Table 34.
Table 34: Guaranteed minimum amount components, GST revenue provision and budget balancing assistance
- Where the difference between the guaranteed minimum amount and GST revenue is less than zero, the amount is zero.
Compensation payments for GST policy decisions
The Australian Government provides compensation to the States for the deferral of GST revenue resulting from its decision that small businesses and non-profit organisations, which voluntarily registered for the GST, could pay and report GST on an annual, rather than monthly or quarterly, basis.
Due to an overpayment of this compensation to the States, the Australian Government agreed with the States to suspend the payments for 2006-07.
Between 1997-98 and 2005-06, the Australian Government provided National Competition Policy payments to the States for implementing National Competition Policy and related reforms. Each State's payments were conditional on that State achieving satisfactory progress with the implementation of the reforms, including a commitment to review legislation that restricts competition, applying competitive neutrality principles to government business activities and introducing specific reforms in the electricity, gas, water and road transport sectors.
The Australian Government suspended $43.2 million in 2005-06 National Competition Policy payments, following recommendations provided by the National Water Commission. This included water reform suspensions for outstanding obligations relating to interstate trading in the southern Murray-Darling Basin, and for lack of progress and outstanding reforms with respect to water planning.
On 13 September 2007, the Government lifted the suspensions following a recommendation by the National Water Commission that there has now been satisfactory progress by the States in implementing their water reform commitments.
Consequently, no National Competition Policy payments were provided in 2006-07, but suspended payments of $43.2 million will be paid in 2007-08.