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Australian Government Coat of Arms

Budget | 2014-15

Budget 2014-15
Australian Government Coat of Arms, Budget 2014-15

Part 3: Fiscal Strategy and Outlook (continued)

Attachment E: Australia's Federal Relations

This attachment provides information on payments for specific purposes and general revenue assistance provided to the States and Territories (the States).

The current framework for federal financial relations under the Intergovernmental Agreement on Federal Financial Relations (the Intergovernmental Agreement) was introduced on 1 January 2009.

The Commonwealth provides substantial funding to the States through both general revenue assistance and specific purpose payments.

More detailed information on the Intergovernmental Agreement and Australia's federal financial relations is provided in Budget Paper No. 3, Federal Financial Relations 2014‑15, and on the Council for Federal Financial Relations website.

Overview of payments to the States

Payments to the States in 2014‑15 are estimated to be $102.1 billion, or 24.1 per cent of total Commonwealth expenditure for the year. This amount comprises payments for specific purposes of $47.2 billion and general revenue assistance of $54.9 billion.

Table 3.23 shows payments for specific purposes and general revenue assistance to the States.

Table 3.23: Commonwealth payments to the States, 2014‑15 to 2017‑18
$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2014‑15                  
Payments for specific purposes 14,019 11,505 9,735 5,477 3,229 1,071 774 1,062 47,225
General revenue assistance 16,824 11,853 11,704 2,298 4,955 1,914 1,135 3,189 54,868
Total payments to the States 30,843 23,359 21,439 7,775 8,183 2,985 1,909 4,251 102,094
2015‑16                  
Payments for specific purposes 15,151 11,387 10,567 5,424 3,660 1,139 773 1,094 50,488
General revenue assistance 17,685 12,638 12,644 2,407 5,261 2,104 1,205 3,421 58,291
Total payments to the States 32,836 24,025 23,210 7,830 8,921 3,243 1,978 4,515 108,779
2016‑17                  
Payments for specific purposes 16,593 11,824 11,346 6,025 3,461 1,093 821 1,059 53,522
General revenue assistance 18,282 13,263 13,842 2,480 5,684 2,151 1,251 3,605 61,487
Total payments to the States 34,875 25,087 25,188 8,505 9,144 3,244 2,072 4,663 115,008
2017‑18                  
Payments for specific purposes 15,984 11,345 10,961 5,866 3,422 1,082 825 977 51,476
General revenue assistance 19,281 14,168 14,514 2,747 5,890 2,200 1,302 3,691 64,673
Total payments to the States 35,266 25,513 25,476 8,612 9,312 3,282 2,127 4,668 116,148

(a) Total column may not equal sum of the state totals. There is no basis on which to estimate state allocations for a small number of payments, which are not reflected in state totals.

Payments for specific purposes

The Commonwealth provides payments to the States for specific purposes in areas that may be administered by the States. Payments to the States for specific purposes will total $47.2 billion in 2014‑15, which is estimated to represent 11.2 per cent of total Commonwealth expenditure in 2014‑15.

The Commonwealth provides the following types of Specific Purpose Payments (SPPs) to the States:

  • National Specific Purpose Payments (National SPPs) in respect of key service delivery sectors;
  • National Health Reform (NHR) funding, which commenced from 1 July 2012;
  • Students First funding, which commenced from 1 January 2014; and
  • National Partnership payments.

Table 3.24 shows total payments for specific purposes by category (National SPPs, NHR funding, Students First funding and National Partnership payments).

Table 3.24: Total payments for specific purposes by category, 2014‑15 to 2017‑18
$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2014‑15                  
National Specific Purpose Payments 1,320 1,028 833 459 295 90 68 43 4,136
National Health Reform funding(b) 4,876 3,829 3,036 1,760 1,073 320 289 157 15,343
Students First funding 4,519 3,658 3,070 1,501 1,079 349 249 260 14,688
National Partnership payments(c) 3,303 2,990 2,796 1,757 781 311 167 602 13,058
Total payments for specific purposes 14,019 11,505 9,735 5,477 3,229 1,071 774 1,062 47,225
2015‑16                  
National Specific Purpose Payments 1,347 1,054 853 476 300 91 70 44 4,235
National Health Reform funding(b) 5,246 4,071 3,277 1,928 1,142 336 313 179 16,492
Students First funding 4,805 3,925 3,413 1,649 1,142 371 264 283 15,853
National Partnership payments(c) 3,752 2,337 3,023 1,371 1,076 341 126 588 13,908
Total payments for specific purposes 15,151 11,387 10,567 5,424 3,660 1,139 773 1,094 50,488
2016‑17                  
National Specific Purpose Payments 1,376 1,081 875 494 305 92 71 46 4,339
National Health Reform funding(b) 5,586 4,289 3,502 2,091 1,201 350 336 199 17,555
Students First funding 5,229 4,221 3,778 1,792 1,211 399 279 311 17,220
National Partnership payments(c) 4,402 2,233 3,191 1,648 743 252 135 504 14,407
Total payments for specific purposes 16,593 11,824 11,346 6,025 3,461 1,093 821 1,059 53,522
2017‑18                  
National Specific Purpose Payments 1,409 1,111 899 513 311 93 73 47 4,455
Public hospitals funding (d) 5,788 4,565 3,695 2,109 1,276 380 301 193 18,307
Students First funding 5,526 4,463 4,032 2,021 1,281 411 289 307 18,331
National Partnership payments(c) 3,262 1,207 2,336 1,222 554 198 161 431 10,383
Total payments for specific purposes 15,984 11,345 10,961 5,866 3,422 1,082 825 977 51,476

(a) As state allocations for a number of programmes have yet to be determined, these payments are not included in state totals. As such, total payments may not equal the sum of state totals.

(b) The efficient growth funding component of National Health Reform funding is indicative only. The distribution of efficient growth funding will be determined by the actual efficient growth in activity in each of the States.

(c) Includes financial assistance grants for local government.

(d) State allocations of public hospitals funding are shown on the basis of state population shares of total funding and are not adjusted for cross‑border activity.

The majority of payments for specific purposes relate to National SPPs, NHR funding and Students First funding, and total $34.2 billion in 2014‑15, an estimated increase of $3.2 billion on the $31.0 billion the States received in 2013‑14.

Payments for specific purposes cover most areas of state and local government activity including health, education, skills and workforce development, community services, affordable housing, infrastructure and environment. Table 3.25 shows total payments for specific purposes by sector.

Table 3.25: Payments for specific purposes by sector, 2014‑15 to 2017‑18
$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2014‑15                  
Health 5,211 4,163 3,254 1,903 1,135 370 302 274 16,612
Education 4,771 3,820 3,211 1,569 1,127 364 263 335 15,475
Skills and workforce development 581 459 371 202 133 40 30 19 1,835
Community services 458 794 345 455 107 48 29 95 2,332
Affordable housing 513 349 453 325 129 34 23 146 1,973
Infrastructure 1,538 1,073 1,403 712 296 105 61 135 5,658
Environment 160 254 56 6 130 29 7 18 661
Contingent payments 4 4 75 .. .. .. .. .. 83
Other(b) 783 589 567 305 171 81 59 40 2,595
Total payments for specific purposes 14,019 11,505 9,735 5,477 3,229 1,071 774 1,062 47,225
2015‑16                  
Health 5,519 4,320 3,405 2,011 1,180 419 322 319 17,494
Education 4,938 4,025 3,498 1,692 1,171 380 270 343 16,330
Skills and workforce development 585 457 371 203 131 40 30 19 1,836
Community services 506 410 326 235 115 36 27 95 1,754
Affordable housing 438 333 405 273 113 31 22 133 1,747
Infrastructure 2,198 962 1,934 697 653 133 37 136 8,028
Environment 182 289 72 4 128 22 5 9 712
Contingent payments 1 .. 50 .. .. - .. .. 51
Other(b) 782 590 506 308 170 79 59 40 2,535
Total payments for specific purposes 15,151 11,387 10,567 5,424 3,660 1,139 773 1,094 50,488
2016‑17                  
Health 5,793 4,437 3,630 2,167 1,242 363 345 237 18,214
Education 5,243 4,241 3,800 1,800 1,220 402 280 358 17,356
Skills and workforce development 637 498 405 223 142 43 33 21 2,001
Community services 560 466 382 215 129 40 40 95 1,930
Affordable housing 443 339 400 251 109 31 22 211 1,807
Infrastructure 2,967 1,050 2,164 1,055 360 124 12 92 9,108
Environment 169 203 58 4 89 12 29 5 568
Contingent payments - - 2 - - - - - 2
Other(b) 781 591 505 311 170 78 59 40 2,536
Total payments for specific purposes 16,593 11,824 11,346 6,025 3,461 1,093 821 1,059 53,522
2017‑18                  
Health 5,992 4,721 3,829 2,186 1,322 394 312 222 18,978
Education 5,537 4,475 4,050 2,029 1,289 413 290 354 18,440
Skills and workforce development 478 377 305 174 105 31 25 16 1,512
Community services 685 497 403 233 136 42 73 89 2,161
Affordable housing 454 345 416 264 111 31 23 224 1,869
Infrastructure 1,978 251 1,405 653 257 78 10 30 5,668
Environment 50 64 32 - 26 10 30 1 213
Contingent payments - - - - - - - - -
Other(b) 811 615 522 326 176 81 62 42 2,635
Total payments for specific purposes 15,984 11,345 10,961 5,866 3,422 1,082 825 977 51,476

(a) As state allocations for a number of programmes have yet to be determined, these payments are not included in state totals. As such, total payments may not equal the sum of state totals.

(b) Includes financial assistance grants for local government.

Total payments for specific purposes by sector and category (National SPPs, NHR funding, Students First funding and National Partnership payments) are shown in Table 3.26.

Table 3.26: Payments for specific purposes by sector and category, 2014‑15 to 2017‑18
$million 2014‑15 2015‑16 2016‑17 2017‑18
Health  
National Health Reform funding 15,343 16,492 17,555  -
Public hospitals funding  -  -  - 18,307
National Partnerships 1,270 1,002 659 672
Education  
Students First funding 14,688 15,853 17,220 18,331
National Partnerships 787 477 136 109
Skills and workforce development  
National Skills and Workforce Development SPP 1,435 1,459 1,484 1,512
National Partnerships 400 377 516  -
Community services  
National Disability SPP(a) 1,395 1,449 1,506 1,570
National Partnerships 937 305 424 591
Affordable housing  
National Affordable Housing SPP 1,306 1,327 1,349 1,374
National Partnerships 667 420 458 495
Infrastructure  
National Partnerships 5,658 8,028 9,108 5,668
Environment  
National Partnerships 661 712 568 213
Contingent payments  
National Partnerships 83 51 2  -
Other  
National Partnerships(b) 2,595 2,535 2,536 2,635
Total payments for specific purposes 47,225 50,488 53,522 51,476

(a) Does not include National Disability SPP adjustments to achieve budget neutrality as this is still subject to negotiation.

(b) Includes financial assistance grants for local government.

Detailed tables of payments for specific purposes are provided in Annex A. This Annex provides accrual estimates of Commonwealth payments to the States.

The Commonwealth provides funding under the Natural Disaster Relief and Recovery Arrangements (NDRRA) to assist the States with relief and recovery assistance following eligible natural disasters.

For accounting purposes, the Commonwealth recognises a liability equal to the present value of future payments expected to be made to the States under the NDRRA. This is regardless of whether or not a State has completed eligible disaster reconstruction work or submitted an eligible claim under the NDRRA.

The estimated NDRRA cash payments are shown in Table 3.27 below (see Table A.8 in Annex A for accrual estimates).

Table 3.27: Estimated NDRRA cash payments, 2014‑15 to 2017‑18
$'000 NSW VIC QLD WA SA TAS ACT NT Total
2014‑15 109,551 156,625 950,000 788 3,167 99 - - 1,220,230
2015‑16 3,189 2,409 1,828,000 1,373 - - - 642 1,835,613
2016‑17 - - 82,000 - - - - - 82,000
2017‑18 - - - - - - - - -

GST and general revenue assistance

General revenue assistance is provided to the States without conditions, and can be spent by the States according to their own budget priorities.

In 2014‑15, the States will receive $54.9 billion in general revenue assistance from the Commonwealth, comprising $53.7 billion in GST entitlements and $1.2 billion in other general revenue assistance. This is a 4.7 per cent increase in general revenue assistance, on the $52.4 billion the States received in 2013‑14. Total general revenue assistance to the States is estimated to represent 13.0 per cent of total Commonwealth expenditure in 2014‑15.

GST entitlements have been revised down since the 2014‑15 Budget by $50 million over the four years to 2017‑18.

Table 3.28 summarises GST and general revenue assistance payments to the States. Detailed tables of GST and general revenue assistance, including state shares of each payment, are provided in Annex A.

Table 3.28: GST and general revenue assistance, 2014‑15 to 2017‑18
$million 2014‑15 2015‑16 2016‑17 2017‑18
GST entitlements 53,710.0 57,200.0 60,390.0 63,630.0
Other payments  
ACT municipal services 38.0 38.6 39.2 40.0
Reduced royalties 49.8 51.5 53.7 48.9
Royalties 995.7 926.3 928.6 878.7
Snowy Hydro Ltd tax compensation 75.0 75.0 75.0 75.0
Total other 1,158.5 1,091.3 1,096.6 1,042.5
Total GST and other payments 54,868.5 58,291.3 61,486.6 64,672.5

GST

GST revenue variations since the 2014‑15 Budget

Table 3.29 provides a reconciliation of the GST revenue estimates since the 2014‑15 Budget. The reconciliation accounts for policy decisions and parameter and other variations.

Table 3.29: Reconciliation of GST entitlement estimates since the 2014‑15 Budget
$million 2014‑15 2015‑16 2016‑17 2017‑18
GST entitlement at 2014‑15 Budget 53,710 57,020 60,440 63,810
Changes between 2014‑15 Budget and MYEFO        
Effect of policy decisions -7 -1 -1 -1
Effect of parameter and other variations 7 181 -49 -179
Total variations 0 180 -50 -180
GST entitlement at 2014‑15 MYEFO 53,710 57,200 60,390 63,630

Specific policy decisions taken since the 2014‑15 Budget that affect GST revenue are shown in Table 3.30. These decisions decrease the amount of GST revenue by $10 million over four years.

Detailed information on policy decisions since the 2014‑15 Budget are included in Appendix A.

Table 3.30: Policy decisions since the 2014‑15 Budget that affect GST revenue
$million 2014‑15 2015‑16 2016‑17 2017‑18
Indirect Tax Concession Scheme — diplomatic and consular concessions -5.0 -1.0 -1.0 -1.0
Reintroduction of fuel excise indexation — change to start date -2.0 0.0 0.0 0.0
Total GST revenue policy decisions -7.0 -1.0 -1.0 -1.0
Reconciling GST revenue and GST entitlements to the States

Under the Intergovernmental Agreement, the States are entitled to receive payments from the Commonwealth equivalent to the revenue received from the GST.

However, GST revenue for a financial year varies from the amount of GST paid to the States for that year because of:

  • GST revenues which are recognised on a Commonwealth whole‑of‑government basis, but not remitted to the Australian Taxation Office (ATO) by 30 June of each financial year, as the revenues will not be remitted until the following financial year;
  • penalties, other than general interest charge (GIC) penalties, which are not included in the definition in the Federal Financial Relations Act 2009 of GST to be paid to the States;
  • the GST component of sales by Commonwealth agencies which has been collected by those agencies but which, as at 30 June in each year, has not been remitted to the ATO, because it is not due to be paid until the next Business Activity Statement is lodged; and
  • a balancing adjustment to account for any variation in the previous financial year between the Treasurer's final outcome determination, and GST payment advances made during that financial year.

The reconciliation of GST revenue and GST entitlements to the States is provided in Table 3.31.

Table 3.31: Reconciling GST revenue and GST entitlements to the States
  Outcome   Estimates 
$million 2013‑14   2014‑15 2015‑16 2016‑17 2017‑18
GST revenue 55,517   56,820 60,390 63,510 66,950
less change in GST receivables 4,123   2,838 2,922 2,848 3,027
GST receipts 51,394   53,982 57,468 60,662 63,923
less non-GIC penalties collected 276   260 270 270 290
less net GST collected by Commonwealth agencies but not yet remitted to the ATO 28   12 -2 2 3
GST entitlements to the States 51,090   53,710 57,200 60,390 63,630

Table 3.32 below provides information on the balancing adjustment relating to 2013‑14 which has been paid in 2014‑15.

Table 3.32: Balancing adjustment relating to 2013‑14
$million Total
GST entitlements to the States in 2013‑14 51,090.2
less advances of GST made throughout 2013‑14 50,720.0
equals following year balancing adjustment 370.2
Distribution of GST entitlement pool among the States

As agreed by all parties in the Intergovernmental Agreement, GST payments are distributed among the States in accordance with the principle of horizontal fiscal equalisation, having regard to the recommendations of the Commonwealth Grants Commission. The calculations for the distribution of the GST pool in 2014‑15 are shown in Table 3.33.

Table 3.33: Distribution of the GST entitlement pool, 2014‑15(a)
  Estimated 31 December 2014 population GST relativities Adjusted population Share of adjusted population 2014‑15 GST entitlement
  (1) x (2) % $million
  (1) (2) (3) (4) (5)
NSW 7,572,549 0.97500 7,383,235 31.2 16,774.1
VIC 5,897,334 0.88282 5,206,284 22.0 11,828.2
QLD 4,775,457 1.07876 5,151,572 21.9 11,703.9
WA 2,630,068 0.37627 989,616 4.2 2,248.3
SA 1,693,119 1.28803 2,180,788 9.2 4,954.6
TAS 515,385 1.63485 842,577 3.6 1,914.3
ACT 390,762 1.23600 482,982 2.0 1,097.3
NT 247,997 5.66061 1,403,814 5.9 3,189.3
Total 23,722,671 na 23,640,869 100.0 53,710.0

(a) Total may not equal sum of State totals due to rounding.

The calculations for the distribution of the 2013‑14 balancing adjustment are shown in Table 3.34. This adjustment has been paid to each State in 2014‑15 following the upwards revision to the States' 2013‑14 GST entitlements of $370.2 million.

Table 3.34: Distribution of the GST balancing adjustment, 2013‑14(a)
  31 December 2013 population  GST relativities Adjusted population Share of adjusted population 2013‑14 GST entitlement 2013‑14 GST advances Balancing adjustment
  $million
  (1) x (2) % $million $million (5) - (6)
  (1) (2) (3) (4) (5) (6) (7)
NSW 7,465,497 0.96576 7,209,878 31.0 15,849.5 15,727.2 122.3
VIC 5,790,990 0.90398 5,234,939 22.5 11,508.0 11,426.1 81.9
QLD 4,690,910 1.05624 4,954,727 21.3 10,892.0 10,822.7 69.3
WA 2,550,874 0.44581 1,137,205 4.9 2,499.9 2,484.8 15.1
SA 1,677,250 1.26167 2,116,136 9.1 4,651.9 4,618.2 33.7
TAS 513,955 1.61454 829,801 3.6 1,824.2 1,809.5 14.7
ACT 384,147 1.22083 468,978 2.0 1,031.0 1,023.9 7.1
NT 242,573 5.31414 1,289,067 5.5 2,833.8 2,807.6 26.1
Total 23,316,196 na 23,240,731 100.0 51,090.2 50,720.0 370.2

(a) Total may not equal sum of State totals due to rounding.

Table 3.35 shows the distribution of the GST entitlement over the current financial year and forward estimates.

Table 3.35: Distribution of the GST entitlement over financial year and forward estimates
$million NSW VIC QLD WA SA TAS ACT NT Total
2014‑15 16,774.1 11,828.2 11,703.9 2,248.3 4,954.6 1,914.3 1,097.3 3,189.3 53,710.0
2015‑16 17,635.1 12,612.9 12,643.7 2,355.1 5,261.1 2,104.0 1,166.8 3,421.2 57,200.0
2016‑17 18,232.4 13,237.9 13,842.1 2,426.6 5,683.8 2,151.1 1,211.3 3,604.7 60,390.0
2017‑18 19,231.2 14,143.1 14,514.4 2,698.1 5,890.2 2,200.3 1,261.9 3,690.9 63,630.0
GST administration costs

States compensate the Commonwealth for the costs incurred by the ATO in administering the GST, including costs incurred by the Australian Customs and Border Protection Service, as shown in Table 3.36.

Table 3.36: GST administration budget, 2013‑14 to 2017‑18
  Actual   Estimates
$million 2013‑14   2014‑15 2015‑16 2016‑17 2017‑18
Australian Taxation Office budget 698.6   688.5 680.3 526.0 512.0
less prior year adjustment -11.0   8.2      
equals State government payments 709.6   680.3 680.3 526.0 512.0
less Australian Taxation Office outcome(a) 690.4          
equals Commonwealth budget impact 19.1          
plus prior year adjustment -11.0          
equals following year adjustment 8.2          

(a) Estimated outcome for 2013‑14 pending confirmation by the Australian National Audit Office.

The preliminary outcome for 2013‑14 GST administration expenses of $690.4 million differs from the amount paid by the States and the prior year adjustment by $8.2 million. Once the audit of the outcome for GST administration expenses in 2013‑14 is completed, the final adjustment will be incorporated into the States' administration costs for 2014‑15.