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Australian Government Coat of Arms

Budget | 2015-16

Budget 2015-16
Australian Government Coat of Arms, Budget 2015-16

Part 3: Fiscal Strategy and Outlook (continued)

Attachment D: 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 2015‑16, and on the Council for Federal Financial Relations website.

Overview of payments to the States

Payments to the States in 2015‑16 are estimated to be $107.4 billion, or 24.8 per cent of total Commonwealth expenditure for the year. This amount comprises payments for specific purposes of $49.3 billion and general revenue assistance of $58.1 billion.

Table 3.25 shows payments for specific purposes and general revenue assistance to the States.

Table 3.25: Commonwealth payments to the States, 2015‑16 to 2018‑19
$million NSW VIC QLD WA SA TAS ACT NT Total (a)
2015‑16                  
Payments for specific purposes 14,662 11,474 10,008 5,419 3,468 1,138 761 1,249 49,257
General revenue assistance 17,451 12,832 13,024 1,922 5,556 2,249 1,075 3,286 58,094
Total payments to the States 32,113 24,306 23,032 7,341 9,024 3,387 1,835 4,535 107,351
2016‑17                  
Payments for specific purposes 16,915 11,552 11,627 5,729 3,777 1,211 832 1,134 54,386
General revenue assistance 18,075 13,366 14,847 1,647 6,153 2,331 1,123 3,324 61,489
Total payments to the States 34,990 24,918 26,474 7,376 9,929 3,543 1,955 4,457 115,874
2017‑18                  
Payments for specific purposes 16,101 11,482 11,311 5,734 3,536 1,060 779 973 52,239
General revenue assistance 18,940 14,041 16,194 1,337 6,511 2,421 1,205 3,183 64,391
Total payments to the States 35,042 25,523 27,505 7,071 10,047 3,481 1,984 4,156 116,630
2018-19                  
Payments for specific purposes 15,485 11,656 10,545 5,693 3,453 1,077 792 749 50,718
General revenue assistance 19,935 14,855 16,841 1,559 6,682 2,459 1,254 3,225 67,256
Total payments to the States 35,420 26,511 27,386 7,252 10,135 3,536 2,045 3,974 117,974

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

Payments for specific purposes

The Commonwealth provides payments to the States for specific purposes in areas administered by the States. Payments to the States for specific purposes will total $49.3 billion in 2015‑16, which is estimated to represent 11.4 per cent of total Commonwealth expenditure in 2015‑16.

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

Table 3.26: Total payments for specific purposes by category, 2015‑16 to 2018‑19
$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2015‑16                  
National Specific Purpose Payments 1,350 1,055 849 463 301 91 69 43 4,222
National Health Reform funding 5,243 4,134 3,284 1,831 1,188 349 321 174 16,525
Students First funding 4,812 3,924 3,298 1,579 1,126 365 265 288 15,658
National Partnership payments(b) 3,256 2,361 2,577 1,546 853 333 105 743 12,852
Total payments for specific purposes 14,662 11,474 10,008 5,419 3,468 1,138 761 1,249 49,257
2016‑17                  
National Specific Purpose Payments 1,378 1,081 868 476 305 92 71 44 4,314
National Health Reform funding 5,523 4,331 3,451 1,956 1,238 359 343 193 17,394
Students First funding 5,240 4,221 3,627 1,701 1,202 394 281 315 16,982
National Partnership payments(b) 4,775 1,919 3,681 1,597 1,031 366 138 582 15,695
Total payments for specific purposes 16,915 11,552 11,627 5,729 3,777 1,211 832 1,134 54,386
2017‑18                  
National Specific Purpose Payments 1,408 1,109 888 490 311 93 72 45 4,415
Public hospitals funding(c) 5,755 4,533 3,629 2,001 1,270 378 296 184 18,047
Students First funding(d) 5,541 4,466 3,808 1,897 1,277 404 294 310 17,999
National Partnership payments(b) 3,397 1,373 2,987 1,347 678 185 116 434 11,779
Total payments for specific purposes 16,101 11,482 11,311 5,734 3,536 1,060 779 973 52,239
2018-19                  
National Specific Purpose Payments 1,440 1,139 909 504 316 93 74 46 4,522
Public hospitals funding(c) 5,987 4,734 3,778 2,095 1,315 388 308 191 18,796
Students First funding(d) 5,693 4,668 3,915 2,090 1,345 406 311 298 18,727
National Partnership payments(b) 2,365 1,115 1,943 1,003 477 189 99 215 8,673
Total payments for specific purposes 15,485 11,656 10,545 5,693 3,453 1,077 792 749 50,718

(a) As state allocations for a number of programmes have yet to be determined, relevant 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.

(c) 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.

(d) State allocations from the 2018 school year onwards are indicative only, and final allocations are subject to formal negotiations between the Commonwealth, the States and the non‑government sector.

The majority of payments for specific purposes relate to National SPPs, NHR funding and Students First funding, and total $36.4 billion in 2015‑16, an estimated increase of $2.2 billion on the $34.2 billion the States received in 2014‑15.

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 3.27 shows total payments for specific purposes by sector.

Table 3.27: Payments for specific purposes by sector, 2015‑16 to 2018‑19
$million NSW VIC QLD WA SA TAS ACT NT Total(a)
2015‑16                  
Health 5,374 4,381 3,389 1,901 1,218 406 328 268 17,267
Education 4,970 4,066 3,411 1,645 1,166 376 273 354 16,283
Skills and workforce development 587 458 372 201 131 40 30 19 1,838
Community services 478 823 351 421 116 34 28 245 2,496
Affordable housing 470 353 444 303 122 31 23 141 1,889
Infrastructure 2,082 787 1,641 767 486 156 36 183 7,167
Environment 254 269 73 8 130 49 6 9 812
Contingent payments 3 2 34 .. .. .. .. 2 41
Other(b) 444 334 292 173 98 44 36 27 1,465
Total payments for specific purposes 14,662 11,474 10,008 5,419 3,468 1,138 761 1,249 49,257
2016‑17                  
Health 5,591 4,383 3,498 1,999 1,250 411 346 282 17,759
Education 5,394 4,344 3,737 1,759 1,239 406 289 367 17,561
Skills and workforce development 638 499 403 217 142 43 33 20 1,994
Community services 502 422 342 190 116 36 27 83 1,969
Affordable housing 475 359 427 261 118 31 24 220 1,915
Infrastructure 3,386 727 2,630 981 604 183 25 111 9,963
Environment 127 214 67 5 134 22 29 4 617
Contingent payments .. .. 7 .. .. - - 1 8
Other(a) 803 604 515 318 174 80 60 44 2,598
Total payments for specific purposes 16,915 11,552 11,627 5,729 3,777 1,211 832 1,134 54,386
2017‑18                  
Health 5,802 4,569 3,664 2,021 1,280 396 298 217 18,247
Education 5,651 4,551 3,888 1,938 1,304 413 300 361 18,431
Skills and workforce development 479 377 302 166 106 31 25 15 1,501
Community services 527 450 361 205 122 38 29 80 2,077
Affordable housing 451 343 386 236 108 29 22 202 1,777
Infrastructure 2,289 480 2,126 835 402 70 12 50 7,202
Environment 82 86 54 1 36 2 30 2 329
Contingent payments - - 3 .. - - - 1 3
Other(b) 821 625 527 331 178 82 62 45 2,673
Total payments for specific purposes 16,101 11,482 11,311 5,734 3,536 1,060 779 973 52,239
2018-19                  
Health 6,031 4,769 3,810 2,114 1,324 401 310 216 18,975
Education 5,693 4,668 3,915 2,090 1,345 406 311 338 18,766
Skills and workforce development 485 384 306 170 107 31 25 15 1,524
Community services 554 481 381 221 128 40 30 73 2,186
Affordable housing 441 349 278 154 97 29 23 18 1,388
Infrastructure 1,420 307 1,269 597 257 79 11 41 4,890
Environment 11 50 38 1 12 8 18 2 219
Contingent payments - - - - - - - - -
Other(b) 850 649 547 346 183 84 64 46 2,769
Total payments for specific purposes 15,485 11,656 10,545 5,693 3,453 1,077 792 749 50,718

(a) As state allocations for a number of programmes have yet to be determined, relevant 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 3.28.

Table 3.28: Payments for specific purposes by sector and category, 2015‑16 to 2018‑19
$million 2015‑16 2016‑17 2017‑18 2018-19
Health        
National Health Reform funding 16,525 17,394 - -
Public hospitals funding - - 18,047 18,796
National Partnerships 743 366 200 179
Education        
Students First funding 15,658 16,982 17,999 18,727
National Partnerships 624 578 432 40
Skills and workforce development        
National Skills and Workforce Development SPP 1,455 1,478 1,501 1,524
National Partnerships 382 516 - -
Community services        
National Disability SPP 1,442 1,492 1,550 1,613
National Partnerships 1,054 477 527 573
Affordable housing        
National Affordable Housing SPP 1,324 1,344 1,364 1,385
National Partnerships 565 571 413 4
Infrastructure        
National Partnerships 7,167 9,963 7,202 4,890
Environment        
National Partnerships 812 617 329 219
Contingent payments        
National Partnerships 41 8 3 -
Other        
National Partnerships(a) 1,465 2,598 2,673 2,769
Total payments for specific purposes 49,257 54,386 52,239 50,718

(a) Includes financial assistance grants for local government.

Detailed tables of payments for specific purposes are provided in Annex A (available online). 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 3.29 below (see Table A.8 in Annex A (available online) for accrual estimates).

Table 3.29: Estimated NDRRA cash payments, 2015‑16 to 2018‑19
$'000 NSW VIC QLD WA SA TAS ACT NT Total
2015‑16 111,895 79,421 1,091,809 3,660 3,643 109 - 22,054 1,312,591
2016‑17 1,095 50 226,404 2,205 50 - - 48,672 278,476
2017‑18 36 - 157,836 313 - - - 31,955 190,140
2018-19 - - - - - - - - -

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 2015‑16, the States will receive $58.1 billion in general revenue assistance from the Commonwealth, comprising $57.3 billion in GST entitlements and $844.3 million in other general revenue assistance. This is a 4.8 per cent increase in general revenue assistance on the $55.4 billion the States received in 2014‑15. Total general revenue assistance to the States is estimated to represent 13.4 per cent of total Commonwealth expenditure in 2015‑16.

GST entitlement estimates have been revised down since the 2015‑16 Budget by $2.4 billion over the four years to 2018‑19.

Table 3.30 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 (available online).

Table 3.30: GST and general revenue assistance, 2015‑16 to 2018‑19
$million 2015‑16 2016‑17 2017‑18 2018-19
GST entitlements 57,250.0 60,720.0 63,690.0 66,670.0
Other payments        
ACT municipal services 38.5 39.1 39.7 40.3
Reduced royalties 32.0 31.7 28.2 22.7
Royalties 698.8 622.7 557.7 448.4
Snowy Hydro Ltd tax compensation 75.0 75.0 75.0 75.0
Total other 844.3 768.5 700.5 586.4
Total GST and other payments 58,094.3 61,488.5 64,390.5 67,256.4

GST

GST entitlement variations since the 2015‑16 Budget

Table 3.31 provides a reconciliation of the GST entitlement estimates since the 2015‑16 Budget. The reconciliation accounts for policy decisions and parameter and other variations.

Table 3.31: Reconciliation of GST entitlement estimates since the 2015‑16 Budget
$million 2015‑16 2016‑17 2017‑18 2018-19
GST entitlement at 2015‑16 Budget 57,050 60,950 64,500 68,200
Changes between 2015‑16 Budget and MYEFO        
Effect of policy decisions 2 11 14 14
Effect of parameter and other variations 198 -241 -824 -1,544
Total variations 200 -230 -810 -1,530
GST entitlement at 2015‑16 MYEFO 57,250 60,720 63,690 66,670

Specific policy decisions taken since the 2015‑16 Budget that affect the GST entitlement are shown in Table 3.32. These decisions increase the amount of the GST entitlement by $41 million over four years.

Detailed information on policy decisions since the 2015‑16 Budget is included in Appendix A.

Table 3.32: Policy decisions since the 2015‑16 Budget that affect the GST entitlement
$million 2015‑16 2016‑17 2017‑18 2018-19
Indirect Tax Concession Scheme — diplomatic and consular concessions .. .. .. ..
Syrian and Iraqi Humanitarian Crisis 2.0 10.6 13.6 14.5
Total 2.0 10.6 13.6 14.5
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 revenue which is 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 receipts 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 financial 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 3.33.

Table 3.33: Reconciling GST revenue and GST entitlements to the States
  Outcome   Estimates 
$million 2014‑15   2015‑16 2016‑17 2017‑18 2018‑19
GST revenue 56,462   59,790 63,700 67,010 70,480
less Change in GST receivables 1,921   2,176 2,709 3,040 3,519
GST receipts 54,542   57,614 60,991 63,970 66,961
less Non-GIC penalties collected 237   250 270 280 290
less Net GST collected by Commonwealth agencies but not yet remitted to the ATO -37   114 1 .. 1
GST entitlements to the States 54,342   57,250 60,720 63,690 66,670

Table 3.34 below provides information on the balancing adjustment relating to 2014‑15 which has been paid in 2015‑16.

Table 3.34: Balancing adjustment relating to 2014‑15
$million Total
GST entitlements to the States in 2014‑15 54,342.0
less Advances of GST made throughout 2014‑15 54,000.0
equals Following year balancing adjustment 342.0
Distribution of GST entitlement pool among the States

As agreed by all parties to 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 2015‑16 are shown in Table 3.35.

Table 3.35: Distribution of the GST entitlement pool, 2015‑16(a)
    Estimated
31 December 2015 population
GST relativities Adjusted population Share of adjusted population 2015‑16 GST entitlement
(1) x (2) % $million
(1) (2) (3) (4) (5)
NSW 7,667,528 0.94737 7,263,986 30.4 17,401.4
VIC 5,989,877 0.89254 5,346,205 22.4 12,807.2
QLD 4,821,821 1.12753 5,436,748 22.7 13,024.1
WA 2,629,341 0.29999 788,776 3.3 1,889.6
SA 1,706,930 1.35883 2,319,428 9.7 5,556.4
TAS 516,085 1.81906 938,790 3.9 2,248.9
ACT 393,232 1.10012 432,602 1.8 1,036.3
NT 246,247 5.57053 1,371,726 5.7 3,286.1
Total 23,971,061 na 23,898,261 100.0 57,250.0

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

The calculations for the distribution of the 2014‑15 balancing adjustment are shown in Table 3.36. This adjustment has been paid to each state in 2015‑16 following the upwards revision to the States' 2014‑15 GST entitlements of $342 million.

Table 3.36: Distribution of the GST balancing adjustment, 2014‑15(a)
31 December 2014 population GST relativities Adjusted population Share of adjusted population 2014‑15 GST entitlement 2014‑15 GST advances Balancing adjustment
$million
(1) x (2) % $million $million (5) - (6)
(1) (2) (3) (4) (5) (6) (7)
NSW 7,565,497 0.97500 7,376,360 31.3 17,019.8 16,897.2 122.6
VIC 5,886,436 0.88282 5,196,663 22.1 11,990.5 11,902.2 88.2
QLD 4,750,513 1.07876 5,124,663 21.8 11,824.3 11,746.4 78.0
WA 2,581,250 0.37627 971,247 4.1 2,241.0 2,242.9 -1.9
SA 1,691,503 1.28803 2,178,707 9.3 5,027.0 4,986.3 40.7
TAS 515,235 1.63485 842,332 3.6 1,943.5 1,928.0 15.5
ACT 387,640 1.23600 479,123 2.0 1,105.5 1,098.3 7.2
NT 244,265 5.66061 1,382,689 5.9 3,190.3 3,198.7 -8.4
Total 23,622,339 na 23,551,784 100.0 54,342.0 54,000.0 342.0

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

Table 3.37 shows the distribution of the GST entitlement over the current financial year and forward estimates.

Table 3.37: Distribution of the GST entitlement over financial year and forward estimates
$million NSW VIC QLD WA SA TAS ACT NT Total
2015‑16 17,401.4 12,807.2 13,024.1 1,889.6 5,556.4 2,248.9 1,036.3 3,286.1 57,250.0
2016‑17 18,025.0 13,341.3 14,847.1 1,615.4 6,152.6 2,331.3 1,083.7 3,323.7 60,720.0
2017‑18 18,890.1 14,016.2 16,193.9 1,308.8 6,511.4 2,420.6 1,165.6 3,183.3 63,690.0
2018-19 19,885.0 14,829.8 16,840.6 1,536.0 6,681.9 2,458.7 1,213.3 3,224.8 66,670.0
GST administration costs

States compensate the Commonwealth for the costs incurred by the ATO in administering the GST, including costs incurred by the Department of Immigration and Border Protection, as shown in Table 3.38.

Table 3.38: GST administration budget, 2014‑15 to 2018‑19
  Actual   Estimates
$million 2014‑15   2015‑16 2016‑17 2017‑18 2018‑19
Australian Taxation Office budget 688.5   679.6 617.1 597.8 587.6
less Prior year adjustment 8.2   7.4      
equals State government payments 680.3   672.2 617.1 597.8 587.6
less Australian Taxation Office outcome(a) 681.1          
equals Commonwealth budget impact -0.8          
plus Prior year adjustment 8.2          
equals Following year adjustment 7.4          

(a) Estimated outcome for 2014‑15 pending confirmation by the Australian National Audit Office.

The preliminary outcome for 2014‑15 GST administration expenses of $681.1 million differs from the amount paid by the States and the prior year adjustment by $7.4 million. Once the audit of the outcome for GST administration expenses in 2014‑15 is completed, the final adjustment will be incorporated into the States' administration costs for 2015‑16.