financial powers of commonwealth

Question 1

financial powers

Answer 1

These powers are often referred to as financial powers because they are relevant to taxing and spending. Recall, Financial powers are a subset of legislative powers because revenue and spending require special legislation called appropriations or money bills.

Question 2

taxation power, section 51 (ii)

Answer 2

The Commonwealth uses this head of power to raise taxes. It is an extensive concurrent power. The states may also raise taxes under this power except for customs, bounties and excises, which Section 90 makes exclusive to the Commonwealth.


Question 3

section 96,

Answer 3

The Constitution contains several mechanisms to allow for the transfer of Commonwealth surplus revenues to the states. Section 96 — called the ‘grants power’ — is one of these transfer mechanisms .The CW makes S96 grants to the states. They are funded from the surplus revenues of the Commonwealth and administered by the Commonwealth Grants Commission, which monitors the grants
programs and ensures states spend the grants as intended. Section 96 states, “the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit”. These are critical words for the
federal balance of power. Section 96 grants are made through the CW enacting a statute granting a state or several states money.
The statute may grant money in one of two ways:
* the grant may be ‘untied’; that is, the state government may spend the money at its discretion. These are general purpose payments (GPPs); or
* Section 96 permits the CW Parl to attach conditions “as it thinks fit”. This power allows conditional grants,
dictating how the states spend the money. Grants made with conditions are specific purpose payments (SPPs).

Question 4

tied/special grants:

Answer 4

tied grants to states, which must then
comply with the Commonwealth’s
conditions. The Commonwealth monitors state spending to ensure compliance with the grant conditions. Tied grants are an example of coercive federalism;
2. incentive payments made to states after they have met the specific conditions of the grant. The grants provide incentives for states to perform specific actions

Question 5

section 87

Answer 5

. Requires the CW to give ¾ of its income raised from excise and customs duties to the states for the first 10 years after Federation, was an attempt to guarantee the financial recourses to the states
. Another mechanism intended to transfer funds from CW to states
*spent clause now

Question 6

section 87

Answer 6

. Requires the CW to give ¾ of its income raised from excise and customs duties to the states for the first 10 years after Federation, was an attempt to guarantee the financial recourses to the states
. Another mechanism intended to transfer funds from CW to states
*spent clause now

Question 7

Section 92: Free Trade

Answer 7

. ‘On the imposition of uniform duties of customs, trade, commerce and intercourse among the states… shall be absolutely free’
. Trade between states must be absolutely free from any impositions. No customs, excises or bounties on trade between the states
. Cole vs Whitfeild 1998- consolidates this. Redefined the meaning of absolutely free and overruled the decision of the state banking case (Bank nationalisation)
. Betfair (2008) WA argued that Betfair should not be allowed to accept bets on a Tasmania Sports events from WA residents. HCA found in favour of Betfair as s92 says that trade should be ‘absolutely free’ between states.

Question 8

VFI

Answer 8

. The term used to describe the disproportionate taxing powers in which the expenditure of a level of government does not correspond to its source of revenue
. VFI creates need for transfers of money from CW to states
. CW collects approximately 80% of total revenues, leaving 20% to be collected by the states
. CW has substantial surplus revenues, and all states are more or less in permanent deficit
. The VFI and Section 96 enable the Commonwealth to dictate how the states
carry out their roles and responsibilities, shift to coercive

Question 9

HFE

Answer 9

. The requirement that the CW parliament use its financial powers to equalize the standard of public service delivery in each state. It requires that some of the poorer states receive a high percentage per capita grant from the CW than other wealthier states
. Attempt to rectify issues with VFI

Question 10

Difference between VFI and HFE

Answer 10

1. VFI is an inequity created by an imbalance in financial powers (e.g. s90) whereas HFE is an attempt to address this
2. VFI takes all government revenue into account, whereas HFE is limited to the redistribution of GST
3. VFI has persisted since federation, whereas current HFE arrangements have only been in place since 1999

Question 11

cw grants commission

Answer 11

. An institution of federalism. It is a statutory authority that administers the distribution of surplus revenues to the states under s96 e.g. allocates GST to the states.
. It is a body independent of the government
. Role is to make decisions about how to measure the fiscal capacities of the states. Works with state and territory governments to develop recommendations for the distribution of GST revenue that reflects their fiscal capabilities
. 3 types of Specific Purpose Payments

Question 12

types of grants

Answer 12

1. Tied grants to states: must comply with CW conditions. CW monitors state spending to ensure compliance with grants conditions- coercive
2. Incentive payments: made to states after they have met the specific conditions of the grant- grants provide incentives for states to preform specific actions (e.g. economic reforms- specified by CW)- coercive e.g.
3. National Partnership Payment: made to states to achieve agreed Nation Projects negotiated by CW and state governments under the National Reform Agenda e.g. ‘closing the gap’ which aims to reduce the gap in life outcomes between Indigenous and non-Indigenous Australians