About federal financial relations

Intergovernmental Agreement on Federal Financial Relations

The Intergovernmental Agreement on Federal Financial Relations, which took effect on 1 January 2009, was agreed by COAG in November 2008. It establishes the overarching framework for Australia’s federal financial relations and a basis for the Commonwealth and the States to collaborate on policy development and service delivery.

Legislative framework

Financial relations between the Commonwealth and the States are governed by the provisions of the Intergovernmental Agreement, the Federal Financial Relations Act 2009 and the COAG Reform Fund Act 2008.

The Federal Financial Relations Act 2009 provides a standing appropriation for the Commonwealth to provide financial support for the delivery of services by the States through National Specific Purpose Payments and National Health Reform funding, and for the Treasurer to determine GST payments to the States. It also provides for the Treasurer to determine National Partnership payments and general revenue assistance to the States from the COAG Reform Fund.

The COAG Reform Fund Act 2008 establishes the COAG Reform Fund for the purpose of making grants of financial assistance to the States. It specifies that the terms and conditions on which financial assistance is granted are to be set out in written agreements between the Commonwealth and the States.

Council on Federal Financial Relations

The Intergovernmental Agreement is an agreement of COAG, which is the key decision-making body with regard to its implementation. COAG has delegated responsibility for the general oversight of the operation of the Intergovernmental Agreement to the Council on Federal Financial Relations. The Council’s broad functions include oversight of the operation of the GST, maintaining and progressing national economic reform, and other institutional functions as set out in the Intergovernmental Agreement. The Council consists of the Treasurers of the Commonwealth and the States.