Legislative Framework

Financial relations between the Commonwealth and the states and territories (states) are governed by the Federal Financial Relations Act 2009 (FFR Act) and the COAG Reform Fund Act 2008.

The FFR Act provides a standing appropriation for the Commonwealth to provide financial support for the delivery of services by the states:

  • the provision of GST, to be used by the states for any purpose
  • national specific purpose payments, to be spent by the states on certain service delivery sectors
  • national health reform payments, to be spent by the states in accordance with the National Health Reform Agreement
  • payments relating to housing, homelessness and housing affordability matters, to be spent by the states in accordance with specified agreements.

The Commonwealth collects GST with GST revenue less administration costs paid to the states. The Commonwealth Grants Commission operates under the Commonwealth Grants Commission Act 1973 and its main function is to make recommendations on the distribution of GST revenue among them in accordance with the principle of horizontal fiscal equalisation.

For more information on GST distribution visit the Commonwealth Grants Commission website.

Other categories of payments that can be made under the FFR Act but are subject to the COAG Reform Fund debit limit include:

  • national partnership payments, to support the delivery by the states of specified outputs or projects.
  • other general revenue assistance (i.e. excludes GST)

The FFR Act provides for the Commonwealth Treasurer to determine national partnership payments and other general revenue assistance to the states, which is paid 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 with the amount subject to the limits prescribed in the appropriation acts for the relevant financial year.  

The Charter of Budget Honesty Act 1998 requires the Treasurer to publicly release and table regular fiscal reports including: a Budget Economic and Fiscal Outlook (Budget), a Mid-Year Economic and Fiscal Outlook (MYEFO), and Final Budget Outcomes (FBO). 

Updated estimates and outcomes of payments from the Commonwealth to the states are published as follows: 

  • Budget information is published in Budget Paper No. 3: Federal Financial Relations
  • MYEFO information is published in Appendix C: Australia's Federal Relations
  • FBO information is published in Part 3: Australia's Federal Financial Relations. 

Current and past versions of these reports can be found at the Budget website.