FOR PRESS APRIL 9, 1976
PREMIER'S CONFERENCE
The Commonwealth and State Governments today made piogress
and agreement on a wide range of Federal issues, including
the principles of a new tax sharing arrangement with the States.
T~ ne meeting was a highly successful working conference on
a number of difficult and fundamental issues, at which progress
was possible because of the cooperative and understanding
attitude adopted by all who took part.
The Conference made a firm decision that local government
would participate in the new tax sharing arrangements as
from 1976/ 77. We agreed to establish State Grants Commissions
in those States which do not already have such a Commission.
There will be a further meeting with the Premiers in June.
At this Conference it is hoped to be able to give an indication
of the assistance which local government might expect to
receive under the new arrangements in 1976/ 77.
As a result of todays meeting there is a strong feeling of
confidence that the June Premier's Conference will lead to
agreement on implementing the new tax sharing system in
1976/ 77.
Details of issues on which agreement was reached are contained
in an attached document.
Working parties of Commonwealth and State bfficials will beset
up, and will report to the June Premier's, Conference.
Todays ieeting also resulted in agreement establish an
Advisory Council on Intergovernmental Relations. The proposed
charter for this Council is also attached to this statement.
The Commonwealth Government will introduce the apprcpriate
legislation to establish the Council during the current
parliamentary session.
ATTACI HMEN T
PERSONAL INCOME TAX SHARING ISSUES SETTLED BETWE'EN
THE COMMONWEALTH AND STATE GOVERNMENT FOLLOWING MEETING
ON FRIDAY 9 APRIL 1976
Following is a very brief summary of issues which have
been settled:-The scheme will be related to personal income tax
not company tax and not including withholding taxes on
interest and dividends.
The scheme will be introduced in two Stages.
Stage 1 Stage 1 will be introduced as from the beginning of
1976-77.
' The States' entitelements under Stage 1 will
represent a specificed. percentage of Commonwealth
imposed personal income tax and State legislation
will thus not be required in regard to State 1.
The " base: to which the percentage will be applied each
year will be personal income tax collection in the year.
The percentage figure will be cater-mined by reference
to the relationship between the financial assistance
grants in 1975-76 and personal income tax collections
in that year.
Personal income tax collections in the Territories
will be included in the base figure but with this
subject to review in the light of developments
in public finances in the Territories.
2
The yield or costs of special surcharges or rebates
applied, in appropriate circumstances, by the
Commonwealth will not be included in the base figure
from which the States' entitlements will be calculated.
There will be a " guarantee" arrangement to ensure
that the States' Stage 1 entitlements in any year are
not less, in absolute terms, than in the previous year.
This arrangement will be supplemented in the first three
years of the new scheme 1976-77, 1977-78 and
1978-79) by a further undertaking that the entitlements
will not be less in a year than the amount which would
have been yielded in that year by the financial
assistance grants formula as laid down in the States
Grants Act 1973-75.
A total entitlement for all States will first be
determined, to be then divided between the States
The initial per capita relativities between the States in
their Stage 1 entitlements will be the relativities in
the financial assistance grants in 1975-76.
( 11) Subject to ( 13) below, and to any absorption of specific
purpose payments, these relativities will be carried
forward into subsequent years in such a way as to
maintain the proportionate relationships between the
per capita entitlemients of the States.
( 12) hne four less populous States will continue to be free
to apply for grants on the recormnendation of the Grants
Commission in addition to their basic entitlements ayielded
under the arrangements suimLarised above.
( 13) There will be a periodic review of relativities between
all States.
Stage 2
( 14) Under Stage 2 each State will be able to legislate to
impose a surcharge on personal income tax in the State,
( but not company
taxation or withholding tax on dividends and interest)
additional to that imposed by the Co. monwealth, or to
give ( at cost to the State) a rebate on personal income
tax payable under Corrnonwealth law and to authorise the
Commonwealth to collect the surcharge or grant
ebate as its agent.
Any State surcharges or rebates will be expressed in
percentage terms.
( 16) Assessment provisions, and the basic income tax rate
structure, will continue to be uniform throughout
Australia, these being r?. a tters for thR
to determine.
4
( 17) The Cori-on. wealth will at all. tim: es remain the sole
collecting and administrative ageiicy in the income tax
field.
( 18) The level of any State surcharges or rebates ill be a
matter for consideration by each State; relevant
decisions will be taken within an appropriate framework
of consultation with the Commonwealth and other States,
but ultimately the level of surcharge or rebate will be
a decision for each individual State. In exercising
. these nowers the States will accept responsibility to
work in parallel with and not in negation of the overall
economic management policies of the Cormonwealth.
( 19) Equalisation arrangements will be made so that less
populous States will be enabled to obtain the same
relative advantage from a surcharge as the States with
a broader tax base.
The Grants Commnission will be responsible for assessing
amounts payable under the arrangements referred to under
( 19).
( 21) An officers' working party will be established to
foraulate detailed proposals to implement Stage 2. The
firm target is to have an appropriate framework
established, relevant matters agreed and necessary
legislation prepared in time for Stage 2 to commence from
the beginning of 1977-78.
( 22) At an appropriate time thfe Co-innlonealth will consider
what ilicat ions Stage 2 might have in relation to Llh'
Territories.
Local Government Assistanice
( 23) Ther-e will be a new scheme of local goverrnment.
assistance, beginning in 1976-77, un-der which such
assistance, to be distributedi th-rough the Statas, will be
related to the yield of Coifwmonwealth personal incoim-. Lax.
( 24) T'he arou-nt of such assistance in 1976-77 will be
determined by the Comnonwealth Government having
to its overall budget considerations.
Imlications -for TLax; 7 Fo-rms and Assessment Notices
In relation to tax forms, chang:, es will be minimal apart,
from necessary changes to take account of surciiarges or
rebates.
( 26) Assess-: 2ent notices will be changed only to accom. nodate
State surcharges or rebates ( any Co-n-oonaealth surcharge
or rebate would, of course, also be shoTin), wit
in-formiation on disposition of Counon-ealth tax to States
andC] local g-over-nt ent provided to . Le-x--, a-ers seoarately b-u-t
in conjunc-tion with assessment notices.
Review of Total Tax Sliari-P. Arran~ ernents
( 27) There will be a review of the tax sharing, arrang ements
as a whole periodically. The f irs t -reviw " ill7 be malde at
ADVISORY COUNCIL FOR INTER-GOVERNMENTAL RELATIONS
CH A1RTER
DECL.. AATION OF PURPOSE
Section 1. Successful operation of our system of federal
govelnment demands the fullest co-operation and co-ordination
of activities betweeni all spheres of gove'n! iient. . n increasigly
complex society in future years suggestLsthat an Advisory
Council for Inter-government Relations be est. ablisbed to give
contiiuing attention to inter-goverrnnental problems.
It is intended that the Advisory Council, in the
preformance of its duties, will bring together representatives
of the Federal, State and local gcvernments nd private citizens
for the consideration of commnon problems.
Premiers' Conference will refer to the Council
subjects for . dvice. Local government authorities, through thei
State organisations, will be able to submit mttters to their
respective Premiers, for consideration by the Premiers'
Conference for reference to the Council. It would also be
open to the Council itself to request that matters be referred
to it for advice.
DUTIES OF THE COUNCIL
Section 2. It shall be the duty of the Advisory Councilto
engage in such activities and to make such
studies and investigations as are necessary or
desirable in the accomplishment of the purposes
set forth in section 1 of this charter;
to consider ways and means of fostering better
relations between the spheres of government;
To submit reports on matters referred to the
Council to the Prime Minister and the Premiers
for tabling in Parliament; and to submit an annual
report on or before 31 August each year to the
Prime Minister and the Premiers for tabling. in
Parliament.
LEG BASIS
Phe Council is to be established by a memorandum
of agreement between the Prime Minister and the Premiers at
the Premiers' Conference. The Commonwealth alone will
introduce any necessary legislation. 2/.
COM. P ) SITION OF THE COUNCIL
The Council is to comprise three Government and two
Oppc3ition members of the Commonwealth Parliament; one
representative from each State; three representatives from/
local government to be elected by the Local Government Association
of Aistealia and preferably to be selected from separate
States; and five citizens to be selected by the Commonwealthi
in consultation with the States having regard to the various
areas and sections of the community and with a view to ensuring
that States without local government representation having
citizens selected.
ROTA" TION OF MEMBERS
Nomination of Commonwealth and State representatives
by the Government of the time will ensure rotation of those
members in the normal course of electoral change. The local
government representatives and the citizens to be appointed for
a three-year term with a limit of two consecutive terms.
Re-election after a break in office would be permissable.
STATUS OF MEMBERS It would be open to Governments to decide whether
to appoint Ministers or backbenchers to the Council.
CHAIRMAN The Chairman is to be a citizen nominated by the
Comiionwealth in consultation with the States.
BUD( ET Funds for the Council to be limited to S$ 300,000 in the fii. st
yeai with the proviso that the Commonwealth and the States
would meet the cost of fares and accommodation for their
repi , sentatives.
COS' SHARING Costs will be shared:
Commonwealth 45% or $ 135,000
Local Government 10% or $ 30,000
States 45% or $ 135,000
be asked
share.
NT. S. W.
Vi c
Old S. A.
W. A.
Tas The Local Government Associatfion of Iutrndi i. will
to assess the method of al local ina tht I ocal govcrinen.
The State share will be al oc(: a ted is f. o'ows:
S35,500 S30, OO
; 21 .500
S17,500 S1 7,000
S13,500
CANBERRA 9 ADril 1976
ISSUES STILL BE TO RESOLVED
A number of issues still remain to 1) e resolved,
but they are technical matters and not issues of.
principle. We do not foresee difficulties in deciding
these issues. They will be considered by w-orking parties
of Commonealth and State officials who will report to
Heads of Government. One of -the tasks remaining, is to establish
procedures and guidelines for reviewing periodically the
relative shares of personal income tax revenue to go to
each State. The Commonwealth feels strongly -that the
appropriate body for this task is the Grants Commission.
' More workH is -to be done to determine the legal
framework which will be required for the imposition of
surcharges or the granting of rebates under stage 2 ofthe
tax sharing arrangements wh-ich will come into effect
in 19' 77/ 73. To minimise any difficulties for employers
and employees which may result from changes PAYE
processes, there will need to be close consultation as
to the timing of the introduction of any changes.
The single most important issue outstanding
is the question of which specific purpose payments to the
States are to absorbed into the gIIeneral revenue
arrangements. A good deal of consideration will need
to be given to this matter and a working group of officers
will be examining the whole range with a view -to decisi~ ns
being made durir9 the course of-the next financial year.