THE COMMONWEALTH OF AUSTRALIA
THE STATE OF NEW SOUTH WALESTHE STATE OF VICTORIA
THE STATE OF QUEENSLAND
THE STATE OF WESTERN AUSTRALIA
THE STATE OF SOUTH AUSTRALIA
THE STATE OF TASMANIA
THE AUSTRALIAN CAPITAL TERRITORY, AND
THE NORTHERN TERRITORY OF AUSTRALIA
WHEREAS
(1) the Special Premiers' Conference on 13 November 1998 developed
principles for the reform of Commonwealth-State financial relations;
(2) the Commonwealth, States and Territories are in agreement
that the current financial relationship between levels of government
must be reformed to facilitate a stronger and more productive federal
system for the new millennium;
(3) while a majority of the States and Territories support the introduction
of the Goods and Services Tax (GST), the agreement of New South Wales,
Queensland and Tasmania to the reform of Commonwealth-State financial
relations does not imply their in-principle endorsement of the GST;
(4) an Agreement was reached between the Commonwealth and the States
and Territories on the reform of Commonwealth-State financial relations
on 9 April 1999;
(5) this revised Agreement was made necessary by the changes to the
Commonwealth Government's A New Tax System (ANTS) package
announced by the Prime Minister on 28 May 1999; and
(6) this revised Agreement supersedes the previous Agreement of 9
April 1999:
IT IS HEREBY AGREED:
PART 1 PRELIMINARY
Commencement Clause
* This Agreement will commence between the Commonwealth, the States
and the Territories on 1 July 1999 unless otherwise
agreed by the Parties.
Objectives
* The objectives of the reforms set down in this agreement include:
(i) the achievement of a new national tax system, including
the elimination of a number of existing inefficient taxes which
are impeding economic activity;
(ii) the provision to State and Territory Governments of revenue
from a more robust tax base that can be expected to grow over
time; and
(iii) an improvement in the financial position of all State
and Territory Governments, once the transitional changes have
been completed, relative to that which would have existed had
the current arrangements continued.
* All Parties to the Agreement acknowledge the need to pursue
on-going reform of Commonwealth-State financial relations.
Acknowledgement of Agreement
* The Commonwealth will attach the Agreement as a schedule to
the A New Tax System (Commonwealth-State Financial Arrangements)
Act 1999. The Commonwealth will use its best endeavours to
ensure the Act will require compliance with the Agreement. The
States and Territories will attach the Agreement as a schedule
to relevant State and Territory legislation. The States and Territories
will use their best endeavours to ensure their legislation will
require compliance with the Agreement.
PART 2 Commonwealth-State Financial reform
Reform Measures
* The Parties will undertake all necessary steps to have appropriate
legislation enacted to give effect to the following reform measures.
* The Commonwealth will legislate to provide all of the revenue
from the GST to the States and Territories and will legislate to
maintain the rate and base of the GST in accordance with this Agreement.
* The Commonwealth will cease to apply the Wholesale Sales Tax from
1 July 2000 and will not reintroduce it or a similar tax in the
future.
* The temporary arrangements for the taxation of petrol, liquor
and tobacco under the safety net arrangements announced by the Commonwealth
on 6 August 1997 will cease on 1 July 2000.
* The payment of Financial Assistance Grants will cease on 1 July
2000.
* The Commonwealth will continue to provide Specific Purpose Payments
(SPPs) to the States and Territories and has no intention of cutting
aggregate SPPs as part of the reform process set out in this Agreement,
consistent with the objective of the State and Territory Governments
being financially better off under the new arrangements.
* The States and Territories will cease to apply the taxes referred
to in Appendix A from the dates
outlined below and will not reintroduce them or similar taxes in
the future
* Bed taxes, from 1 July 2000;
* Financial Institutions Duty, from 1 July 2001;
* Stamp duties on quoted marketable securities from 1 July 2001;
* Debits tax by 1 July 2005, subject to review by the Ministerial
Council;
* The Ministerial Council will by 2005 review the need for retention
of stamp duty on non-residential conveyances; leases; mortgages,
debentures, bonds and other loan securities; credit arrangements,
installment purchase arrangements and rental arrangements; and on
cheques, bills of exchange, promissory notes; and unquoted marketable
securities.
* The States and Territories will adjust their gambling tax arrangements
to take account of the impact of the GST on gambling operators.
* Following negotiations under the CSHA, the States and Territories
will ensure that increases in pensions and allowances specified
in the tax reform package will not flow through to increased public
housing rents where these rents are linked to the level of pensions.
* Nothing in this clause will prevent any Party from introducing
anti-avoidance measures that are reasonably necessary to protect
its remaining tax base or liabilities accrued prior to the date
the tax ceases to apply.
GST Legislation
* All Parties agree to reconsider this Agreement should the Commonwealth
Parliament pass the GST legislation in a way that significantly
affects this Agreement.
Distribution of GST Revenue
* The Commonwealth will make GST revenue grants to the States
and Territories equivalent to the revenue from the GST subject
to the arrangements in this Agreement. GST revenue grants will
be freely available for use by the States and Territories for
any purpose.
* The Commonwealth will distribute GST revenue grants among the
States and Territories in accordance with horizontal fiscal equalisation
(HFE) principles subject to the transitional arrangements set
out below and other relevant provisions of this Agreement.
* Details of the payment arrangements are contained in Appendix
B to this Agreement.
Transitional Arrangements
* In each of the transitional years following the
introduction of the GST, the Commonwealth guarantees that the
budgetary position of each individual State and Territory will
be no worse off than it would have been had the reforms set out
in this Agreement not been implemented.
* The Commonwealth will extend the transitional period by Regulation
(as provided for in the A New Tax System (Commonwealth-State
Financial Arrangements) Act 1999) to give effect to the commitments
in clause 10 in the event that transitional assistance is required
by any State or Territory after 30 June 2003.
* To meet this guarantee, the Commonwealth will make transitional
assistance payments to each State and Territory, as necessary,
over this period. These payments will take the form of interest
free loans and grants in July 2000-01 and grants paid quarterly
in subsequent years and will be freely available for use by the
States and Territories for any purpose. Any payments or repayments
made by way of loans or grants under the Commonwealth's guarantee
will be excluded from assessments of per capita relativities recommended
by the Commonwealth Grants Commission (CGC).
* The amounts of any additional assistance under the guarantee
will be determined in accordance with the processes set out in
Appendix C to this Agreement.
* After the second year following the introduction of the GST,
GST revenue grants will be determined on the basis of HFE principles.
That is, after the first two years, any State or Territory which
is receiving more than would have been received under the current
arrangements will retain that excess.
First Home Owners Scheme
* To offset the impact of the introduction of a GST, the States
and Territories will assist first homebuyers through the funding
and administration of a new uniform First Home Owners Scheme.
* This assistance will be provided to first home owners consistent
with Appendix D to this Agreement.
Application of the GST to Government
* The Parties intend that the Commonwealth, States, Territories
and local government and their statutory corporations and authorities
will operate as if they were subject to the GST legislation. They
will be entitled to register, will pay GST or make voluntary or
notional payments where necessary and will be entitled to claim
input tax credits in the same way as non-Government organisations.
All such payments will be included in GST revenue.
* The Commonwealth will legislate to require the States and the
Northern Territory to withhold from any local government authority
being in breach of Clause 17 a sum representing the amount of
unpaid voluntary or notional GST payments. Amounts withheld will
form part of the GST revenue pool. Detailed arrangements will
be agreed by the Ministerial Council on advice from Heads of Treasuries.
Government Taxes and Charges
* The Commonwealth, States and Territories agree that the GST
does not apply to the payment of some taxes and compulsory charges.
* The Parties will agree a list of taxes and compulsory charges
that are outside the scope of the GST. This list will be promulgated
by a determination by the Commonwealth Treasurer as set out in
Division 81-5 of the A New Tax System (Goods and Services Tax)
Act 1999 (the GST Act).
* In agreeing the list, the Commonwealth, States and Territories
will have regard to the following principles:
(i) taxes that are in the nature of a compulsory impost for general
purposes and compulsory charges by the way of fines or penalties
should not be subject to GST as these will not relate to any specific
supply of goods or services;
(ii) similarly, those regulatory charges that do not relate to
particular goods or services should be outside the scope of the
GST; and
(iii) the inclusion of any other charge in the Commonwealth Treasurer's
determination notwithstanding that it may relate to the supply
of a particular good or service will require the unanimous agreement
of the Commonwealth, States and Territories.
* The agreed list of taxes and other compulsory charges that are
outside the scope of the GST will be subject to on-going review
and adjustment as necessary in consultation with the Ministerial
Council. The Parties will notify any objections to changes to
the list within a period to be specified by the Ministerial Council.
Reciprocal Taxation
* Reciprocal taxation will be progressed on a revenue neutral
basis, through the negotiation of a Reciprocal Taxation Agreement
with the objectives of:
* improving the transparency of tax arrangements between all
levels of government;
* ensuring tax neutrality; and
* replacing the Statement of Policy Intent (SOPI) for the taxation
treatment of Government Business Enterprises with tax arrangements
which are broader in scope.
* It is the intention of the Parties to this Agreement that a
National Tax Equivalent Regime (NTER) for income tax will be operational
for State and Territory government business enterprises from 1 July
2000. It is also intended that the reciprocal application of other
Commonwealth, State and Territory taxes will be subsequently implemented
as soon as practicable.
* Local government organisations will be consulted with a view
to making the NTER for income tax operational for wholly owned
local government business enterprises from 1 July 2000 and
including local government in the Reciprocal Tax Agreement at
a later date.
* Where the application of full indirect reciprocal tax arrangements
is prevented by the Constitution, jurisdictions have agreed to
work cooperatively to introduce voluntary payment arrangements
in these circumstances.
* All governments have agreed that no further compensation payments
will be payable by any jurisdiction under the SOPI.
Monitoring of Prices
* In accordance with the Trade Practices Act 1974, as amended,
the Australian Competition and Consumer Commission will formally
monitor prices and take action against businesses that take pricing
decisions in a manner inconsistent with tax reform.
* In order to ensure that these measures apply to the whole economy,
the States and Territories will adopt the Schedule version of
Part VB of the Trade Practices Act 1974 (part XIAA of the
New Tax System Price Exploitation Code) to extend the measures
in Part VB to cover those areas outside the Commonwealth's
constitutional power. All Parties will work towards having any
necessary legislation in place by 1 July 1999.
* The monitoring and prohibition on unreasonable pricing decisions
will commence on 1 July 1999 and continue until 30 June 2002.
PART 3 - ADMINISTRATION OF THE GST
Management of the GST Rate
* After the introduction of the GST, a proposal to vary the 10
per cent rate of the GST will require:
(i) the unanimous support of the State and Territory Governments;
(ii) the endorsement by the Commonwealth Government of the day;
and
(iii) the passage of relevant legislation by both Houses of the
Commonwealth Parliament.
Management of the GST Base
* Subject to clauses 34, 35 and 36 of this Agreement, after the
introduction of the GST, any proposal to vary the GST base will
require:
(i) the unanimous support of the State and Territory Governments;
(ii) the endorsement by the Commonwealth Government of the day;
and
(iii) the passage of relevant legislation by both Houses of the
Commonwealth Parliament.
* All future changes to the GST base should be consistent with:
(i) the maintenance of the integrity of the tax base;
(ii) simplicity of administration; and
(iii) minimising compliance costs for taxpayers.
* A proposal to vary the GST base by way of a Ministerial determination
under the GST Act and the GST Transition Act will require the
unanimous agreement of the Ministerial Council established under
clause 40. The Ministerial Council will develop practical arrangements
to ensure timely consideration of proposed Ministerial determinations.
* During the first 12 months following the implementation of the
GST, the Commonwealth Government will retain the discretion to
make changes unilaterally to the GST base where such changes:
(i) are of an administrative nature (as defined in Appendix
E to this Agreement);
(ii) are necessary to facilitate the implementation of the new
tax; and
(iii) have regard to the need to protect the revenue of the States
and Territories.
* From July 2001, changes to the GST base of an administrative
nature (as defined in Appendix E)
would require the majority support of the Commonwealth, the States
and the Territories.
Australian Taxation Office
* The States and Territories will compensate the Commonwealth
for the agreed costs incurred by the Australian Taxation
Office (ATO) in administering the GST.
* Accountability and performance arrangements will be established
between the ATO and the State and Territory Governments consistent
with Appendix F to this
Agreement. These arrangements will include maximising compliance,
cost efficiency, simplicity for taxpayers and administrative transparency.
* The ATO and State and Territory Governments will collaborate
to explore options for the States and Territories to benefit from
the use of the Australian Business Number system.
Part 4 institutional arrangements
Establishment of Ministerial Council
* A Ministerial Council comprising the Commonwealth, the States
and the Territories will be established from 1 July 1999 to oversee
the operation of this Agreement.
* The membership of the Ministerial Council will comprise the
Treasurer of the Commonwealth and the Treasurers of the States
and Territories (or designated representatives).
* The functions of the Ministerial Council will include:
* the oversight of the operation of the GST;
* the oversight and coordination of the implementation of
this Agreement;
* the review of matters of operational significance raised
through the GST Administration Sub-Committee;
* discussion of CGC recommendations regarding relativities
prior to the Commonwealth Treasurer making a determination;
* monitoring compliance with the conditions governing the
provision of assistance to first home owners set out in Appendix D
to this Agreement;
* monitoring compliance with the Commonwealth's undertaking
with respect to SPPs;
* considering reports of the GST Administration Sub-Committee
on the performance of the ATO in GST administration;
* reviewing the operation of the Agreement over time and considering
any amendments which may be proposed as a consequence of such
review;
* making recommendations to the Commonwealth Treasurer on
the Guaranteed Minimum Amount applying to each State and Territory
under the Transitional Arrangements;
* approving changes to the GST base which require the support
of a majority of Commonwealth, State and Territory Governments;
* considering on-going reform of Commonwealth-State financial
relations; and
* considering other matters covered in this Agreement.
* The Treasurer of the Commonwealth will convene the Ministerial
Council in consultation with the other members of the Council
not less than once each financial year. If the Commonwealth Treasurer
receives a request from a member of the Council, he will consult
with the other members concerning convening a meeting. The Treasurer
of the Commonwealth will be the chair of the Council. The Council
may also conduct its business by correspondence.
* All questions arising in the Ministerial Council will be determined
by unanimous agreement unless otherwise specified in this Agreement.
* While it is envisaged that the Ministerial Council will take
decisions on most business arising from the operation of this
Agreement, major issues will be referred by the Ministerial Council
to Heads of Government for consideration, including under the
auspices of the Council of Australian Governments.
* The Ministerial Council will establish a GST Administration
Sub-Committee comprised of Commonwealth, State and Territory officials
to monitor the operation of the GST, make recommendations
regarding possible changes to the GST base and rate and to monitor
the ATO's performance in GST administration. The GST Administration
Sub-Committee will function in accordance with the arrangements
set out in Appendix E to
this Agreement.
SIGNED for and on behalf of the Parties by:
The Honourable John Winston Howard,
Prime Minister of the Commonwealth of Australia,
on the 20th day of June 1999
in the presence of:
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The Honourable Robert John Carr,
Premier of the State of New South Wales,
on the 24th day of June 1999
in the presence of:
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The Honourable Jeffrey Gibb Kennett,
Premier of the State of Victoria,
on the 26th day of June 1999
in the presence of:
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The Honourable Peter Douglas
Beattie,
Premier of the State of Queensland,
on the 25th day of June 1999
in the presence of:
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The Honourable Richard Fairfax
Court,
Premier of the State of Western Australia,
on the 29th day of June 1999
in the presence of:
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The Honourable John Wayne Olsen,
Premier of the State of South Australia,
on the 25th day of June 1999
in the presence of:
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