Expenditure and taxation in delegated legislation [2022] AUSStaCSDLM 130 (30 November 2022)

• Chapter 6
• Expenditure and taxation in delegated legislation
• Commonwealth expenditure
• Advance to the Finance Minister determinations
• Instruments specifying expenditure under the Financial Framework (Supplementary Powers) Act 1997 and Industry Research and Development Act 1986
• Instruments providing for Commonwealth grants to states and territories under the Federal Financial Relations Act 2009
• General revenue assistance – section 9, Federal Financial Relations Act
• Instruments providing for expenditure pursuant to special accounts
• Levying of taxation in delegated legislation

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Chapter 6

Expenditure and taxation in delegated legislation

6.1 This Chapter identifies the instruments which the committee has resolved to draw to the attention of the Senate under standing order 23(4) in the interests of promoting appropriate parliamentary scrutiny and control of Commonwealth expenditure in delegated legislation.^[1] This Chapter is divided into two sections, covering expenditure-related matters and the levying of taxation in delegated legislation.

Commonwealth expenditure

6.2 This section contains four broad categories of expenditure-related instruments:

• Advance to the Finance Minister determinations;

• instruments specifying Commonwealth expenditure under the Financial Framework (Supplementary Powers) Act 1997 and the Industry Research and Development Act 1986;

• instruments providing grants to the states and territories under the Federal Financial Relations Act 2009; and

• instruments providing for or in relation to expenditure pursuant to other special accounts.

Advance to the Finance Minister determinations

6.3 The annual Appropriation Acts contain Advance to the Finance Minister (AFM) provisions which enable the Finance Minister to provide additional appropriations to agencies throughout the financial year via non-disallowable determinations.^[2] The Finance Minister may only issue an AFM determination if satisfied that there is an urgent need for expenditure that is either not provided for or has been insufficiently provided for in the existing appropriations of the agency.

6.4 The committee detailed its concerns about the AFM mechanism in the reports of its inquiry into the exemption of delegated legislation from parliamentary oversight.^[3] These concerns include the large amount of public money that may be allocated under the AFM provisions and the non-disallowable status of the AFM determinations which limit parliamentary oversight. In light of these concerns, the committee has resolved to draw the Senate's attention to Commonwealth expenditure provided for by AFM determinations under Senate standing orders 23(4) and 23(4A).^[4]

6.5 The committee did not identify any AFM determinations registered during the relevant period.

Instruments specifying expenditure under the Financial Framework (Supplementary Powers) Act 1997 and Industry Research and Development Act 1986

6.6 The Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) and the Industry Research and Development Act 1986 (the IRD Act) authorise the Commonwealth to spend public money on grants and programs specified in instruments made under those Acts. Consequently, the specification of expenditure in an instrument made under these Acts effectively authorises the Commonwealth to spend public monies on the relevant grant or program. The scrutiny of these instruments is a key aspect of parliamentary scrutiny and control of Commonwealth expenditure.^[5] Accordingly, the committee has resolved to draw the Senate's attention to Commonwealth expenditure authorised by delegated legislation made under the FF(SP) Act and IRD Act under Senate standing order 23(4).^[6]

6.7 The committee did not identify any instruments specifying expenditure made under the FF(SP) Act and IRD Act registered during the relevant period.

Instruments providing for Commonwealth grants to states and territories under the Federal Financial Relations Act 2009

6.8 The Federal Financial Relations Act 2009 (the Federal Financial Relations Act) is a key source of legislative authority for funding provided by the Commonwealth to the states and territories. It empowers the relevant minister to make determinations providing for payments of general revenue assistance to the states and territories (under section 9) and specific purposes agreed with a state or territory (under section 16). Such instruments are not subject to disallowance by Parliament.^[7]

6.9 The Annual Appropriation Acts set a debit limit on the total amounts that can be provided in general revenue assistance and specific purpose payments under sections 9 and 16 of the Federal Financial Relations Act. The Appropriation Act (No. 2) 2021-2022 sets these limits at $5 billion and $25 billion, respectively. Noting the significant amount of expenditure which the relevant minister may determine subject to these limits, together with the non-disallowable status of the determinations, the committee has resolved to draw these instruments to the attention of the Senate under standing order 23(4).

6.10 The following table lists instruments providing for Commonwealth grants pursuant to the Federal Financial Relations Act framework registered in the relevant period.

General revenue assistance – section 9, Federal Financial Relations Act

Instrument	Amount	Description
Federal Financial Relations (General Purpose Financial Assistance—2022-23 Payment No. 4) Determination 2022 [F2022L01351]	$130 158 528.38	Determines amounts of general purpose financial assistance to be paid to Western Australia and the Australian Capital Territory.

Instruments providing for expenditure pursuant to special accounts

6.11 In addition to instruments made under the Federal Financial Relations Act, the Commonwealth may make other instruments providing for or relating to payments to states, territories and other entities. The Public Governance, Performance and Accountability Act 2013 (the PGPA Act) empowers the Finance Minister to establish special accounts by legislative instrument (section 78) or enactment (section 80). Special accounts are a mechanism by which an amount of money in the consolidated revenue fund can be identified for a specific purpose and may only be expended subject to any conditions imposed on the account.

6.12 Where special accounts are established by primary legislation under section 80 of the PGPA Act, legislative instruments relating to the expenditure under the special account may be made. Such instruments may, for example, relate to investment of the expenditure or caps on the amount of expenditure under the special account.

6.13 As instruments that provide for or relate to special accounts can involve significant expenditure and may be exempt from disallowance, the committee has resolved to draw these instruments to the attention of the Senate.

6.14 The committee did not identify any instruments providing for or related to expenditure pursuant to special accounts in this period.

Levying of taxation in delegated legislation

6.15 The committee considers that one of the most fundamental functions of the Parliament is to levy taxation. In this regard, the committee's longstanding view is that it is for the Parliament, rather than makers of delegated legislation, to set a rate of tax. The committee's concerns are heightened where the tax is not limited by a cap in the relevant enabling Act.

6.16 Senate standing order 23(3)(j) requires the committee to consider whether an instrument contains matters more appropriate for parliamentary enactment (that is, matters that should be enacted via primary legislation rather than delegated legislation). This includes where an instrument imposes, or sets the rate of, a tax or levy. The committee has not identified any such instruments in this period.

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[1] Details of all instruments which the committee has resolved to draw to the attention of the Senate under standing order 23(4) are published on the committee's website.

[2] A list of Advance to the Finance Minister Determinations is available on the Department of Finance's website. They may also be accessed on the Federal Register of Legislation.

[3] Senate Standing Committee for the Scrutiny of Delegated Legislation, Inquiry into the exemption of delegated legislation from parliamentary oversight: Interim report (December 2020) pp. 59–60, 71; Senate Standing Committee for the Scrutiny of Delegated Legislation, Inquiry into the exemption of delegated legislation from parliamentary oversight: Final report (March 2021) pp. 59, 70.

[4] Details of all instruments which the committee has resolved to draw to the attention of the Senate under standing order 23(4) are published on the committee's website.

[5] For further information see the committee's guideline on Scrutiny of Commonwealth expenditure and Chapter 7 of the report of the committee's inquiry, Parliamentary scrutiny of delegated legislation.

[6] Details of all instruments which authorise Commonwealth expenditure are published on the committee's website.

[7] Federal Financial Relations Act 2009, sections 9(5) and 16(5).