Section 96 of the Australian Constitution
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Section 96 of the Constitution of Australia
permits that the Australian (Commonwealth) Parliament
is able, subject to the approval of the State(s) concerned, to grant financial assistance to any State on the terms and conditions that it sees fit. Its use in Australian parliaments has led to the Commonwealth parliaments having significant influence over matters that would otherwise be constitutionally State matters.
enumerates limits on Commonwealth involvement in the residual powers of the States, section 96 provides the Commonwealth with the power to grant money to any state. These monetary grants are typically tied to certain terms and conditions (often legislative) that the states must adhere to in order to receive the grant. As these grants are linked to a particular purpose, they are known as 'tied grants'. In practice, section 96 has provided the Commonwealth parliament with the ability to influence policy matters that lie within the residual powers of the States (e.g. Education, Health, Water, etc.).
is present, meaning that the Commonwealth has significantly greater income than the states. This is largely due to the uniform federal system of income tax
that was introduced in 1942 in accordance with s51(ii). Additionally, Section 51(iv) grants the Commonwealth control over state borrowings, furthering the reliance of the States on Commonwealth funding. The vertical fiscal imbalance
, alongside section 96 of the Australian Constitution has effectively extended the Commonwealth's powers beyond those enumerated in section 51 of the Australian Constitution
and other explicit enumerations of Commonwealth legislative power (e.g. Section 52 and Section 90).
Constitution of Australia
The Constitution of Australia is the supreme law under which the Australian Commonwealth Government operates. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia...
permits that the Australian (Commonwealth) Parliament
Parliament of Australia
The Parliament of Australia, also known as the Commonwealth Parliament or Federal Parliament, is the legislative branch of the government of Australia. It is bicameral, largely modelled in the Westminster tradition, but with some influences from the United States Congress...
is able, subject to the approval of the State(s) concerned, to grant financial assistance to any State on the terms and conditions that it sees fit. Its use in Australian parliaments has led to the Commonwealth parliaments having significant influence over matters that would otherwise be constitutionally State matters.
Full text
Tied Grants
Whilst section 51 of the Australian ConstitutionSection 51 of the Australian Constitution
Section 51 of the Constitution of Australia grants legislative powers to the Australian Parliament only when subject to the constitution. When the six Australian colonies joined together in Federation in 1901, they became the original States and ceded some of their powers to the new Commonwealth...
enumerates limits on Commonwealth involvement in the residual powers of the States, section 96 provides the Commonwealth with the power to grant money to any state. These monetary grants are typically tied to certain terms and conditions (often legislative) that the states must adhere to in order to receive the grant. As these grants are linked to a particular purpose, they are known as 'tied grants'. In practice, section 96 has provided the Commonwealth parliament with the ability to influence policy matters that lie within the residual powers of the States (e.g. Education, Health, Water, etc.).
Vertical Fiscal Imbalance
Section 96 does not oblige states to accept 'tied grants', i.e. States reserve the right to refuse a grant and its subsequent policy conditions. However, in Australia, a vertical fiscal imbalanceFiscal imbalance
- Meaning and Types :Fiscal imbalance is the term used to denote a mismatch in the revenue powers and expenditure responsibilities of a government. In the literature on fiscal federalism, two types of fiscal imbalances are measured: Vertical Fiscal Imbalance and Horizontal Fiscal Imbalance...
is present, meaning that the Commonwealth has significantly greater income than the states. This is largely due to the uniform federal system of income tax
South Australia v Commonwealth
South Australia v Commonwealth 65 CLR 373 is a High Court of Australia case that established the Commonwealth government's ability to impose a scheme of uniform income tax, ultimately arising in a vertical fiscal imbalance in the spending requirements and taxing abilities of the various levels of...
that was introduced in 1942 in accordance with s51(ii). Additionally, Section 51(iv) grants the Commonwealth control over state borrowings, furthering the reliance of the States on Commonwealth funding. The vertical fiscal imbalance
Fiscal imbalance
- Meaning and Types :Fiscal imbalance is the term used to denote a mismatch in the revenue powers and expenditure responsibilities of a government. In the literature on fiscal federalism, two types of fiscal imbalances are measured: Vertical Fiscal Imbalance and Horizontal Fiscal Imbalance...
, alongside section 96 of the Australian Constitution has effectively extended the Commonwealth's powers beyond those enumerated in section 51 of the Australian Constitution
Section 51 of the Australian Constitution
Section 51 of the Constitution of Australia grants legislative powers to the Australian Parliament only when subject to the constitution. When the six Australian colonies joined together in Federation in 1901, they became the original States and ceded some of their powers to the new Commonwealth...
and other explicit enumerations of Commonwealth legislative power (e.g. Section 52 and Section 90).