FACT SHEET 6

What is the impact of Statehood on financial relations with the Commonwealth?

• Statehood for the Northern Territory will not change the current financial arrangements with the Commonwealth.

• The Commonwealth provides grants to the States and Territories in the form of tied grants called Specific Purpose Payments and untied grants called General Purpose Payments which mainly come from GST revenue.

• The Northern Territory receives Commonwealth revenue in the same way as the states and has been doing so since the late 1980s.

• Specific Purpose Payments are grants made by the Commonwealth to be spent under the terms and conditions set by the Commonwealth. Those funds are generally to be spent on Health and Education.

• General Purpose Payments can be spent in the way a state or territory wishes.

• General Purpose Payments are distributed to the states and territories on the basis of ‘per capita relativities’ calculated by the Commonwealth Grants Commission.

• The calculation seeks to ensure that each state and territory has the capacity to provide services at national average levels of efficiency.

• According to these calculations the smaller jurisdictions such as the Northern Territory receive more than their per capita share of GST revenue.

• Despite moves by some of the larger states seeking a change to the way GST revenue is allocated, the Commonwealth is unlikely to make any changes without the agreement of all the states.

• The current formula recognises the unique circumstances of the Northern Territory. Statehood will not jeopardise the existing formula.

• Statehood for the Northern Territory will preserve the right of the Northern Territory to receive Specific Purpose Payments under S.96* of the Australian Constitution and will entrench the right of the Northern Territory to be treated fairly for the purposes of the allocation of GST revenue.

*S.96 states - The (Commonwealth) Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

Northern Territory Statehood Steering Committee