RMG-100: Guide to appropriations
First published: 25 January 2017
Appropriations are laws made by the Australian Parliament. The Commonwealth cannot spend money without an appropriation. Spending money without an appropriation is a breach of section 83 of the Constitution. There are two main categories of appropriations: annual appropriations and special (or standing) appropriations.
A special appropriation is a provision within an Act (that is not an Annual Appropriation Act) that provides authority to spend money for particular purposes, for example, to finance a particular project or to make social security payments. Special appropriations account for around three quarters of all government expenditure each year.
The annual Appropriation Acts detail annual appropriations provided to Commonwealth entities. The Acts take precedence over details in CBMS, Portfolio Budget Statements/Portfolio Additional Estimates Statements and annual reports:
Appropriations: Constitutional background
The Australian Constitution, in section 81, provides for one Consolidated Revenue Fund (CRF), formed from all revenues or moneys raised or received by the Executive Government of the Commonwealth. The CRF is ‘self‑executing’. That is, all money paid to the Commonwealth (or any person or organisation acting on behalf of the Commonwealth) automatically forms part of the CRF. Whether or not the Commonwealth has credited the money to a fund or a bank account, the money forms part of the CRF upon receipt by, or on behalf of, the Commonwealth. This covers taxes, charges, levies, borrowings, loan repayments and money held in trust. Section 81 does not deal with the manner in which money that forms the CRF shall be kept, nor does it deal with the keeping and auditing of accounts holding public money.
Section 83 of the Constitution provides that no money shall be drawn from the Treasury of the Commonwealth except under an appropriation made by law. Section 81 provides that all appropriations from the CRF must be for the purposes of the Commonwealth. The ‘Treasury’ of the Commonwealth, mentioned in section 83, equates to the CRF referred to in section 81. Together, sections 81 and 83 provide that there must be an appropriation, made by law, for the purposes of the Commonwealth, before money may be drawn from the CRF. This is a key element of the provisions which safeguard parliament’s control over government spending.
Commonwealth entities are resourced through appropriations from the CRF. The main two types of appropriations to authorise the spending of money from the CRF are annual appropriations and special appropriations:
- annual appropriations, which are contained in annual Appropriation Acts that provide annual funding to entities to undertake government operations and programmes; and
- special appropriations, which are appropriations established in Acts other than those in annual Appropriation Acts, noting that some aspects may also appear in specific legislative instruments (such as special accounts established under the PGPA Act by disallowable determinations of the Finance Minister).
Annual appropriation legislation
Section 53 of the Constitution provides that the Australian Senate may not amend proposed laws appropriating money for the ordinary annual services of the government. Under section 54 of the Constitution, a proposed law appropriating money for the ordinary annual services of the government can only deal with such appropriations. Accordingly, the annual appropriations are split into Bills that provide for the ordinary annual services of the government (e.g. Appropriation Bills (No.s 1, 3, 5, etc) and those that do not (e.g. Appropriation Bills (No.s 2, 4, 6, etc)).
In dealing with what constitutes the ordinary annual services of the government and those which do not, the Senate and the then government worked through this allocation in 1965. The outcome of these discussions is generally referred to as the Compact. This allocation was revisited in 1999 to take into account the introduction of accrual budgeting. The government continues its consultations with the Senate on reviewing the terms of the Compact with a view to clarifying the definition of what constitutes the ordinary annual services of the government.
The services of the four parliamentary departments are not considered to be ordinary annual services of the government. Accordingly, there is a third Budget annual Appropriation Bill, Appropriation (Parliamentary Departments) Bill (No. 1), that proposes appropriations for the parliamentary departments.
A second set of three annual Appropriation Bills is usually introduced during the financial year, called the Additional Estimates Appropriation Bills. These three Bills correspond to the three Budget Appropriation Bills and continue the numbering sequence: Appropriation Bill (No. 3) (i.e. ordinary annual services), Appropriation Bill (No. 4) (i.e. other than ordinary annual services) and Appropriation (Parliamentary Departments) Bill (No. 2). The Additional Estimates Appropriation Bills seek authority from parliament for the additional expenditure of money from the CRF, in order to meet requirements that have arisen since the last Budget. Further annual Appropriation Bills are introduced during the year if required. These further Bills are typically called the Supplementary Additional Estimates Appropriation Bills.
A summary of the Budget appropriations, by portfolio, entity and outcome is provided in Budget Paper No. 4 – Agency Resourcing.
Contact for information: AMTMail@finance.gov.au
Special appropriations: background
A special appropriation (also known as a standing appropriation) is included in a specific Act (other than an Annual Appropriation Act) when it authorises a payment where an entitlement exists, or a payment of a specified amount separately identified in an annual Appropriation Act. Some special appropriations state a maximum amount that is appropriated for the particular purpose. They can be referred to as being ‘limited by amount’. Others do not state a maximum amount but the payment amount has to be calculated according to legislative criteria that determine the amount to be paid.
A number of factors are taken into account in determining whether an annual or special appropriation may be used in particular circumstances. For example, a cash limited appropriation might not be appropriate for an entitlement-based programme which is demand driven. Generally, a special appropriation may be used when:
- it is desirable to create a legal entitlement which is to be provided to everyone who satisfies specific criteria (for example, the age pension)
- it is necessary to give effect to inter-governmental arrangements by providing a specific amount under stated conditions (for example, the Schools Assistance Act 2008 and the Local Government (Financial Assistance) Act 1995)
- it is important to demonstrate the independence of an entity from parliament and the executive by providing for automatic payment of the remuneration of its officeholders (for example, the salaries of judges, statutory officeholders, and the Auditor-General)
- it is considered necessary to demonstrate Australia’s ability to meet its financial obligations independently of parliamentary approval of funds (for example, the repayment of loans); or
- other unique circumstances exist which would be difficult to accommodate in annual appropriations.
The Administrative Arrangements Orders sets out the legislation administered by a minister of state. It is the responsibility of a department to ensure that all special appropriations contained within legislation that is the responsibility of its minister are managed by the department, or are allocated by the minister to other Commonwealth entities within the minister’s portfolio. Nonetheless, entities are able to spend money from special appropriations which are the responsibility of a minister in another portfolio where the appropriate legal measures have been put in place.
The Finance publication Budget Paper No. 4 – Agency Resourcing, produced as part of the annual Budget process, contains a table, the Table of Estimated Expenditure from Special Appropriations, which shows estimates of expenses for each special appropriation Act for each Commonwealth entity. It is in two parts: the first is a summary table showing the total special appropriations by portfolio; the second shows the estimate for each special appropriation Act for each entity for the Budget year and an ‘Estimated Actual’ figure for the previous year. All amounts in the table are shown under the entities whose ministers are responsible for the special appropriation legislation concerned. The Agency Resourcing Table presents total special appropriations for each entity by outcome and for each portfolio.
Special appropriations: special accounts
A special account is a limited special appropriation that notionally sets aside an amount that can be expended for listed purposes. The amount of appropriation that may be drawn from the CRF by means of a special account is limited to the balance of each special account at any given time. Special accounts are not bank accounts. Amounts forming part of the balance of a special account may be held in various ways, such as in the Official Public Account, an entity's official bank account, or partly in both.
A special account can be established either by the Finance Minister making a determination under section 78 of the PGPA Act, or by legislation as recognised under section 80 of the PGPA Act. A special account determination made by the Finance Minister is a legislative instrument. Both a determination (for a section 78 special account) and legislation (for a section 80 special account) are considered by parliament before becoming law. The appropriation authority to draw money from the CRF is section 78 or 80 of the PGPA Act, as relevant – rather than the determination or the legislation. Special accounts may be established when it is clear that other types of appropriations are not suitable. For example, there may be a need for specific transparency, including where activities are jointly funded with other governments. The determination or Act that establishes a special account specifies the purposes for which the special account may be debited. The establishing determination, and in most cases the establishing Act, also identifies the types of receipts that may be credited to increase the balance of the special account.
Depending on its purpose, a special account may be credited with amounts from annual appropriations, special appropriations, from third parties, by direct legislative provision, or in limited circumstances with investment income.
Some special accounts sunset (i.e., cease in effect) after a set period of time after their establishment. Officials are recommended to familiarise themselves with the sunset dates (if any) of all appropriation legislation that provides funding to their entity. At the time a special account ceases, any unspent balance is no longer available to the Commonwealth entity to spend. There can be no ‘negative’ special account balances.
The Department of Finance has developed the following resources for officials of Commonwealth entities. Finance Circular 2009/01 provides an introduction on establishing, managing and reporting special accounts. It replaces Finance Circular 2003/09 and summarises components of the Financial Management Guidance (No. 7): Guidelines for the Management of Special Accounts. The Guidelines discuss a number of aspects of special accounts including their establishment, management, reporting and banking procedures.
Chart of Special Accounts
The Chart of Special Accounts lists all special accounts managed by portfolio departments. The Chart is intended to assist officials in the effective management and reporting of special accounts. Each special account listed on the Chart is hyperlinked to its most recent legal instrument on the Commonwealth’s legislation database . The Chart is updated whenever a new special account is created, an old one is abolished, or when the administration of a special account changes.
The estimated balances and cash flows for special accounts, across all Commonwealth entities, for the upcoming financial year, are included in Budget Paper No. 4 – Agency Resourcing. The final balances and cash flows for special accounts, across all Commonwealth entities, for the financial year ended 30 June, are provided in the report entitled Special Accounts Balances and Cash Flows Report. There is an important distinction in the way receipts into special accounts are displayed in the Table of Estimated Cash Flows and Balances for Special Accounts and in the Agency Resourcing Table. The former distinguishes between appropriated and non-appropriated receipts into special accounts, while the Agency Resourcing Table shows only estimates of receipts from sources external to the relevant entity. The Table of Estimated Cash Flows and Balances for Special Accounts and the Agency Resourcing Table both include estimates of public money that is not held on account of the Commonwealth or for the use or benefit of the Commonwealth.
Transactions that are made by individual Commonwealth entities, using special accounts, are disclosed in the relevant entity’s annual financial statements. These statements are available on the relevant entity’s website. The transactions of the whole Australian Government are consolidated and disclosed in Finance’s Consolidated Financial Statements.
- 2015-16 Budget Paper No. 4 
- 2014-15 Budget Paper No. 4 
- 2013-14 Budget Paper No. 4 
- 2012-13 Budget Paper No. 4 
- 2011-12 Budget Paper No. 4 
Special Accounts Balances and Cash Flows Report
- 2014-15 Cash Flows and Balances for Special Accounts Report [ 163 KB]
- 2014-15 Cash Flows and Balances for Special Accounts Report [ 404 KB]
- 2012-13 Cash Flows and Balances for Special Accounts Report [ 130 KB]
- 2012-13 Cash Flows and Balances for Special Accounts Report [113 KB]
- 2011-12 Cash Flows and Balances for Special Accounts Report [ 320 KB]
- 2011-12 Cash Flows and Balances for Special Accounts Report [ 174 KB]
Commonwealth Consolidated Financial Statements
Special appropriations: repayments by the Cth (section 77)
A non-corporate Commonwealth entity (entity) can use the special appropriation contained in section 77 of the PGPA Act to repay money collected and processed as general government revenue (i.e. the amount was remitted to the Official Public Account (OPA) as an administered receipt). The special appropriation can only be used by an entity if the entity has no other appropriate appropriation to make the repayment (for example, if an entity received an overpayment and credited it to an annual departmental appropriation item in accordance with section 27 of the PGPA Rule, then the entity will make the repayment from that departmental appropriation item. If, on the other hand, the entity remitted the overpayment to the OPA as an administered receipt, then it may use section 77 to make the repayment).
Examples of repayments that may be made using the special appropriation in section 77 include:
- returning a bond, a security deposit or an amount found on Commonwealth premises
- returning an overpayment to the Commonwealth
- repaying an amount to a related third party (such as the executor of a deceased person's estate); and
- repaying an amount that was credited to a departmental item or a special account and no balance is available for the respective appropriation to make the required repayment.
Annual appropriations: background
Annual Appropriation Acts provide annual funding for government operations and programmes and also for investment in assets and reduction of liabilities. Bills proposing appropriations for the forthcoming financial year are introduced into parliament on Budget Night and, when passed, fund approximately 25 per cent of all government expenditure for the year.
The annual Appropriation Bills propose specified amounts of appropriation for expenditure by entities to carry out the government’s outcomes. Those amounts may only be expended on the purposes for which the appropriations are provided and that expenditure must be consistent with relevant legislation and government policy. The Finance Minister is responsible, on behalf of the government, for arrangements by which entities adhere to those requirements.
Appropriations are provided for particular purposes. The purpose of departmental appropriations is to provide money for the annual operating costs of entities. For administered appropriations, those purposes are the outcomes which are shown beside the appropriation amounts. Outcomes are the results, consequences or impacts of government actions.
The purpose and detailed operation of the clauses in the Appropriation Bills are outlined in explanatory memoranda tabled in parliament when the Bills are introduced on Budget Night. Each Appropriation Bill and its Explanatory Memoranda are available at www.budget.gov.au and also at www.legislation.gov.au . Further information on outcomes and on the outcomes framework more generally is available at Managing Performance.
Appropriation Bill (No. 1)
Appropriation Bill (No. 1) proposes appropriations for activities that are considered to be the ordinary annual services of the government and hence the Bill cannot be amended by the Senate under section 53 of the Constitution. The Bill sets out amounts according to whether they are departmental or administered.
Departmental appropriations are provided to meet costs over which an entity has control. They are the ordinary operating costs of entities. Expenditure typically covered by departmental appropriations include:
- employee expenses
- supplier expenses
- other operational expenses (for example, interest and finance expenses)
- non operating costs (for example, replacement and capitalised maintenance of existing departmental assets valued at $10 million or less).
Departmental appropriations can also include supplementation for work that entities were directed by government to undertake in the previous financial year, but after the last date for the inclusion in the Additional Estimates Bills. Entities are expected to meet the cost of these activities from their existing appropriations, which may then be replenished by a departmental appropriation in the following financial year.
Departmental appropriations are appropriated as a single amount for each entity. The single appropriation represents the cost of entity operations and may be used to make any payment related to the functions of the entity. Appropriation Bill (No. 1) shows a split of that amount across outcomes. The split is notional, providing an indication of the departmental resources that will be required to achieve outcomes. Appropriation is not provided for non-cash costs such as bad debts and write-offs.
For all non-corporate Commonwealth entities, non-operating costs, as discussed above, are funded via the Departmental (or Administered) Capital Budget (DCB/ACB) which is used to meet the costs associated with the replacement of minor assets (assets valued at $10 million or less) or maintenance costs that are eligible to be capitalised. The funding for depreciation, amortisation and make-good expenses was replaced with a DCB in the 2010-11 Budget.
Corporate Commonwealth entities continue to be funded for depreciation, amortisation and make good expenses except for Designated Collecting Institutions (DCI’s) (such as the National Gallery of Australia) where they are not funded for depreciation on their heritage and cultural assets.
Administered appropriation items are those administered by the entity on behalf of the government. They are amounts required to meet the total estimated expenses for administered activities that are expected to be incurred in the budget year. They are normally related to activities governed by eligibility rules and conditions established by the government or parliament such as grants, subsidies and benefit payments. Entities therefore have less discretion over how administered operating costs are incurred. Administered amounts are appropriated separately for outcomes (i.e. the split across outcomes is not notional). In limited circumstances, non operating costs as discussed above are funded via the ACB for the replacement of existing administered assets valued at $10 million or less, and maintenance costs that are eligible to be capitalised.
The detail on appropriations in Appropriation Bill (No. 1) is set out in Schedule 1 to the Bill.
Appropriation Bill (No. 2)
As explained above, Appropriation Bill (No. 2) provides appropriations for matters that are not proposed for the ordinary annual services of the government. It covers both ‘non-operating’ costs and administered amounts for new outcomes which have not previously been approved by parliament, payments direct to local government, and some payments made to or through the states, the Australian Capital Territory (ACT) and the Northern Territory (NT).
Most payments ‘to’ the states are made under the Federal Financial Relations Act 2009 and the related COAG Reform Fund Act 2008. Ongoing payments classified as ‘through’ the states for non-government schools are made under the Schools Assistance Act 2008. Other payments for non-government schools are proposed in Appropriation Bill (No. 2).
Financial assistance grants for local government continue to be made under the Local Government (Financial Assistance) Act 1995.
Schedule 1 to Appropriation Bill (No. 2) confers, on the Ministers named, the power to determine:
- conditions under which any payments to and through the states, the ACT and NT and local government authorities may be made
- the amounts and timing of those payments.
The new administered outcomes item in Appropriation Bill (No. 2) requests appropriations in respect of administered outcomes which have not previously been approved by parliament. This requirement is based in the Compact of 1965.
Non-operating costs (sometimes called ‘capital’ costs) included in Appropriation Bill (No. 2) comprise:
- ‘equity injections’, which are provided to entities to, for example, enable investment in assets to facilitate departmental activities. Equity injections can for example, be used to propose appropriations for new assets and replacement assets usually valued at more than $10 million;
- ‘administered assets and liabilities’ appropriations, which provide funding for acquiring new administered assets, enhancing existing administered assets and discharging administered liabilities relating to activities administered by entities on behalf of the government.
General Drawing Rights Limits
The Nation-building Funds Act 2008 and the COAG Reform Fund Act 2008 establish special accounts under section 80 of the PGPA Act in relation to funds established by those Acts. The government intends that payments made from the funds will be transparent and subject to parliamentary scrutiny with the aim of ensuring a managed and orderly rate of expenditure. Accordingly, the Nation-building Funds Act 2008 and the Federal Financial Relations Act 2009 provide for mechanisms to specify a maximum limit (called the ‘general drawing rights limit’) on the amount that can be paid out from each fund’s special account in a particular financial year.
The General Drawing Rights Limits for the financial year are included in the text of Appropriation Bill (No. 2). It is important to note that this Bill will not appropriate amounts to be paid from the funds. The intention of specifying general drawing rights limits is to set maximum limits on the amounts that may be covered by drawing rights issued by the Finance Minister for the current year, for the purposes to which the limits apply. Appropriation (Parliamentary Departments) Bill (No. 1).
The Appropriation (Parliamentary Departments) Bill (No. 1) proposes appropriations for all the departmental, administered and non‑operating costs of the four parliamentary departments.
Period of validity of annual appropriations
Annual appropriations continue to be available to entities until the relevant amount is fully expended or the relevant legislation ceases to provide authority for any unspent amounts to be used (for example, if the Act providing the entitlement sunsets after a particular date).
There can be situations where entities require extra funding for urgent expenditure for which there is insufficient appropriation. In such cases, Appropriation Bill (No. 1) and Appropriation Bill (No. 2) each contain a clause entitled ‘Advance to the Finance Minister’ (AFM), which enables the Finance Minister to provide the urgent additional appropriation. The AFM provision in Appropriation Bill (No. 1) is limited to a maximum of $295 million and in Appropriation Bill (No. 2) is limited to $380 million. Details on each amount issued under the AFM are subject to the requirements of the Legislation Act 2003 , though not subject to disallowance, and are published on the Federal Register of Legislative Instruments. An annual report to parliament is prepared on the use of the AFM provision and covers all amounts issued and, in particular, any component of an AFM that may not have been used by the relevant entity in the relevant financial year.
Appropriation (Parliamentary Departments) Bill (No. 1) also contains a clause corresponding to the AFM provided in the other two Acts. Called the Advance to the Presiding Officer (APO), the total that may be issued is limited according to the parliamentary department concerned. As with the AFM provision, the use of the APO is reported in an audited annual report.
All three Budget Appropriation Bills include, for information purposes, a figure for the previous financial year, labelled the ‘Actual Available Appropriation’. It is calculated for each item by adding the amounts appropriated in the previous year’s annual Appropriation Acts, amounts adjusted under provisions of the PGPA Act plus adjustments such as AFMs. In some instances, the figure may also be affected by limits applied administratively by the Department of Finance. The Actual Available Appropriation provides a comparison with the appropriation proposed for the budget year. It does not affect the amounts available at law. In some cases, there are discrepancies between the sums of items and the totals of the Actual Available Appropriation, due to rounding.
Contact for information: AMTMail@finance.gov.au
Adjusting annual appropriations
The annual appropriation acts, the PGPA Act and government policy contain mechanisms for adjusting annual appropriations. New or updated government decisions can require changes to annual appropriations in three ways:
1. Increasing annual appropriations
Increases to annual appropriation can be provided during the course of a financial year, or for the next financial year, where existing appropriations are inadequate and reallocation within the appropriation type is not possible. Existing appropriations must first be considered. What appropriations are available? For example, departmental – all years; administered – all years, within the same outcome. Contact your AAU for further information.
Current Financial Year
The best mechanism to provide additional appropriation in the current year is based on when the additional appropriation will be called on. Will the additional appropriation be required before or after the next round of Appropriation Bills (Additional Estimates)?
Before Additional Estimates
Thought needs to first be given to re-prioritisation of current appropriations. If that is not possible, an Advance to the Finance Minister (AFM) may be appropriate.
After Additional Estimates
Include in estimates update for MYEFO or early pre-ERC for current year outlays
Next Financial Year
Include estimates in pre-ERC or Budget rounds in CBMS.
Appropriations most often need to be moved in response to transfers of functions, for example a new Administrative Arrangements Order. As “finances follow functions”, entities will need to establish the amount of appropriations relating to the transferring function.
Timing of moving appropriations
Appropriations that need to be moved are done so on a prioritised basis, with section 75 legislative instruments required for urgent transfers. (For more information, see Machinery of Government changes.) Entities must first consider when will the gaining entity need additional appropriation to make payments for the new function?
Current Year Appropriations
Appropriations to support payments – immediate to 2 weeks
Thought needs to first be given to re-prioritisation of current appropriations. If that is not possible, an AFM may be appropriate. An AFM provides urgent appropriation where existing appropriations are inadequate, with details for the AFM application provided by entity CFOs.
Appropriation to support payments – between 2 weeks and Additional Estimates
Section 75 of the PGPA Act provides for appropriations to be transferred when a function is moved from one entity to another. (For more information, see Machinery of Government changes.)
Appropriation to support payments – after Additional Estimates
Include in estimates update for MYEFO or early pre-ERC rounds in CBMS for current year outlays.
Prior Year Appropriations
Entities will need to assess the amount of prior year appropriations that relate to payments for the transferred function.
These amounts are included in estimates update for MYEFO or early pre-ERC rounds in CBMS.
Appropriations most often need to be reduced in response to government decisions to implement saving initiatives, or to reduce annual administered appropriation items.
Quarantine – preventing inadvertent drawdowns
Where a government decision means policy authority to spend has changed, quarantines can be placed over the relevant annual appropriation, which provides an administrative control preventing inadvertent drawdowns. AAU Directors can request quarantines be put in place.
Contact for information: AMTMail@finance.gov.au.
Advances to the Finance Minister (AFM)
The Advance to the Finance Minister (AFM) is a provision in the annual Appropriation Acts which enables the Minister for Finance (Finance Minister) to provide additional urgently needed appropriation to entities for expenditure in the current year. The Finance Minister may only agree to issuing an AFM 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 entity. The Finance Minister provides the additional appropriation by means of a determination.
The annual Appropriation Act for the parliamentary departments includes a provision that enables the Presiding Officer(s) to issue urgently required appropriation for the four parliamentary departments to the relevant extent set out in the legislation, called the Advance to the responsible Presiding Officer (APO).
Before issuing a determination to increase an entity’s appropriation item, the Finance Minister must be satisfied that the legislative criteria set out in the annual Appropriation Acts are met. The legislative criteria are generally worded along the following lines:
- Amounts can be issued under the AFM if the Finance Minister is satisfied that:
- there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in the Schedules:
- because of an erroneous omission or understatement; or
- because the additional expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Appropriation Bills before those Bills were introduced into the House of Representatives.
- The Appropriation Acts have effect as if the Schedules were amended, in accordance with a determination of the Finance Minister, to make provision for so much (if any) of the expenditure as the Finance Minister determines.
The amounts that can be issued under the AFM provisions are limited to amounts identified in the annual Appropriation Acts. Advances under Appropriation Act No. 1 are limited to $295 million, whilst advances under Appropriation Act No. 2 are limited to $380 million.Where these limits are close to being exhausted, or are likely to be exhausted, provision will be made in the Additional Estimates Appropriation Acts for these limits to be restored to the original amounts, irrespective of amounts that had been issued before the commencement of these Acts. This will ensure that there are sufficient amounts within the AFM for the remainder of the financial year.
If the Additional Estimates Bills provide for expenditure, and amounts are issued under the AFM provisions prior to the commencement of the Bills (ie. upon receiving Royal Assent) for the same expenditure, the amounts appropriated in the Acts for this expenditure will be reduced by the amounts advanced. This will prevent appropriations for the same expenditure being provided from both the AFM and the Additional Estimates Appropriation Acts.
Role of entity officials
List of AFMs issued
Contact for information: AMTMail@finance.gov.au.
Receipts to increase annual appropriations (section 74)
Corporate Commonwealth entities may spend certain receipts in accordance with their enabling legislation or constitution. Where a corporate Commonwealth entity collects money for and on behalf of the Commonwealth (for example, taxes and levies) this money is part of the CRF.
Many non-corporate Commonwealth entities receive money from sources other than in the annual Appropriation Acts, such as payment for goods and services. As a general rule, amounts received by an entity must be returned to the CRF, and an appropriation is required before the amounts can be spent. If no appropriation authority is available, the receipts must be remitted to the Official Public Account and cannot be spent by the entity.
If the receipt is of a kind prescribed in section 27 of the PGPA Rule for the purposes of section 74 of the PGPA Act, then an entity can add that prescribed receipt to its most recent departmental appropriation item. Section 74 of the PGPA Act provides that an entity’s appropriation item may be increased by an amount of a kind prescribed by section 27 of the PGPA Rule. In this way, the retained receipts may be spent by the entity under one of its existing appropriation items.
Note these receipts differ from cost recovery activities, where revenue collected must be returned to the Consolidated Revenue Fund.
A non-corporate Commonwealth entity can collect receipts from various sources. Section 74 and 74A of the PGPA Act enables an entity to spend some of those receipts by authorising that certain appropriations may be increased with specific types of receipts and repayments. Where an amount collected cannot be retained, it must be remitted to the Official Public Account and cannot be spent. Section 27 of the PGPA Rule prescribes the kinds of receipts that can be retained under s74 and s74A of the PGPA Act. Examples of the kinds of receipts that are prescribed by PGPA Rule s27 include an amount received:
- for services provided by the entity
- for selling or hiring out goods (including leasing out goods)
- as accumulated leave entitlements of an employee (received from a former employer)
- as GST-related receipts collected when selling goods and services, in order to pay net GST owed to the Australian Taxation Office (ATO)
- as GST-related refunds from the ATO (if s74A of the Act was not used to pay the related GST qualifying amounts)
- related to a trust or similar arrangement; and
- as a repayment of some or all of an amount that was earlier paid.
Contact for information: firstname.lastname@example.org.
Portfolio Budget Statements
The Portfolio Budget Statements (PB Statements) inform members of parliament and the public of the proposed allocation of resources to government outcomes. They also assist the Senate Standing Committees with their examination of the government’s Budget. The PB Statements, Budget Papers, Annual Appropriation Bills (Nos. 1 and 2) and Appropriation (Parliamentary Departments) Bill (No. 1) are tabled in the parliament on Budget Night, the second Tuesday in May of each year. The Bills require that the PBS be taken into account when interpreting the appropriated items in the Schedules.
The PB Statements contain details of the estimated payments under each of the annual Appropriation Bills and other legislation providing appropriations. In doing this, entities are required to report against the approved list of outcomes and programs for which they are responsible. They also contain details of estimated receipts from other sources, including taxation, customs, excise and receipts from fees and charges collected by entities. The appropriation details included in the PB Statements’ tables match the figures in the Appropriation Bills and the relevant amounts included in the tables in Budget Paper No. 4.
Individual PB Statements are intended to further explain the purposes and planned performance of entities and their contributions towards the achievement of outcomes. Entities also include their programmes’ objectives; financial and non-financial performance, including deliverables; and key performance indicators.
PB Statements also assist in the interpretation of the Appropriation Bills. There is a provision in the Acts that declares the PB Statements to be extrinsic material under paragraph 15AB(2)(g) of the Acts Interpretation Act 1901. As a result, a court may use the PB Statements to decide whether a particular expenditure is consistent with the purpose of the appropriation item.
PB Statements are prepared by those Commonwealth entities which receive funding through the annual Appropriation Acts (either directly or through a portfolio department). Finance has issued the following guidelines on the format and printing of the PBS:
- Guide to preparing the 2016-17 Portfolio Budget Statements [ 1.2 MB]
- Guide to preparing the 2016-17 Portfolio Budget Statements [ 621 KB]
Excel and Word templates are downloadable from the Central Budget Management System, or please contact your Chief Finance Officer (CFO) Unit to obtain a copy.
Financial data and footnotes for the 2016-17 PBS will be made available after the Budget has been released at http://www.data.gov.au to assist those who wish to analyse the financial information published in the PBS. The website also has financial data from the 2014-15 PBS and PAES.
Requirements for performance information in PB Statements – Finance Secretary Direction
The Finance Secretary has issued the following Direction, effective 24 February 2016, under Section 36(3) of the PGPA Act. The Direction sets out the requirements for performance information included in Portfolio Budget Statements.
Previous year's version
- Guide to preparing the 2015-16 Portfolio Budget Statements [ 1 MB]
- Guide to preparing the 2015-16 Portfolio Budget Statements [ 421 KB]
Portfolio Additional Estimates Statements – mid-February each year
The Portfolio Additional Estimates Statements (PAESs) inform the parliament of changes to the proposed allocation of resources since the Budget. The PAES, annual Appropriation Bills (Nos. 3 and 4) and Appropriation (Parliamentary Departments) Bill (No. 2) are tabled in the parliament usually in mid-February each year.
The annual Appropriation Bills (Nos. 3 and 4) and Appropriation (Parliamentary Departments) Bill (No. 2) require that the PBS be taken into account when interpreting the appropriated items in the Schedules.
Not all portfolios prepare a PAES. Only those entities for whom the government has agreed to change funding through the Appropriation Bills listed in the previous paragraph need produce a PAES. Finance has issued the following guidelines on the format and printing of the PAES:
- Guidance to Preparing the 2016-17 Portfolio Additional Estimates Statements [ 1.1 MB]
- Guidance to Preparing the 2016-17 Portfolio Additional Estimates Statements [ 239 KB]
Last year's version of the PAES guidance is available for reference when entities prepare annual reports:
Taxation of entities (including GST)
Under the Australian Constitution, liability for Commonwealth taxes cannot extend to the Commonwealth or to a Commonwealth entity. Nevertheless, Commonwealth entities generally pay and collect Goods and Services Tax (GST) on the same basis as other Australian entities.
A framework has been implemented for the Commonwealth, underpinned by the "The New Tax System" legislation, to make Commonwealth entities subject to taxation on a notional basis. The A New Tax System (GST, Luxury Car Tax and Wine Tax) Direction 2015 replaced the Finance Minister's (A New Tax System) Directions 2005 and continues to give effect to the parliament’s long standing intention that Commonwealth entities are to be notionally liable to pay certain taxes. The Direction applies only to entities that cannot be made liable to taxation by a Commonwealth law, for example non-corporate Commonwealth entities such as departments of state which are legally part of the Commonwealth. Additional information about the GST and indirect tax reforms is available at the Australian Taxation Office.
Appropriations and reporting
The amounts of appropriation shown in the three Appropriation Bills for the Budget year, in entity annual reports, the Commonwealth Consolidated Financial Statements, and records in CBMS, all exclude recoverable GST. The appropriations shown therefore represent the net amount that parliament allocates to particular purposes. This aligns with the accounting treatment of expenses and assets and the presentation of Budget estimates.
Parliament has provided that appropriations be increased by the amount of recoverable GST on payments by Commonwealth entities from all appropriations limited by amount. As a result, there is sufficient appropriation for payments under all such appropriations, provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial appropriation.
Other relevant legislation on GST appropriations management includes:
- Section 74A of the PGPA Act, which authorises a non-corporate Commonwealth entity (entity) to increase certain appropriations with a specific Goods and Services Tax (GST) related amount.
- Section 27 of the PGPA Rule, which supports the operation of section 74 of the PGPA Act, prescribes two further types of GST-related receipts that may be retained by increasing certain appropriations.
An entity can rely on the two mentioned provisions of the PGPA Act (sections 74A and 74) to manage the following GST-related amounts:
- section 74A of the PGPA Act to pay GST qualifying amounts; and
- section 74 of the PGPA Act (as supported by section 27(2A) of the PGPA Rule, to retain two types of GST-related receipts:
- amounts collected when selling goods and services (in order to pay net GST owed to the Australian Taxation Office (ATO)); and
- GST refunds from the ATO (to the extent that section 74A was not used to increase an appropriation to pay the related GST qualifying amount; section 27(8) refers).
Other taxes, fees and charges
Under the Inter-Governmental Agreement on the Reform of Commonwealth-State financial relations, the Commonwealth, States and Territories agree the taxes and compulsory charges that are outside the scope of the GST. A copy of the list of taxes, fees and charges that are not subject to the GST is available on the Treasury website . The agreed list of taxes and regulatory 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 for Commonwealth-State Financial Relations. The Treasury is the central point of contact for Commonwealth entities.
Contact for information: email@example.com.
Foreign exchange risk management
The Australian Government's foreign exchange risk management policy has been in place since 1 July 2002. This policy applies to all Commonwealth entities in the general government sector (GGS). The policy applies to both departmental and administered funding.
Foreign exchange risk is the risk that an entity's financial performance or position will be affected by fluctuations in the exchange rate between the Australian dollar and other currencies. The overarching principle of the policy is that GGS entities are responsible for the management of their foreign exchange risks. However, the entities must not act to reduce the foreign exchange risk that they would otherwise face in the course of their business arrangements.
To assist GGS entities in managing foreign exchange risk, Finance has published Finance Circular 2006/06, which introduces revised guidance on the policy, and Financial Management Guide No. 2: Australian Government Foreign Exchange Risk Management Guidelines, which provide in-principle guidance to entities, and may also be used as a benchmark to assess entities' foreign exchange risk management practices.
Contact for information: firstname.lastname@example.org.
Machinery of Government (MoG) changes
The terms ‘machinery of government changes’ (MoG changes) and ‘administrative re-arrangements’ are interchangeable and are used to describe a variety of organisational or functional changes affecting the Commonwealth.
Some common examples of MoG changes are:
- changes to the Administrative Arrangements Order (AAO) following a Prime Ministerial decision to abolish or create a Commonwealth entity or to move functions/ responsibilities between Commonwealth entities
- movement of functions into, or out of, the Australian Public Service.
The Australian Public Service Commission, in conjunction with Finance has developed Implementing Machinery of Government (MoG) changes Guide as a source of practical guidance to help entities implement MoG changes. The guide provides:
- an overview of the MoG process
- protocols for resolving the transfer of resources
- principles and approaches for planning and implementing MoG changes, including a timeframe for key events
- guidance on financial management and people management
- advice on managing physical relocations, information, records, data and taxation
- information on setting up a new entity.
The information below complements the Machinery of Government (MoG) changes Guide.
Delegations of Powers
Take a principled approach
ICT Checklist items for consideration
Last updated: 14 February 2017