Commonwealth-State financial relations

The Intergovernmental Agreement on Federal Financial Relations provides the overarching framework for the Australian Government’s financial relations with the states. It sets the foundation for collaboration on policy development and service delivery, and for the implementation of economic and social reforms in areas of national importance.

There are a number of intergovernmental forums that oversee Australia’s system of federal-state financial relations. These include:

  • Council on Federal Financial Relations (CFFR), which comprises the Treasurers of the Australian, state and territory governments and which oversees the operation of the Intergovernmental Agreement on Federal Financial Relations.
  • Heads of Treasuries (HoTs) meetings, which are convened every three to four months to discuss federal financial relations issues, and which are attended by Commonwealth, state and territory Under Treasurers or Secretaries. HoTs also provide advice to the CFFR as required.
  • Council of Australian Governments (COAG), the peak intergovernmental forum in Australia, attended by the Prime Minister, Premiers and Chief Ministers, and the President of the Australian Local Government Association.

Queensland Treasury provides support for the Premier, Treasurer and Under Treasurer to participate at these forums.

Treasury also works with other Queensland Government agencies to negotiate national partnership funding agreements with the Australian Government, ensuring that Queensland’s interests are considered and that negotiations comply with the Queensland Government principles for intergovernmental activities. We also advocate on Queensland’s behalf to ensure that Australian Government funding to Queensland is distributed fairly and with consideration to Queensland’s expenditure requirements, demographic growth, size and other characteristics.

Major intergovernmental reforms underway

COAG and CFFR are responsible for driving major reforms important to Australia’s future. Currently, they are continuing to work through tax and federation reform processes that began with the announcement of Commonwealth white paper processes. While the white papers are no longer progressing, COAG has agreed to progress relevant national reforms through the CFFR.

Following the COAG meeting of 1 April 2016, the CFFR work program includes considering proposals to share the Commonwealth’s personal income tax revenue among the States and Territories, to enhance the transparency of government expenditure, to examine the possibilities for state tax reform, and to develop a new productivity-enhancing competition reforms agreement. Treasury is actively working to ensure the reforms align with the Queensland Government’s objectives, that Queensland’s revenue-raising ability is sustainable and that vertical fiscal imbalance (VFI) is minimised.

Horizontal fiscal equalisation reviews

The GST payments each state and territory receives each year from the Australian Government are designed to address VFI. They are calculated using a complex methodology that takes into account each state and territory’s revenue-raising ability and its expenditure requirements. This calculation, called the horizontal fiscal equalisation (HFE) calculation, is carried out by the Commonwealth Grants Commission (CGC).

Queensland’s full submissions to CGC HFE processes, past and current, are available on the CGC website. For more information on VFI and Queensland’s share of GST revenue, please see Chapter 7 of the 2016-17 Queensland Budget paper Budget Strategy and Outlook.

Last updated: 2 June 2019