Opinion Number. 1497

Subject

Surplus Revenue payment of surplus revenue to states: meaning of ‘surplus revenue’: ascertainment of surplus revenue: deduction of moneys appropriated but remaining in consolidated revenue fund: significance of payment to a trust fund

Key Legislation

SURPLUS REVENUE ACT 1908 s 4: SURPLUS REVENUE ACT 1910 ss 4, 6: OLD AGE PENSIONS APPROPRIATION ACT 1908: COAST DEFENCE APPROPRIATION ACT 1908: CONSTITUTION ss 89, 94

Date
Client
The Secretary, Parliamentary Joint Committee of Public Accounts

The Secretary, Parliamentary Joint Committee of Public Accounts, has forwarded to me the following communication for advice:

Following is an extract from the Annual Report of the Commonwealth Auditor-General (Mr C.J. Cerutty) for the year 1925–26:

The Surplus Revenue Act 1910 provides that any Surplus Revenue is to be distributed among the States. In practice no surplus is shown in the Consolidated Revenue Fund at the end of the financial year because any remaining credit is transferred to Trust Fund under authority of appropriations made by Parliament. It is thus available for expenditure when required. The legality of these transfers to Trust Fund was affirmed by the High Court in the action brought against the Commonwealth by the Government of New South Wales in 1908. It would appear from the judgement in that case that moneys appropriated by Parliament, but unexpended, need not be regarded as Surplus Revenue, even if they are not transferred to Trust Fund. The periodical balancing of the accounts is, of course, necessary, but does not affect the position, and such moneys would not become Surplus Revenue merely because they remain in the Consolidated Revenue Fund on the thirtieth of June. If, therefore, such moneys are allowed to remain in the Consolidated Revenue Fund, they would be secure against a claim by the States. Moreover, should that course be followed it would be easy to indicate that the credit balance could not be again appropriated.

The committee is anxious to have a clear understanding of the legal position with regard to surpluses in the Consolidated Revenue Fund, and would be glad of advice on the following points:

  1. Is Mr. Cerutty’s interpretation, as above expressed, substantially correct;
  2. If there had been a surplus of, say, £ 1,000,000 in the Commonwealth Consolidated Revenue Fund last financial year and such sum was not transferred to Trust Fund for subsequent expenditure, would the States have any legal claim on the Commonwealth for the distribution amongst them of the said surplus of £1,000,000.

The favour of an early reply will be appreciated.

The case referred to by the Auditor-General is apparently the State of New South Wales v. Commonwealth, 7 C.L.R. p. 179, in which the High Court had to consider whether certain sums appropriated by Parliament by the Old Age Pensions Appropriation Act 1908 and the Coast Defence Appropriation Act 1908 were properly deducted from the revenue of the Commonwealth for the financial year in which the appropriations were made in order to ascertain the ‘surplus revenue’ payable to the States under section 94 of the Constitution and section 4 of the Surplus Revenue Act 1908.

The Court held that the words ‘surplus revenue’ in section 94 of the Constitution denote the same sum as the aggregate amount of the balances required by section 89 of the Constitution to be paid monthly to the States. It was further held that the Commonwealth Parliament has authority to appropriate money out of the Consolidated Revenue for a specific purpose, and money so appropriated, although not yet actually disbursed, is ‘expenditure’ within the meaning of section 89 of the Constitution, and cannot form part of the ‘surplus revenue’ distributable among the States under section 94 until the actual disbursement of it for that purpose is no longer lawful or no longer thought necessary by the Government. The moneys as appropriated were therefore properly deducted from the revenue in order to ascertain the ‘surplus revenue’ payable to the States.

Section 4 of the Surplus Revenue Act 1910 provides that the Commonwealth shall, during the period of ten years beginning 1 July 1910 and thereafter until Parliament otherwise provides, pay to each State an annual sum amounting to twenty-five shillings per head of the number of people of the State. Section 6 is as follows:

6. In addition to the payments referred to in section four of this Act, the Treasurer shall pay to the several States, in proportion to the number of their people, all surplus revenue (if any) in his hands at that close of each financial year.

In my view, the above case is authority for the principle that only those sums which have been appropriated by Parliament for the purposes of the Commonwealth for some definite or specific purpose are to be deducted from the Consolidated Revenue Fund for the purpose of ascertaining the amount of the surplus revenue payable to the States under the Surplus Revenue Act 1910. The payment to a Trust Fund would apparently be immaterial if the money is appropriated by law (see judgement of Isaacs J. at p. 202).

I think, therefore, that any revenue in the Consolidated Revenue Fund at the end of the financial year which is not appropriated by law is surplus revenue within the meaning of section 6 of the Surplus Revenue Act 1910. It would appear, however, from the report of the Auditor-General that, in practice no surplus is shown in the Fund at the end of the financial year because any remaining credit is transferred to trust funds under authority of appropriations made by Parliament. If any revenue, which would otherwise be surplus revenue, is, before the end of any financial year, transferred to any Trust Fund by virtue of an appropriation by Parliament, I think that no surplus revenue would remain in the hands of the Treasurer for payment to the States in accordance with the provisions of section 6 of the Act.

[Vol. 25, p. 284]