Bills Digest 76 1995-96
Loan Bill 1996
WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments.
This Digest was available from 14 May 1996
CONTENTS
Date introduced:8 May 1996
House: House of Representatives
Portfolio: Finance
Commencement:On Royal Assent or 1 July 1996, which ever
is the later.
To provide for the financing of a prospective deficit in the Consolidated
Revenue Fund.
The Commonwealth Public Account, which is the main bank account of the
Commonwealth, consists of the CRF, the Loan Fund and the Trust Fund. The
CRF is the main working account of the Commonwealth and its main sources
of receipts are income tax, sales tax, payroll tax, customs duties, excise
and other departmental receipts. The main payments from the CRF are for
payments to or for other levels of government; social welfare and health
benefits; defence services; departmental expenditure on running expenses,
works and other services; and interest payments and sinking fund contributions.
Where payments for the CRF exceed receipts such that the CRF would be
in deficit, the CRF is balanced by charging certain payments to the Loan
Fund. Usually this is done by passing a Loan Act, which generally provides
for certain expenditures, usually defence expenditures, to be charged
to the Loan Fund. The CRF is thus reimbursed for any relevant defence
expenditures which may have been made from it. Defence expenditures tend
to be chosen because they involve large amounts of money and because the
Commonwealth does not seek Australian Loan Council approval for borrowings
of a defence nature. A Loan Act may also authorise the use of Loan Fund
monies to supplement the CRF receipts for the purpose of covering certain
other, non-defence payments.
The Trust Fund contains money held in trust for people and authorities
other than the Commonwealth Government; working accounts covering certain
factories, stores and services; other money held in trust under the authority
of Parliament to meet future expenditure; and funds and accounts not part
of the accounts of the Minister for Finance but which, because of their
enabling legislation, are part of the Trust Fund.
The term 'current financial year' is defined by clause 3 to be
the year ending 30 June 1997.
Clause 4 will authorise the Treasurer to borrow funds, by the
issue of bonds or Treasury Bills, for defence services during the current
financial year.
Clause 5 provides that funds raised under clause 4 are only to
be spent on defence services and borrowing costs.
Clause 6 will authorise the Treasurer to borrow, during the financial
year, funds to supplement the CRF. The amount borrowed is not to exceed
the deficit in the CRF and borrowing costs; is to be raised by the issue
of bonds or Treasury Bills and be within limits approved by the Loan Council.
Funds so borrowed are only to be used to make payments to the CRF and
to meet borrowing costs (clause 7).
A common source of confusion is the relationship between the CRF outcome
and the Budget outcome. It can occur, for example, that the CRF may be
in deficit and a Loan Act may be required to be passed in order for the
CRF to be balanced, while the Budget outcome itself might be in surplus.(1)
There are two reasons why this situation may arise. Firstly, the Budget
outcome reflects transactions on all three Funds in the Commonwealth Public
Account, not just the CRF. Secondly, the outcome of the CRF reflects the
difference between the payments and receipts of that Fund, whereas the
Budget outcome reflects the differences between Budget outlays and revenue.(2)
(1) D. James, An Overview of the Commonwealth Budgetary Process,
Parliamentary Research Service - Department of the Parliamentary Library,
1993, p. 9.
(2) Ibid.
Ian Ireland Ph. 06 277 2438
13 May 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other sources should
be consulted to determine whether the Bill has been enacted and, if so,
whether the subsequent Act reflects further amendments.
PRS staff are available to discuss the paper's contents with
Senators and Members and their staff but not with members of the public.
ISSN 1323-9032
© Commonwealth of Australia 1996
Except to the extent of the uses permitted under the Copyright Act
1968, no part of this publication may be reproduced or transmitted
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other than by Members of the Australian Parliament in the course of their
official duties.
Published by the Department of the Parliamentary Library, 1996.
This page was prepared by the Parliamentary Library, Commonwealth of
Australia
Last updated: 14 May 1996
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