Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2022-2023-2024-2025
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
APPROPRIATION BILL (NO. 2) 2025-2026
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Finance,
Senator the Honourable Katy Gallagher)
Table of Acronyms and Defined Terms
AAA Actual Available Appropriation
AFM Advance to the Finance Minister
AI Act Acts Interpretation Act 1901
Commonwealth An entity as defined in section 10 of the PGPA Act
entity
corporate entity A corporate Commonwealth entity or a
Commonwealth company within the meaning of the
PGPA Act
CRF Consolidated Revenue Fund
Finance Minister Minister for Finance
GST Goods and Services Tax
non-corporate A non-corporate Commonwealth entity as defined in
entity the PGPA Act, or the High Court of Australia
PGPA Act Public Governance, Performance and Accountability
Act 2013
portfolio Portfolio Budget Statements
statements
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 1
Outline
Appropriation Bill (No. 2) 2025-2026
General Outline
1 This Explanatory Memorandum accompanies the Appropriation Bill (No. 2)
2025-2026 (the Bill).
2 The main purpose of the Bill is to propose appropriations from the
Consolidated Revenue Fund (CRF) for services that are not the ordinary annual
services of the Government.
3 The Bill proposes appropriations broadly equivalent to 7/12ths of the
estimated 2025-26 annual appropriations for services that are not the ordinary
annual services of the Government, plus 2025-26 Budget measures. The Bill also
includes appropriations for expenditure in the remainder of 2024-25 agreed since
the 2024-25 Additional Estimates.
4 The Supply Bill (No. 2) 2025-2026 appropriates the CRF for the other
5/12ths with a few exceptions, less any Budget measures, to ensure that there are
adequate appropriations available for the first five months of 2025-26 for services
that are not the ordinary annual services of Government.
5 In accordance with sections 53 and 54 of the Australian Constitution,
appropriations for the ordinary annual services of the Government must be
contained in a separate Bill from other appropriations. This Bill proposes
appropriations for services that are not the ordinary annual services of the
Government. Annual appropriations that are for the ordinary annual services of
the Government are proposed in Appropriation Bill (No. 1) 2025-2026, on
broadly the same proportional basis as this Bill. Together with the Appropriation
(Parliamentary Departments) Bill (No. 1) 2025-2026, these three Bills are termed
the Budget Appropriation Bills.
6 The Portfolio Budget Statements (portfolio statements) show amounts
included in both Appropriation Bills (Nos. 1 and 2) 2025-2026 and Supply Bills
(Nos. 1 and 2) 2025-2026. This Explanatory Memorandum should be read in
conjunction with the various 2025-26 portfolio statements, which contain details
of the appropriations set out in the Schedules to the Bills.
Structure of the Bill
7 The Bill provides for the appropriation of specified amounts for expenditure
by Australian Government entities, primarily being non-corporate Commonwealth
entities (non-corporate entities) under the Public Governance, Performance and
Accountability Act 2013 (PGPA Act).
8 Part 1 of the Bill deals with definitions, the interpretative role of the
portfolio statements, and the concept of notional transactions.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 2
Outline
9 Part 2 of the Bill proposes appropriations to make payments of the amounts
in Schedule 2 for State, ACT, NT and local government items (clause 7),
administered items (clause 8), administered assets and liabilities items (clause 9),
other departmental items (clause 10) and corporate entity items (clause 11).
10 Part 3 of the Bill specifies the amount available for allocation from the
Advance to the Finance Minister (AFM) after the commencement of the Bill, once
enacted (clause 12).
11 Part 4 of the Bill deals with credits to special accounts (clause 13) and the
conditions that apply to State, ACT, NT and local government items (clause 14
and Schedule 1), provides for amounts to be appropriated as necessary (clause 15)
and specifies when the Bill is repealed (clause 16). In addition to the AFM
provision in Part 3, clause 15 of the Bill recognises that the appropriations
proposed in the Bill may also be varied by the PGPA Act.
Financial Impact
12 The Bill, once enacted, will appropriate the amounts specified in Schedule 2
as set out in clause 6.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 3
Statement of Compatibility with Human Rights
Statement of Compatibility with Human Rights
1 The Bill seeks to appropriate money for services that are not considered to
be the ordinary annual services of the Government.
2 Accordingly, the Bill performs an important constitutional function, by
authorising the withdrawal of money from the CRF for the broad purposes
identified in the Bill.
3 However, as the High Court has emphasised, beyond this, the Appropriation
Acts do not create rights and nor do they, importantly, impose any duties.
4 Given that the legal effect of Appropriation Acts is limited in this way, the
Bill is not seen as engaging, or otherwise affecting, the rights or freedoms relevant
to the Human Rights (Parliamentary Scrutiny) Act 2011.
5 Detailed information on the relevant appropriations, however, is contained
in the portfolio statements.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 4
Notes on Clauses
Notes on Clauses
Part 1--Preliminary
Clause 1--Short title
1 Clause 1 specifies that the short title of the Bill, once enacted, will be the
Appropriation Act (No. 2) 2025-2026.
Clause 2--Commencement
2 Clause 2 provides for the Bill to commence as an Act on the later of either
1 July 2025 or the day of the Royal Assent.
Clause 3--Definitions
3 Clause 3 defines the key terms used in the Bill, such as "administered item",
"non-corporate entity", and "State, ACT, NT and local government item".
Clause 4--Portfolio statements
4 Clause 4 declares that the portfolio statements are relevant documents for
the purposes of section 15AB of the Acts Interpretation Act 1901 (AI Act).
Paragraph 15AB(2)(g) of the AI Act provides for material to be considered in the
interpretation of an Act if the material is declared by the Act to be a relevant
document for the purposes of section 15AB of the AI Act.
5 The purpose of the portfolio statements is to provide information on the
proposed allocation of resources to government outcomes by Commonwealth
entities within each portfolio. The term "portfolio statements" is defined in
clause 3 to mean the Portfolio Budget Statements tabled in relation to the Bill.
Clause 5--Notional transactions between entities that are part
of the Commonwealth
6 Clause 5 provides that notional transactions between non-corporate entities
are to be treated as if they are real transactions. Notional transactions, therefore,
require the debiting of an appropriation made by the Parliament. The payments of
the amounts in Schedule 2 from one non-corporate entity to another do not
require, in a constitutional sense, an appropriation, because both non-corporate
entities operate within the CRF. For reasons of financial discipline and
transparency, the practice has arisen for these payments between non-corporate
entities to be treated as though they required an appropriation, and to debit an
appropriation when such notional payments are made. This is consistent with
section 76 of the PGPA Act.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 5
Notes on Clauses
7 When a non-corporate entity makes a payment, whether to another
non-corporate entity or another part of the same non-corporate entity (such as a
different "business unit" within the entity), it is to be treated as a "real" payment.
This means that the appropriation made by the Parliament is extinguished by the
amount of the notional payment, even though no payment is actually made from
the CRF. Similarly, a notional receipt in such a situation is to be treated by the
receiving non-corporate entity (where relevant) as if it were a real receipt. This
does not mean every internal transfer of public money involves a notional
payment and receipt.
Part 2--Appropriation items
Clause 6--Summary of appropriations
8 Clause 6 sets out the total of the appropriations in Schedule 2 to the Bill.
The amounts in Schedule 2 may be increased by a determination made under
subclause 12(2) (clause 12 deals with the Advance to the Finance Minister).
9 The amounts in Schedule 2 to the Bill may be adjusted further in accordance
with sections 74 and 75 of the PGPA Act. Specifically:
• Section 74 of the PGPA Act, when read with Rule 27 of the Public
Governance, Performance and Accountability Rule 2014, permits
non-corporate entities to retain certain types of receipts by adding them to
their most recent departmental item or other type of appropriation in an
Appropriation Act when prescribed.
• Appropriations may be adjusted by amounts recoverable by a non-corporate
entity from the Australian Taxation Office for Goods and Services Tax
(GST), in accordance with section 74A of the PGPA Act. The amounts
specified in Schedule 2 exclude recoverable GST. The appropriations shown
represent the net amount that the Parliament is asked to allocate to particular
purposes.
• Section 74A has the effect of increasing an appropriation by the amount of
the GST qualifying amount arising from payments in respect of the
appropriation. As a result, there is sufficient appropriation for payments
under an appropriation item, provided that the amount of those payments,
less the amount of recoverable GST, can be met from the initial amount
shown against the item in Schedule 2. Section 74A also applies to notional
transactions between and within non-corporate entities.
• Items may be adjusted to take into account the transfer of functions between
non-corporate entities, in accordance with section 75 of the PGPA Act. It is
possible that adjustments under section 75 may result in new items and/or
outcomes being created in an Appropriation Act.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 6
Notes on Clauses
10 Additionally, the Finance Minister manages the payment from items in the
Bill to Commonwealth entities using a discretionary power under section 51 of the
PGPA Act. Section 51 allows the Finance Minister to manage the timing and the
amount of appropriated money to be made available to a Commonwealth entity
(an entity as defined in section 10 of the PGPA Act), except as required by law.
Clause 7--State, ACT, NT and local government items
11 Clause 7 provides administered appropriations for financial assistance to the
States, ACT, NT and local governments. State, ACT, NT and local government
items are appropriated separately for each outcome, making it clear what the
funding is intended to achieve. The amount specified in Schedule 2 for an
outcome may be applied by a non-corporate entity for the purpose of making
payments to any of the States, ACT, NT or local government authorities for the
purpose of achieving that outcome.
12 Clauses 7 and 14 delegate the Parliament's power under section 96 of the
Constitution to impose terms and conditions on payments of financial assistance
to the States to the responsible Ministers listed in Schedule 1 to the Bill.
Schedule 1 also lists the Ministers who may determine the amounts and timing of
those payments. These payments are usually made pursuant to eligibility rules and
conditions established by the Government or the Parliament.
13 Additional information on payments to the States, Territories and local
governments can be found in the portfolio statements of the relevant entities.
These documents can be found at www.transparency.gov.au.
Clause 8--Administered items
14 Subclause 8(1) provides for the appropriation of new administered outcome
amounts to be applied by a non-corporate entity for the purpose of contributing to
the outcome for a non-corporate entity. An "administered item" is defined in
clause 3 to be an amount set out in Schedule 2 opposite an outcome for a
non-corporate entity under the heading "New Administered Outcomes". As with
administered items in the Appropriation Bill (No. 1) 2025-2026, New
Administered Outcomes are appropriated separately for each outcome, making it
clear what the funding is intended to achieve.
15 The purposes for which each administered item can be spent are further set
out in subclause 8(2). Subclause 8(2) provides that where the portfolio statements
indicate a particular activity is in respect of a particular outcome, then expenditure
on that activity is taken to be expenditure for the purpose of contributing to
achieving that outcome.
16 New Administered Outcomes are administered by a non-corporate entity on
behalf of the Government (e.g. certain grants, benefits and transfer payments).
These payments are usually made pursuant to eligibility rules and conditions
established by the Government or the Parliament. Specifically, administered items
are tied to outcomes (departmental items are not).
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 7
Notes on Clauses
17 New Administered Outcomes are typically proposed when a non-corporate
entity's outcomes are changed to reflect new program objectives, strategies and/or
activities; and/or
• a non-corporate entity seeks administered operating appropriations for the
first time (including existing non-corporate entities that have received
departmental operating appropriations in the past); and/or
• annual administered operating appropriations are proposed for the first time,
for programs previously funded by special appropriations.
Clause 9--Administered assets and liabilities items
18 Clause 9 provides amounts in Schedule 2 to acquire new administered
assets, enhance existing administered assets and/or discharge administered
liabilities relating to activities administered by non-corporate entities on behalf of
the Government. Administered assets and liabilities appropriations are provided
for functions managed by a non-corporate entity on behalf of the Government.
Administered assets and liabilities items can be applied for any outcomes of the
non-corporate entity in Schedule 2 to this Act, or Schedule 1 to the Appropriation
Act (No. 1) 2025-2026.
Clause 10--Other departmental items
19 Clause 10 appropriates amounts for other departmental expenditure under
the heading "Equity Injections", over which the non-corporate entity exercises
control. This clause provides that the amount specified in other departmental
items for a non-corporate entity may be applied for the departmental expenditure
of the entity.
20 Equity Injection appropriations may be used to make payments related to
enhancing the entity's asset base or reducing prior year liabilities, and would not
generally include other (operating) expenditure. Expenditure that may be typically
covered includes:
• the acquisition and construction costs associated with new departmental
assets, for example, the construction of a new building that will facilitate
departmental activities;
• the acquisition of heritage and cultural assets by Designated Collection
Institutions;
• the replacement of major departmental assets valued at more than
$10 million, for example, the development of a departmental software
application valued at more than $10 million to replace an existing software
application; and
• the reduction of prior year liabilities, for example, the payment of liabilities
incurred in a prior year relating to remediation costs to restore sites.
21 Other departmental items are not expressed in terms of a particular financial
year. For example, Equity Injection appropriations provide funding to meet the
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 8
Notes on Clauses
cost expected to be incurred in the Budget year to acquire a new asset, however,
for a number of reasons, some part of the appropriation might not be required
until a later financial year. Other departmental items are available until they are
spent, or the Act through which they were appropriated is repealed. Annual
Appropriation Acts have a lifespan of up to three years after which they
automatically repeal.
Clause 11--Corporate entity items
22 Clause 11 provides for appropriations of money for corporate entities to be
paid from the CRF by the relevant Department. Clause 11 provides that payments
for corporate entities must be used for the purposes of those entities.
23 A "corporate entity" is defined in clause 3 to be a corporate Commonwealth
entity or a Commonwealth company within the meaning of the PGPA Act. Many
corporate entities receive funding from appropriations. However, these entities are
legally separate from the Commonwealth, and as a result, do not debit
appropriations or make payments from the CRF.
24 Corporate entity payments are initiated by requests to the relevant portfolio
Departments from the corporate entities. Corporate entities hold the amounts paid
to them on their own account.
25 Subclause 11(2) provides that if a corporate entity is subject to another Act
that requires amounts appropriated by the Parliament for the purposes of that
entity to be paid to the entity, then the full amount of the corporate entity payment
must be paid to the entity.
26 The purpose of subclause 11(2) is to clarify that subclause 11(1) is not
intended to qualify any obligations in other legislation regulating a corporate
entity, where that other legislation requires the Commonwealth to pay the full
amount appropriated for the purposes of the entity.
27 In addition to the annual appropriations, some corporate entities may also
receive public money from related entities such as a portfolio Department and
from special appropriations managed by those Departments. Many corporate
entities also receive funds from external sources.
Part 3--Advance to the Finance Minister
Clause 12--Advance to the Finance Minister
28 Subclause 12(1) enables the Finance Minister to allocate additional amounts
for expenditure when satisfied that there is an urgent need for expenditure in the
current year that is not provided for, or is insufficiently provided for, in
Schedule 2 either because of an erroneous omission or understatement, or because
of unforeseen circumstances. The allocated amount is referred to as the Advance
to the Finance Minister (AFM).
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 9
Notes on Clauses
29 Subclause 12(2) enables the Finance Minister to make a determination to
allocate an amount from the AFM, with this Act having effect as if Schedule 2
were amended in accordance with such determination.
30 Subclause 12(3) provides that the total amount that can be determined under
subsection 12(2) of this Act cannot be more than $600 million.
31 Subclause 12(4) provides that a determination under subclause 12(2) is a
legislative instrument, which must be tabled in the Parliament. It is not subject to
section 42 (disallowance) or Part 4 of Chapter 3 (sunsetting) of the Legislation
Act 2003; legislative instruments enabled by the Bill, once enacted, automatically
repeal when the Act itself repeals (see clause 16).
32 The following strong accountability and transparency arrangements will
continue to apply to AFM determinations made during 2025-26, including:
• registration of each AFM determination with an explanatory statement on
the Federal Register of Legislation (legislation.gov.au);
• a media release by the Finance Minister in weeks when AFMs are issued;
• an annual assurance review by the Australian National Audit Office
(ANAO); and
• an annual report on the AFM allocations tabled in the Parliament, inclusive
of the ANAO's assurance review report.
Why AFM determinations are exempt from disallowance
33 Disallowance of an AFM determination would frustrate the purpose of the
provision, which is to provide additional appropriation for urgent expenditure.
This also reflects the need for entities to have certainty of appropriation when
making expenditures. The disallowance of an AFM determination would not
invalidate expenditure that has already been made in reliance upon it. However, it
would leave entities short of the funds that they need to carry out their other
ordinarily budgeted expenditure in what remains of a financial year.
34 Disallowance of an AFM determination would reduce an entity's
appropriation to its original level. Yet the urgent expenditure it had already
undertaken validly prior to disallowance, in reliance upon the determination,
would count towards the newly reduced appropriation.
35 The reason why this occurs is because an AFM determination does not
authorise expenditure on a particular purpose. It increases an existing
multi-purpose appropriation item (departmental or administered) in the
Appropriation Act that covers expenditure on a range of different programs. If a
House disallows the determination, it reverses the increase and impairs the
funding remaining for other programs that are unrelated to the AFM.
36 Accordingly, disallowance would leave the entity with a shortfall in the
appropriation available to fund the ongoing expenditure for which the
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 10
Notes on Clauses
Government originally budgeted and which the Parliament approved when it
passed the Appropriation Act. Because of the unavoidable negative impacts that
disallowance of an AFM would cause to the routine operations of the
Government, there is a bipartisan consensus that AFM determinations should be
exempt from disallowance.
Part 4--Miscellaneous
Clause 13--Crediting amounts to special accounts
37 Clause 13 provides that if the purpose of an item in Schedule 2 is also the
purpose of a special account (regardless of whether the item expressly refers to the
special account), then amounts may be debited against the appropriation for that
item and credited to the special account. Special accounts may be established
under the PGPA Act by a determination of the Finance Minister (section 78) that
is disallowable by the Parliament or by another Act (sections 79 and 80). The
determination or Act that establishes the special account will specify the purposes
of the special account.
Clause 14--Conditions etc. applying to State, ACT, NT and local
government items
38 Clause 14 deals with the Parliament's power under section 96 of the
Constitution to provide financial assistance to the States. Clause 14 delegates the
power to the responsible Ministers listed in Schedule 1 to the Bill, by providing
the Ministers named in Schedule 1 with the power to determine, in the way
described in subclause 14(3):
• conditions under which payments to the States, ACT, NT and local
government may be made: paragraph (2)(a); and
• the amounts and timing of those payments: paragraph (2)(b).
39 Subclause 14(4) provides that determinations made under subclause 14(2)
are not legislative instruments, because these determinations are not altering the
appropriations approved by the Parliament. Determinations under subclause 14(2)
are administrative in nature and will simply determine how appropriations for
State, ACT, NT and local government items will be paid.
40 Determinations under clause 14 are rare. Most payments to the States and
Territories are governed by, and appropriated through, the Federal Financial
Relations Act 2009. For the payments to the States, ACT, NT and local
government in an even-numbered Appropriation Act, generally other legislative or
agreed frameworks determine how the payments are made and when, such as the
Local Government (Financial Assistance) Act 1995 or a National Agreement.
Many of these arrangements can be found on the Federal Financial Relations
website (http://www.federalfinancialrelations.gov.au/).
41 Although financial assistance is provided to the ACT, NT and local
governments without reference to section 96 of the Constitution, those payments
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 11
Notes on Clauses
are administered in the same way. Therefore, the Ministers identified in
Schedule 1 may set the amounts and timing and impose terms and conditions on
those payments. Subclause 14(5) also notes that clause 14 will not limit the
powers of the Commonwealth under section 96 of the Constitution to provide
financial assistance to a State which is not appropriated by a State, ACT, NT and
local government item.
42 In the Bill, appropriations to the States, ACT, NT and local government are
sought for the Department of Education against Outcome 1, the Department of
Infrastructure, Transport, Regional Development, Communications and the Arts
against Outcomes 1 and 3, and the National Indigenous Australians Agency
against Outcome 1.
43 Further information may also be found in the portfolio statements for the
respective portfolios which are available at www.transparency.gov.au.
Clause 15--Appropriation of the Consolidated Revenue Fund
44 Clause 15 provides that the CRF is appropriated as necessary for the
purposes of the Bill. Significantly, this clause means that there is an appropriation
in law when the Act commences. That is, the appropriations are not made or
brought into existence just before they are paid, but when the Act commences.
This clause indicates that the amounts appropriated may be affected by the
PGPA Act, in particular sections 74 and 75 (see clause 6), after the Act
commences.
Clause 16--Repeal of this Act
45 Clause 16 provides that the Bill, once enacted, will be repealed at the start
of 1 July 2028.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 12
Notes on Clauses
Schedule 1--Payments to or for the States, ACT, NT and
local government
46 In accordance with clause 14, Schedule 1 lists the Ministers responsible for
determinations on payments to or for the States, ACT, NT and local government.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 13
Notes on Clauses
Schedule 2--Services for which money is appropriated
47 Schedule 2 specifies the appropriations proposed for services that are not the
ordinary annual services of the Government. Schedule 2 contains a summary table
which lists the total amounts for each portfolio. A separate summary table is
included for each portfolio, with other tables detailing the appropriations for each
Commonwealth entity. More details about the appropriations in Schedule 2 are
contained in the portfolio statements and the second reading speech for the Bill.
48 Schedule 2 includes, for information purposes, a figure for the previous
financial year labelled "Actual Available Appropriation (italic figures) -
2024-2025". The Actual Available Appropriation (AAA) is an estimate that does
not affect the amount available at law. That figure provides a comparison with the
proposed appropriations.
49 The AAA is calculated for each item by adding the amounts appropriated in
the previous financial year's annual Appropriation Acts, plus any AFMs, and any
adjustments under sections 51 and 75 of the PGPA Act. In some instances, the
figure may also be affected by limits applied administratively by the Department
of Finance. In addition, where an entity's outcome structure has changed since the
last Appropriation Act, only ongoing outcomes may be shown in the Bill. For
these reasons, the AAA figures may be different from the sum of amounts
provided in earlier Appropriation Acts.
Explanatory Memorandum to Appropriation Bill (No. 2) 2025-2026
House of Representatives 14