Now lawMoney & Tax Introduced in the House of Representatives, 12 May 2026

Budget law for state payments adds $3 billion fuel fund

This law covers federal spending for 2026-27 that is outside the normal running of government. That includes money for states and big purchases. It sets a $40 billion limit on project payments to the states. It also has a large emergency fund for fuel.

Official name: Appropriation Bill (No. 2) 2026-2027

Who it affects

• State and territory governments: Federal payments for projects and changes can go up to a $40 billion limit this year.
• Local councils: Some federal money for councils flows through this law, under rules set by named ministers.
• Anyone who relies on fuel, such as drivers, truckies and farmers: The government can move up to $3 billion fast under this law if fuel runs short.
• The Liberal and National parties: The Finance Minister has promised to ask the person who speaks for them on money before using more than $1 billion at once.

Money for states and projects

The government cannot spend public money unless Parliament agrees. All tax and other income goes into one pot. It is called the Consolidated Revenue Fund. A law has to say how much can come out and what it is for.

Three main spending bills come with each May Budget. The Budget is the government's yearly plan for money in and money out.

The Constitution is the rule book for how Australia is run. It says money for the normal yearly running of departments must sit in its own bill. That is Bill No. 1.

This bill is called Appropriation Bill (No. 2). An appropriation is money Parliament lets the government spend. This bill covers the rest. That means payments to states, territories and councils. It also covers brand new programs. And it covers big purchases like buildings or major computer systems.

What the words mean

The first part explains the words in the bill. It says the detailed budget papers for each area of government can be used to work out what the law means.

It also treats money moved between parts of the government as a real payment. No cash leaves the pot. But the spending still gets counted, and people can see it.

Five kinds of money

A list at the back of the bill sets out the amounts. They come in five kinds.

The first is money for states, territories and councils. In this bill, it goes through three bodies. They are the Department of Education, the department for roads and transport, and the National Indigenous Australians Agency. That agency runs programs for Aboriginal and Torres Strait Islander people. Each amount is tied to a set goal.

The second is for new programs run for the government, such as grants or benefits. A program counts as new in a few cases. Its goals might change. An agency might get this kind of money for the first time. Or it might have been paid for another way before.

The third pays for things owned and debts linked to those programs.

The fourth pays for big items worth more than $10 million, like a new building. It can also buy old and cultural items for national collections, such as museums.

The last is for government bodies that stand apart in law, such as some agencies and government companies. Their department passes the money on.

Big emergency fund for fuel

The Advance to the Finance Minister is an emergency fund. It is for urgent costs that were missed or not expected. Under this law, it can reach $3.6 billion for the year.

Of that, $600 million can be used for any urgent need. The other $3 billion can only be used to deal with fuel supply problems.

A matching fund of $2.4 billion sits in Bill No. 1. Of that, $2 billion is for fuel.

The government's notes on the bill say this lets the government act fast on fuel supply if needed. Any agency listed in the bill could ask for some. Money not spent can no longer be used from 1 July 2027.

Each use must be published on the Federal Register of Legislation, the official list of laws and rules. It must have an explanation. It must also be announced in a public statement to the news media.

The Finance Minister has promised to ask the person who speaks on money for the Liberal and National parties before using more than $1 billion at once.

A yearly report goes to Parliament. The Australian National Audit Office checks government spending. It reviews that report.

Parliament cannot vote to cancel a use of the fund. The notes say both big parties agree with this.

Limits on state payments

Most federal money for the states goes through another law. That is the Federal Financial Relations Act 2009, the law for federal payments to the states. The money passes through an account called the Federation Reform Fund.

This bill does not hand over that money. It sets the most that can be paid out of the fund this year.

Some top-up grants to the states can be spent however the states choose. These are limited to $5 billion for 2026-27.

Other payments go to states to do set projects or make changes. Some reward states for changes that matter to the whole nation. These are called national partnership payments. They are limited to $40 billion.

Treasury, the government's money department, expects to spend about $26.3 billion on them in 2026-27.

The notes say the limit has usually been set $10 billion to $15 billion above expected spending since 2014-15. The extra room covers new programs and big surprises, such as large natural disasters.

If a bushfire or flood hits, there is space to send help without a new law.

The limits go up by any GST that is part of the payments. GST is the 10% tax on most things you buy.

Rules for state payments

Section 96 of the Constitution lets the federal government give money to the states with rules attached. This bill passes that power to the ministers it lists. They can set the rules, amounts and timing. The notes say they rarely need to do this.

Money can also move into other accounts set up for the same purpose. The law switches itself off at the start of 1 July 2029.

Start date

The bill was brought to the House of Representatives, the lower house of Parliament, on Budget night, 12 May 2026. MPs debated it in late May. The House passed it on 4 June 2026.

The Senate, the other house of Parliament, got it on 22 June 2026. It passed the bill on 29 June 2026.

The Governor-General is the King's representative. He signed it into law on 30 June 2026. It became Act No. 55 of 2026.

It was set to start on 1 July 2026, or the day it was signed, whichever came later. So it started on 1 July 2026.

How they voted

Its journey through Parliament

Official sources

• Bill page on aph.gov.au
• Text of the bill
• Explanatory memorandum

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