Contingent payments

Contingent payments arise where the Commonwealth has committed to provide compensation when an event occurs or otherwise guarantees a State's financial position. Payments to the States will only arise if the relevant event occurs.

The Commonwealth is contributing to the participating States' schemes for out of court settlement costs for eligible individuals who contracted Hepatitis C through the blood supply service between 1985 and 1991.

A new spending measure associated with this funding is discussed in Budget Paper No. 2, Budget Measures 2016‑17.

Natural Disaster Relief and Recovery Arrangements (NDRRA)

The Commonwealth is providing funding under the NDRRA to assist the States with relief and recovery assistance following eligible natural disasters.

This includes payments to the States in response to recent natural disasters including the bushfires in South Australia in November 2015, Victoria in December 2015, Western Australia in January 2016 and in Tasmania commencing in January 2016 and flooding in the Northern Territory in December 2015. Payments are also being made for past disasters such as Tropical Cyclone Lam in the Northern Territory in February 2015, Tropical Cyclone Marcia in Queensland in February 2015, Tropical Cyclone Olwyn in Western Australia in March 2015 and Tropical Cyclone Nathan in both the Northern Territory and Queensland in March 2015.

The Commonwealth recognises a liability equal to the present value of future payments expected to be made to the States under the NDRRA. This is regardless of whether a State has completed eligible disaster reconstruction work or submitted an eligible claim under the NDRRA.

The estimated expenses in the table above reflect expected Commonwealth costs associated with disasters that have occurred in 2015‑16 and the unwinding of the discount on the provision, which reflects the time value of money.

Estimated cash payments are presented in the table below, illustrating when the Commonwealth expects to reimburse the States for costs incurred in relation to past disasters.