Act of Grace Payments and the Constitution

This article focuses on a hitherto underexplored but increasingly important area of public expenditure: act of grace payments. Act of grace payments are voluntary, highly discretionary gifts of money made by the executive in the absence of any legal duty to do so. The expenditure on such payments in Australia has been significant, and a lack of transparency creates serious risks to integrity. Further, the cases of Pape v Federal Commissioner of Taxation, Williams v Commonwealth and Williams v Commonwealth [No 2] have transformed the constitutional framework for public expenditure. Accordingly, this article conducts a fine-grained analysis of the constitutional legality of act of grace payments at the Commonwealth, state and territory levels. The authors argue that there are significant constitutional issues with act of grace payments at the Commonwealth level, and that many state-based act of grace payments are likely to be illegal. To address these issues, and to reduce the risk that payments will be made illegally, the authors recommend several legislative and soft law changes.