RESEARCH PAPER SERIES, 2017–18              9 May 2018

Budget Concepts—Advance to the Finance Minister: a Quick Guide

Dinty Mather and Jonathan Chowns

Economics Section

An established feature of the Appropriation Bills is the Advance to the Finance Minister (AFM). The AFM recently attracted attention when its use to conduct the same-sex marriage postal ballot by the Australian Bureau of Statistics (ABS) was the subject of a High Court challenge.

This brief explains the concept, how it has been used and summarises the High Court’s judgment in which it found that the AFM was validly used in that case.

Some basic Budget principles—The Consolidated Revenue Fund and appropriations

The Consolidated Revenue Fund (CRF) is established by section 81 of the Australian Constitution. All moneys received by the Commonwealth must be paid into it. Section 83 of the Constitution requires that the Commonwealth may withdraw any monies from the CRF only if an Act of the Parliament authorises an appropriation and specifies its purpose.

Such appropriations are found in the Appropriation Acts, the first of which for the 2018-19 financial year was tabled by the Treasurer on 8 May 2018, and also for certain standing appropriations, like payments for Medicare, in the legislation creating the Commonwealth’s liability to pay. For instance, subsection 125(1) of the Health Insurance Act, which provides the framework for Medicare payments, says:

125 (1) All amounts payable by the Commonwealth under Part II or under an arrangement in force under section 129A shall be paid out of the Consolidated Revenue Fund, which is appropriated accordingly.(emphasis added)

Mechanisms to deal with uncertainty—the Advance to the Finance Minister

Forecasts of future expenditure needs are sometimes necessarily inexact. They may be based on assumptions that prove to be wrong, assessments of future economic conditions that do not eventuate or circumstances that are simply unanticipated.

It is established practice to build into estimates of future expenditure some flexibility to account for contingencies. Two Budget mechanisms to achieve flexibility are the Contingency Reserve and the Advance to the Finance Minister. They serve different purposes to address different kinds of uncertainty.

The AFM is a long-standing feature of the Appropriation Bills dating from 1979 when the Advance to the Finance Minister replaced the Advance to the Treasurer following the establishment in 1976 of the office of the Finance Minister and, with it, the creation of the Department of Finance.[1]

The AFM is a provision in the Appropriation Bills to release money without any specified outcome or purpose.

As a recent example, section 10 of the Appropriation Bill (No. 1) 2018–19 provides that the Finance Minister can issue an advance to an entity when:

the Finance Minister is satisfied that there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, […]:

(a)              because of an erroneous omission or understatement; or

(b)              because the expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Bill for this Act before that Bill was introduced into the House of Representatives.[2]

In order to make a payment from the AFM under that Act, the Finance Minister must make a Determination under section 10. The Determination is a legislative instrument, but disallowance and sun-setting do not apply under section 42 and Part 4 of Chapter 3 of the Legislation Act 2003.[3]

A similar provision is found in Appropriation Bill (No. 2), the difference being that the Appropriation Bill (No. 1) deals with the ‘the ordinary annual services of the Government’ and Appropriation Bill (No. 2) concerns ‘other annual services of the Government’.

Typically, the Advance is established in the first Appropriation Acts each year and then replenished whenever supplementary Appropriation Acts are passed.

The proposed amounts for appropriation to the AFM in 2018-19 are:

•        up to $295 million for the ordinary annual services of the Government—Appropriation Bill (No. 1) 2018–19[4]

•        up to $380 million in relation to the other annual services of the Government—Appropriation Bill (No. 2) 2018–19.[5]

A list of determinations made by Finance Ministers, their amount and purpose, features at the end of this brief.

The Appropriation Bills for the Parliamentary Departments make similar provision for advances to the responsible Presiding Officers—the President of the Senate and the Speaker of the House of Representatives.

High Court challenge

In the Advance to the Finance Minister Determination (No. 1 of 2017–2018), made on 9 August 2017, the Finance Minister determined that a payment of $122 million be made to the Australian Bureau of Statistics from the Advance to the Finance Minister. The Explanatory Statement to the Determination explains that this payment was made so that the ABS could conduct a voluntary, postal plebiscite on the subject of same-sex marriage. The ABS had an existing statutory authority to carry out that type of work and to spend money to do so under section 9 of the Census and Statistics Act 1905 (Cth) and section 13 of the Census and Statistics Regulation 2016 (Cth).

In Wilkie v Commonwealth, the Member for Denison, Andrew Wilkie, and others challenged this use of the AFM on several grounds. These included that the use set out in the Finance Ministers’ Determination on that occasion did not satisfy the criteria including that it was not urgent and unforeseen. The High Court found otherwise.[6]

Another basis of the challenge was that the Determination did not sufficiently describe the purposes for which the moneys were to be expended, and was therefore invalid as an ‘appropriation in blank’. In rejecting that argument, the High Court held that ‘the degree of specificity of the purpose of an appropriation is for Parliament to determine.’[7] Further, and critically, the High Court said that the appropriation was not effected by the Finance Minister making a Determination: the appropriation was effected by section 12 of the Act. The Minister’s Determination was merely a decision to allocate already appropriated money to a particular purpose.

List of Advances to the Finance Minister issued since 2010-11

Year

Portfolio

Appropriation Act

Advances provided

Determination (Federal Register of Legislation)

Minister and Purpose of advance

2017–18

Australian Bureau of Statistics

Appropriation Act (No.1) 2017–18

$ 122,000,000.00

Advance to the Finance Minister Determination (No. 1 of 2017-2018)

Minister Cormann

To undertake the voluntary postal plebiscite for the Plebiscite (Same-Sex Marriage) Bill 2016.

2016–17

There were no Advances to the Finance Minister issued in the 2016-2017 financial year.

2015–16

Australian Electoral Commission

Appropriation Act (No.1) 2015–16

$ 101,237,000.00

Advance to the Finance Minister Determination (No. 1 of 2015-16)

Minister Cormann

To enable AEC to implement the electoral reforms recently agreed to by Parliament in the Commonwealth Electoral Amendment Act 2016, as well as to bring forward election preparations for the 2016 Federal Election

2014–15

There were no Advances to the Finance Minister issued in the 2014-2015 financial year.

2013–14

There were no Advances to the Finance Minister issued in the 2013-2014 financial year.

2012–13

Education, Employment and Workplace Relations

Appropriation Act (No.1) 2012–13

$ 24,117,394.97

Advance to the Finance Minister Determination (No. 1 of 2012-2013)

Minister Wong

To enable DEEWR to cover payments under the General Employee Entitlements and Redundancy Scheme (GEERS).

Health and Ageing

Appropriation Act (No.1) 2012–13

$ 107,000,000.00

Advance to the Finance Minister Determination (No. 2 of 2012-2013)

Minister Wong

To enable Health to make payments through the Local Hospital Networks Special Account, to Victorian Local Hospital Networks.

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No.1) 2012–13

$ 91,017,000.00

Advance to the Finance Minister Determination (No. 3 of 2012-2013)

Minister Wong

To enable FaHCSIA to meet payment obligations under the Family Support Program before 30 June 2013. As part of the 2013-2014 Budget, the Government agreed to bring forward $91.857 million for services under the Family Support Program. 

Health and Ageing

Appropriation Act (No.1) 2012–13

$ 12,500,000.00

Advance to the Finance Minister Determination (No. 4 of 2012-2013)

Minister Wong

To enable Health to make payments to the Epworth HealthCare Geelong Hospital and to provide grants to organisations to address Female Genital Mutilation.

Health and Ageing

Appropriation Act (No.1) 2012–13

$ 2,200,000.00

Advance to the Finance Minister Determination (No. 4 of 2012-2013)

Minister Wong

To enable payments to be made to the Australian Red Cross Society. 

Regional Australia, Local Government, Arts and Sport

Appropriation Act (No.1) 2012–13

$ 4,632,500.00

Advance to the Finance Minister Determination (No. 5 of 2012-2013)

Minister Wong

To enable the Department of Regional Australia, Local Government, Arts and Sport to make payments to service providers to improve opportunities for community participation in sport and recreation.

2011–12

Education, Employment and Workplace Relations

Appropriation Act (No.1) 2011–12

$ 33,242,205

Advance to the Finance Minister Determination (No. 2 of 2011-2012)

Minister Gray

To enable the Department of Education, Employment and Workplace Relations to meet an increased number of General Employee Entitlements and Redundancy Scheme payments.

Education, Employment and Workplace Relations

Appropriation Act (No.1) 2011–12

$ 14,327,392

Advance to the Finance Minister Determination (No. 3 of 2011-2012)

To enable the Department of Education, Employment and Workplace Relations to meet an increased number of General Employee Entitlements and Redundancy Scheme payments.

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No.1) 2011–12

$ 5,561,983

Advance to the Finance Minister Determination (No. 4 of 2011-2012)

Minister Wong

To enable the Department of Education, Employment and Workplace Relations to meet an increased number of General Employee Entitlements and Redundancy Scheme payments.

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No.1) 2011–12

$ 17,610,000

Advance to the Finance Minister Determination (No. 5 of 2011-2012)

Minister Wong

To enable the Department of Families, Housing, Community Services and Indigenous Affairs to meet commitments for No Interest Loan Scheme subsidies under the Home Energy Saver Scheme.

Regional Australia, Local Government, Arts and Sport

Appropriation Act (No.1) 2011–12

$ 6,000,000

Advance to the Finance Minister Determination (No. 6 of 2011-2012)

Minister Wong

To enable the Department of Regional Australia, Local Government, Arts and Sport to meet commitments under funding agreements with community and cultural bodies in 2011-2012.

Regional Australia, Local Government, Arts and Sport

Appropriation Act (No.1) 2011–12

$ 6,200,000

Advance to the Finance Minister Determination (No. 7 of 2011-2012)

Minister Wong

To enable the Department of Regional Australia, Local Government, Arts and Sport to meet commitments under funding agreements with sports and recreation bodies in 2011-2012.

Prime Minister and Cabinet

Appropriation Act (No.2) 2011–12

$ 41,881,000

Advance to the Finance Minister Determination (No. 1 of 2011-2012)

Minister Wong

To enable the Department of Regional Australia, Regional Development and Local Government to meet legal commitments under funding arrangements that fall due before the Appropriation passage of the next annual Acts.

2010–11

Prime Minister and Cabinet

Appropriation Act (No.1) 2010–11

$ 30,701,000

Advance to the Finance Minister Determination (No. 1 of 2010-2011)

Minister Wong

To enable the Department of the Prime Minister and Cabinet to meet a shortfall of funding for expenditure relating to the transfer of responsibility for cultural affairs, including movable cultural heritage, and support for the arts.

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No.1) 2010–11

$ 14,159,000

Advance to the Finance Minister Determination (No. 2 of 2010-2011)

Minister Wong

To enable the Department of Families, Housing, Community Services and Indigenous Affairs to meet increased expenditure of the Helping Children with Autism Early Intervention program.

Finance and Deregulation

Appropriation Act (No.1) 2010–11

$ 5,100,000

Advance to the Finance Minister Determination (No. 3 of 2010-2011)

Minister Wong

To enable the Australian Electoral Commission to ensure ongoing employee and supplier commitments can be paid as they fall due.

Prime Minister and Cabinet

Appropriation Act (No.1) 2010–11

$ 7,500,000

Advance to the Finance Minister Determination (No. 4 of 2010-2011)

To enable the Department of Prime Minister and Cabinet to cover payments for the 2011-12 budget measure ‘Supporting football in the lead up to the 2015 Asian Cup’. This measure has expenditure implications in the 2010-11 financial year that were unforeseen at the time of the 2010-11 Appropriation Bills (No. 1) and (No. 3).

Prime Minister and Cabinet

Appropriation Act (No.1) 2010–11

$ 3,130,000

Advance to the Finance Minister Determination (No. 5 of 2010-2011)

Minister Wong

To enable the Department of Prime Minister and Cabinet to fund early event planning activity and contribute to the establishment of the Local Organising Committee for the 2011-12 budget measure ‘Supporting football in the lead up to the 2015 Asian Cup’.

Source: Department of Finance, ‘Advances to the Finance Minister (AFM)’, Department of Finance website.

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[1].               A history of the inclusion within Appropriation Acts (No. 1) of Advances to the Finance Minister and, before then, of Advances to the Treasurer is set out by the High Court in its judgment in Wilkie v Commonwealth from paragraph 72.

[2].              Appropriation Bill (No. 1) 2018–2019, section 10; Appropriation Bill (No. 2) 2018–2019, section 12.

[3].              Legislation Act 2003.

[4].               Appropriation Bill (No. 1) 2018–2019, clause 10.

[5].               Appropriation Bill (No. 2) 2018–2019, clause 12.

[6].               Wilkie v Commonwealth (2017) 349 ALR 1, [2017] HCA 40, at [151].

[7].               Ibid., at [91].