RESEARCH PAPER SERIES, 2018–19              28 March 2019

Budget concepts—Advance to the Finance Minister: a quick guide

Dinty Mather and Jonathan Chowns
Economic Policy Section

Several mechanisms are included within the Commonwealth Budget to provide flexibility to the Government for dealing with, or reflecting, unforeseen or unexpected occurrences. 

One of those mechanisms is the Advance to the Finance Minister (AFM), which provides a flexible source of appropriation that may, subject to certain conditions, be expended on any purpose the Government chooses.

Another mechanism—the Contingency Reserve—adjusts the presentation of the overall budget balance to reflect the general tendency of programs to cost more than anticipated, and for certain known contingencies that the Government considers likely to occur. The Contingency Reserve is the subject of another Quick Guide.

The AFM attracted attention in 2017 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.

Advances generally

In the first Appropriation Act passed by the Australian Parliament (the Appropriation Act 1901–02) the Parliament provided for an advance to the Treasurer of £100,000. The stated purpose of the advance was:

To enable the Treasurer to make advances to Public Officers and to pay expenses of an unforeseen nature which will afterwards be submitted for Parliamentary Appropriation …[1]

Such advances continued to be provided for in subsequent Appropriation Acts. 

For the 1978–79 financial year the Parliament began providing an advance to the Finance Minister instead of the Treasurer (Advance to the Finance Minister or AFM); reflecting the split in 1976 of the Department of the Treasury and the creation of the Department of Finance.[2]

How it works

Section 10 of the Appropriation Act (No. 1) 2018–2019 illustrates how the AFM works (the relevant provisions are reproduced at the end of this Quick Guide).

Subsection 10(2) allows the Finance Minister to make a Determination under the AFM mechanism. The Determination is non-disallowable legislative instrument.

The Determination records the schedule to which an additional allocation is being made and the amount.

The Determination is deemed to have the same effect as if the Appropriation Act were amended to increase the appropriation to the entity by that amount.

The Finance Minister may make a Determination only if they are satisfied that there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for already, in the Appropriation Act because:

•        something was omitted or understated in error or

•        the expenditure was unforeseen at the last moment that it was possible to include it as an item in the Appropriation Bill prior to introduction.

A similar provision is found in Appropriation Act (No. 2) 2018–2019, 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 AFM is established in the first Appropriation Acts each year and then replenished, if needed, whenever supplementary Appropriation Acts are passed.

The Finance Minister may not make Determinations for amounts that total more than the cap set in subsection 10(3) of the Appropriation Act (No. 1).

The amounts for appropriation to the AFM in 2018–19 were:

•        up to $295 million for the ordinary annual services of the Government—Appropriation Act (No. 1) 2018–2019

•        up to $380 million in relation to the other annual services of the Government—Appropriation Act (No. 2) 2018–2019.

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 with respect to the parliamentary departments.

A list of Determinations made by Finance Ministers including their amount and purpose is provided at Table 1. At the time of writing, one Determination has been by the Finance Minister for the 2018–19 Budget year.

High Court consideration

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 (ABS) 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 set out in subsection 10(1) of the Appropriation Act (No. 1) 2017–2018, including that it was not urgent and unforeseen. The High Court found the determination had been validly made.[3]

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.’[4] 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.

Criticism by the Senate Standing Committee for the Scrutiny of Bills

Following the High Court’s decision in Wilkie v Commonwealth, the Senate Standing Committee for the Scrutiny of Bills raised a concern about the availability of the Advance to the Finance Minister.  In particular the Committee said:

1.23 The committee notes that the AFM provision in this bill allows the Finance Minister to allocate additional funds to entities up to a total of $295 million via non-disallowable delegated legislation and that it therefore delegates significant legislative power to the Executive. One of the core functions of the Parliament is to authorise and scrutinise proposed appropriations. High Court jurisprudence has emphasised the central role of the Parliament in this regard. In particular, while the High Court has held that an appropriation must always be for a purpose identified by the Parliament, '[i]t is for the Parliament to identify the degree of specificity with which the purpose of an appropriation is identified'.[5]

The Committee went on to emphasise:

1.25 As AFM determinations are not subject to disallowance, the primary accountability mechanism in relation to AFMs (beyond the initial passage of the authorising provision in the regular appropriation bills) is an annual report tabled in Parliament on the use of the AFM. These reports are considered in committee of the whole on a motion that the statements of expenditure be approved. In addition, the reports are published on the Department of Finance website. The committee draws these reports to the attention of Senators.

1.26 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of allowing the Finance Minister to determine the allocation of significant additional funds to entities in a legislative instrument not subject to disallowance.[6]

Attachment A:  Extract from Appropriation Act (No. 1) 2018–2019

Part 3—Advance to the Finance Minister

10 Advance to the Finance Minister

(1)  This section applies if 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, in Schedule 1:

(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)  This Act has effect as if Schedule 1 were amended, in accordance with a determination of the Finance Minister, to make provision for so much (if any) of the expenditure as the Finance Minister determines.

(3)  The total of the amounts determined under subsection (2) cannot be more than $295 million.

(4)  A determination made under subsection (2) is a legislative instrument, but neither section 42 (disallowance) nor Part 4 of Chapter 3 (sunsetting) of the Legislation Act 2003 applies to the determination.

Table 1: list of Advances to the Finance Minister issued since 2010–11

Year

Portfolio

Appropriation Act

Advances provided ($)

Determination (Federal Register of Legislation)

2018–19

Department of Infrastructure, Regional Development and Cities

Appropriation Act (No. 2) 2018–2019

75 379 000.00

Advance to the Finance Minister Determination (No. 1 of 2018-2019)

2017–18

Australian Bureau of Statistics

Appropriation Act (No. 1) 2017–2018

122 000 000.00

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

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) 2015–2016

101 237 000.00

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

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) 2012–2013

24 117 394.97

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

Health and Ageing

Appropriation Act (No. 1) 2012–2013

107 000 000.00

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

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No. 1) 2012–2013

91 017 000.00

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

Health and Ageing

Appropriation Act (No. 1) 2012–2013

12 500 000.00

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

Health and Ageing

Appropriation Act (No. 1) 2012–2013

2 200 000.00

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

Regional Australia, Local Government, Arts and Sport

Appropriation Act (No. 1) 2012–2013

4 632 500.00

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

2011–12

Education, Employment and Workplace Relations

Appropriation Act (No. 1) 2011–2012

33 242 205.00

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

Education, Employment and Workplace Relations

Appropriation Act (No. 1) 2011–2012

14 327 392.10

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

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No. 1) 2011–2012

5 561 983.00

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

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No. 1) 2011–2012

17 610 000.00

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

Regional Australia, Local Government, Arts and Sport

Appropriation Act (No. 1) 2011–2012

6 000 000.00

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

Regional Australia, Local Government, Arts and Sport

Appropriation Act (No.1) 2011–2012

6 200 000.00

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

Regional Australia, Regional Development and Local Government

Appropriation Act (No.2) 2011–2012

41 881 000.00

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

2010–11

Prime Minister and Cabinet

Appropriation Act (No.1) 2010–2011

30 701 000.00

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

Families, Housing, Community Services and Indigenous Affairs

Appropriation Act (No.1) 2010–2011

14 159 000.00

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

Australian Electoral Commission

Appropriation Act (No.1) 2010–2011

5 100 000.00

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

Prime Minister and Cabinet

Appropriation Act (No.1) 2010–2011

7 500 000.00

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

Prime Minister and Cabinet

Appropriation Act (No.1) 2010–2011

3 130 000.00

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

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[1]               Appropriation Act 1901–02 (Cth), Schedule 2, Part 1, Division 25A.

[2].               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 (2017) 349 ALR 1, [2017] HCA 40, from paragraph 72.

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

[4].               Ibid., at [91].

[5].               Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, 2018, The Senate, 20 June 2018, pp. 7–8.

[6].               Ibid.