Bills Digest No.
48, 2019–20
PDF version [665KB]
Michael Klapdor
Social Policy Section
8
November 2019
Contents
The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill and the Bills
Digest
Background
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
Date introduced: 17
October 2019
House: House of
Representatives
Portfolio: Agriculture
Commencement: On
the earlier of proclamation or six months after Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at November 2019.
The Bills Digest at a glance
The Farm
Household Support Amendment (Relief Measures) Bill (No. 1) 2019 (the Bill)
will:
- increase
the maximum time a person is able to access the Farm Household Allowance (FHA)
from four years over a lifetime to four years in each specified ten year period
- change
the allowable deduction regime to provide for losses from a farm enterprise and
farm-related businesses to be deducted from the amount of income assessed under
the FHA income test
- introduce
a one-off lump sum ‘relief payment’ for those who have exhausted their four
year maximum FHA period by 1 July 2020—the payment will be worth $7,500 for a
single recipient or $6,500 for a member of a couple ($13,000 for a couple
combined) and
- allow
for the Minister for Agriculture to prescribe further lump sum
payments—including the amount of the payment and the eligibility
conditions—through the Minister’s Rule (a legislative instrument).
The measures were announced on 17 October 2019 as the next
instalment of the Government’s response to the 2019 Independent Review into the
FHA program, following on from changes introduced in July 2019.
The changes to the maximum time a person can receive the
FHA were recommended by this Review.
The Review recommended much broader changes to the income
test arrangements than those proposed in the Bill, including a decoupling of
the FHA from the social security system.
The Review found that linking the FHA program to drought
via supplementary or relief payments could lead to perverse outcomes—it
recommended the Government provide relief payments through a program separate
from the FHA.
Providing the Minister with the power to provide further
relief payments through legislative instrument is a significant measure. The
Minister will be able to set qualification criteria and the payment amounts
through changes to the Minister’s Rule. While any such legislative instrument
will be subject to disallowance by the Parliament, the power is very broad in
scope with no guiding principles or eligibility criteria set out in the Farm Household
Support Act 2014. The scope of the power to make these payments appears
to be unprecedented, especially when compared with comparable payments such as
lump-sum disaster payments which have some eligibility criteria and guidance on
payment rates set out in legislation.
The Bill has broad support from non-government parties and
stakeholders.
According to the Explanatory Memorandum the measures in
the Bill are expected to cost $47 million through to June 2023.
Purpose of
the Bill
The purpose of the Farm
Household Support Amendment (Relief Measures) Bill (No. 1) 2019 (the Bill)
is to amend the Farm
Household Support Act 2014 (FHS Act) and the Social Security
(Administration) Act 1999 (SS Admin Act) to:
- increase
the maximum time a person is able to access the Farm Household Allowance (FHA)
from four years over a lifetime to four years in each specified ten year period
(Schedule 1)
- change
the allowable deduction regime to provide for losses from a farm enterprise and
farm-related businesses to be deducted from the amount of income assessed under
the FHA income test (Schedule 2)
- introduce
a one-off lump sum ‘relief payment’ for those who have exhausted their four
year maximum FHA period by 1 July 2020—the payment will be worth $7,500 for a
single recipient or $6,500 for a member of a couple ($13,000 for a couple
combined) (Schedule 3) and
- allow
for the Minister for Agriculture to prescribe further lump sum
payments—including the amount of the payment and the eligibility
conditions—through the Farm Household Support
Minister’s Rule 2014 (Minister’s Rule), which is a legislative instrument
(Schedule 3).
The measures were announced on 17 October 2019 as the next
instalment of the Government’s response to the 2019 Independent Review of the
FHA program.[1]
The changes to the maximum time a person can receive the FHA were recommended
by this Review.[2]
Structure of
the Bill and the Bills Digest
The Bill contains three schedules. The Bills Digest
provides information on the FHA including recent changes in the ‘Background’
section and examines the proposed amendments in the ‘Key issues and provisions’
section below.
Background
Farm
Household Allowance
The FHA is an income support payment which assists
eligible farmers and their partners who are experiencing financial hardship. It
is paid at the same rate as the social security payment Newstart Allowance (or
the same rate as Youth Allowance if the recipient is aged under 22 years).[3]
The payment is time-limited: farmers can only receive the payment for up to
four cumulative years.[4]
FHA recipients are granted a Health Care Card which
enables access to discounted medicines under the Pharmaceutical Benefits Scheme
and other concessions. Recipients can also receive a $4,000 activity supplement
to pay for approved activities including training or professional advice.
Recipients required to have a Farm Financial Assessment can receive a separate
supplement worth up to $1,500 to assist with the cost of the assessment.[5]
A temporary supplement, the FHA Supplement, was payable to FHA recipients
during one or both supplement payments periods: 1 September 2018 to
1 December 2018 and 2 December 2018 to 1 June 2019. The supplement amount
for each period was $3,000 each for members of a couple and $3,600 for singles.[6]
The FHA was introduced in 2014 via the FHS Act and
replaced a number of financial supports offered to farmers during times of
drought, in particular, the Exceptional Circumstances Relief Payment. The
previous Exceptional Circumstances arrangements had been found to be
inequitable and ineffective as they could result in farm businesses being less
responsive to drought conditions.[7]
The FHA was designed to support farmers in financial
difficulty regardless of the specific cause or whether they were located within
a specific drought declared area. It is intended to give farmers ‘breathing
space to implement plans and seek training to become financially
self-sufficient, so they are better placed to sustain their farming business’.[8]
Number of recipients
According to the Department of Agriculture, as at 4
October 2019, more than 12,700 people had received the FHA since it was
introduced in 2014.[9]
There were around 6,600 people receiving the FHA as at 4 October 2019.[10]
Expenditure
Estimated actual expenditure for the FHA in 2018–19 was
$163.4 million but this was expected to decrease to $59.7 million in 2019–20
(not including the impact of the measures proposed in the Bill).[11]
The Department of Agriculture’s Annual Report 2018–19 states that
$114.2 million was spent on FHA payments in 2018–19.[12]
Payment
rates
The current payment rates for the FHA are set out in Table
1.
Table 1: Farm Household
Allowance payment rates
| Recipient circumstances |
Maximum basic rate |
Energy Supplement |
Total |
| Single, aged under 22, no
dependent children |
$455.20 |
$7.00 |
$462.20 |
| Single, aged 22 or over, no
dependent children |
$559.00 |
$8.80 |
$567.80 |
| Single, aged 60 or over, no
dependent children, after 9 continuous months on payments |
$604.70 |
$9.50 |
$614.20 |
| Single, aged under 22, with
dependent children |
$596.50 |
$9.20 |
$605.70 |
| Single, aged 22 or over, with
dependent children |
$604.70 |
$9.50 |
$614.20 |
| Partnered, aged 22 or over |
$504.70 |
$7.90 |
$512.60 |
| Partnered, aged under 22,
no dependent children |
$455.20 |
$7.00 |
$462.20 |
| Partnered, aged under 22,
with dependent children |
$499.90 |
$7.70 |
$507.60 |
Source: Department of Human Services (DHS), A
guide to Australian Government payments: 20 September–31 December 2019, DHS, Canberra, 2019. Other supplementary
payments may be payable depending on a recipient’s circumstances, including:
Pharmaceutical Allowance, Rent Assistance, Telephone Allowance, Remote Area
Allowance and bereavement payments.
Other
supports available
The FHA is only
one of the Australian Government supports available to farms in difficulty,
particularly during drought. Other supports available include the Farm
Management Deposits scheme, concessional taxation arrangements, concessional
loans, cash payments under the Drought Community Support Initiative, counselling
and mental health supports.[13]
Eligibility
for the FHA
To be eligible for the FHA, an individual must be a farmer
or partner of a farmer and meet residency requirements, income and assets tests
as well as mutual obligation requirements. The income and assets tests and
mutual obligation requirements are different from those that apply to Newstart
Allowance and are designed to allow farmers to remain on their farm rather than
being forced to sell off some or all of their farm assets in order to qualify
for support. Certain waiting or preclusion periods may also apply before an
eligible recipient can start receiving the FHA.[14]
Income test
To meet the FHA income test, a claimant must have income
below the cut-off point for Newstart Allowance or Youth Allowance, whichever
applies (the cut-off point is the point at which a person’s Newstart Allowance
rate is reduced to zero under the Newstart Allowance income test).[15]
The current income test cut-off for a single Newstart Allowance recipient is
$1,075.34 per fortnight and for a partnered recipient it is $983.34 (each).[16]
Deductions can apply in determining assessable income.
Allowable deductions are set out in the Minister’s Rule.[17]
The Minister’s Rule currently provides for allowable deductions in relation to
farm income to be any amounts that would reduce a person’s ordinary income
under section 1075 of the Social Security Act
1991 (SS Act). This section relates to permissible deductions of
business income such as expenses necessary for the conduct of a business with
the purpose of earning a taxable income.[18]
The Minister’s Rule also provides that where a farm
enterprise has less than zero income for the year, some off-farm income may be
deducted in calculating total income using what is known as the ‘off-farm
income offset’.[19]
Off-farm income is any amount earned, derived or received that was not produced
by an activity of the farm enterprise (such as agistment payments, interest
payments and rental income). The deduction can only be used where the ordinary
farm income from the farm enterprise is less than zero and the off-farm income
is being used to pay interest on a loan related to the farm enterprise. A
maximum of $80,000 of off-farm income can be deducted from assessable income
under the income test in this way, if the FHA claimant meets all the applicable
requirements for this deduction.[20]
Assets test
There are two parts of the assets test: one applies to
non-farm assets and the other to farm assets.
The non-farm and liquid assets test assesses liquid
assets, such cash held in bank accounts, term deposits and shares; and non-farm
assets such as jewellery, furniture, investment properties, businesses and
vehicles. The family home and up to two hectares of land surrounding it (on a
single title and used only for domestic purposes) is exempt from the non-farm
assets test.[21]
A farm asset is any asset that is used or held wholly or mainly for the
purposes of a farm enterprise and includes land used for the purpose of a farm
enterprise, water resources or access rights, livestock, crops, plant or
equipment, and the unpaid portion of a loan used to purchase farm assets.[22]
The combined value of assessable non-farm assets must not
exceed the asset limits for Newstart Allowance. The current asset test limits
are:
- single
homeowner: $263,250
- single
non-homeowner: $473,750
- couple
homeowner combined: $394,500
- couple
non-homeowner combined: $605,000.[23]
The farm assets test assesses the net value of the farm’s
assets. To be eligible for the FHA, the total value of farm assets must not
exceed $5 million.[24]
In some cases, hardship provisions can apply which allow
for some assets to be made exempt from the assets test. This can occur where a
person is unable to rearrange their financial affairs, is in severe financial
hardship and is unable to sell or borrow against an asset.[25]
Mutual obligation requirements
The mutual obligation requirements for the FHA require a
recipient to complete a Farm Financial Assessment and enter into a Financial
Improvement Agreement.[26]
The Farm Financial Assessment considers the financial
position of the farmer, their partner and the farm. As noted above, up to
$1,500 can be provided to help cover the cost of consulting a prescribed
advisor to complete the assessment.
The Financial Improvement Agreement is a plan for working
towards financial self-reliance and sets out activities to be undertaken to
improve the farmer’s financial situation. Activities can include undertaking
training or study, obtaining professional advice, seeking or being willing to
undertake paid work or any other activities approved by the Department of Agriculture
and Water Resources.[27]
Recent
policy changes
In August 2018, the Coalition Government introduced and
passed the Farm
Household Support Amendment (Temporary Measures) Act 2018 to
temporarily increase the farm assets value limit to $5 million from 1 September
2018 to 30 June 2019 and provide for two instalments of the FHA Supplement
during the same period.[28]
Then Minister for Agriculture and Water Resources, David
Littleproud, stated that ‘these temporary measures are designed to help
our farmers in need in the short term while we undertake an independent review
of the program’.[29]
2019–20 budget measure—forced disposal of livestock
In the 2019–20 Budget, the Government announced that it
would provide $3.1 million over two years from 2018–19 to exempt net income
from the forced sale of livestock from the FHA income test, where that income
is invested in a Farm Management Deposit.[30]
The measure was implemented via the Farm Household
Support (Forced Disposal of Livestock) Minister’s Rules 2019 which modified
the definition of income in the SS Act. To meet the requirements, the
disposal (including killing) of livestock must occur wholly or mainly for one
of the following reasons:
- an
action by the Australian Government or a state or territory government that has
the effect that land or water cannot be used to support the livestock
commercially (for example, compulsory acquisition of an estate in land or changing
a law governing how land or water may be used), other than an action taken with
the farmer’s free consent
- drought
or natural disaster affecting the availability of pasture, fodder or water so
that the farm could not reasonably support the livestock
- reasonable
concern for the welfare of the livestock
- a
requirement by or under a law of the Commonwealth, a state or a territory to
dispose of the livestock.[31]
An amount received for the forced disposal of livestock
must be deposited in a Farm Management Deposit or Centrelink must be notified
that it will be deposited within 42 days.[32]
Independent Review of the Farm Household Allowance
The Independent Review was completed in February 2019.[33]
The Review Panel was chaired by Michele Lawrence, a dairy farmer and member of
the Agriculture Industry Advisory Council.
The Review made six broad recommendations:
- decoupling the FHA from the SS Act with
the aim of simplifying the application process and tailoring the eligibility
settings to farm businesses
- strengthening mutual obligation requirements to make them more
meaningful and enable farmers to plan through current hardships and future
business shocks or to leave the industry with dignity
- refocus the Rural Financial Counselling Service to focus on business
coaching
- improve communications of the FHA’s purpose and requirements
- distinguish the FHA from drought and promote its broader purpose of
supporting farmers during financial hardship irrespective of the cause
- build in regular assessment of the performance of the scheme.[34]
In July 2019, the Coalition Government introduced and
passed the Farm
Household Support Amendment Act 2019.[35]
That Act:
- made
permanent the temporary increase in the FHA farm assets value limit to $5
million
- removed
indexation of the farm assets value limit to movements in the Consumer Price
Index (CPI) and
- clarified
the treatment of allowable deductions for the purposes of the FHA income test
so that farm business deductions apply to farm business income, and off-farm
deductions apply to off-farm income.[36]
The Act implemented only part of one of the actions
associated with the Independent Review’s recommendations: maintaining the $5
million farm asset limit.[37]
However, the amendments to indexation were counter to the Review’s suggestion
that the limit continue to be indexed to movements in the Consumer Price Index.[38]
Committee
consideration
Senate Rural
and Regional Affairs and Transport Legislation Committee
On 17 October 2019, the Senate referred the Bill to the
Senate Rural and Regional Affairs and Transport Legislation Committee for
inquiry and report by 7 November 2019.[39]
The Committee tabled its report on 7 November 2019.[40]
Details of the inquiry are at the Committee
website.
The Committee recommended the Bill be passed stating:
The prompt enactment of this bill will make sure farmers can
receive ongoing financial assistance, while also providing a broader scope for
off-farm income streams which do not jeopardise the eligibility of farmers for
the FHA. Given the importance of these measures, the committee recommends that
the bill be passed as a matter of priority.[41]
Australian Labor Party (Labor) senators made additional
comments to the Committee’s report stating their position that there should be
no time-limit for FHA recipients while the current drought is ongoing. Labor senators
noted: ‘the Government has not provided a coherent rationale for cutting
farmers off and then providing the equivalent of six months payment up-front
when the regular payment is withdrawn’.[42]
Labor senators also raised concerns with the proposed relief
payment:
Currently, there is confusion as to why the payment is being
paid to farmers and submitters have raised concerns that the relief payment
should not be considered as an exit payment. The Government must explain the
intent behind the relief payment and under what circumstances additional relief
payments will be made by the Minister’s rules.[43]
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing, the Senate Standing Committee for
the Scrutiny of Bills was yet to consider the Bill.
Policy
position of non-government parties/independents
Australian
Labor Party
Labor supports the Bill. Shadow Minister for Agriculture
Joel Fitzgibbon stated in his second reading speech: ‘We support this bill,
just as we've supported every other bill—this is the 12th we've supported. This
is the 12th package of amendments to the farm household allowance, and we've
supported each and every one of them’.[44]
Labor has also called on the Government to remove the four
year limit on the FHA altogether. Fitzgibbon stated:
We need to take away the time cap, which is forcing farmers
off income support, and park it away until we get to the other end of this
drought, and let's all pray that it comes sooner rather than later. I don't
think there's an Australian out there who thinks that we should be throwing
farming families off income support—a very modest payment—at this point in
time.[45]
Centre
Alliance Party
The Centre Alliance Party supports the Bill. Rebekha
Sharkie MP commended the Bill to the House in her second reading speech and
noted the findings of the Independent Review of the FHA, particularly
recommendations relating to mutual obligation requirements and the need for a
focus on long-term viability and structural change.[46]
Katter’s
Australian Party
Katter’s Australian Party MP Bob Katter supports the Bill,
stating in his second reading speech:
We're here to talk about family farm assistance. We applaud
the government for extending that to four years but, unfortunately and sadly,
if you want to look at an average figure for droughts—not that there is an
average figure—you're probably looking at about seven years. Under intense
pressure they have added a cash payment at the end of the four years. We
appreciate that as well.[47]
Pauline
Hanson’s One Nation Party
Senator Pauline Hanson reportedly criticised the current
assistance for farmers as ‘lousy’ and has proposed allowing farmers to continue
to receive the FHA beyond the proposed four year time limit.[48]
The proposal would allow the Secretary of the Department of Agriculture to
provide ‘exceptional circumstances certificates’ which would allow FHA
recipients to continue to receive the payment beyond the time limit if the area
they reside in is still in drought.[49]
Position of
major interest groups
Independent
Review Panel
The members of the Independent Review of the FHA panel
made a submission to the Senate Rural and Regional Affairs and Transport
Legislation Committee’s inquiry into the Bill.[50]
In the submission the panel stated their support for the Bill on the condition
that further amendments would follow. The panel members stated: ‘We do not
believe that the proposed amendment addresses the systemic concerns
underpinning the broader recommendations in our report’.[51]
NSW Farmers’
Association
The NSW Farmers’ Association stated its support for the
Bill in its submission to the Senate committee inquiry into the Bill but noted that
‘many issues identified by our members and other stakeholders are yet to be
addressed’.[52]
The Association wanted more information on what supports would be available to
farmers who have reached their four year limit in ten (under the proposed
amendments) and clarity around the purpose of the proposed lump sum relief
payments. The Association raised concerns with the implementation of the changes
to the off-farm income offset and issues with the current application process
for the FHA:
Our members are of the view that the overall procedure for
processing applications and assessing loss and income needs to be overhauled,
rather than tinkering with different parts. There is significant complexity in
the application process and in the ongoing reporting requirements, and these
need to be addressed.[53]
Isolated
Children’s Parents’ Association of Australia Inc.
The Isolated Children’s Parents’ Association of Australia
Inc. (ICPAA) stated its support for the Bill in a submission to the Senate
committee inquiry.[54]
The ICPAA also suggested the Government should consider expanding FHA
eligibility to non-farmers from rural areas.[55]
Financial
implications
According to the Explanatory Memorandum the measures in
the Bill are expected to cost $47 million through to June 2023.[56]
This is not the net fiscal impact as the Explanatory Memorandum states that
this figure does not include the costs of service delivery or cost-offsets from
tax revenue.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[57]
Parliamentary
Joint Committee on Human Rights
At the time of writing, the Parliamentary Joint Committee
on Human Rights had not considered the Bill.
Key issues
and provisions
The Bill proposes to:
- increase
the maximum time a person is able to access the FHA from four years over a
lifetime to four years in each specified ten year period
- change
the allowable deduction regime to provide for losses from a farm enterprise and
farm-related businesses to be deducted from the amount of income assessed under
the FHA income test
- introduce
one-off lump sum ‘relief payment’ for those who have exhausted their four year
maximum FHA period by 1 July 2020—the payment will be worth $7,500 for a single
recipient or $6,500 for a member of a couple ($13,000 for a couple combined)
- allow
for the Minister for Agriculture to prescribe further lump sum
payments—including the amount of the payment and the eligibility
conditions—through the Minister’s Rule (a
legislative instrument).
Schedule 1—Time
limit on payment
When the FHA was first introduced in 2014, the time limit
for receipt of the payment was three years in a person’s lifetime. Former
Minister for Agriculture, Barnaby Joyce, stated at the time: ‘The three years
of income support provided by the allowance will give farm families time to
plan for their future and take action to achieve greater financial security and
self-reliance’.[58]
The 2013 Intergovernmental Agreement on National Drought
Reform (which led to the establishment of the FHA) was reviewed in 2018 but the
Review did not raise the three year time limit on claiming FHA as a significant
issue.[59]
Further, the Secretary of the Department of Agriculture and Water Resources
Daryl Quinlivan told a Senate Estimates hearing that the issue of the
time limit ‘was not raised in any prominent way in the review and it has not been
a major part of the conversations with Commonwealth and state ministers on the
matter that I have been party to’.[60]
The time limit was increased to four years from 1 August
2018 as a result of amendments made by the Farm Household
Support Amendment Act 2018. Then Minister for Agriculture and Water
Resources David Littleproud stated:
When the farm household allowance program was introduced in
2014, the cumulative period of farm household allowance available to an
eligible farmer or their partner was set at three years, or 1,095 days.
However, this government has seen firsthand and listened to
the experiences of Australian farmers. We know that some farmers and their
families have been, and continue to be, subject to pressures that extend beyond
a cumulative three year period and need more time to recover from hardship and
get back on their feet.[61]
The more recent Independent Review of the FHA found that
changes in the time limit can create expectations of ongoing support and
impeded the effectiveness of the program in delivering structural change.[62]
The Independent Review quoted two witnesses on the change to a four year time
limit:
The theory of a three year payment was a good one and was able
to be used as leverage to get people to act. After the introduction of the
fourth year the message of ‘no more, this is it’ was erased. Some customers are
already asking ‘if it does not rain will there be a fifth year?’ (Farm
Household Case Officer, Victoria)
It was difficult when the fourth year was announced as it
undid the work of the counsellors telling people it is time limited and they
need to use the time to do the hard thinking and make the strategic decisions
to be able to improve their circumstances. (Rural financial counsellor, New
South Wales)[63]
The Independent Review considered that further changes to
the four year time limit should not occur but found that the four years in a
lifetime limit was unrealistic and should be changed to four years in every
ten. The Review found:
Allowing access only once in a lifetime does not acknowledge
that good and viable farmers can be affected by multiple financial downturns
outside of their control over the course of their lives.[64]
The Independent Review recommended the four years in ten
time limit as it:
... provides farmers with a reasonable level of support over
their lifetime and strikes a balance between acknowledging the variability of
agriculture and supporting farmers in need, while not impeding structural
change and entrenching welfare dependency.[65]
Key provisions
Items 1–4 of Schedule 1 amend sections 3, 4
and 5 of the FHS Act (which set out the objects of the Act, the
simplified outline and the definitions, respectively) to change references to
the current four year time limit with references to the new fours years in a
specified ten year period time limit.
Item 6 repeals subsection 6(1) of the FHS Act
and inserts proposed subsections 6(1) and 6(1A) which define the
new terms specified 10 year period and meets the four years
or less requirement. A specified 10 year period is a period of ten
years beginning on 1 July 2014 or on a tenth anniversary of 1 July 2014.
A person is considered to meet the four years or less requirement if, on a day FHA
is payable to an individual, they have not received FHA for more than 1,460
days in the specified 10 year period in which the day falls. Under the proposed
changes, those who have exhausted their FHA time limit will not be able to
benefit from the amendment until the next ten year period commences from
1 July 2024.
Paragraph 8(h) of the FHS Act provides for the
current four year time limit for FHA qualification for a farmer. Item 9
repeals and substitutes paragraph 8(h) to add the qualification requirement
that the person meets the four years or less requirement.
Item 10 repeals and substitutes paragraph 9(j) to
apply the same qualification requirement to a farmer’s partner.
Schedule
2—Farm business losses
Current FHA
income test
The current income test arrangements for the FHA are
complex and the Independent Review of the FHA found the current design creates
confusion and ‘unintended perverse outcomes’.[66]
In particular, the Review found that the income test treatment of non-farm
income acted as a disincentive for farmers to earn income through contracting
or agistment activities which are classified as ‘non-farm’ despite using farm
equipment or land. The Review recommended decoupling the FHA from social
security income test arrangements and designing a FHA-specific income test
drawing more on taxation classifications of income where appropriate.[67]
As discussed in the ‘Background’ section to this Bills
Digest, the current income test provides for allowable deductions from
assessable income in a way that replicates the treatment of business expenses
and income under the social security means test. The current income test also
provides for a special non-farm income offset where non-farm income that is
used to pay interest on a farm-related loan can be excluded from the income
test. This non-farm income offset can only be used where the farm enterprise is
making a loss and a maximum of $80,000 in non-farm income can be excluded in
this way.
2019 changes
Some small changes were made to the income deduction
arrangements from 1 July 2019 as a result of amendments in the Farm Household
Support Amendment Act 2019. The amendments clarified that the business
deductions that arose from the farm business could be applied only to farm
income and deductions that arose from non-farm businesses could only be applied
to non-farm income.[68]
The amendments did not change the non-farm income offset component of the
income test.
Proposed
amendments—broadening the income offset provisions
Schedule 2 of the Bill proposes to replace the
existing income test deduction arrangements, including the non-farm income
offset arrangements. The new arrangements will mean that farm business losses
can be used as a deduction against any other assessable income under the income
test. The definition of farm business will include the farm enterprise and
farm-related businesses—those that use the same equipment or other physical
assets. A limit on the loss amount a person and their partner (if any) can
deduct from their assessable income in this way will apply—$100,000 in a
financial year. A person and their partner cannot have their assessable income
reduced below zero under the proposed provisions.
The proposed amendments allow for the existing social
security business income assessments and deductions to apply in working out a
person’s assessable income under the income test (currently, subsection 67(3)
of the FHS Act prevents the permissible deductions for business income
provisions under the SS Act applying to income from farm enterprises). The
only FHA-specific deduction that will apply will be in relation to farm
business losses.
Key
provisions
Section 67 of the FHS Act sets out how to work out
allowable deductions for the purposes of working out an FHA claimant’s ordinary
income (the income assessed under the income test). Subsections 67(2) and (5)
allow for the Minister’s Rule to prescribe the kinds of allowable deductions
that relate to a farm enterprise, maximum amounts that can be deducted and
circumstances where the allowable deduction provisions may not apply.
As noted above, the Minister’s Rule currently allows for
the same business deductions as apply under the SS Act to apply to farm
income for the purposes of section 67. The Minister’s Rule also provides for
the ‘off-farm income offset’ which allows for a deduction where certain
off-farm income is used to pay interest on a loan related to the farm
enterprise. Currently, the upper limit on the amount that can be deducted under
this offset is $80,000.
Item 1 of Schedule 2 repeals and substitutes
section 67 of the FHS Act to shift all the key provisions which set out
allowable deductions from the FHS Act to the Minister’s Rules.
Items 2 and 3 amend Parts 1 and 2 of the
Minister’s Rule to provide for the new allowable deduction regime. Under the
proposed changes, the provisions relating to general business deductions that apply
as under the SS Act and the off-farm income offset provisions will be
removed.
The new provisions will allow for a farm business that
operates at a loss to claim the loss amount as a deduction on their
ordinary income.[69]
The maximum amount that can be deducted by the person and their partner (if
any) is $100,000 per annum.[70]
A farm business is defined at proposed section 7B of the
Minister’s Rule as a business that is a farm enterprise and any directly
related business. A directly related business, also defined in
the same section, is one that relies to a large extent on the use of shared
equipment or other shared physical assets with the farm enterprise. The amount
of the loss is calculated as the difference between the farm business’ income
and any reductions. Reductions are the same deductions as are made for a tax
year under Division 1A of Part 3.10 of the SS Act were you to assume the
income from the farm business for the tax year exceeded the reductions (that
is, as if the business were not making a loss) and the person was the only
person carrying on the farm business.
While the definition of farm business can capture some
activities that would previously have been considered ‘off-farm income’—for
example, income from agistment—the new provisions will no longer allow for
off-farm income used to pay interest as an offset. However, the provisions will
enable any losses from the farm or farm-related businesses to reduce the level
of income from other sources (such as financial investments or other
employment) that will be assessed under the FHA income test.
Schedule
3—Relief payments
Schedule 3 of the Bill provides for a lump-sum
relief payment to be paid to farmers who reach (or have reached) the FHA time
limit prior to 1 July 2020. The Schedule also gives the Minister a rule-making
power to make further lump sum payments, including the eligibility for and
amount of the payment.
Relief
payment for reaching the time limit
The proposed relief payment for those who have received
the FHA for 1,460 days (four years) prior to 1 July 2020 will be paid at a rate
of $6,500 for a member of couple ($13,000 combined if both members of the
couple qualify) and $7,500 for a single person. The only qualifying criterion
for the payment is that the person has received the FHA for four years prior to
1 July 2020. No claim is required for the payment and no debt will be raised
against someone who receives the payment when they should not have (for
example, due to error or where they received the incorrect rate of payment).[71]
Officials from the Department of Agriculture told a Senate
Estimates hearing in October 2019 that around 1,800 farmers and partners who
are currently on the FHA are expected to have reached the four year limit by
June 2020.[72]
In his second reading speech on the Bill, Minister for
Water Resources, Drought, Rural Finance, Natural Disaster and Emergency
Management David Littleproud noted that the ‘FHA is not a drought measure’.[73]
However, the relief payment is explicitly a drought relief measure:
... in recognition of the extending severe drought conditions,
this bill provides for a relief payment for those farmers who have or will
exhaust their four years of payment up until 30 June 2020. Each couple that has
come to the end of their four-year payment period will be given a drought
relief payment of $13,000 and for singles this drought relief payment will be
$7,500. That's the equivalent of six months FHA payment.
Some FHA recipients have done everything they can to respond
to their circumstances. Many have continued to face severe drought conditions.
Nothing any of us can do will make it rain but we can ease this transition off
payment. This creates more space for those people to take the time they need to
decide what their long-term future holds.[74]
Independent
Review opposed relief payments through the FHA program
The Independent Review was against using the FHA to provide
one-off relief payments. The Review heard evidence that the payment of the FHA
Supplement lump sums had increased confusion around the purpose of the FHA
program and that ‘the purpose and objective of the FHA has been lost to a large
extent in the promotion of the supplementary payment’.[75]
The Review heard from rural financial counsellors that these lump sum payments,
presented as drought relief, diverted the FHA from its original
purpose—assistance during the time of adjustment—to a welfare payment for those
in drought.[76]
The Independent Review found that the FHA Supplement
payments provided in 2018 and 2019 had attracted a cohort of farmers not suited
to the objectives of the FHA such as pensioners who switched payments in order
to receive the lump-sum payments.[77]
The Review considered that linking the FHA program to
drought via supplementary payments could lead to perverse outcomes and
concluded: ‘The Panel considers that the FHA program should not be used to
provide one-off drought relief payments, and that the government should find
alternative programs to provide such assistance’.[78]
Power to make further relief payments
Schedule 3 will also give the Minister for
Agriculture the power to make further relief payments through amendments to the
Minister’s Rule.[79]
The powers are very broad, allowing for the Minister to prescribe qualification
requirements that might apply to these payments and the amounts. As with the
relief payment for those who have exhausted their FHA time limit, there will be
no requirement for a claim to be made and any overpayments cannot be raised as
debts (except in cases of fraud).[80]
Amendments to the Minister’s Rule are legislative
instruments and can be disallowed by the House of Representatives or the Senate.[81]
However, providing such a broad rule-making power to a Minister to make
lump-sum payments of any amount and with no guiding criteria set out in the Act
appears to be unprecedented. The lump-sum Australian Government Disaster
Recovery Payment (AGDRP)—which is intended to be paid in the immediate
aftermath of a major disaster such as a bushfire or flood—includes eligibility
criteria and basic provisions for the amount of payment in the SS Act
(which can then be further adjusted by the Minister).[82]
The AGDRP is also a lump sum payment but is paid at a much lower rate than the
proposed relief payment—$1,000 for an adult and $400 for a child.[83]
These rates have not been changed since the payment was introduced in 2006.[84]
The Explanatory Memorandum provides no information as to
the kinds of situations in which further relief payments are envisaged. The
Minister’s second reading speech also does not refer to the proposed
rule-making power, the circumstances in which it might be used or why there is
a need for this power. Deputy Prime Minister Michael McCormack has suggested
that there will be further supplementary payments available to those who reach
the FHA time limit due to the ongoing drought:
Well, the Farm Household Allowance of course is available for
four years in every ten, and once farmers have finished with the Farm Household
Allowance, if they’re coming off that, if they’ve been in drought for four
years, well there’ll be a supplementary payment of $13,000 for couples. But we’re
not going to allow any farmers in drought-stricken areas to miss out. To not
know where their next income is coming from. We will support farmers, the
legislation allows us to make supplementary payments, and we will continue to
do that ... It’s very, very important that people know that the Federal
Government has their back. That certainly in those drought-stricken areas,
there will be assistance, there will be ongoing assistance and we will be
supporting our farmers.[85]
Key
provisions
Item 3 of Schedule 3 inserts proposed Part
4B—Relief payments into the FHS Act.
Proposed section 89E sets out the qualification
requirements for a relief payment:
- if
1,460 days of the FHA was payable to the person before 1 July 2020 or
- they
meet the circumstances set out in the Minister’s Rule.
Proposed section 89F sets out the amount of a
relief payment:
- if
their previous FHA rate was calculated on the basis of them being a member of a
couple—$6,500
- any
other previous FHA circumstances—$7,500 or
- where
the amount is paid under circumstances set out in the Minister’s Rule, an
amount prescribed in the Minister’s Rule.
Proposed section 89F also provides that an amount
paid as a relief payment that should not have been paid is not a debt due to
the Commonwealth (except where the payment was obtained by fraud).
Item 6 amends table item 6 at subsection 93(1) of
the FHS Act so a relief payment is considered a ‘social security
payment’ under the SS Act. Item 7 amends table item 14 at section
95 so that the SS Act provisions relating to debt recovery through
deductions from a person’s social security payment do not apply to relief
payments.
Item 9 repeals section 12L of the SS Admin Act and
substitutes proposed section 12L, which provides that a claim is not
required for FHA supplement or a relief payment made under the FHS Act.
Item 10 adds relief payment to the list of payments
defined as a lump sum benefit at subsection 47(1) of the SS
Admin Act. This section provides for Centrelink’s administration of lump
sum payments and sets out that they must be paid to the person entitled to them
unless another provision applies, such as where the person has nominated
another individual to receive their payments.
[1]. B
McKenzie (Minister for Agriculture), Making
the FHA work better for farmers, media release, 17 October 2019.
[2]. M
Lawrence, G Somerset and R Slonim, Rebuilding
the FHA: a better way forward for supporting farmers in financial hardship: an independent
review of the Farm Household Allowance (Independent Review of the FHA),
report prepared for the Department of Agriculture and Water Resources (DAWR),
Canberra, February 2019, p. 39.
[3]. Department
of Human Services (DHS), ‘Farm
Household Allowance’, DHS website, last updated 18 October 2019.
[4]. Prior
to 1 August 2018, the maximum cumulative period was three years. This was
extended to four years via the Farm Household
Support Amendment Act 2018. See M Klapdor, ‘New
Bill to extend the Farm Household Allowance’, FlagPost, Parliamentary
Library blog, 27 June 2018.
[5]. Department
of Agriculture (DoA), ‘Farm
Household Allowance’, DoA website, last reviewed 17 October 2019.
[6]. M
Klapdor, Farm
Household Support Amendment (Temporary Measures) Bill 2018, Bills
digest, 14, 2018–19, Parliamentary Library, Canberra, 20 August 2018, pp. 3,
10.
[7]. DoA,
‘History
of drought policy and programs’, DoA website, last reviewed 27 September
2019.
[8]. DAWR,
Farm
Household Allowance, fact sheet, DAWR, Canberra, August 2018, p.
1.
[9]. DoA,
‘Farm
Household Allowance dashboard’, DoA website, last reviewed 8 October 2019.
[10]. Ibid.
[11]. Australian
Government, Portfolio
budget statements 2019–20: budget related paper no. 1.1: Agriculture and Water
Resources Portfolio, p. 39.
[12]. DoA,
Annual
report 2018–19, DoA, Canberra, 2019, p. 81.
[13]. DoA, ‘Drought and rural assistance: assistance measures’, DoA website, last reviewed 27 September 2019; Department of
Infrastructure, Transport, Cities and Regional Development (DITCRD), ‘Drought Communities Programme’, DITCRD
website, last updated 27 September 2019.
[14]. These
include the Newly Arrived Resident’s Waiting Period, the seasonal worker
preclusion period and the income maintenance period. See DAWR, Farm
Household Allowance: guidelines, DAWR, Canberra, July 2019,
pp. 18–23.
[15]. DHS,
‘Farm
Household Allowance: income and assets test’, DHS website, last updated 20
September 2019.
[16]. DHS,
‘Income
test for Newstart Allowance, Partner Allowance, Sickness Allowance and Widow
Allowance’, DHS website, last updated 22 October 2019.
[17]. Farm Household Support
Minister’s Rule 2014, section 6.
[18]. Department
of Social Services (DSS), ‘4.12.7.20
Allowable and non-allowable deductions’, Social security guide, DSS
website, last reviewed 20 September 2017.
[19]. DAWR,
Farm
Household Allowance: guidelines, op. cit., pp. 35–38.
[20]. Ibid.,
p. 37.
[21]. DHS,
‘Farm
Household Allowance: income and assets test’, op. cit.
[22]. DAWR,
Farm
Household Allowance: guidelines – legislative changes from 5 April 2017,
DAWR, Canberra, April 2017, p. 4.
[23]. DHS,
A
guide to Australian Government payments: 20 September–31 December 2019,
DHS, Canberra, 2019.
[24]. The
farm asset value limit was temporarily increased to $5,000,000 (from $2,550,000)
between 1 September 2018 to 30 June 2019. This increase was made
permanent from 1 July 2019 as a result of amendments in the Farm Household
Support Amendment Act 2019. These amendments also removed indexation of
the farm asset value limit—previously the value limit was indexed on 1 July of
each year in line with movements in the Consumer Price Index. M Klapdor, Farm
Household Support Amendment Bill 2019, Bills digest, 8, 2019–20,
Parliamentary Library, Canberra, 2019, p. 9.
[25]. DAWR,
Farm
Household Allowance: guidelines, op. cit., p. 24.
[26]. DHS,
‘Farm
Household Allowance: how to work with your caseworker’, DHS website, last
updated 25 July 2019.
[27]. DAWR,
Farm
Household Allowance: guidelines, op. cit., pp. 43–44.
[28]. Parliament
of Australia, ‘Farm
Household Support Amendment (Temporary Measures) Bill 2018 homepage’,
Australian Parliament website.
[29]. D
Littleproud, ‘Second
reading speech: Farm Household Support Amendment (Temporary Measures) Bill 2018’,
House of Representatives, Debates, 16 August 2018, p. 7511.
[30]. Australian
Government, Budget
measures: budget paper no. 2: 2019–20, pp. 46–47.
[31]. Schedule
1, Farm Household
Support (Forced Disposal of Livestock) Minister’s Rules 2019.
[32]. Ibid.
[33]. Lawrence
et al., Independent Review of the FHA, op. cit.
[34]. Ibid.,
p. x.
[35]. Parliament
of Australia, ‘Farm
Household Support Amendment Bill 2019 homepage’, Australian Parliament
website.
[36]. M
Klapdor, Farm
Household Support Amendment Bill 2019, op. cit., p. 3.
[37]. Lawrence
et al., Independent Review of the FHA, op. cit., p. 25.
[38]. Ibid.
[39]. Senate
Rural and Regional Affairs and Transport Legislation Committee, Farm
Household Support Amendment (Relief Measures) Bill (No. 1) 2019 [Provisions],
Senate, Canberra, November 2019, p. 1.
[40]. Ibid.
[41]. Ibid.,
p. 13.
[42]. Australian
Labor Party Senators, Additional
Comments, Senate Rural and Regional Affairs and Transport Legislation
Committee, Farm
Household Support Amendment (Relief Measures) Bill (No. 1) 2019 [Provisions],
The Senate, Canberra, November 2019, p. 15.
[43]. Ibid.
[44]. J
Fitzgibbon, ‘Second
reading speech: Farm Household Support Amendment (Relief Measures) (No. 1) Bill
2019’, House of
Representatives, Debates, [proof], 23 October 2019, p. 26.
[45]. Ibid.
[46]. R
Sharkie, ‘Second
reading speech: Farm Household Support Amendment (Relief Measures) (No. 1) Bill
2019’, House of Representatives, Debates, [proof], 23 October 2019,
p. 77.
[47]. B
Katter, ‘Second
reading speech: Farm Household Support Amendment (Relief Measures) (No. 1) Bill
2019’, House of Representatives, Debates, [proof], 23 October 2019,
p. 76.
[48]. R
Viellaris, ‘Hanson
sprays at PM’, The Courier-Mail, 31 October 2019, p. 3.
[49]. Ibid.
[50]. M
Lawrence, R Slonim and G Somerset, Submission
to the Senate Rural and Regional Affairs and Transport Legislation Committee, Inquiry
into the Farm Household Support Amendment (Relief Measures) (No. 1) Bill 2019,
[Submission no. 5], 25 October 2019.
[51]. Ibid.,
[p. 1].
[52]. NSW
Farmers’ Association, Submission
to the Senate Rural and Regional Affairs and Transport Legislation Committee, Inquiry
into the Farm Household Support Amendment (Relief Measures) (No. 1) Bill 2019,
[Submission no. 2], 28 October 2019, [p. 1].
[53]. Ibid.,
[p. 2].
[54]. Isolated
Children’s Parents’ Association of Australia Inc., Submission
to the Senate Rural and Regional Affairs and Transport Legislation Committee, Inquiry
into the Farm Household Support Amendment (Relief Measures) (No. 1) Bill 2019,
[Submission no. 4], October 2019, p. 1.
[55]. Ibid.,
p. 2.
[56]. Explanatory
Memorandum, Farm Household Support Amendment (Relief Measures) (No. 1) Bill
2019, p. 3.
[57]. Ibid.,
pp. 12–15.
[58]. B
Joyce, ‘Second
reading speech: Farm Household Support Bill 2014’, House of Representatives,
Debates, 6 March 2014, p. 1875.
[59]. Intergovernmental
Agreement Review Working Group, Review
of the Intergovernmental Agreement on National Drought Program Reform,
DAWR, Canberra, 2018.
[60]. Senate
Rural and Regional Affairs and Transport Legislation Committee, Official
committee Hansard, 24 May 2018, p. 20.
[61]. D
Littleproud, ‘Second
reading speech: Farm Household Support Amendment Bill 2018’, House of
Representatives, Debates, 20 June 2018, p. 5706.
[62]. Lawrence
at al., Independent Review of the FHA, op. cit., p. 38.
[63]. Ibid.
[64]. Ibid.,
pp. 38–39.
[65]. Ibid.,
p. 39.
[66]. Ibid.,
pp. 17–24.
[67]. Ibid.,
pp. 17, 20, 21–24.
[68]. M
Klapdor, Farm
Household Support Amendment Bill 2019, op. cit., pp. 10–11.
[69]. Farm
Household Support Minister’s Rule 2014, proposed sections 6 and 7.
[70]. Farm
Household Support Minister’s Rule 2014, proposed section 7A.
[71]. Farm Household
Support Act 2014 (FHA Act), proposed sections 89E
and 89F.
[72]. Senate
Rural and Regional Affairs and Transport Legislation Committee, Official
committee Hansard, [proof], 22 October 2019, p. 119.
[73]. D
Littleproud, ‘Second
reading speech: Farm Household Support Amendment (Relief Measures) (No. 1) Bill
2019’, House of Representatives, Debates, [proof], 17 October 2019,
p. 7.
[74]. Ibid.
[75]. Lawrence
et al., Independent Review of the FHA, op. cit., p. 54.
[76]. Ibid.
[77]. Ibid.
[78]. Ibid.,
p. 55.
[79]. FHA
Act, proposed subsection 89E(2).
[80]. FHA
Act, proposed subsection 89F(3).
[81]. Explanatory
Memorandum, op. cit., p. 9; The Senate, ‘No.
19 Disallowance’, Guides to Senate Procedure, Parliament of Australia
website, last reviewed June 2019. The Legislation Act
2003 sets out the requirements for legislative instruments. Legislative
instruments must be tabled in Parliament (section 38) and are generally
disallowable by the Parliament (sections 42 and 44). The legislative instrument
to be made by the Minister under section 106 and proposed subsection 89E(2)
of the FFA Act will be disallowable by either House of Parliament.
[82]. Social Security Act
1991, sections 1061K–1061P.
[83]. Australian
Government, ‘Disaster
Recovery Payment’, DisasterAssist website, n.d.
[84]. P
Yeend and F Childs, Families,
Community Services and Indigenous Affairs and Other Legislation (2006 Budget
and Other Measures) Bill 2006, Bills digest, 151, 2005–06,
Parliamentary Library, Canberra, 14 June 2006, p. 10.
[85]. M
McCormack (Deputy Prime Minister, Minister for Infrastructure, Transport and
Regional Development), Transcript
of interview with Laura Jayes: Sky News Live, media release, 30 October
2019.
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