Purpose of the Bill

The purpose of the Farm Household Support Amendment (Temporary Measures) Bill 2018 (the Bill) is to amend the Farm Household Support Act 2014 (the FHS Act) to:

• temporarily increase the farm assets limit for the Farm Household Allowance (FHA) from $2,637,500 to $5,000,000 for the period 1 November 2018 until 30 June 2019 and
• provide for a new supplement, the FHA Supplement, to be paid to qualifying FHA recipients who receive the FHA during one or both supplement payment periods: 1 September 2018 to 1 December 2018 and 2 December 2018 to 1 June 2019. The supplement amount for each period is $3,000 each for members of a couple and $3,600 for singles.

The two measures were announced on 5 August 2018 as temporary relief measures for farmers affected by drought.[1] The two measures are expected to cost $158 million over four years from 2018–19.[2]

Background

The Farm Household Allowance (FHA) is an income support payment which supports 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]

The FHA was introduced in 2014 via the Farm Household Support Act 2014 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.[6]

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’.[7]

Department of Agriculture and Water Resources officials told a Senate Estimates hearing in May 2018 that around 7,900 people have been on the FHA since it was introduced, and there were around 2,060 current recipients.[8] According to the Department’s annual report, around $66 million was spent on the FHA in 2016–17.[9]

The current payment rates for the FHA are set out in Table 1.

Table 1: Farm Household Allowance payment rates

Source: Department of Human Services (DHS), A guide to Australian Government payments: 1 July–19 September 2018, DHS, Canberra, 2018. 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.

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, counselling and mental health supports.[10]

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.[11]

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).[12] The current income test cut-off for a single Newstart Allowance recipient is $1,053.34 per fortnight and for a partnered recipient it is $963.50 (each).[13]

Some off-farm income may be deducted when calculating total income. 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.[14]

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.[15] Farm assets include 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.[16]

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: $258,500
• single non-homeowner: $465,500
• couple homeowner combined: $387,500
• couple non-homeowner combined: $594,500.[17]

The farm assets test assesses the net value of the farm’s assets. Currently, to be eligible for the FHA, the total must not exceed $2,637,500.[18]

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.[19]

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.[20]

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.[21]

Committee consideration

At the time of writing, the Bill had not been referred to any committees.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Policy position of non-government parties/independents

Australian Labor Party

Shadow Minister for Agriculture Joel Fitzgibbon stated that the Opposition supported the measure raising the assets threshold but questioned whether the supplementary FHA amounts were enough.[22] The Shadow Minister also raised issues with the two-part design of the supplement and the ease with which families could access the payment. In an interview with Fran Kelly on ABC Radio, Mr Fitzgibbon suggested the full value of the supplement might be provided up front:

KELLY: ... Meanwhile the Government has offered this $12,000 top up to their assistance payments in two tranches. Labor, you have said and Bill Shorten has said that is not good enough and you should just be able to get those $12,000 in one go and get it next month. Why is that going to make much difference and aren’t there challenges there even with the concerns you’ve raised about the Centrelink struggling under the current load?

FITZGIBBON: Look Fran, we are desperate to send a bipartisan message. The last thing farmers and farming communities and the towns affected want is politicians bickering over drought policy, but the Government makes it so hard and it is so frustrating. We have been saying for four years now that the Farm Household Allowance was failing both in its design and in its delivery and now Malcolm Turnbull pops up one Sunday and says, ‘oh look, we’ll give $12,000 away’.

KELLY: That’s because people have told him they can’t pay their bills and can’t pay their car rego. They need some cash right now. That’s why isn’t it?

FITZGIBBON: But then Fran, he doesn’t properly explain how it’s going to be easier to access it. He has changed the asset test which we support, that’s great but he has done nothing around making it more easy for people to access it. We know that over the course of the last four years that too many have been unable to do so and changing the asset test threshold won’t improve that situation for many and we are saying, look we aren’t in Government but here is an idea. Many people are saying to us including on this particular tour that $12,000 is not enough but if I am going to receive $12,000 I need it now. So we are saying why stage it over two payments, six and six? Every situation is different in terms of every farming family. Why not give them the option - it’s in the same fiscal year, why not give them the option to take the whole $12,000 now or indeed six and six or if they want, $2,000 every month for six months.

KELLY: Okay.

FITZGIBBON: Let the farming families decide how they can best utilise this money.[23]

Position of major interest groups

The National Farmers’ Federation has welcomed the measures proposed in the Bill. Federation President Fiona Simson stated that the supplement would ‘provide significant relief from the hardship currently facing many’.[24]

The NSW Farmers’ Association also welcomed the measures. Association President James Jackson stated that the association ‘is pleased that a key issue raised with the Government—that the assets test was too low and disqualified many farmers in real need—has been addressed in this announcement’.[25]

Financial implications

According to the Explanatory Memorandum, the two measures in the Bill are expected to cost $158 million over four years from 2018–19, including implementation costs.[26]

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.[27]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Bill had not been considered by the Parliamentary Joint Committee on Human Rights.

Key issues and provisions

Rationale

The 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’.[28] This review is expected to be completed in the first half of 2019 and will examine the design of the FHA. The Minister noted farming families across ‘a lot of the east as well as parts of the west are going through tough times’.[29]

Minister Littleproud said that the increase in the net farm asset value limit to $5.00 million:

... will give more farmers access to the farm household allowance during times of hardship. It will help those farmers who have little or no cash flow access to assistance—assistance that provides them an allowance as well as breathing room to prepare for and adapt to change. It means these farmers will not have to sell their assets and risk taking away some or all of their future income-producing capacity of their farm business. It also recognises that farm assets can be difficult to sell quickly and, during tough times, are often sold for less than they're worth.[30]

In regards to the FHA Supplement, the Minister stated that it:

... will give farming families what they sorely lack right now—cash. The additional disposable income will help put food on the table and cover basic expenses such as bills and school fees and will flow through to businesses in country towns doing it tough.[31]

Additional assistance limited to farmers

The measures will allow more farmers to access the FHA and temporarily increase the level of assistance available to them. However, non-farmers in rural and regional areas who are also affected by drought, such as small businesses reliant on income from farmers, will not be eligible for the assistance measures.

The measures in the Bill will allow farmers with significant assets to access government support, and will provide a generous boost in incomes for those on the FHA compared to non-farmers only eligible for payments such as Newstart Allowance.

Numbers affected

The Government estimates that an additional 8,000 farmers could become eligible for FHA support as a result of the increase in the farm assets value limit.[32] The most recent statistics on FHA recipients were that there were 2,060 current recipients.[33] This suggests more than 10,000 could benefit from the FHA Supplement payment.

Access issues

In July 2018, the Government released estimates that up to 15,000 farmers eligible for the FHA had not applied for it.[34] It is unclear why applications had not been made, however, issues around access to the payment and difficulties dealing with the application process have consistently been raised over the life of the program.

A recent review of the Intergovernmental Agreement on National Drought Program Reform (which expired in July 2018) included statements from stakeholders who raised issues with the application process for the FHA and the time taken to process claims.[35] Issues with processing times were also raised in a 2016 series of roundtables with Victorian dairy farmers.[36]

Minister Littleproud stated that the Department of Human Services would be ‘looking at a risk based approach for processing applications’ for the FHA, due to a ‘surge in applications’ for the FHA.[37] This suggests less scrutiny of whether or not a farmer or their partner meets the eligibility requirements, unless they meet a particular risk-profile. The Minister stated that post-claim checking will limit the risk of overpayment.[38] It is worth noting that payments of the FHA Supplement to those who are later found to be ineligible (except in cases of fraud) will not be considered debts to the Commonwealth and debt recovery provisions will not apply to these supplement amounts.[39]

On 19 August 2018, the Government announced that it would bolster Centrelink processing staff levels and phone access capacity for farmers seeking to apply for the FHA. The application process would also be simplified with fewer supporting documents required to make a claim.[40]

In response to concerns around access, the Opposition has committed to providing 100 Centrelink Community Response Officers to assist in establishing local outreach services in areas facing drought or other adversity, and to add two new Mobile Service Centres.[41]

Key provisions

Schedule 1

Item 1 repeals and substitutes new section 34 of the FHS Act to set the current farm assets value limit and a temporary farm assets value limit to apply for the period 1 November 2018 to 30 June 2019.

The new farm assets value limit to be set in the Act is the current limit of $2,637,500. The FHS Act currently refers to the amount of $2.55 million but this amount has been indexed according to movements in the Consumer Price Index (as provided for in Part 5 of the FHS Act). This part of the amendment is essentially an update­—the same indexation provisions will apply to the $2,637,500 amount from 1 July 2019.

The temporary farm asset value limit will be $5.00 million. Under new subsection 34(4), this temporary limit will continue to apply after 30 June 2019 for any person for whom the FHA is payable during the 1 November 2018–30 June 2019 period. This means those who receive the FHA during the temporary period will not be subject to the lower, standard farm asset value limit after the temporary period has ended, unless and until they re-apply for the FHA after the temporary period (for example, if they stop receiving the FHA and then re-apply for it any time after July 2019.) Those who have not received the FHA on one or more of those days during the temporary period will be subject to the lower farm asset value limit. This advantages those farmers and their partners who receive the payment during the temporary period over later claimants of the FHA.

Items 2–4 update the indexation provisions for the farm asset value limit—indexation will only apply to the $2,637,500 amount, with the first adjustment of this amount to occur on 1 July 2019.

Schedule 2

Item 1 of Schedule 2 amends section 4 of the FHS Act to include reference to a ‘FHA Supplement’ in the simplified outline of the Act.

Item 4 inserts new Part 4A to the FHS Act which sets out the qualification requirements and amount of the FHA Supplement. The FHA Supplement consists of two payments, one paid to a person for whom the FHA is payable on any day in the period 1 September 2018 to 1 December 2018. The second paid to a person for whom the FHA is payable on any day in the period 2 December 2018 to 1 June 2019. A claim is not required.

The amount of the payment for one of the qualifying periods is:

• $3,000 if the person is a member of a couple or
• $3,600 for a person in any other circumstance.

New subsection 89C(2) provides that where the FHA Supplement is paid to a person where they are not eligible then the payment will not be considered a debt to the Commonwealth. This will not apply in situations where the amount was obtained by fraud. This provision is unusual compared to most social security payments where overpayments or payments to those ineligible would be considered debts and a range of recovery arrangements would apply.

Item 4 amends section 90 so that the FHA Supplement is treated—alongside the FHA, the activity supplement and the farm financial assessment supplement—as if it were a social security payment. This means the general rules around claim provisions, how payments are made, and review procedures set out in the Social Security Act 1991 and the Social Security (Administration) Act 1999 apply.

Item 7 amends the table at section 95 so that the provisions of the Social Security Act 1991 relating to deductions from a social security payment for repayment of certain debts or overpayments do not apply in relation to the FHA Supplement. This means deductions from the FHA Supplement cannot be made for repayment of certain debts or overpayments arising under social security or tax law.

Item 8 adds reference to the FHA Supplement at subsection 105(3) to provide for the appropriation of funds from the Consolidated Revenue Fund to pay the supplement.

Items 9–12 amend the Social Security (Administration) Act 1999 so that no claims are required for payment of the FHA and the Secretary is provided with discretion over when and how to make a payment of the FHA Supplement to an eligible recipient.