Introductory Info
Date introduced: 13 February 2020
House: House of Representatives
Portfolio: Agriculture, Drought and Emergency Management
Commencement: Schedule 1 on 1 July 2020. Schedule 2 on the day after Royal Assent.
Purpose of
the Bill
The Farm Household Support Amendment (Relief Measures)
Bill (No. 1) 2020 (the Bill) amends the Farm Household
Support Act 2014 (the FHS Act) to:
- remove
the business income reconciliation process whereby Farm Household Allowance
(FHA) recipients’ income estimates would be checked against their tax returns
and full financial statements in order to verify they were eligible for the FHA
and received the correct payment rate and
- remove
the legislated time limit for FHA claimants to complete their farm financial
assessment—an eligibility requirement for the FHA. The current time limit is 28
days with extensions of a further 28 days granted in some circumstances. A time
limit will still apply but this will be determined on an individual basis.
The Minister for Agriculture, Drought and Emergency
Management, David Littleproud, described the measures as the final instalment
of the Government’s response to the 2019 Independent Review of the FHA program.[1]
The removal of the business income reconciliation process was recommended by
the Independent Review and was announced in the Government Response to the
Independent Review on 27 September 2019. [2]
The Independent Review recommended removing the requirement for claimants to
complete a farm financial assessment altogether.[3]
The change to the time limit was not previously announced by the Government.
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).[4]
The payment is time-limited: farmers can only receive the payment for up to
four cumulative years in every ten year period starting from 1 July 2014.[5]
From 16 December 2019, farmers and their partners who
reach their four year maximum period by 1 July 2020 are eligible for a one-off
lump sum ‘relief payment’—the payment is worth $7,500 for a single recipient or
$6,500 for a member of a couple ($13,000 for a couple combined).[6]
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 $10,000 activity
supplement to pay for approved activities including training or professional
advice (and associated travel and accommodation). 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.[7]
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.[8]
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.[9]
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.
Number of recipients
According to the Department of Agriculture, Water and the
Environment, as at 6 March 2020, close to 14,000 people had received
the FHA since it was introduced in 2014.[10]
There were approximately 7,100 people receiving the FHA as at 6 February 2020.[11]
Expenditure
Actual expenditure for the FHA in 2018–19 was $114.2 million
but this was expected to decrease to $103.5 million in 2019–20.[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 |
$462.50 |
$7.00 |
$469.50 |
| 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 |
$606.00 |
$9.20 |
$615.20 |
| 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 |
$462.50 |
$7.00 |
$469.50 |
| Partnered, aged under 22,
with dependent children |
$507.90 |
$7.70 |
$515.60 |
Source: Services Australia (SA), A
guide to Australian Government payments: 1 January–19 March 2020, SA,
Canberra, 2020. 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 farmers 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]
The income test as it currently applies can reduce a
person’s FHA payment rate if their income exceeds $104 per fortnight. However,
under amendments made by the Farm Household
Support Amendment (Relief Measures) Act (No. 2) 2019, no payment rate
reductions will occur under the income test. These amendments will commence on
proclamation or six months from 11 December 2019 (whichever occurs
first). Under the new income test arrangements, an individual will either be
eligible for the FHA and receive the full payment rate or ineligible and
receive a zero rate. There will be no part-rate payments.[17]
Deductions can apply in determining assessable income. Allowable
deductions include 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]
Under the Farm Household Support
Minister’s Rule 2014 farm business losses can be used as a deduction
against any other assessable income under the income test. The definition of
farm business includes 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 applies—$100,000 in a financial year. A person and their
partner cannot have their assessable income reduced below zero under the farm
business loss provisions.[19]
Assets
test
Currently, 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.[20]
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.[21]
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.[22]
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.[23]
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.[24]
Under amendments made by the Farm Household
Support Amendment (Relief Measures) Act (No. 2) 2019, the farm and
non-farm assets tests will be combined into one assets test with a value limit
of $5.5 million. This limit will not be indexed. These amendments will commence
on proclamation or six months from 11 December 2019 (whichever occurs first).
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.[25]
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, Water and the Environment.[26]
Recent policy changes
Farm Household Support
Amendment (Temporary Measures) Act 2018
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.[27]
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’.[28]
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, when that income is
invested in a Farm Management Deposit.[29]
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.[30]
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.[31]
Independent Review of the Farm
Household Allowance
The Independent Review of the Farm Household Allowance was
completed in February 2019.[32]
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
- revise
the Rural Financial Counselling Service to focus on business coaching
- improve
communication 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.[33]
Farm Household Support Amendment Act 2019
In July 2019, the Coalition Government introduced and the
Parliament passed the Farm Household
Support Amendment Act 2019.[34]
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.[35]
The Act implemented only part of one of the actions
associated with the Independent Review’s recommendations: maintaining the $5
million farm asset limit.[36]
However, the amendments to indexation were counter to the Review’s suggestion
that the limit continue to be indexed to movements in the CPI.[37]
Farm
Household Support Amendment (Relief Measures) Act (No. 1) 2019
In November 2019, the Parliament passed the Farm Household
Support Amendment (Relief Measures) Act (No. 1) 2019.[38]
That Act:
- increased
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
- changed
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
- introduced
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
- allowed
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).[39]
The measures had been announced on 17 October 2019 as the
next instalment of the Government’s response to the 2019 Independent Review.[40]
The changes to the maximum time a person can receive the
FHA were recommended by this Review.[41]
The Review recommended much broader changes to the income
test arrangements than those implemented by that Act, including a decoupling of
the FHA from the social security system.[42]
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.[43]
Farm
Household Support Amendment (Relief Measures) Act (No. 2) 2019
In December 2019, the Parliament passed the Farm Household
Support Amendment (Relief Measures) Act (No. 2) 2019. That Act:
- changes
the income test for the FHA so that part-rate payments will not be calculated.
The income test will be ‘sudden-death’: farmers and their partners will either
be eligible for FHA under the income test and receive the maximum payment rate
or they will be ineligible under the income test and not receive any FHA
- combines
the FHA farm assets test and non-farm assets test into one assets test with a
value limit of $5.5 million and clarifies the assessment of water entitlements
to ensure they are not double-counted under the assets test
- removes
the requirement for farm financial assessments to be conducted by a person
prescribed by the Minister’s Rule. The person undertaking the assessment will
still be required to have no interest in the farm or any related assets and
must have appropriate qualifications or expertise. However, the requirement
they be part of professional body whose members provide financial advice will
be removed
- increases
the maximum FHA activity supplement from $4,000 to $10,000 and expands the
scope of costs the supplement can be used for to include travel and
accommodation associated with approved activities. The supplement can currently
be used to fund approved activities including training or professional advice.[44]
The measures are to commence on the earlier of a day to be
fixed by proclamation, or six months after the date of Royal Assent (11
December 2019).
Committee
consideration
Senate Standing
Committee for the Selection of Bills
On 27 February 2020, the Senate Selection of Bills
Committee recommended the Bill not be referred to a committee for inquiry.[45]
Senate
Standing Committee for the Scrutiny of Bills
The Senate Scrutiny of Bills Committee had no comment on
the Bill.[46]
Policy
position of non-government parties/independents
The Australian Labor Party has stated it supports the
Bill.[47]
In his second reading speech on the Bill, Shadow Minister for Agriculture and
Resources, Joel Fitzgibbon, criticised the four years in ten time limit for
receipt of the FHA, particularly as it applies to those in areas of ongoing
drought. He also noted that many Labor MPs were ‘bewildered by the flexibility
of the Farm Household Allowance in so many areas that isn’t available to other
welfare recipients’.[48]
Katter’s Australian Party MP Bob Katter spoke on the Bill
in the House of Representatives but did not indicate whether or not he
supported the Bill.[49]
Position of
major interest groups
At the time of writing, major stakeholder groups do not
appear to have commented on the Bill.
Financial
implications
The Explanatory Memorandum states that the ‘cost for the
suite of changes to the FHA program is approximately $127 million, which
includes the measures in the Bill’.[50]
No detail is provided for the costs of the measures included in the Bill or
which measures are included in the $127 million figure.
Previous legislation introduced in response to the
Independent Review of the FHA have included some details of the financial
impact:
- Farm
Household Support Amendment Bill 2019: $34.3 million over four years
beginning in the 2019–20 financial year (described as the ‘costs to the
payment’)[51]
- Farm
Household Support Amendment (Relief Measures) Bill (No. 1) 2019: $47 million
through to June 2023 (not the net fiscal impact as this figure excludes
administration costs and offsets from tax revenue)[52]
- Farm
Household Support Amendment (Relief Measures) Bill (No. 2) 2019: $30 million
through to June 2023 (not the net fiscal impact as this figure excludes
administration costs and offsets from tax revenue).[53]
The 2019–20 Mid-Year Economic and Fiscal Outlook stated
that $114.5 million in funding would go towards changes to the Farm Household
Allowance over the four years from 2019–20:
including expanding and simplifying eligibility arrangements,
providing a single rate of payment, and strengthening the case management
approach to support farmers in hardship. The Government will also provide a
one-off relief payment of $7,500 for singles and $12,000 for couples to current
and former recipients who have exhausted their four year entitlement to payment
by 30 June 2020.[54]
It is unclear why there is no specific costing for the
measures proposed in the Bill.
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.[55]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights had no
comment on the Bill.[56]
Key issues
and provisions
Business
income reconciliation
The FHA income test uses the social security concept of ‘ordinary
income’ which includes income from employment, real estate and businesses,
deemed income from investments and boarders or lodgers.[57]
Maintenance income (child support) and some exempt lump sum amounts are not
treated as ordinary income. Gross income before tax is assessed. The income
test does not assess taxable income.
Estimates of
business income
Under the social security income test, the assessment of
business income uses the previous year’s tax assessment.[58]
However, if the previous year’s tax assessment does not provide an accurate
indication of current income, then an estimate may be made on available
evidence, such as a business profit and loss statement. As a matter of policy,
such estimates should be reassessed every three months and/or when a new,
accurate, tax assessment becomes available.[59]
The FHS Act includes specific provisions for the
use of estimates of business income in determining the rate of FHA. The FHA
Guidelines indicate that it is standard practice for estimates to be used as ‘farm
business income can be difficult to predict due to factors such as commodity
prices and seasonal conditions’.[60]
The estimate must be considered reasonable by the Secretary (of the Department
of Agriculture, Water and the Environment—as delegated to Services Australia officers).
Estimated business income is calculated by adding the estimated taxable income
for the financial year with any re-credited business deductions, including:
- carried
forward losses
- capital
expenditure
- investments
in farm management deposits
- superannuation
contributions
- obsolescence
and
- donations
to charities.[61]
Revised estimates can be provided at any time during a financial
year and, if considered reasonable, can be used to determine the person’s FHA
payment rate/eligibility for the remainder of the financial year.[62]
Reconciliation
If required by Services Australia, FHA recipients must
submit their personal and business tax returns and their financial statements
(or notify Services Australia if they are not required to lodge a tax return).[63]
These documents must be provided even if the farmer (and their partner) is no
longer in receipt of the FHA. These documents are used to reconcile the FHA
recipient’s income estimates with their actual income, and to determine if they
were correctly paid.
The reconciliation process can result in a person
receiving a top-up payment if they did not receive their full entitlement; or a
debt being raised if they received an overpayment. Where the person received
the correct amount then no further action is taken.
Where an FHA recipient fails to comply with a notice from
Services Australia to provide details of their actual business income, then a
debt equal to the entire amount of FHA they received during the financial year
may be raised against them until such time as they comply with the notice.[64]
Issues
raised by Independent Review
The Independent Review of the FHA stated: ‘Estimating income
and incurring a debt resulting from BIR [business income reconciliations] were
significant concerns and sources of both confusion and stress for farmers
receiving the FHA’.[65]
The review panel found that these concerns were due to three issues: variability
of income; income for social security purposes versus taxation purposes; and,
complexity.
The variability of farm income is one of the reasons given
for allowing estimates to be provided rather than documented information. The
Independent Review found:
Although operating with uncertainty is not unique to farming
businesses, the nature of farm income can make it difficult for people to
determine the forward income reportable under the program and therefore prevent
FHA overpayments.[66]
The different definition of income used under social
security law compared to tax law was described as adding ‘additional layers of
complexity and confusion for farmers estimating their income’.[67]
The difference reflects the different purposes of assessing income under social
security law—assessing eligibility for government assistance—compared to tax
law—assessing a person’s tax liability.
The Independent Review’s first recommendation was for the
FHA to be ‘decoupled’ from the SS Act based on its finding that ‘using
the social security framework to provide support to farmers added unnecessary
complexity and simply did not work for farm business operators’.[68]
Following this decoupling, the review panel proposed that the FHA income and
assets test be redesigned using existing taxation classifications and processes
for income treatment and changing the income reporting and assessment process
‘so it recognises the irregularity of farm income over multiple years and
reduces the likelihood of farmers being overpaid and incurring a debt’.[69]
The Review found significant concern amongst stakeholders
and farmers over debts arising from the business income reconciliation
process—that is, where the reconciliation process identified that an FHA
recipient had underestimated their income and received a higher amount of FHA
than they were entitled to under the FHS Act. The Review heard that some
individuals did not want to apply for the FHA as they were concerned they would
end up with a debt while others took issue with the timing of the process with
debts being raised years after the relevant financial year.[70]
The Review considered that its proposed changes to the
income reporting and assessment framework would remove the need for a
reconciliation process (as it considered that income estimates would be more
accurate). It recommended replacing the reconciliation process with ‘targeted
fraud compliance’—that is, targeted sampling of selected FHA recipient’s
records in order to control for fraud. The report noted: ‘The Panel considers
only significant predictable or intentional discrepancies should be pursued’.[71]
Proposed
changes
The Bill proposes removing the provisions in the FHS
Act relating to business income estimates and reconciliation. The
Explanatory Memorandum states that ‘this means, a person’s rate of payment will
be based on their current income’.[72]
The assessment of business income will follow the process used in the SS Act
with no specific reconciliation process set out in the FHS Act.
Minister Littleproud stated:
An estimate of current income will be used to calculate the
rate of payment. The estimate can be updated as many times as needed during the
year, but crucially it will not be used to look backwards over the year. This
means farmers will not worry that a debt will be raised at the end of the year
through this business income reconciliation process.[73]
The Minister also stated that ‘regular sampling of records
will be undertaken to ensure the right person receives the right payment at the
right time’.[74]
It is unclear if this process will follow the social security policy guidelines
for three monthly reviews of estimates of business income.[75]
The proposal implements part of one of the Independent
Review’s recommendations—to replace the business income reconciliation process
with targeted fraud compliance. However, the Government has rejected the main
recommendation to decouple the FHA from the social security system and has not
implemented the proposals to use the tax law definition of income rather than the
social security definition.[76]
The Government Response, which included the announcement of this measure,
stated: ‘The Review Panel had
recommended completely decoupling FHA from the social security system. We are
confident that with the changes announced today, there is no need to remove the
payment from its links to social security’.[77]
Income
estimates and reconciliation for other government payments
The current method for assessing business income—allowing
for estimates to be used with a reconciliation process once actual income is
known—provides for the fact that farm business income can be irregular and
variable. It also ensures that recipients only receive the correct rate of
payment.
The use of income estimates with a formal reconciliation
process at the end of the financial year is standard practice for recipients of
Family Tax Benefit and Child Care Subsidy.[78]
Both payments require families to estimate their income for the financial year with
a formal reconciliation process taking place using information contained in the
recipients’ tax returns (or information on income from government payments
already held by Services Australia). Both Family Tax Benefit and Child Care
Subsidy include some safeguards against debts arising due to
overpayments—Family Tax Benefit provides for end-of-year supplements to
eligible families which can be used to offset any debts arising from an
overpayment and Child Care Subsidy withholds five per cent of a family’s
estimated entitlement during the financial year which is then paid as a lump
sum at the end of the year (or used to reduce any debt from an overpayment).[79]
The FHA reconciliation arrangements do not include any
similar safeguards against debts from overpayments and the Independent Review
made clear that these potential debts were a significant concern for farmers
and stakeholders. Notably, the SS Act does not include any similar
provisions to the FHS Act regarding the use of income estimates and a
formal reconciliation process. This is possibly because it is much less likely
for social security income support recipients to have business
income—particularly with the much lower asset limits that apply compared to the
FHA (i.e. the value of business assets make it much harder for business owners
to qualify for income support).
Key
provisions
Item 1 of Schedule 1 repeals the definition of business
income at subsection 5(1) of the FHS Act. This definition refers
to the meaning given by subsection 68(3) which is repealed by item 4.
The definition is used for the purposes of the provisions allowing for
estimates of business income and to be used in calculating a person’s FHA rate
and for the reconciliation process. The general income test for the FHA relies
on Benefit Rate Calculator B (for those who have turned 22) or the Youth
Allowance Rate calculator (for those who have not turned 22) in the SS Act.
The SS Act has its own definitions covering different forms of income
including business income which will apply for FHA purposes.
Item 4 repeals Subdivision D of Division 8 of Part
2 of the FHS Act (sections 68–70). This removes the provisions covering
the use of estimates of business income and debts arising from payments of FHA
based on estimates of business income.
Extending
time limit for farm financial assessment
As discussed in the ‘Background’ section of this Bills
Digest, it is a mutual obligation requirement for the FHA that a claimant
complete a Farm Financial Assessment. The Farm Financial Assessment is a
‘comprehensive assessment of the financial position of a farm enterprise and
the person for whom the assessment is conducted’.[80]
The purpose of the assessment is to ‘develop and evaluate options to improve
the person’s financial position through an analysis of their resources, liabilities,
barriers and goals’.[81]
In some cases, where a person has previously received the FHA and their
circumstances have not changed substantially, they may not be required to
complete a new Farm Financial Assessment.
Some parts of the Farm Financial Agreement need to be
completed by a financial adviser. Currently, there is a requirement that this
adviser meet the requirements for being a prescribed adviser under the Farm Household Support
Minister’s Rule 2014.[82]
Amendments in the Farm Household Support Amendment
(Relief Measures) Act (No. 2) 2019 remove the requirement for farm
financial assessments to be conducted by a person prescribed by the Minister’s
Rule. The person undertaking the assessment will still be required to have no
interest in the farm or any related assets and must have appropriate
qualifications or expertise. However, the requirement they be part of
professional body whose members provide financial advice will be removed. These
changes are to commence on the earlier of a day to be fixed by proclamation, or
six months after the date of Royal Assent (11 December 2019).
Current time
limit
Currently, a person required to complete a Farm Financial
Assessment must do so within 28 days of the notice being provided to the FHA
claimant. If the assessment is not completed within this timeframe then the FHA
will not be payable to the claimant (if the Secretary is satisfied that this is
reasonable). This can mean the rejection of a claim that is yet to be granted,
or the suspension of the person’s payment if their claim has already being
granted.[83]
A person can request an extension to complete the
assessment of up to 28 days. If the person does not complete the assessment
within the extended period then a granted claim will be cancelled.[84]
Issues
raised by the Independent Review
The Independent Review raised a number of issues with Farm
Financial Assessment and Financial Improvement Agreement requirements for the
FHA. The review panel stated that it was concerned the requirements were
generally seen as ‘bureaucratic hurdles or ‘tick boxes’ for accessing the
payment, rather than tools to help farmers improve their long-term financial
circumstances’.[85]
The review report stated that this was likely because both requirements are not
sufficiently flexible or tailored to individual circumstances.[86]
Concerns were raised regarding the time frame, with the
review report stating that those coming on to the FHA were under a tremendous
amount of stress and that there was a perception that much of the information
required for the Farm Financial Assessment had already been provided as part of
the ‘demanding application process’.[87]
Regarding the time limit:
The Panel considers that some recipients need more time to
recover before making significant decisions about their business and personal
future. In some cases, time is also needed to work out the real causes of the
financial hardship and the actions needed to get on a more sustainable
footing—for example, where financial distress is not necessarily caused by
drought.[88]
The review report also cited evidence that many recipients
were receiving assistance from rural financial counselling services and that
this assistance duplicated some of the FHA’s mutual obligation requirements
(such as assessing recipient’s current financial situation).[89]
The review panel recommended removing the requirement for
FHA recipients to undertake a Farm Financial Assessment or to sign on to a
Financial Improvement Agreement. Instead, the review suggested that FHA
recipients meet with a rural financial counsellor at least every three months
to have structured discussions about their situation and opportunities for
change.[90]
Proposed
changes
The Bill proposes to remove the specific 28 day time
period in which a Farm Financial Assessment needs to be undertaken. Instead,
the FHS Act will only require that the assessment be undertaken within a
‘specified period’. This will be determined by Services Australia taking into
consideration the location of the FHA recipient and their farm, and the
availability of an adviser to do the assessment.[91]
Key
provisions
Paragraph 85(2)(d) of the FHS Act currently
requires a written notice that a person must have a Farm Financial Assessment
conducted to specify the period ‘of no more than 28 days’ within which the
assessment must be conducted. Item 1 of Schedule 2 amends this
paragraph so that a written notice must specify the period ‘within which the
person must have the farm financial assessment conducted’. No maximum time
limit is set.
Paragraph 85(3) currently provides that an extension can
be granted to this period of no more than 28 days. Item 2 replaces the
reference to ‘no more than 28 days’ with ‘a specified period’. This will allow
any extensions to the initial period to be determined by the Secretary of the
Department of Agriculture, Water and the Environment (or Services Australia
acting as a delegate).