Chapter 2Key issues
1.1This chapter explores the extent of support for the Agriculture (Biosecurity Protection) Levies Bill 2024, the Agriculture (Biosecurity Protection) Charges Bill2024, and the Agriculture (Biosecurity Protection) Levies and Charges Collection Bill 2024 (the bills). It examines some of the key issues raised by participants in relation to specific aspects of the bills during the inquiry.
General views on the bills
1.2There was broad support from various submitters for a strong and sustainable biosecurity funding mechanism that would protect Australia against the threat of exotic pests and diseases. The principle that biosecurity is a shared responsibility between all stakeholders, including government, the public and industry, was acknowledged by most submitters including Cattle Australia, the NFF Horticulture Council, and NSW Farmers.
1.3The Department of Agriculture, Fisheries and Forestry (the department) highlighted that a 'sustainably funded biosecurity system is essential to protect Australia from potentially devastating pest and disease outbreaks, safeguard our $84 billion agricultural, fisheries and forestry industries, and protect 1.6million jobs across the agricultural supply chain'.
1.4However, many submitters opposed the biosecurity protection levy (BPL) as a component of a sustainable biosecurity model. For example, the National Farmers' Federation (NFF) argued that it was 'concerned that the levy may have a distortionary impact on the rural research and development system given it does not appear to accord with underlying principles such as proper establishment processes, industry support, equitability and accountability'.
1.5Similarly, while welcoming the allocation of additional funding to biosecurity, the Invasive Species Council (ISC) commented that the way in which the BPL has been designed has been vague, and consultation limited:
Affected industries already contribute levies to biosecurity, some of which are voluntary. The levy in its current design does not consider the difference in risk from different products or pathways, and funding generated will not be earmarked for specific biosecurity activities or services, rather it will go to consolidated revenue of [the department] for any part of the portfolio.
Comments on specific aspects of the bills
1.6Although submitter feedback addressed various aspects of the bills, most of the commentary centred on the following issues:
consultation on the bills;
impact on the existing levy system;
transparency regarding the use of funds;
hypothecation of revenue;
timeframe for implementation; and
potential alternative or additional revenue sources.
Consultation on the bills
1.7The department stated that the development of the bills was informed by extensive and targeted consultation with a wide range of industry stakeholders between August and September last year and following the introduction of the bills to the Parliament.
1.8Thedepartment further indicated that it had attended 82 meetings with industry groups and committees between May 2023 and February 2024. It also told the committee that 'there were 92 written submissions to the consultation process, some of which we have on our website. In addition to the formal public consultation, we have engaged with a number of stakeholders through meetings, webinars and correspondence'.
1.9However, many submitters expressed concern regarding the adequacy of consultation by the Australian Government (the government) and a failure to adequately address industry concerns. For example, Livestock SA stated that from 'thebeginning of the BPL introductory process, the consultation with industry has been inadequate, and this was reflected in the subsequent levy design'. Livestock SA argued that:
Producers and broader industry stakeholders were not given the opportunity for authentic dialogue with policy developers on the BPL design prior to its announcement. Communication throughout the process of BPL development has been unclear, leading to confusion and dissatisfaction for producers. Although some minor alterations to the BPL have been made following industry advice, insufficient effort has been invested to truly understand our producers' concerns and the levy remains unsuitable and inequitable as a result.
1.10Likewise, GrainGrowers stated that much of the engagement with industry 'has been through on-line submissions and meetings rather than face-to-face workshops or discussion, which infer inflexibility in the design and development'. It argued that:
This is not in line with the co-design approach that is being regularly used in policy and program design. As a consequence, we believe that there are serious risks that have not been accounted for in the design of the measure and there is the potential for unintended consequences that have not been accounted for.
1.11Grain Producers Australia (GPA) argued that the failure to identify risk creators and risk beneficiaries was another shortcoming of the policy design and consultation process. GPA stated:
Being described as the only beneficiaries and forced to pay another levy—whilst the container levy remains unresolved—is a significant factor and a key reason why most all producer groups are opposed to the BPL, in one way or another, and have lost trust and confidence in the overall 'sustainable' funding model processes and hopes of any future effective engagement on it.
1.12In addition, the NFF emphasised that there continued to be a lack of detailed and clear information available to industry so close to the proposed implementation date:
The government has asserted that the BPL will generate revenue to contribute six per cent of the costs of sustainably funded biosecurity system, however it is not clear what the sustainability funded biosecurity system budget represents or how this may fluctuate or change over time. Further, we remain in the dark on specific details of the calculation of individual industries' levy rates or collection methodology, in regulation or otherwise.
1.13Cattle Australia argued that '[w]ithout appropriate implementation, co-design planning, stakeholder oversight and adequate safeguards, it will just be a tax on industry funded levy investment, rather than a levy jointly managed by industry and government, as a shared responsibility for improved biosecurity, sustainability and regional food security'.
1.14However, the department noted that it has addressed 'key concerns with the proposed design, regarding equity and fairness of levy rates, associated confusion with the existing agricultural levy system, and multiple imposition points for the commodities across the supply chain'. In addition, the department highlighted plans for 'further engagement with stakeholders on the back of the more recent modelling and the new [gross value of production (GVP)] model that has been applied'.
Impact on the existing levy system
1.15Some participants expressed concern the BPL may have a negative impact on the existing agricultural levy system. For example, Sheep Producers Australia argued that 'under the agricultural levy system levies are established and managed through a carefully designed system underpinned by principles of equity, efficiency and transparency'. It argued that:
The rushed, ill-conceived and secretive approach to the design of the BPL stands in stark contrast to the strong foundations of the agricultural levy system, leaving producers with no reason to support the BPL or engage in good faith on its final design and implementation.
1.16Australian Dairy Farmers (ADF) argued that the BPL has impeded the ability of the dairy sector to raise 'its own funds for purposes specific to improving on-farm biosecurity awareness and practices'. It noted that:
Prior to the May 2023 Budget announcement, ADF was undertaking groundwork, including discussion with [the department], to enable it to propose to dairy farmers the striking of a 'biosecurity levy', the moneys from which would be held by [Animal Health Australia] and spent, under ADF guidance, on post-border, on-farm and supply-chain biosecurity improvements that are sorely needed.
1.17AUSVEG echoed these concerns and argued that the BPL could potentially pose risks to the viability of current levy structures:
Growers, when faced with additional levy fees, may be unable to pay both the new biosecurity protection tax and the current agricultural levies. This could result in growers reducing or eliminating their agricultural levies, which would then leave funding gaps in other critical services or funding mechanisms such as the Emergency Plant Pest Response.
Equitable collection of the BPL
1.18The department indicated that it has responded to feedback from stakeholders and the BPL rates would now be calculated based on each industry's proportionate share of the total GVP for the agriculture, fisheries, and forestry sector. It noted that the BPL would also 'be tailored to individual products and goods to remove multiple imposition points across a product's supply chain, subject to further consultation'.
1.19While acknowledging that the government had changed the levy calculation to a model based on the GVP, many submitters remained concerned that the BPL would not be implemented equitably across all industries and products. Forexample, the NFF argued that:
For some industries, the GVP model will result in more significant payments from smaller farm businesses (e.g. in some horticultural industries). There has been no industry consultation on the GVP model. While this change claims to create a more equitable and fairer model, it ultimately fails to address the NFF's wide-ranging concerns.
1.20Indeed, the Australian Honey Bee Industry Council (AHBIC) noted that approximately half of the national honey crop was currently not subject to levies as it was produced by recreational beekeepers. AHBIC indicated that:
Relying on the current collection system will result in the 2,000 commercial beekeepers being burdened with the additional levies and the rest of the 47,000 recreational beekeepers continuing to benefit from the contributions of a few. This proposal of piggybacking on the existing levy system for our industry, will only exacerbate the inequities of the system.
1.21Similarly, Oysters Tasmania noted that the government 'does not know the identity of those who gather oysters, either commercially or recreationally, nor the value of this production'. As a result, it argued:
Any attempt to create from scratch a federal taxing regime covering the Tasmanian oyster farming sector, which is not currently subject to a federal agricultural levy, would involve transitional, administration, and compliance costs that would represent a prohibitively high proportion of revenue collected. It would also involve great arbitrariness.
1.22Greenlife Industry Australia argued that unlike other levies, the BPL 'cannot be passed on through supply chains as primary producers are generally price takers and do not set their commodity prices which fluctuate significantly based on supply and demand'. As such, it argued that 'it is highly likely there will be many instances where the BPL will erode any profit for the grower and in fact will deepen any market induced losses at any given time for our growers'.
1.23Several submitters also pointed to potential issues and weaknesses in the policy case for the BPL that were identified by the Productivity Commission, the Australian National University's Tax and Transfer Policy Institute, and the Office of Impact Analysis.
Recognition of existing contributions
1.24Several participants commented that there was a lack of recognition that producers already contributed to Australia's biosecurity system through existing national subscriptions and levies.
1.25WoolProducers Australia, for example, argued that the BPL ignores the existing significant financial and in-kind contributions that Australian producers already make towards the national biosecurity system:
… I think one of the main issues with the approach taken for the proposed introduction of this levy is the complete disregard for the contribution that producers already pay to the national biosecurity system. Yes, we are beneficiaries, but there are many other beneficiaries as well. Whether it's a state or a national levy, we contribute significantly, and there has been no acknowledgement of that.
1.26Many participants also viewed the BPL as being inconsistent with the existing guidelines and principles around the establishment of agricultural levies. Forexample, NFF Horticulture Council argued that:
As a levy, the BPL falls short of every one of the 12 Levy Principles introduced and adhered to by government and industry alike since 1997. As a tax, which inarguably the BPL is more accurately categorised, it also falls well short of best practice, including the design principles for the tax and transfer system applied by the Henry Tax Review of 2009 of equity, efficiency, simplicity, sustainability and policy consistency.
Transparency regarding the use of funds
1.27The department reiterated that the BPL would form part of a more sustainable funding model for Australia's biosecurity system. The department noted that the model would 'remove unpredictability and inconsistency in funding and increase funding to a stable and predictable level, which allows us to plan with certainty, to make long-term investments in preparedness for the rapidly growing threat and complexity'.
1.28The need for transparency, accountability, and reporting in relation to the revenue raised through the BPL, was a consistent theme in submissions to the inquiry. For example, the Australian Forest Products Association raised concerns that there would be no accountability on how the revenue raised would be allocated:
As proposed, the Biosecurity Protection tax will go to consolidated revenue. This government or future ones, have no obligation to use the revenue received for the purposes for which it was collected. Further, in the proposed funding framework there is no provision for the department to provide accurate, timely reporting on how industry funds are used to support biosecurity and the benefits to producers.
1.29GrainGrowers highlighted that it was important that the BPL was 'differentiated on grower invoices from existing industry levies which have been agreed to by industry'. GrainGrowers argued that:
It is also important that levy collected by the department is clearly and transparently reported by the department in its financial reports to ensure that the department and government can be held to account. Actual rates of collection should be reported against the budgeted collection rates for each industry to ensure there is transparency, along with the administrative costs of collection and compliance associated with the levy.
1.30The department indicated that 'revenue collected from the BPL will support the permanent increase to the annual budget appropriation for Commonwealth funded biosecurity activities'. It also pointed to the establishment of the Sustainable Biosecurity Funding Advisory Panel, which would provide increased transparency of biosecurity expenditure:
The new advisory panel has been created to provide increased transparency for key contributors of biosecurity funding including producers and importers and will build closer collaboration between government and key stakeholders, with regular meetings to share insights, and discuss biosecurity priorities.
Hypothecation of revenue
1.31The department emphasised that the revenue collected from the BPL would underpin increased government appropriation to directly support biosecurity activities. The department argued:
The additional contributions to consolidated revenue support the Commonwealth's capacity to provide the significantly and permanently increased annual budget appropriation for Commonwealth biosecurity functions. This stable and predictable budget allocation is critical to enable long term management of Commonwealth biosecurity resources.
1.32However, some participants expressed concern that the funds collected under the BPL would be part of consolidated revenue, with no clarity that the levy funds will go towards industry biosecurity measures. For example, the Australian Nut Industry Council (ANIC) stated that:
Unlike traditional biosecurity funding, which is directly reinvested into specific biosecurity projects, the proposed levy will contribute to general consolidated revenue. This approach does not ensure that the funds will be used to achieve tangible biosecurity outcomes, thereby diminishing the purpose of the levy.
1.33ADF commented that there was 'considerable uncertainty that all the revenue collected via this charge will be spent on biosecurity or will result in an equivalent increase in biosecurity funding, especially if utilised to help cover existing departmental deficit budgets'.
1.34Likewise, Australian Grape & Wine commented that there was a lack of oversight applied within the bills regarding the allocation and dispersal of the revenue to be collected:
In the case of levies, there should be a clear relationship between the liability and the provision of a service for which it is exacted. However, the bill shows that the revenue remains non-hypothecated with funding going into consolidated revenue. According to the Australian Government Department for Finance's cost recovery policy, a levy differs from general taxation as it should be 'earmarked' to fund activities provided to the group that pays the levy. That same policy advises that it is usually inappropriate to cost recover activities such as law enforcement and national security.
Potential alternatives
1.35Several submitters pointed to potential alternatives to the BPL, including recommendations of the Craik Review relating to the introduction of a container levy. The NFF, for example, emphasised the need for increased contributions from risk creators, including container imports:
With respect to the 'Container Levy' or equivalent measure, Australian agriculture has advocated for many years the need for a broad-based levy on inbound containers to help fund the biosecurity system. This call has been supported by environmental and invasive species organisations. Producers were extremely disappointed that this was not included in the May budget.
1.36In addition, the Freight and Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) supported 'the need to protect against biosecurity risks and would be prepared to pay an additional levy or cost recovery fee on the proviso that an appropriate proportion directly translates to commensurate improved and immediate trade facilitation measures'.
1.37This initiative from the FTA and APSA was supported by many submitters, including the NSW Farmers' Association, Australian Grape & Wine, and Western Australian Farmers' Federation.
1.38The Australian Fresh Produce Alliance (AFPA) also outlined alternative proposals to achieve a more equitable outcome, including a tiered business turn-over based BPL that is distributed across the industry equitably:
The preferred tiered business turnover-based BPL recommends businesses make a fixed contribution based on which annual turnover bracket they are within, ensuring a more equitable distribution of the BPL. This approach offers easy administration and adjustment and aligns with the government's goal of creating a fairer payment system.
1.39The ISC suggested two potential alternative mechanisms, including an environment protection levy on imports, and risk insurance for biosecurity activities relating to imports. Itargued that these alternative mechanisms would 'provide the best potential outcomes for equity, environment, and the broader biosecurity system'.
1.40In response, the department stated that the Craik Review had also identified the supplementing of the charge on the Full Import Declarations (FID) as an alternative to the introduction of a container levy and noted that the government had increased the FID charge for sea cargo from $49 to $63. Thedepartment told the committee that:
As at 15 April 2024, cost recovery and revenue from importers was $281.4million for financial year 2023–24. That includes an additional $36.5million resulting from increases to the FID and other charges that took effect from 1 July. I should also note that a new charge on goods valued under $1,000 imported by air and sea will be introduced from 1 July 2024, which will cover an additional $27 million annually from importers.
Taken together, these changes mean that in 2024–25 we expect that our revenue from importers will be over $390 million.
1.41Furthermore, the department highlighted that 'Australia would need to ensure that any new container levy or similar charge on imports would be consistent with Australia's international trade law obligations and the Commonwealth charging framework'. The department argued:
In short and simple terms, we need to comply with our international trade obligations, which come from the World Trade Organization and our free-trade agreements, and they provide the discipline with regard to the kinds of charges we can levy on imports. As a principle, we cannot treat imports differently from domestically produced goods to raise internal revenue, so this is a two-way street. These obligations significantly benefit Australia, with over 70 per cent of all Australian agricultural produce being exported and with a forecast value of $71.6 billion in 2023–24.
Timeframe for implementation
1.42The department has indicated that it plans to complete its engagement with industry stakeholders with a view to having the levy in place on 1 July 2024. This would also include an information campaign to commence in advance of the commencement date.
1.43However, concerns were raised by participants in relation to the short timeframe for policy development, impact analysis and implementation of the BPL. Forexample, AgForce argued that it would impact producers across all commodities and supply chain participants:
The government's headstrong adherence to the 1 July 2024 timeframe has undermined appropriate consultation and does not allow for the robust processes necessary to develop a policy of this importance. As such, AgForce is deeply concerned about the risk of negative, unintended consequences for agricultural stakeholders and the potential to undermine stability of Australia's world leading biosecurity system.
1.44Given the complexities of the seafood industry, the Australian Barramundi Farmers Association also argued that setting up fair and equitable levy rates, collection points and structures for the seafood sector by the deadline would be extremely difficult:
With the exception of one aquaculture sector, there are no existing levy structures within the seafood sector to which the Biosecurity Protection Levy could be appended, and there are limited common product aggregation points in the seafood supply chain.
1.45In addition, GrainGrowers argued that uncertainty still existed 'around the levies and charges that would be associated with this legislation, and much of the detail on levy rates and the way that they are set will be established through regulation'. It noted that 'in the absence of this detail it is not clear what the impact will be for agricultural industries'.
1.46Some submitters called for the BPL to be delayed until there was capacity to implement across industries. Others argued that a formal review of the proposed BPL should be conducted following its implementation, including an assessment of the regulatory costs and efficiency of the levy.
1.47The department has pointed out that the design and implementation of the proposed BPL would 'be subject to review by the department every three years in relation to rates and a review of the operation of the bills after three years'.
Committee view
1.48The committee would like to thank participants for their engagement in the inquiry, as well as the government's consultation processes in the lead-up to the introduction of the bills.
1.49The new BPL will ensure that those who directly benefit from Australia's strong biosecurity system make a modest and direct contribution to ensure the system is sustainably funded into the future. Indeed, the committee notes that the revenue collected from the BPL will support a permanent increase to the annual budget appropriation for Commonwealth funded biosecurity activities.
1.50The committee heard that the BPL would complement the additional funding of more than $1.03billion over 4 years, and $267 million per year from 2027–28, announced in the 2023–24 Budget. The committee also notes the increases in fees and charges for importers that came into effect in July last year, as well as the increase to the passenger movement charge from 1 July this year, will see risk creators contribute more to Commonwealth biosecurity funding.
1.51While acknowledging stakeholder concerns about the design and effectiveness of the proposal, the committee understands that the BPL will not replace or duplicate the efforts of producers but will help support biosecurity activity to manage the risks of pests and diseases entering Australia. While primary producers are currently a beneficiary, they don't contribute directly to biosecurity efforts to manage the risks.
1.52Contributions from producers, such as levies paid to Animal Health Australia and Plant Health Australia, do not fund the Commonwealth's biosecurity functions at the border. The department's functions at the border, along with policy and technical market access, the Indigenous Rangers Biosecurity Program, and supporting neighbouring countries to strengthen their biosecurity, are wholly funded by the government and not by agricultural producers.
1.53Further, the department has addressed many of the concerns raised during the initial consultation process and has indicated that the rate will no longer be set in reference to 2020–21 agricultural levy rates. The department has also stated that the BPL will—subject to further consultation—be tailored to individual products to remove multiple imposition points across supply chains.
1.54The committee notes that the option of a container levy continues to be raised as an alternative to the BPL. It is true that the container levy was canvassed in the Craik Review when that report was completed seven years ago in 2017. However, the committee notes that the Craik Review also stated that an alternative to a container levy would be to increase the FID charge that applies to container imports.
1.55On this point, the committee notes that the government has increased the FID from 1 July 2023, a decision that effectively returned importer fees and charges to full cost recovery for the first time since 2015. This decision was acknowledged by Mr Chris Parker from Cattle Australia, who said that the 'changes to the FID are long overdue, given there's been no increase since 2015'.
1.56In relation to whether a container levy could be applied on top of the return to full cost recovery that has already occurred, the committee notes comments from the department at paragraph 2.41 that this may have implications for Australia's international trade obligations.
1.57In addition, the committee notes that the previous government attempted to introduce a container levy, in the form of a 'biosecurity imports levy' in the 2018–19 Budget. That levy was intended to raise over $100 million per year to fund biosecurity. However, the levy proposal was abandoned two years later, in May 2020, without having raised a single cent for biosecurity.
1.58The committee notes the evidence from GPA that producers who have been asked to pay the BPL were not aware of the increase to FID charges for sea cargo. The committee finds this claim surprising as details about the increases in fees and charges for importers are publicly available on the department's website. The committee also notes that GPA's evidence is contrary to comments from Cattle Australia, which acknowledged that the changes to the FID were long overdue.
1.59The committee acknowledges the establishment of the Sustainable Biosecurity Funding Advisory Panel (the Panel). The Panel will provide transparency and an opportunity for producers to provide input regarding the implementation of the BPL. The committee understands that an information campaign will also begin in advance of the 1July2024 commencement date.
1.60In addition, the committee urges the department to ensure that it continues to engage those industries who have not yet been consulted in relation to the implementation of the BPL and conclude those consultations before the commencement date.
1.61On balance, the committee is satisfied that the BPL will support the government's commitment to provide sustainable, predictable, and permanent biosecurity funding. It therefore recommends that the bills be passed.
1.62The committee recommends that the Senate pass the bills.
Senator Glenn Sterle
Chair