This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 28 May 1996
Date introduced: 9 May 1996
House: House of Representatives
Portfolio: Primary Industries and Energy
Commencement: The amendments to the Offshore
Minerals Act 1994 are retrospectively taken to have commenced
on 25 February 1994, while those to the Wool International Act
1993 will commence on Royal Assent.
The major amendments proposed by this omnibus Bill:
- discontinue provisions which enable persons who have paid wool
tax on shorn wool (other than carpet wool) to make contributions of
up to a maximum of 5.5% over the 4.5% wool tax payment;
- provide for the debt component of the wool tax to be set by
- allow Wool International to participate in the formation of a
company or companies, or to acquire equity in such bodies, which,
subject to ministerial approval, may engage in any form of wool
The amendments proposed by this Bill which represent major
policy initiatives relate to the wool industry. The amendments, for
the most part, are identical to those proposed by the Keating
Government in the Primary Industries and Energy Legislation
Amendment Bill (No. 3) 1995. That Bill lapsed with the dissolution
of Parliament for the 1996 election.
(a) Wool International
Wool International, which was established as a statutory
authority in December 1993, took over responsibility for the sale
and management of the wool stockpile from the Australian Wool
Realisation Commission in accordance with the timetable contained
in the Wool International Act 1993.
(b) Additional Contributions by Wool-Tax
Producers' payment of the debt component of the wool tax gives
each producer equity in Wool International on privatisation.
Additional contributions give contributors a right to additional
The discontinuation of the provisions providing for additional
contributions were announced by the Government's Minister for
Primary Industries and Energy on 20 June 1995. The rationale given
by the Minister for the discontinuation was:
Circumstances in the wool industry have now changed
significantly and I announced at the Wool Council Conference last
month that all of the proceeds from the sale of the stockpile, once
the debt has been removed, should be returned directly to
There is therefore no justification for retaining the voluntary
contributions which where essentially seen as a debt for equity
The possibility also exists that a small number of large
producers with a capacity to make the maximum contribution could
reduce the return to other growers who are not in a financial
position to make voluntary contributions.
The Legislation will be changed to implement this decision with
effect from today.
The small number of voluntary contributions already made will be
accepted. Any contributions received following this announcement
(ie. 5:30 pm on 20 June) will be returned to the contributor but
this would not be possible until the legislation is amended.
The then Opposition supported the Government's action with
respect to additional contributions. The Shadow Minister for
Primary Industries in a Media Release of 20 June 1995
[the Opposition] ... has welcomed the announcement that wool tax
payments will be limited to the compulsory 4.5% for the purposes of
determining future equity in Wool International.
... that allowing woolgrowers to pay an additional voluntary
amount of up to 5.5%, as has been the case until now, would cause a
serious imbalance in grower equity in Wool International.
In recent months it has become obvious that growers will have
significant equity in Wool International when the time comes to
wind it up and paying extra wool tax now would have given those
growers a bigger share of the pie at the expense of other
This clearly would have been an unjust outcome and the Minister
for Primary Industries and Energy, Senator Collins, was correct to
close this option.
(c) Payments to Wool International
In relation to the amendments providing for the setting of the
debt component of the wool tax by regulation, the Minister in the
Second Reading Speech to the Primary Industries Legislation
Amendment Bill (No. 3) 1995 stated that:
At the May 1995 annual general conference of the Wool Council of
Australia, it was announced that the government had agreed to
conduct a review of the 4.5 per cent component of wool tax payable
to Wool International. This decision was taken in the context of
significant projected surplus of funds in Wool International once
the government guaranteed debt has been retired.
The review, to be conducted in early 1996, will examin if there
is scope to reduce or even eliminate this component of the tax from
1 July 1996.
The amendments proposed by the Primary Industries Legislation
Amendment Bill (No. 3) 1995 Bill were intended to expedite
implementation of the outcome of the review.
(d) Forward and Futures Trading
The Keating Government's rationale for the proposed amendments
allowing Wool International to participate in forward and futures
trading was as stated by the then Minister in the Second Reading
Speech to the Primary Industries Legislation Amendment Bill (No. 3)
1995, that is, that the then Government believed that such a
... represents a natural progression in Wool International's
efforts to stimulate more effective management of risk in the
industry, ... . It will assist eligible wool tax payers to evaluate
the commercial viability of a privatised organisation undertaking
forward marketing operations and providing risk management
services. In that way it will help eligible wool tax payers to make
a more informed decision regarding privatisation.
The Minister in the Second Reading Speech to the Primary
Industries Legislation Amendment Bill 1995 indicated that strict
measures would be specified in the conditions encompassed in a
ministerial approval required for the program, such as reporting
requirements, and that:
- there will be no government guarantee involved;
- regular reports will be provided to the Wool International
Board, and through it to the Minister;
- rigorous risk management arrangements will be put in place to
ensure that the operation of the program is conducted within an
agreed capital limit;
- it will be funded from revenue received from the management of
non-wool assets, as provided for in the existing legislation;
- be subject to all the requirements of the Corporations Law, and
all forms of taxation.
It is reported in The Land of 2 November 1995 that most
sections of the wool industry have elected (at the October Wool
Council of Australia's half-yearly meeting) to back Wool
International's bid to establish itself as a forward buyer of
grower's wool. For example NSW Farmers Association delegate, Keith
Campbell is reported as saying:
Unless we pursue strongly this initiative we will condemn not
only ourselves, but also the people coming on in next generations
to a huge amount of market uncertainty and production at less than
Barry Court of the Pastoralists and Graziers Association (PGA)
of Western Australia is reported as saying:
... it was wrong to use money compulsorily acquired from growers
for the venture. I think it flies in the face of PGA policy for
private enterprise to support the motion.
Under the scheme proposed by Wool International, $24 million
will be used to establish a subsidiary company, WI Holdings, to
offer growers and processors fixed forward sales contracts in a
two-year trial beginning in July 1996.
In relation to Wool International's proposed forward marketing
scheme, the Shadow Minister for Primary Industries in a Media
Release of 25 October 1995 said:
... the Government's decision to allow Wool International to
trade in wool as a means of developing forward selling options for
growers appeared to be necessary to give them better access to
tools for managing risk.
Forward selling options are badly needed by growers and will
assist them in managing the high level of risk inherent in a
volatile market that is dangerously dependent on spot price
(e) The Liberal and National Parties' Wool Industry
During the 1996 election campaign, the Liberal and National
Parties gave a number of commitments in relation to the wool
- removal of the 4.5% wool tax no later than 1 July 1996;
- closely monitoring Wool International Holdings (WIH) to ensure
it achieves its objectives of promoting the use of risk management
- cap funding to WIH at the current level of $24 million;
- make available to growers as much as possible of their equity
in the stockpile, beginning as soon as it is commercially feasible
to do so, by means to be established in consultation with the
- give growers the option of investing in a privatised Wool
- allow farmers who take the cash-out option to instruct Wool
International to direct cash payments into Farm Management Bonds or
Income Equalisation Deposits.
Schedule 6 - Amendment of the Wool International Act
The powers of Wool International (WI) are contained in section 9
of the Wool International Act 1993 (the Principal Act). A
new subsection 9(3) is inserted in the Principal
Act by item 1 which provides WI, subject to
Ministerial approval, with power:
- to form or participate with others in the formation of a
- acquire, hold or dispose of shares or stock of, or debentures
or other securities of, a company.
WI may only exercise the above powers in relation to a company
whose objects include trading in wool (whether or not the wool
exists) [item 1], and is to fund such activities
solely from non-wool assets (eg. warehouse rental income)
Ministerial approval of the exercise by WI of the above powers
is subject to disallowance by Parliament. The reader should note
that the proposed disallowance period is three sittings days rather
than the normal 15 sitting days specified under section 46A of the
Acts Interpretation Act 1901. In addition, where the
Minister has not exercised the approval power before 1 July 1997,
or an approval has been given before 1 July 1997 which has been
subsequently disallowed, the Governor-General may declare proposed
subsection 9(3) to have ceased to have effect.
Comment: Proposed subsections 9(3) and 9(7) are identical to
those proposed by the then Government in Primary Industries and
Energy Legislation Amendment Bill (No. 3) 1995. Proposed
subsections 9(4)-9(6) were not provisions contained in the Primary
Industries and Energy Legislation Amendment Bill (No. 3) 1995.
Neither the Second Reading Speech or the Explanatory Memorandum
to the Bill provide a rationale for the proposed disallowance
period of three sittings days rather than the 15 sitting days
specified under section 46A of the Acts Interpretation Act
1901. A probable rationale for the reduced disallowance period
relates to the natures of derivates tradingand the requirement of
certainty for commercial transactions.
Part 7 of the Principal Act (sections 43-56) deals with WI
finances. Section 43 requires the Commonwealth to pay WI amounts
received after 1 July 1993 from the tax imposed on shorn wool
(other than carpet wool) under the Wool Tax Acts. The amount to be
payed by the Commonwealth is an amount equal to 4.5% of the sale
value of the wool [subsection 43(2)].
New subsection 43(2) is substituted in the WI
Act by item 2 which makes the percentage of wool
tax collected payable by the Commonwealth to WI a maximum of 4.5%
or such lower amount set by regulation.
Section 45 of the WI Act allows persons who have paid wool tax
on shorn wool (other than carpet wool), after 1 July 1993, to make
additional contributions to the Commonwealth, up to a maximum of
5.5% of the sale value of the wool. Additional contributions
received by the Commonwealth are required to be paid to WI. Section
45 is repealed by item 3.
Comment: Items 2 and 3 are identical to those proposed by the
then Government in Primary Industries and Energy Legislation
Amendment Bill (No. 3) 1995.
Item 11 requires WI to repay any additional
contributions made after 20 June 1995 (the date of the announcement
of the discontinuation of the provisions providing for additional
Item 14 provides for a right of compensation if
the repayment of additional contributions results in the
acquisition of property other than on just terms. Where an
acquisition other than on just terms occurs, the Commonwealth is
liable to pay reasonable compensation as is determined by the
Federal Court. Damages or compensation recovered or other remedy
given in another proceeding must be taken into account in the
assessment of compensation under this item.
Schedule 1 - Amendment of the Offshore Minerals Act
Section 15 of the Offshore Minerals Act 1994 provides
that the area under a licence remains under the original
Commonwealth or State jurisdiction which issued that licence even
if there is a shift in the baseline [generally, the 'baseline' is
the lowest astronomical tide along the coast but also includes
lines enclosing bays and indentations that are not bays and
straight baselines that depart from the coast]. The rationale of
the Government when proposing the insertion of the section in 1993
... to ensure that the area under a licence remains constant
despite any shifts in the coastline which may occur as a result of
natural erosion or accretion processes caused by, among other
things, storm and wave action.
There is evidence of shifts of up to one nautical mile having
occurred around certain areas of the Australian coast, and shifts
of up to three nautical miles may occur. Under these circumstances
the baseline, and as a consequence the outer limit of the three
nautical mile offshore area under State jurisdiction, may shift
either landward or seaward as the case may be. Without this
provision the licence holder in certain locations would not have
any security of title as it could become invalid if the coastline
shifts during the life of the project.
The effect of proposed paragraphs 15(1)(a), (b) and
(c) and 15(3)(a), (b) and (c), which are
substituted in the Offshore Minerals Act 1994 by
items 1 and 2, is to apply the effect of section
15 is to changes in the location of the baseline resulting from
acquisition of new date or reconsideration of existing data. As
stated in the Explanatory Memorandum to the Bill, the amendments
are necessitated by a recent case where the validity of licenses
has been put in doubt by a change in the location of the baseline
caused by reconsideration of old data.
(1) John Anderson MP, Reviving the Heartland - Building a
sustainable future for Australia's primary industries, 5
February 1996, pp. 27 and 28.
(2) Offshore Minerals Bill 1993, Explanatory
Memorandum, pp. 8 and 9.
Ian Ireland Ph. 06 277 2438
28 May 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
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© Commonwealth of Australia 1996
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Last updated: 28 May 1996
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