Bills Digest No. 59   1997-98 Farm Household Support Amendment (Restart and Exceptional Circumstances) Bill 1997


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This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History

Farm Household Support Amendment (Restart and Exceptional Circumstances) Bill 1997

Date Introduced: 2 October 1997
House: House of Representatives
Portfolio: Primary Industries and Energy
Commencement: Royal Assent

Purpose

To establish the Farm Family Restart Scheme and the Exceptional Circumstances Relief Payment for farm families.

Background

The Farm Family Restart Scheme (FFRS) was announced on 14 September 1997 as part of the Government's integrated rural policy package entitled Agriculture - Advancing Australia.It is described there as 'the Government's key program for delivering improved welfare support to the farm sector, as well as providing adjustment assistance to farmers who wish to leave the land'.(1)

It is intended that the FFRS will begin operating on 1 December 1997, providing a welfare safety net for low income farmers experiencing financial hardship who cannot borrow further against their assets and/or who are not ready to make a decision to place their farm on the market and access welfare support under the Social Security hardship provisions.

It is further intended that the FFRS will operate as a 'decision support system' for farmers considering leaving the industry by giving them access to professional advice on the future viability of their business and on employment opportunities if they choose to leave the farm.

The key features of the scheme will be:

  • income support paid at the Newstart Allowance rate (with a partner component where applicable).(Currently for a single person with no children, the maximum payment per fortnight is $321.50.For a couple with children, the maximum fortnightly payment to each partner is $290.10).(2) This payment will be available for a maximum period of twelve months;
  • recipients will not have to satisfy an activity test and will not have to put the farm on the market to obtain assistance;
  • recipients will have a binding obligation to obtain professional advice on the future viability of the business, and career counselling where appropriate.Financial support will be provided to help recipients meet this obligation;
  • access to a re-establishment grant of up to $45,000 on the sale of the farm.This will only be available to farmers who enter the scheme during its first two years of its operation; and
  • the value of any income support used by the recipient will be deducted from the re-establishment grant.This is intended to provide an incentive to farmers to leave sooner rather than later in order to retain a larger grant;
  • the re-establishment grant will be subject to an assets test.Farmers may have up to $90,000 in assets to qualify for the maximum grant.The re-establishment grant will phase down by $2 for every $3 in assets above the threshold;
  • farmers who have been on the scheme for less than six months and withdraw will be eligible to apply to rejoin the scheme, to complete their twelve months.Farmers who withdraw from the scheme after six months will not be able to rejoin.

Comparison with the Farm Household Support Scheme (FHS)

The Farm Household Support Scheme came into operation in March 1993.It was intended to support those farm families who were unable to access commercial finance by providing income support for day-to-day living expenses.Since October 1993 demand for Farm Household Support (FHS) fell so that, by the end of 1995-96, the number of families being supported was less than fifty.In 1995-96 a total of $959,000 was spent on FHS.(3) The FHS was terminated in May 1997.(4)

The Farm Family Restart Scheme differs from the previous FHS is a number of ways, including:

  • farmers do not have to sell their farm in order to gain assistance;
  • they have an obligation to obtain financial advice, and career counselling where appropriate;
  • the FFRS payments are paid as a grant, not as a loan; but
  • any amounts paid will be deducted from the re-establishment grant, should the farmer decide to leave the farm.(Under the FHS, farmers who sold their property within two years had the first nine months of the FHS payments converted to a grant.Farmers who sold their farms outside the two year period, or farmers who did not sell their farms, had to repay the whole amount of FHS); and
  • the value of assets which the farmer may have and still qualify for the maximum re-establishment grant has been increased from $45,000 to $90,000.

This Bill also introduces the Exceptional Circumstances Relief Payment (ECRP).It is similar to the current Drought Relief Payment (DRP) and will be available to eligible farmers in declared Exceptional Circumstances. The Bill does not define 'exceptional circumstances'.However, in his second reading speech the Minister for Primary Industries and Energy, Hon John Anderson MP, said that:

(t)he exceptional circumstances relief payment gives recognition to the fact that there are exceptional circumstances which are beyond the scope of normal farm risk management strategies.It will be available to farmers suffering financial hardship as a result of rare and severe events including, but not restricted to, extreme drought.(5)

This will be similar to the Exceptional Circumstances (EC) provisions of the current Rural Adjustment Scheme under which the payment of interest rate subsidies is possible, in exceptional circumstances, for other than severe drought.For example, in 1993 payments were made to farmers in southern Australia whose crops were affected by heavy rain at harvest time while in 1994 EC payments were made as a consequence of the decline in wool prices.(6)

Requests for drought exceptional circumstances assistance are currently assessed using a nationally agreed framework based on six core criteria consisting of the threshold meteorological criterion, agronomic and stock conditions, farm income levels, water supplies, environmental impacts and scale of event.Under the threshold meteorological criterion, it must be established that the event for which assistance is sought is of such severity that it only occurs once in every twenty to twenty five years, and last longer than twelve months.(7)

DRP will continue as a transitional arrangement.The ECRP will replace the DRP when this Bill receives Royal Assent.

The DRP is (and ECRP will be) an income support payment equivalent to the Newstart Allowance (including partner allowance where applicable).It is subject to an income test and an off-farm assets test.Eligibility for DRP also qualifies farm families for special access to a Health Care Card and Family Payments, and the exemption of farm assets from the Austudy assets test.The length of time that a farmer can receive this payment will be determined on a case-by-case basis, according to the nature of the declared exceptional circumstance.A twelve month recovery period will continue to apply for exceptional drought.

Main Provisions

The effect of Item 17 is to limit claims for restart income support to four years from the scheme's commencement date, and to limit applications for re-establishment grants to two years from the scheme's commencement date.

Item 24 sets out the eligibility criteria for restart income support.

Who qualifies for restart income support?To qualify for restart income support a person must be:

  • a farmer
  • at least 18 years of age
  • an Australian resident
  • in Australia
  • a farmer for a continuous period of two years immediately before they apply; and
  • have a certificate of inability to obtain finance.
  • Circumstances in which a person will not qualify for restart income support include:
  • if the Secretary determines that they are not effectively in control of the farm (for example, when a mortgagee has taken control, or when a person is a bankrupt, or when an eviction notice has been served on a person in respect of a farm);
  • if a person, or their partner has already received restart income support for a total of more than six months; or
  • if a person has already been paid restart income support on two earlier occasions.

Item 29 sets out additional circumstances under which restart income support will not be paid for a period, even though the person may be qualified to receive it.These circumstances include:

  • if a person is receiving farm household support or exceptional circumstances relief payment;
  • if there is no determination by the Secretary that the value of the person's assets does not exceed their asset value limit;
  • if the person is a full-time student;
  • is receiving another support payment, or
  • is receiving income from funds provided under a Commonwealth funded employment program.

It will be possible for a person receiving restart income support to transfer to exceptional circumstances relief payment, with their restart income support suspended for the period that they receive the other payment (Item 31).Item 94 explains how this will be done.

Restart income support and exceptional circumstances relief payment is not payable to a person for the period that the person's partner is receiving either farm household support, exceptional circumstances relief payment or restart income support (Item 37).

Obligation to obtain advice.All people receiving restart income support have an obligation to obtain advice on the long term prospects for their farm business and their future options if they decide to leave the industry.Item 42 enables the Secretary to direct the recipient to obtain certain advice, and to assist the person in paying for the advice.The item also sets the consequences for the recipient of not complying with the Secretary's direction.

Rate of restart income support.Item 54 inserts a new Division 3 under which the rate of restart income support is determined.

  • It is to be the sum of any Newstart allowance and partner allowance that a person would receive if they were entitled to receive those payments;
  • Exempt assets (farm assets, and life insurance and superannuation) and proceeds from a forced disposal of livestock are to be disregarded for the purposes of calculating the rate at which restart income support is payable.

Restart income support is paid as a grant not a loan.Item 60 specifies that restart income support is paid as a grant of financial assistance.

Digest comment: The Farm Household Support was paid as a loan to the person.In his second reading speech on this Bill, the Minister for Primary Industries and Energy, Hon John Anderson, said:

Support paid under this scheme will be provided as a grant - not as a loan scheme, which was proven ineffective under the former government's farm household support scheme.It resulted in low income farmers incurring debts to the government which they simply did not have the capacity to repay.This government has, in fact, decided to wipe the slate clean in regard to the household support scheme in days gone by and write off those debts.Those who have repaid - there are only a few of them - will receive a reimbursement.(8)

An amount of $5.1 million has been estimated to write-off the debts of the Farm Household Support Scheme.(9) The write-off of these debts is not included in the current Bill.

Restart re-establishment grant scheme and restart advice scheme.Item 95 inserts new sections in the Farms Household Support Act 1992 for the purpose of allowing eligible applicants to be provided with a re-establishment grant.The Minister is provided with power to make an instrument which will be the basis for the operation of the scheme, covering such matters as criteria for eligibility, administrative procedures, and the amount and method of payment of the grant.

The item also sets out the framework that will enable eligible applicants and their families to be provided with professional advice on their long term prospects, including the administrative arrangements for applying for assistance, the types of advice and the people who may provide it.

Repeal of sunset clause. The Farm Household Support Act 1992 was to cease to have effect on 31 December 2000.The effect of Item 108 is to extend the Principal Act indefinitely.

Transitional arrangements for the assessment of claims and payment of drought relief payments are set out in Schedule 3.The effect of Items 2 and 3 of Schedule 3 is to continue the current Drought Relief Payment until the Exceptional Circumstances Relief Payment is available (i.e. when this Bill receives Royal Assent).Item 2 specifies that a drought exceptional circumstances certificate continues valid for the period specified on that certificate.Item 3 specifies that any claims made for drought relief payment, but not yet assessed, will be treated as a claim for exceptional circumstances relief payment.

Concluding Comments

This Bill introduces a number of elements of the Agriculture - Advancing Australia package announced by the Government on 14 September 1997.These are:

  • setting up the Farm Family Restart Scheme; and
  • conversion of Drought Relief Payments to Exceptional Circumstances Relief Payments.

Items of the AAA Package not included in the current Bill include:

  • Farm Business Improvement Program (FarmBIS);
  • Farm Management Deposits Scheme;
  • encouragement for older farmers to pass the family farm on to a younger generation, retire and have immediate access to the Age Pension;
  • funding for rural communities to help them cope with change; and
  • the phasing down of interest rate subsidies under the Rural Adjustment Scheme.

Endnotes

  1. Agriculture - Advancing Australia: an integrated rural policy initiative of the Federal Government for farmers and rural communities, 14 September 1997.
  2. Centrelink Commonwealth Government Payment Rates 20 September - 31 December 1997.
  3. Dept. of Primary Industries and Energy, Rural Adjustment Scheme Annual report 1995 96, AGPS, Canberra, 1996: 31.
  4. Farm Household Support Amendment Act 1997.
  5. Second reading speech, House of Representatives, Debates, 2 October 1997: 8703.
  6. Rural Adjustment Scheme Advisory Council, Annual report 1993 94, AGPS, Canberra, 1994: 22 & 49. Also, ibid, Annual report 1994 95: 22.
  7. ibid, Annual report 1995 96, AGPS, Canberra, 1996: 6.
  8. Second reading speech, op.cit..
  9. Agriculture - Advancing Australia, op. cit.

Contact Officer and Copyright Details

Rosemary Bell
21 October 1997
Bills Digest Service
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