Bills Digest No. 160  1999-2000Primary Industries (Excise) Levies Amendment Bill 2000

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WARNING:
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
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details

Passage History

Primary Industries (Excise) Levies Amendment Bill 2000

Date Introduced: 12 April 2000

House: House of Representatives

Portfolio: Agriculture, Fisheries and Forestry

Commencement: 30 June 2000

Purpose

To repeal the sunset clause in Schedule 18 to the Primary Industries (Excise) Levies Act 1999 which comes into effect after 30 June 2000 and so enable the transaction levy on the sale of sheep, lambs and goats to continue.

Background

Levies on agricultural, livestock and forestry products are imposed by the Commonwealth at the request of the relevant industry. Since 1 July 1998 a transaction levy has been collected on commercial sales of sheep, lambs and goats. The proceeds of this levy have been used to fund research, marketing and health and safety monitoring in the sheep, lamb and goat industries. The Primary Industries (Excise) Levies Act 1999 has a sunset clause (clause 7 of Schedule 18) which comes into effect after 30 June 2000. The purpose of this Bill is to remove the sunset clause and allow the transaction levy on the sale of sheep, lambs and goats to continue to be collected.

History of the Live-stock Transactions Levy

Prior to 1 July 1998 levy funds for the sheepmeat industry were collected by a slaughter levy which was paid by the owner of the sheep or lambs at the point of slaughter. In most instances the owner at the point of slaughter was not the producer of the sheep or lambs. This meant that in most cases, meat processors, wholesalers, retailers and live-sheep exporters were paying the levy, despite the proceeds being predominantly directed at programs which were supported by, and initiated on behalf of the producers.

The restructuring of the Australian Meat and Livestock Council and related bodies, which came into effect on 1 July 1998, included a Government decision to remove the statutory requirement for processors and live-sheep exporters to pay a compulsory slaughter levy.⁽¹⁾ This forced producers to consider alternate levy arrangements to meet their commitment to various levy funded programs managed by Meat and Livestock Australia, the National Residue Survey and the Australian Animal Health Council.

The Government introduced the Live-stock Transactions Levy Bill 1997 which proposed to implement a levy on the sale value (an ad valorem levy) of sheep and lamb transactions from 1 July 1998. The Bill was referred for consideration to the Senate Rural and Regional Affairs and Transport Legislation Committee which reported on 25 November 1997.⁽²⁾ The Committee's report drew attention to a division of opinion between producers of sheepmeat and some representatives of wool producers, especially stud merino breeders, over the proposed levy. Some representatives argued that with a transaction levy, merino breeders and growers of merino sheep would be subsidising meat producers for no benefit.⁽³⁾ Others noted that the levy was used to support animal health programs that contributed to the improvement of the wool industry, and genetic research programs that benefited both the sheepmeat and wool industries.⁽⁴⁾

The outcome of the Committee's report was an amendment to the Live-stock Transactions Levy Bill 1997 that inserted a sunset clause at section 11 to state that: 'this Act, unless sooner repealed, ceases to be in force at the end of 2 years after the commencement time'.

The Live-stock Transactions Levy Act 1997 was repealed by the Primary Industries Levies and Charges (Consequential Amendments) Act 1999. The Primary Industries (Excise) Levies Act 1999 (the Principal Act) consolidated 27 levies into one Act. The Schedules to the Principal Act impose levies on specific agricultural, livestock and forestry products. Schedule 18 of the Principal Act imposes the Live-stock Transactions Levy, and clause 7 of that Schedule is the sunset clause.⁽⁵⁾

Operation of the Live-stock Transactions Levy

The levy is distributed for four purposes:

• Meat and Livestock Australia (MLA) marketing
• MLA research and development
• Australian Animal Health Council (AAHC)
• National Residue Survey (NRS)

It is administered by the Levies Management Unit of the Department of Agriculture, Fisheries and Forestry. The rate of the levy is set by Regulations and must be equal to, or less than the maximum rate in the legislation. The levy rate is based on the budgeted revenue needed to carry out the four purposes, and is determined by an estimate of the number of transactions, and an estimate of the sale price for sheep, lambs and goats in any one year. The levy for sheep and lambs is calculated as a percentage rate of the sale price with a legislated maximum rate applying. The levy for goats is a flat rate per transaction.

It is estimated that in 1998-99 the levy raised $20.5 million which was distributed in the following way:⁽⁶⁾

Review of the Live-stock Transactions Levy

In 1999 the Sheepmeat Council of Australia (SCA) initiated an independent review of the levy. The SCA is a prescribed industry body for the purpose of the Australian Meat and Live-stock Industry Act 1997, and the Minister is required to have regard to policy formed by the SCA concerning the live-stock transaction levy.⁽⁷⁾ The SCA set up a review committee consisting of nominated representatives of the sheep, lamb and goat production sectors (3 members), livestock agents (1 member), processors (1 member) and Government (1 observer), with a Chairperson appointed by the SCA.

The review considered the purpose of the levy, and the most equitable, efficient and widely acceptable future levy mechanism for the sheep, lamb and goat industries. Submissions were sought from interested parties through advertisements in national daily newspapers and the rural press. Industry organisations were also invited to make submissions. In all, 19 submissions were received from a range of organisations and individuals, including several from stud merino breeders' organisations.⁽⁸⁾

The committee concluded that an ad valorem transaction levy was the most transparent and equitable basis of imposing a levy for the agreed purposes of the industries, with the exception of lambs sold for wool production and finishing. Lambs sold for wool production are currently levied at the full lamb rate and levied again as sheep when sold for mutton at the end of the animal's productive wool life. The committee considered that part of the first levy on the lamb was not equitable as the levy was used for programs not directly related to wool marketing or wool research.

In the case of lambs sold for finishing, the committee found that the levy on the first sale of a lamb to a finisher was in order, but considered that the subsequent levy on the lamb sold for slaughter was overtaxed by part of the first levy on the lamb. The committee recommended that the most equitable method of levy collection on lambs grown for meat purposes was a value added levy that levied the increased value of a lamb at each point of sale.

A number of submissions received by the committee supported the need to address the inequity in the levy on lambs sold for wool production and lambs sold for finishing. In his Second Reading Speech, the Minister for Agriculture, Fisheries and Forestry, Hon Warren Truss, rejected the proposal for a levy rebate for lambs used for wool production as impractical and said that '[i]t would weaken compliance, complicate the audit process and significantly increase administrative costs'.⁽⁹⁾ He drew attention to levy relief arrangements in place until 31 August 2001 which reduce the levy on lamb sales from 2% to 1% and which were introduced by the Government in response to the tariff quota regime imposed by the United States on 22 July 1999.⁽¹⁰⁾

Main Provisions

Item 1 of Schedule 1 repeals the sunset clause (clause 7) of Schedule 18 (Live-stock transaction levy) to the Primary Industries (Excise) Levies Act 1999. The effect of repealing this clause will be to allow the levy on the sale of sheep, lambs and goats to continue. Failure to pass this Bill will result in the levy ceasing at the end of 30 June 2000.

Endnotes

2. Processors and live-sheep exporters make non-statutory contributions towards the cost of selected industry programs that are directly relevant to their needs. Under Schedule 17 of the Primary Industries (Excise) Levies Act 1999 the Government has set the processor and exporter levies at zero, but has the industry's agreement to raise the levies if non-statutory contributions are not adequate to meet agreed funding levels for joint industry programs.

3. Senate Rural and Regional Affairs and Transport Legislation Committee, 'Report: Live-stock Transactions Levy Bill 1997', November 1997, Parliamentary Paper 1997, no. 464.

4. ibid., p. 10.

5. ibid., p. 9.

6. Clause 7 of Schedule 18 to the Primary Industries (Excise) Levies Act 1999 reads:

   Cessation of operation of Schedule

   This Schedule, unless sooner repealed, ceases to be in force at the end of 30 June 2000.

7. Sheepmeat Council of Australia Inc., Live-stock Transaction Levy Review Report, 26 July 1999, p. 6 and 7.

8. Section 59 of the Australian Meat and Live-stock Industry Act 1997.

9. Sheepmeat Council of Australia Inc., Live-stock Transaction Levy Review Report, 26 July 1999, p.7 and 8. A list of those making submissions is as follows:

10. Hon Warren Truss, 'Second Reading Speech, Primary Industries (Excise) Levies Amendment Bill 2000', House of Representatives, Debates, 12 April 2000, p. 15078.

11. ibid., p. 15078.

Contact Officer and Copyright Details

Rosemary Bell
9 May 2000
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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ISSN 1328-8091
© Commonwealth of Australia 2000

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Published by the Department of the Parliamentary Library, 2000.

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