Bills Digest No. 115 2004–05
Bill (No. 3) 2004
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
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Bill (No. 3) 2004
House: House of Representatives
Portfolio: Finance and
On the day it receives the
To appropriate additional sums
for the ordinary annual services of the Government.
Section 83 of the Constitution
No money shall be drawn from the Treasury of the
Commonwealth except under appropriation made by law.
There are two broad categories of appropriations:
There are usually six annual appropriation Bills. They authorise
about 25 per cent of annual Commonwealth spending.
Special (or standing) appropriations the terms are often used
interchangeably authorise about 75 per cent of spending. An example
is the Social Security (Administration) Act 1999 under
which age pensions, Austudy payments and other social security
payments are made.
Three annual appropriations Bills are introduced when the Budget
is brought down. They are:
Appropriation Bill (No. 1)
Appropriation Bill (No. 2 ), and
Appropriation (Parliamentary Departments) Bill (No. 1).
These Bills are reproduced in Budget Paper No. 4.
The Bills authorise the payment of specified amounts for
particular purposes. Appropriation Bill (No.1) provides for the
appropriation of money from the Consolidated Revenue Fund for the
ordinary annual services of government. Appropriation Bill (No. 2)
provides for the appropriation of money from the Consolidated
Revenue Fund for purposes other than the ordinary services of
government. The division of items between the two Bills accords
with the 1965 compact between the House of Representatives and the
Appropriation Bill (No. 1) appropriates amounts according to
whether they are departmental or administered expenses.
Departmental expenses are those that agencies
control.(1) Examples are salaries, other cash expenses,
and non-cash expenses such as accruing employee entitlements and
depreciation. Administered expenses are those that agencies
administer on behalf of the government. [While some administered
expenses are paid under Appropriation Bill (No. 1), the bulk are
paid under special appropriations].
Appropriation Bill (No. 2) provides appropriations for:
Administered expenses include:
grants to the States and Territories (sometimes called section
96 grants), and
new administered outcomes.
Non-operating costs sometimes called capital costs include:
equity injections which are provided to agencies to enable
investment in new capacity when normal cash flows are
loans which are provided to agencies and used when an investment
is expected to result in a direct return such as an efficiency
previous years outputs appropriations: these provide funding for
outputs that were delivered in a previous year. This can occur, for
example, when a decision is made to implement a new activity after
the date for inclusion in the additional appropriation Bills. Such
activities are funded initially from cash balances, which are then
replenished by the previous years outputs appropriation, and
administered assets and liabilities appropriations: they provide
funding for acquiring new assets, extending existing assets, and
discharging administered liabilities relating to activities
administered by agencies in their fiduciary capacity on behalf of
The Parliamentary Departments have a separate Appropriation Bill
because Parliament is constitutionally separate and independent of
Funding requirements often change after the Budget is brought
down. Governments make new policy commitments which have to be
funded. Agencies reassess their requirements and, if necessary,
submit requests for additional funding. The Government may agree to
additional funding if the amounts in the Appropriation Acts are
inadequate. The process whereby additional funds are provided is
additional estimates, and begins
around November. The approved additional estimates are incorporated
into Appropriation Bill (No. 3), Appropriation Bill (No. 4), and
Appropriations (Parliamentary Departments) Bill (No. 2). These
Bills are the counterparts of Appropriation Bill (No. 1),
Appropriation Bill (No. 2), and Appropriations (Parliamentary
Departments) Bill (No. 1) respectively.
Portfolio Additional Estimates Statements are the additional
estimates counterparts of Portfolio Budget Statements, and contain
explanations of Appropriation Bill (No. 3), Appropriation Bill (No.
4), and Appropriation (Parliamentary Departments) Bill (No. 2).
New policy proposals should not be included in Appropriation
Bill (No. 3) because they do not fall with the classification of
ordinary annual services. New policy measures are funded either
through Appropriation Bill (No. 4) or special appropriations.(if
Advance to the Finance Minister (AFM) provides flexibility to
the system of appropriating funds. The AFM is a contingency fund
from which the Minister for Finance can spend for emergency or
unforeseen circumstances. Authority for payments derives from the
annual Appropriation Acts. According to Department of Finance and
Administration guidelines, funding is available only if agencies
meet two tests:
the need for funding must be urgent, and
the need was unforeseen or arose because of erroneous omission
The Appropriation Acts also require the Finance Minister to
account to Parliament for spending from the AFM, which the Minister
does by tabling monthly and annual statements. Whereas in the past,
these reports were virtually useless in finding out the purposes
for which funds were expended, their content has improved
dramatically and they now contain plain English explanations.
The Bill refers to Special Accounts. In essence, they are
ledgers in the Consolidated Revenue Fund that are used to record
all spending and revenue relevant to a particular activity. Special
accounts are thus a means of simplifying the recording and keeping
track of amounts of money associated with that activity.
According to the second reading speech, sums sought in the Bill
fall into three categories:
funding of election commitments
major items of expenditure, and
estimates variations and other measures.
$18.5 million to the Department of Health and Ageing to further
address mental health issues, including depression and dementia
$10.1 million to establish the National Water Commission and
provide program funding under the Australian Water Fund
$10 million contribution to the Department of Communications,
Information Technology and the Arts towards upgrading the Penrith
$6.9 million to the Attorney-General s Department for additional
funding for the National Community Crime Prevention program, in
addition to the extra $5 million announced before the election,
$6.5 million to the Department of Veterans Affairs as additional
funding to commemorate significant anniversaries in 2005, including
the 90th anniversary of the Gallipoli landings and the 60th
anniversary of the end of World War II.
- $365.1 million to the Department of Employment and Workplace
Relations in additional funding for Job Network, reflecting the
continuation of record levels of performance and employment
outcomes under Employment Services Contract 3
- a net $103.8 million to the Department of Defence, which
includes $149.4 million to fund accelerated depreciation for the
earlier withdrawal of F111 fighter bomber planes and two guided
$85.1 million in indexation adjustments
$123.5 million to establish Tourism Australia
$78.7 million to the Department of Family and Community Services
to fund Centrelink costs for the recent budget measure, More Help
$60 million to the Australian Taxation Office to provide
transitional grants to state funded organisations which will become
ineligible for an exemption from fringe benefits tax as public
$42.1 million to the Department of Environment and Heritage to
enhance and supplement the Great Barrier Reef structural adjustment
$24.3 million to the Department of Health and Ageing for the
childhood obesity package.
These amount to around $690.7 million.
As noted, some of funding sought is for commitments made during
the 2004 election.
Section 53 of the Constitution states:
Proposed laws appropriating revenue or moneys, or
imposing taxation, shall not originate in the Senate. But a
proposed law shall not be taken to appropriate revenue or moneys,
or to impose taxation, by reason only of its containing provisions
for the imposition or appropriation of fines or other pecuniary
penalties, or for the demand or payment or appropriation of fees
for licences, or fees for services under the proposed law.
The Senate may not amend proposed laws imposing
taxation, or proposed laws appropriating revenue or moneys for the
ordinary annual services of the Government.
The Senate may not amend any proposed law so as to
increase any proposed charge or burden on the people.
The Senate may at any stage return to the House of
Representatives any proposed law which the Senate may not amend,
requesting, by message, the omission or amendment of any items or
provisions therein. And the House of Representatives may, if it
thinks fit, make any of such omissions or amendments, with or
Except as provided in this section, the Senate
shall have equal power with the House of Representatives in respect
of all proposed laws.
In short, the Senate cannot amend any laws for appropriating
monies for the ordinary annual services of the government. The
Senate can, however, amend any appropriations for other
The clauses in the Bill are largely identical to the provisions
of Appropriation Act (No. 3) 2003 04. The following
focuses on the provisions in the Bill that are not in this Act.
Part 2 deals with basic appropriations. They
are the amounts allocated to agencies so they can provide ordinary
annual services. Clause 6 of Part 2 specifies a
total of $1 540 million. The amounts for each agency are contained
in Schedule 1.
Clause 8 deals with basic appropriations for
administered items. Subclause 8(1) provides that,
for an administered item, the Finance Minister may issue amounts
that do not exceed, in total, the lesser of:
Budget Paper No. 4 contains the following explanation of these
Appropriations for administered expenses are
subject to a determination by the Finance Minister on the amounts
to be issued. The effect of that determination is to prevent any
part of the appropriation that has not been expensed in the year
from being issued from the Consolidated Revenue Fund. By convention
the Finance Minister issues determinations in relation to
administered expenses appropriations following the completion of
each financial year.(3)
Subclause 8(3) is a provision that has not
appeared in earlier years Appropriation Bills. It provides that a
determination under paragraph 8(1)(b) is not a legislative
instrument for the purposes of the Legislative
Instruments Act 2003. This means that
the Minister s determination is not required to be tabled in each
House of Parliament, and is not subject to disallowance.
The provisions in Clause 9 are identical to the
comparable provisions in Appropriation Act (No. 3) 2003 04
except for the addition of subclause 9(9) and
subclause 9(10). Subclause 9(9) relates to
subclauses 9(1) and 9(2). These
two subclauses deal with the lapsing of departmental expenses:
The annual appropriations acts are not expressed
in terms of a particular financial year and so do not automatically
lapse. Amounts appropriated for departmental expenses and for
non-operating costs can be subject to a lapsing process first
introduced in the additional estimates appropriations bills for
2003-2004. Under this process, on request in writing from a
responsible minister for an agency, the Finance Minister may issue
a determination to reduce the agency s departmental expense or
non-operating costs appropriation. Requests for amounts to be
lapsed may arise, for example, because the appropriation is no
longer required. Until the Finance Minister issues a determination
under this process, moneys appropriated for departmental expenses
and non-operating costs may be issued from the Consolidate Revenue
Fund in the budget or later years.(4)
Subclause 9(9) provides that a determination under subclause
9(1) or subclause 9(2) is a legislative instrument for the purposes
of the Legislative Instruments Act
2003 and that, despite subsection 44(2) of this Act,
section 42 of this Act applies to the determination. However, Part
6 of that Act does not apply to the determination.
Comment. Part 6 of the Legislative Instruments
Act deals with the sunsetting of legislative instruments,
subsection 44(2) with legislative instruments that are not subject
to disallowance, and section 42 with the disallowance of
legislation instruments. Thus subclause 9(9) provides that the
sunset provisions do not apply but that the disallowance provisions
Subclause 9(10) provides that a written request under subclause
9(1) or subclause 9(2) is not a legislative instrument for the
purposes of the Legislative Instruments Act.
The provisions in Clause 10 are identical to
the comparable provisions in Appropriation Act (No. 3) 2003 04
except for the addition of subclauses 10(3) and
10(4). These subclauses deal with section 31 of
the Financial Management and Accountability Act 1997 (FMA
Act) and net appropriations . Section 31 of the FMA Act allows a
departmental item to be increased by an amount (up to the amount of
eligible receipts) where the Finance Minister and the Minister
responsible for an agency have entered into a net appropriation
agreement with the agency. (A
proforma agreement can be found on the Department of Finance
and Administration website). Such an agreement provides that, if
the agency receives any amounts covered by the agreement, the
agency s appropriation will be increased in the annual
Appropriation Acts. Specific provisions in the annual Appropriation
Acts give effect to the agreement. Thus, the agreement has effect
only while the specific provisions are in the annual Appropriation
Acts. The main effect of subclauses (3) and (4) is to apply net
appropriation agreements to administered items and specifically to
the agencies set out in paragraphs 10(4) (a) to
The provisions in Clause 11 are identical to
the comparable provisions in Appropriation Act (No. 3) 2003 04
except for the addition of subclause 11(3).
Subclauses 11(1) and
(2) allow the Finance Minister to increase the
amount specified in a departmental item but limit the increase to
no more than $20 million. Subclause 11(3) provides that the Finance
Minister s determination is a legislative instrument for the
purposes of the Legislative Instruments Act but that neither
section 42 of that Act nor Part 6 of that Act applies.
Clause 12 deals with the
advance to the Finance Minister. The provisions in Clause 12 are
identical to the comparable provisions in Appropriation Act (No. 3)
2003 04 except for the addition of subclause 12(4)
and subclause 12(5). Subclause
12(3) limits the amount of the advance for the financial
year ended 30 June 2005 to $175 million. Subclause 12(4) provides
that if an amount set out in Schedule 1 of the Bill is recovered,
then the total the Minister can advance remains at $175 million.
Subclause 12(2) provides that, where the Finance
Minister has advanced an amount, Schedule 1 is taken to be amended
to take account of the advance. Subclause 12(5)
provides that a determination issued under subclause 12(2) is a
legislative instrument for the purposes of the Legislative
Instruments Act 2003 but that neither section 42 of
that Act nor Part 6 of that Act applies.
Agency Resourcing 2004-05. Budget Paper No. 4 , p. 4.
For a more comprehensive discussion, see Agency Resourcing
2004-05. Budget Paper No. 4 , pp. 4 5.
Agency Resourcing 2004-05. Budget Paper No. 4 , p. 5.
Agency Resourcing 2004-05. Budget Paper No. 4 , p. 5.
16 February 2005
Bills Digest Service
Information and Research Services
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© Commonwealth of Australia 2005
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