Bills Digest no. 132 2005–06
(No. 1) 2006
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
Contact Officer & Copyright Details
1) 2006 2007
Date introduced: 9 May 2006
House: House of
Portfolio: Finance and Administration
Commencement: On Royal Assent.
To appropriate approximately $53.335
billion for the ordinary annual services of the Government.
Section 83 of the Constitution provides that no monies may be
withdrawn from the Consolidated Revenue Fund (CRF) except under an
appropriation made by law . Laws authorising spending are
- special appropriations, or
- six (usually) annual Appropriation Acts.
Special appropriations which account of about 75 per cent of
spending are spending authorised by Acts for particular purposes.
Examples are age pensions, disability support pensions and the
Newstart Allowance paid under the Social Security
(Administration) Act 1999, and the Family Tax Benefits A and B
paid under A New Tax System (Family Assistance)
(Administration) Act 1999.
The Appropriation Bill (No. 1) 2006-2007 (the Bill) appropriates
funds for the ordinary annual services of the Government . By
comparison Appropriation Bill (No. 2) 2006-2007 appropriates funds
for other annual services. Section 54 of the Constitution requires
that there be a separate law appropriating funds for the ordinary
annual services of the Government. That is why there are separate
bills for ordinary annual services and for other annual services.
The distinction between ordinary and other annual services was set
out in a Compact between the Senate and the Government in 1965 (the
Compact has been updated to take account of the adoption of accrual
The amounts allocated to each Commonwealth portfolio and the
breakdown between departmental outputs and administered expenses,
are set out in Schedule 1.
Departmental outputs are expenses that portfolio departments and
agencies control. They are essentially the cost of running agencies
for example are salaries and other day-to-day operating expenses.
The bulk of appropriations in the Bill are for departmental
expenses. Administered expenses are those that agencies administer
on the Government s behalf. While most administered expenses are
funded through special appropriations, some are funded through the
Bill. The regional partnerships program and the Bass Strait
Passenger Vehicle Equalisation Scheme are examples of administered
expenses funded through the Bill.(1)
Departmental outputs and administered expenses contribute to
outcomes. They are the results or consequences for the community
that the Government wishes to achieve. For example, the Bill
appropriates funds for the Federal Magistrates Service under
Outcome 1 which is:(2)
To provide the Australian community with a simple
and accessible forum for the resolution of less complex disputes
within the jurisdiction of the Federal Magistrates Service.
Section 53 of the Constitution provides that the Senate may not
amend proposed laws appropriating revenue or moneys for the
ordinary annual services of the Government. The Senate may,
however, return to the House of Representatives any such proposed
laws requesting, by message, the omission or amendment of any items
or provisions therein.
In May 2005, the Commonwealth announced its intention to
introduce a workplace relations reform package. In response, the
Australian Council of Trade Unions instituted a national campaign
opposing the proposed reforms. The Government also commenced a
national advertising campaign to promote the proposed reforms. The
advertisements were funded from appropriations to the Employment
and Workplace Relations Portfolio under the Appropriation Act
(No. 1) 2005-2006.
The crucial question argued before the High Court was whether
the purpose for which the Commonwealth decides to appropriate money
must be described in the appropriation Acts with some degree of
specificity and, if so, what degree of specificity would be
required under the Australian Constitution.
In Combet, all members of the High Court agreed that
the Constitution requires some degree of specificity. The majority
in this matter, comprised of Gummow, Hayne, Callinan and Heydon JJ,
endorsed the view that so-called blank appropriations, that are
appropriations without any specificity, are invalid.(4)
Further, the majority, with Gleeson CJ agreeing, held that the
degree of specificity is to be set by Parliament.
However, the majority did not provide a conclusive answer as to
where the specificity threshold may lie. Rather, arguably even
sidestepping the issue, their Honours held that departmental items
specified in appropriation bills are not connected to outputs which
could have provided some specificity. As a result, their Honours
did not hesitate to find that the expenditure for the advertising
campaign was covered by the appropriation Act. On this point,
Gleeson CJ provided some form of guidance, arguing that outputs are
valid expressions of Parliament s choice, unless they are expressed
in such broad terms that they are devoid of meaning.(5)
His Honour found that the breadth of the output stated for the
departmental item was sufficient to support the expenditure by the
The decision by the majority was heavily criticised by the
dissenting Justices Kirby and McHugh. McHugh argued that the
approach taken by the majority would appear to authorise agencies
to spend money on whatever outputs it pleases .(6)
Justice Kirby made a similar point, especially noting that
appropriations cannot be denuded of meaning without violating
The total amount appropriated from consolidated revenue under
the Bill is approximately $53.335 billion (as compared to the
Appropriation Act (No. 1) 2005-2006, where the amount was
approximately $47.371 billion).(8) As usual, by far the
largest single portfolio appropriation is Defence with some $17.541
billion. Whilst aggregate appropriations for the various portfolios
and agencies within each portfolio are contained in
Schedule 1 of the Bill, more detailed information
for all portfolios can found in their respective Portfolio Budget
Statements at http://www.budget.gov.au/2006-07/pbs/html/index.htm
The main provisions of the Bill are in practice identical to
Appropriation Act (No. 1) 2005-06, with only a few minor
deletions to take account of redundant provisions.
New section 4 provides that Portfolio Budget
Statements are to be considered as relevant extrinsic
interpretational material under section 15AB of the Acts
Interpretation Act 1903. This provision was contained in the
Appropriation Act (No.1) 2005-2006, a fact noted by the
High Court in the Combet case discussed above. However,
the contents of the relevant Portfolio Budget Statement does not
appear to have been an influential factor in the majority decision
in that case.
6 provides that the basic appropriation is
$53,334,579. The amounts allocated to each agency, and the
breakdown between departmental outputs and administered expenses,
are set out in Schedule 1. The actual
appropriation is done under new section 15.
New Section 7 empowers the Finance Minister to
issue money from the Consolidated Revenue Fund for departmental
items (department outputs) for an agency but restricts the total to
that specified in Schedule 1.
New Section 8
deals with administered items in the basic appropriation.
Subclause 8(1) limits the amount of money the
Finance Minister can issue for administered items from the
Consolidate Revenue Fund to the lesser of the amount
specified in Schedule 1, and the amount that the
Finance Minister includes in a determination. The general procedure
with respect to such a determination is as
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 CRF. By convention the Finance Minister
issues determinations in relation to administered expenses
appropriations following the completion of each financial year.
Unlike the reduction determinations for departmental outputs or
non-operating costs discussed above, the determinations for
administered expenses do not reduce the appropriation. Rather, they
are a declaration by the Finance Minister of the maximum amount
that may be issued for the respective items. The effect of the
determination is that administered expense appropriations that have
not been expensed in a year cannot be spent in later years.
New Section 9 deals
with reduction of appropriations upon request . Departmental
appropriations do not lapse at the end of the financial year. They
therefore remain legally valid until spent, that is, the unspent
balances of all departmental appropriations remain available across
all financial years. However, amounts appropriated for departmental
expenses can be subject to a reduction process. Under this process,
the Finance Minister may issue a determination following a written
request from the relevant Minister to reduce an agency s
departmental expenses appropriation. As in the 2005-06 Act, for
previous years such determinations are legislative instruments, and
disallowable by either House of Parliament in the usual way under
the Legislative Instruments Act 2003.
New Section 11
allows the Finance Minister to increase, by determination, spending
on departmental items. The maximum allowed is $20 million. Such
determinations are legislative instruments, but are not
disallowable under the Legislative Instruments Act 2003:
new subsection 11(3).
New section 12
effectively allows the Finance Minister to increase the total
amount appropriated in Schedule 1 by up to $175
million in urgent cases were the need for additional amount was
unforeseen or not provided for due to an erroneous omission or
understatement . A determination by the Finance Minister increasing
the appropriation is a legislative instrument, but not disallowable
under the Legislative Instruments Act 2003: new
- Department of Transport and Regional Services 2006-2007
Portfolio Budget Statement.
- See: page 32 of the Appropriation Bill (No.1) 2006-2007.
- Combet v Commonwealth  HCA 61.
- ibid., paragraph 160 per Gummow, Hayne, Callinan and Heydon
- ibid., paragraph 27 per Gleeson J.
- ibid., paragraph 90 per McHugh J
- ibid., paragraph 258, per Kirby J.
- Although with later adjustments, the actual available 2005-2006
appropriation appears to have been 48.165 billion. See p. 13 of the
- 2006-2007 Budget Paper No. 4
19 May 2006
Bills Digest Service
Information and Research Services
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Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Information and Research Service, nor do they constitute
professional legal opinion.
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contents with Senators and Members and their staff but not with
members of the public.
© Commonwealth of Australia 2006
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Published by the Parliamentary Library, 2006.
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