Bills Digest No. 33, 2013–14              21 January 2014

Infrastructure Australia Amendment Bill 2013

Paula Pyburne
Law and Bills Digest Section 

Date introduced: 20 November 2013

House:  House of Representatives

Portfolio: Infrastructure and Regional Development

Commencement: Sections 1–3 and Parts 1 and 5 of Schedule 2 on Royal Assent. All other provisions commence on the same day being the earlier of a single day fixed by Proclamation or six months after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose of the Bill

The primary purpose of the Infrastructure Australia Amendment Bill 2013 (the Bill) is to amend the Infrastructure Australia Act 2008[1] to establish Infrastructure Australia as a separate entity under the Commonwealth Authorities and Companies Act 1997 (CAC Act).[2] As a result, Infrastructure Australia will be an independent governing entity that is both legally and financially separate from the Commonwealth.

Structure of the Bill

The Bill contains two Schedules:

·      Part 1 of Schedule 1 amends the Infrastructure Australia Act to re-establish Infrastructure Australia as a Commonwealth authority which is subject to the CAC Act

·      Part 2 of Schedule 1 makes consequential amendments to the Income Tax Assessment Act 1997[3] so that determinations about designated infrastructure projects are made by a responsible person rather than, as currently, by the Infrastructure Coordinator—which position is abolished by this Bill and

·    Schedule 2 of the Bill contains comprehensive transitional and savings provisions.

Background

Funding of infrastructure in Australia

Responsibility for infrastructure in Australia is spread across all three tiers of government and the private sector. The burden of both funding and physical provision of infrastructure lies overwhelmingly with the states.

The Commonwealth provides grants to the states and local government to fund infrastructure but the states and local government are responsible for its physical provision. The private sector too is becoming increasingly involved in the financing, construction and operation of infrastructure, for example, in areas such as toll roads and electricity generation. Responsibility for regulation lies mainly with the Commonwealth and the states as set out in Appendix 1 of this Bills Digest.[4]

Need for an infrastructure strategy

In 2005, the Business Council of Australia reported that:

Research undertaken for the BCA by Rod Sims of Port Jackson Partners Limited (PJPL) demonstrates that the current state of Australia’s most fundamental infrastructure—supporting all elements of the transport network, energy and water supplies, and the basic facilities to support growing and spreading urban communities—is in urgent need of reform, repair and expansion. We are at the crossroads in terms of infrastructure development as a result of poor institutional arrangements and policy choices. Changes are required to alleviate current capacity constraints, and provide additional capacity to support high growth in the years ahead.[5]

The Business Council of Australia stressed that governments at all levels needed to ‘develop an infrastructure strategy that ensures Australia is one of the top global competitors’.[6] This was only one of a number of reports which were highly critical of the adequacy of Australia’s infrastructure.[7]

On 11 May 2005, the Australian Labor Party (ALP) announced that it would establish Infrastructure Australia if elected to government.[8] On 2 August 2007, the then leader of the opposition, Kevin Rudd, detailed his plans for Infrastructure Australia stating that it would have three divisions:

·      to deal with policy and regulatory issues, driving reform on legal, tax, planning and infrastructure finance matters

·    to audit the adequacy of the nation’s infrastructure, identify weaknesses and prioritise projects and

·      to evaluate the business cases of projects, project financing options including PPP (Private Public Partnerships) and manage the probity process.[9]

Consistent with that policy, the Infrastructure Australia Act was enacted, and Infrastructure Australia was established, in April 2008.[10]

Later in 2008, the Nation-building Funds Act 2008 was enacted to provide an ongoing revenue stream to finance, or leverage finance, for key infrastructure of national significance.[11] Under the government’s proposed arrangements, Infrastructure Australia would be responsible for recommending projects for funding from the Building Australia Fund.[12]

Infrastructure Australia

The role of Infrastructure Australia is to advise all levels of government, investors, and infrastructure owners on matters relating to the provision of infrastructure.[13]

Current governance arrangements

At present, the Infrastructure Australia Act establishes the Infrastructure Australia Council (the Council) which consists of a Chair and eleven other members. The Minister appoints the Chair and the other members of the Council by written instrument made under the Infrastructure Australia Act.[14] The Council has the statutory role of providing advice to the relevant Minister on infrastructure matters, including the development of priority lists.[15]

The Infrastructure Australia Act also establishes the Infrastructure Coordinator (the Coordinator) as a statutory office holder, appointed by the Minister.[16] The function of the Coordinator is to assist the Council in the performance of its functions.[17] The Coordinator is appointed by the Minister on a full-time basis for a period not exceeding five years.[18] In addition, the Coordinator undertakes any other functions that the Minister, by writing, directs the Coordinator to perform.[19]

Although the 2007 election policy was that Infrastructure Australia would be established as an independent statutory authority[20] it was actually established as part of Department of Infrastructure, Transport, Regional Development and Local Government (the Department of Infrastructure). It is neither a statutory authority under the CAC Act nor a prescribed agency under the Financial Management and Accountability Act 1997.[21]

Accordingly, the Office of the Infrastructure Coordinator’s funding is appropriated within that of [the Department of Infrastructure]. Specifically, the Office of the Infrastructure Coordinator funding is included within the departmental outputs funding for the Department’s Outcome 1 ‘Improved infrastructure across Australia through investment in and coordination of transport and other infrastructure’.

Departmental outputs are appropriated as a single amount for each entity, such that the $7.5 million per annum annual funding for the Office of the Infrastructure Coordinator and the Major Cities Unit is able to be used to fund any departmental expenditure.[22]

In addition, the Coordinator operates within the legal framework of the Department of Infrastructure and is accountable to the Minister—not the Council. Staff members of Infrastructure Australia are engaged under the Public Service Act 1999, and are employees of the Department of Infrastructure.[23]

These governance arrangements create a tension between the Council and the Coordinator. Whilst the Coordinator is to assist the Council, he or she is engaged by, and can be terminated by, the Minister—but not the Council. The Coordinator is accountable to the Minister—not the Council—and is assisted by staff from the Minister’s department. On its face, the arrangements could create a situation where the assistance provided to the Council by the Coordinator is unduly influenced by the Minister which may, in turn, affect the content or ordering of the Infrastructure Priority List.

Governance of Australian government bodies

In 2003, a review of corporate governance of statutory authorities and office holders was undertaken by John Uhrig (the Uhrig report). A purpose of the review was to identify issues concerning the governance of those instrumentalities and to provide options for Government to improve their performance and get the best from them and their accountability frameworks. The review was asked to develop a broad template of governance principles and arrangements that the Government could extend to statutory authorities and office holders, and potentially beyond, to a wider range of public sector bodies.[24]

In response to the recommendations of the Uhrig report, the Government developed formal governance arrangements which outline the principles for helping determine the most appropriate structure and governance arrangements for such entities. According to the Governance Arrangements for Australian Government Bodies:

There is a policy preference to curb unnecessary proliferation of Government bodies. Consequently, a function, activity or power should, if possible, be conferred on an existing department, or another existing Australian Government body, rather than on a new body.

If there are persuasive policy reasons to form a new body, then its purpose—and its financial, legal and staffing status—will need careful consideration …

If it appears that a governing board will be essential for a body’s effective governance, then it would be appropriate for the body to operate under the Commonwealth Authorities and Companies Act 1997 (CAC Act). These bodies are both legally and financially separate from the Commonwealth. The extent of Government control over a Commonwealth authority depends on its establishing legislation …

There is little reason for bodies to operate outside of, or with exceptions to, the FMA Act or the CAC Act.[25]

This Bill formally establishes Infrastructure Australia as an entity to which the CAC Act applies. The CAC Act regulates certain aspects of the financial affairs of Commonwealth authorities. In particular, it has detailed rules about reporting and accountability. It also deals with other matters such as banking and investment and the conduct of officers.[26] By replacing the Council with a Board, the Bill operates to impose directors’ duties upon the members. This makes Board members formally accountable for their decisions.

The Bill also addresses the tension between the Council and the Coordinator by de-coupling the position of Coordinator from the Minister and placing the position (to be renamed the CEO) under the control of the Board.

Creating the infrastructure priority list

Infrastructure Australia’s first task was to undertake, with the agreement of COAG, a nationwide audit of Australia’s infrastructure.[27] It was to produce its first infrastructure priority list within 12 months of its establishment based on the findings of the audit.[28]

The first infrastructure priority list was published in May 2009.[29] The May 2008 Budget Papers provide some guidance to the Government’s intention about the contents of the infrastructure priority list stating:

Only public infrastructure projects which at least meet a minimum benchmark social rate of return—determined through rigorous cost-benefit analysis, including ex post evaluation and review—should be funded, and relative social rates of return above the minimum benchmark should be used to prioritise the funding of projects. While there are differences between the private and public components of the physical capital stock, there is a clear role for expected rates of return to drive investment decisions in both cases.[30]

The first infrastructure priority list identified nine ‘priority’ projects. In addition, 28 ‘pipeline’ projects were considered to show potential but further project development and analysis was required before Infrastructure Australia considered it would be able to make a funding recommendation to the Australian Government.[31]

Having reviewed the process by which Infrastructure Australia formulated the first infrastructure priority list, the Australian National Audit Office had this to say:

A clear strength in the processes employed in developing the first Infrastructure Priority List was the rigorous approach adopted to analysing proponent submissions against the published criteria. The published criteria themselves set a high standard, with a strong focus on the economic appraisal of candidate projects. However, whilst all shortlisted projects were considered against the same criteria, the pipeline projects did not pass the tests set out in the published Prioritisation Methodology.[32]

Adherence to the infrastructure priority list

Although it is responsible for creating and publishing the infrastructure priority list (and subsequent revisions of the list), Infrastructure Australia is merely an advisory body and is not empowered to make decisions in relation to those infrastructure projects which are funded.

In March 2012 former Finance Minister, Lindsay Tanner, argued that the Government was ‘ignoring the national interest and handing out infrastructure funding “irrespective of merit” for political and not economic gain’ and it was reported that ‘the federal government has often ignored the recommendations of it [sic] advisory body Infrastructure Australia, sometimes giving the green light to projects the body had warned against’.[33]

In addition, there have been complaints about projects considered by the states to be priority projects which have not made it on to the infrastructure priority list. For example, ‘the New South Wales’ (NSW) government’s planned 36 kilometre North West Rail Link from Chatswood to the Hills district in the outer north-west was listed in 2012 as an early stage project that required more work’.[34] NSW Transport Minister, Gladys Berejiklian is reported to have said: ‘This is a joke—Infrastructure Australia’s Michael Deegan and federal Transport Minister Anthony Albanese are the only people who don’t see [the North West Rail Link] as a priority’.[35]

Committee consideration

Standing Committee for the Selection of Bills

On 4 December 2013, the Standing Committee for the Selection of Bills referred the Bill to the Rural and Regional Affairs and Transport Legislation Committee for inquiry and report by 17 March 2014.[36]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bills Digest, the Senate Standing Committee for the Scrutiny of Bills had not published any comments in relation to the Bill.

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human rights had not published any comments in relation to the Bill.

Policy position of the Nationals

Speaking in support of the Bill, Darren Chester of the Nationals outlined a number of the projects that the government has committed itself to building, including updates to major highways. He also mentioned:

… one other infrastructure project that I am very keen to see progressed in this term of government. The Victorian coalition government is carrying out the first stage of the Macalister Irrigation District 2030 plan. This plan has been around for a long time. It is basically an attempt to modernise irrigation infrastructure that has been allowed, through decades, to deteriorate to the extent that it does not meet modern needs. These planned upgrades include channel automation projects, outlet rationalisation and construction of a balancing storage that will support the return of more than 12,000 megalitres of water a year to productive use.

For members who do not live in rural seats, talking about irrigation upgrades and 12,000 megalitres might not sound particularly important. But 12,000 megalitres per year means more wealth created in regional communities. It means greater productive capacity for the Macalister Irrigation District. It means that milk production can be boosted by in the order of 24 million litres per year.[37]

Position of the Australia Labor Party

The Australian Labor Party (ALP) opposes the Bill on the grounds that it attempts

… to re-establish the old link between the political process and the delivery of infrastructure [by giving] the Minister for Infrastructure the right to interfere with Infrastructure Australia's considerations by nominating pet projects for assessment [and allowing] the Minister to ignore entire classes of infrastructure investment, such as public transport.[38]

Policy position of the Australian Greens

In May 2013, Adam Bandt of the Australian Greens (the Greens) introduced a Private Member’s Bill into the House of Representatives, the purpose of which was to amend the Infrastructure Australia Act to prioritise Commonwealth funding of rail projects over any infrastructure project that relates to roads. The exception would be those road projects designed to address an urgent or significant road safety issue or on which construction has already begun.

Speaking on behalf of the Infrastructure (Priority Funding) Amendment Bill 2013,[39] Mr Bandt said:

It is simply astounding that Commonwealth might fund the east-west tollway ahead of the Melbourne Metro rail. It is a question of priorities. Victoria's public transport system is under severe pressure and needs an urgent injection of Commonwealth funds. According to Infrastructure Australia, the east-west tunnel has not made the grade, yet the Melbourne Metro, which tops the Infrastructure Australia's national priority list, is being sidelined.[40]

The Greens’ preference for improved public transport is also evidenced by Greens Senator Rhiannon who said in relation to the proposal to build the WestConnex toll road:

This is bad news for Sydneysiders, particularly people in Western Sydney, who desperately need governments to fix their ailing public transport system. It throws up the question: why are the New South Wales and federal governments ignoring the lessons of history and lining up to repeat their mistakes with WestConnex? The question is not a choice between if governments should be financing new roads or if they should build them through public-private partnerships. The question is: why are we squandering precious infrastructure funding to extend heavily congested roads when the problem is caused by a lack of fast, frequent public transport?[41]

Position of major interest groups

Jennifer Westacott, Chief Executive of the Business Council of Australia has expressed the view that the Commonwealth should strengthen the independence of Infrastructure Australia and have it generate a national list of priority projects focused on lifting productivity so that it is not just ‘a clearing house for proposals by state governments’.[42]

More recently, the Business Council of Australia has recommended, amongst other things, that an intergovernmental agreement should be implemented ‘to define a stronger Commonwealth funding role’.[43]

Commenting on the introduction of the Bill, Infrastructure Partnerships Australia (IPA) Chief Executive Brendon Lyon said:

Infrastructure Australia is an important agency, but there is also a wide recognition that deeper skills and a clear mandate would equip Infrastructure Australia to deliver better outcomes. The legislation will make Infrastructure Australia a stronger organisation and equip it with the right accountabilities and expectations.[44]

Financial implications

According to the Explanatory Memorandum, there is no net impact on the Australian Government Budget flowing from this amendment:

It is proposed that Infrastructure Australia undertake its new functions within existing funding, including the current appropriations of $12.072 million in 2013-14, $12.126 million in 2014-15, $12.224 million in 2015-16 and $12.303 million in 2016-17.[45]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.[46] The Government considers that the Bill is compatible with human rights and does not raise any human rights issues.

Key issues and provisions

Part 1 of Schedule 1

Part 1 of Schedule 1 of the Bill amends the Infrastructure Australia Act.

Establishing Infrastructure Australia

Item 8 of Schedule 1 of the Bill repeals sections 4 and 5 of the Infrastructure Australia Act and inserts proposed sections 4 and 5–5D. Proposed section 4 establishes Infrastructure Australia as a body corporate with its own seal, the power to acquire and dispose of property and which may sue and be sued. Importantly the CAC Act applies to Infrastructure Australia. The CAC Act management framework sets out high-level general management duties[47] and audit and financial reporting requirements,[48] and prescribes compliance with certain general policies of the government.[49] The management unit of a Commonwealth authority is a governing board of one or more ’directors’ [50] who are subject to directors’ duties and must act in the interests of the body.[51]

Transitional provisions in items 2–7 of Part 2 of Schedule 2 of the Bill set out the terms for the transfer of the assets and liabilities of the old Infrastructure Australia to Infrastructure Australia as established under this Bill.

Functions

Proposed section 5 sets out the general functions of Infrastructure Australia. The existing functions of conducting audits of nationally significant infrastructure and developing Infrastructure Priority Lists based on the results of those audits are retained,[52] as are the functions of identifying impediments to investment, promoting investment in infrastructure, undertaking or commissioning research and any other functions conferred on Infrastructure Australia by the Infrastructure Australia Act.[53]

The key difference is that under the terms of existing subsection 5(4) of the Infrastructure Australia Act Infrastructure Australia is to carry out its function of evaluating proposals for investment in, or enhancements to, nationally significant infrastructure only ‘on request by the Minister’.

The function is situated in proposed paragraph 5(c) which provides that the function is to be carried out subject to section 5A. Under proposed section 5A Infrastructure Australia is to evaluate proposals for investment in, or enhancements to, nationally significant infrastructure.[54] Proposed section 5A allows the Minister to make two types of determinations, both of which are legislative instruments.[55] First, the Minister may determine other infrastructure which is to be evaluated by Infrastructure Australia. Second, the Minister may determine a class of proposals which Infrastructure Australia may not evaluate.[56] The Explanatory Memorandum does not provide any guidance on the types of determinations the Minister might make. However, it would seem that the Minister could, for instance, determine that public transport proposals are a class of proposals that Infrastructure Australia must not evaluate (although the Government has not made any formal statements to this effect). Either of the determinations are legislative instruments which are tabled in both of the Houses of the Parliament and are subject to disallowance.

This means that under the existing provision, the evaluation function is only carried out at the request of the Minister. Under the proposed provision, the function is carried out by Infrastructure Australia, subject to either, or both, of the determinations which are outlined above.

Another difference is that Infrastructure Australia is no longer required to provide advice on infrastructure policy issues arising from climate change or to review Commonwealth infrastructure funding programs to ensure they align with Infrastructure Priority Lists.[57]

Under proposed section 5B, Infrastructure Australia is to develop Infrastructure Plans to be given to the Minister which cover a period of 15 years.[58] Infrastructure Plans are to be prepared every five years (or at other intervals determined by the Minister by legislative instrument).[59] In developing Infrastructure Plans, Infrastructure Australia is to specify priorities for nationally significant infrastructure for Commonwealth, state, territory and local governments and to outline anticipated productivity gains, the need for complementary infrastructure and the timeframes for delivering the proposals.[60] Infrastructure Australia is to take into account a range of information in developing Infrastructure Plans including, but not limited to, the outcome of consultations with Commonwealth, state, territory and local governments as well as the outcomes of audits, Infrastructure Priority Lists and evaluations.[61]

Under proposed section 5C Infrastructure Australia is to provide advice to all stakeholders—that is the Minister, governments, and investors in, and owners of, infrastructure about:

·    Australia’s current and future needs and priorities relating to nationally significant infrastructure

·    policy, pricing and regulatory issues

·    impediments to the efficient utilisation of national infrastructure networks

·    options and reforms to make the utilisation of national infrastructure networks more efficient

·    the needs of users of infrastructure and

·    mechanisms for financing investment in infrastructure.

The provisions of proposed section 5C are in equivalent terms to those in existing paragraphs 5(1)(a)–(f) of the Infrastructure Australia Act. The Explanatory Memorandum does not provide any information about the rationale for proposed sections 5B and 5C. However, these provisions assist in identifying and prioritising future infrastructure projects. This should act as a buffer to claims for priority which satisfy regional rather than national interests.

Infrastructure Australia has an additional limited function which is set out in proposed section 5D. If requested to do so by the Minister it is to:

·      review and provide advice on proposals to facilitate the harmonisation of policies, and laws, relating to development of, and investment in, infrastructure[62] and

·      publish evaluations and relevant evidence on its website, with the exception of material which is commercial in confidence.

The effect of the latter of these functions is that evaluations will only be published if the Minister requests it. It would not appear, then, that this material will be published routinely.

Other written directions

Existing section 6 of the Infrastructure Australia Act empowers the Minister to give written directions to Infrastructure Australia about the performance of its functions. Those directions are not legislative instruments.[63] Item 9 of Schedule 1 of the Bill repeals and replaces existing subsections 6(3) and 6(4) to set out the general nature of the directions that may be given—and to make clear that the Minister must not give directions about the content of any audit, list, evaluation, plan or advice to be provided by Infrastructure Australia.

The effect of proposed subsection 6(4) of the Infrastructure Australia Act is to make clear that the Minister’s ability to give directions has some limitations. In particular, the Minister cannot direct Infrastructure Australia about the details or outcomes of specific submissions for funding or about the manner in which it forms the Infrastructure Priority List.

These provisions expand upon existing subsections 6(3) and (4) which limit the directions that the Minister can make to those that are of a general nature only.

Establishing the Board

Item 11 inserts proposed Part 2A into the Infrastructure Australia Act. Within the new Part proposed section 6D establishes the Board of Infrastructure Australia and proposed section 6E sets out its functions. Importantly, it is for the Board to decide the objectives, strategies and policies to be followed by Infrastructure Australia and to ensure the proper, efficient and effective performance of Infrastructure Australia’s functions.

The Board is constituted in equivalent terms to the current Council, that is, a Chair and 11 other members.[64] There are no changes to the manner in which members are appointed, the term of appointment, remuneration of members or the provisions allowing for leave of absence of members.[65] Item 15 repeals and replaces subsections 18(1) and (2) to update the circumstances in which the Minister may terminate the appointment of a member of the Board. Importantly, item 11 in Part 6 of Schedule 2 of the Bill makes clear that persons who are members of the Council of old Infrastructure Australia are not automatically appointed as members of the Board of Infrastructure Australia as established under this Bill.

Items 17–24 make consequential amendments to provisions about the meetings of the Board by substituting the term ‘the Board’ for existing references to the term ‘Infrastructure Australia’.

The CAC Act imposes conduct obligations on the members of the Board. These include obligations of care and diligence,[66] good faith,[67] proper use of position[68] and proper use of information,[69] as well as certain duties of disclosure.[70]

Annual report

Item 25 of Part 1 of Schedule 1 of the Bill repeals Division 4 which sets out the requirement for Infrastructure Australia to provide an annual report. Schedule 1 of the CAC Act contains detailed requirements about the annual report of Commonwealth authorities.

Subitem 10(1) of Schedule 2 of the Bill requires the old Infrastructure Australia to prepare a final report for the Minister for presentation to the Parliament.

Role of the Chief Executive Officer, staff and consultants

Item 27 repeals those provisions of the Infrastructure Australia Act which establish the Infrastructure Coordinator. Proposed sections 27 and 28 establish the role of Chief Executive Officer (CEO) and detail his, or her, role. In addition, proposed section 28A requires the CEO to act in accordance with policies determined by the Board.

Items 29–37 of Part 1 of Schedule 1 of the Bill amend the existing terms and conditions of appointment of the Coordinator to insert references to the CEO and to make clear that the Board is empowered to appoint the CEO and that the CEO is accountable to the Board. Importantly, item 11 in Part 6 of Schedule 2 of the Bill makes clear that the person who is currently appointed to be the Coordinator of old Infrastructure Australia is not automatically transferred into the position of CEO in Infrastructure Australia as established under this Bill.

Item 38 of Part 1 of Schedule 1 of the Bill repeals section 39 of the Infrastructure Australia Act and inserts proposed sections 39–39AA to provide clarity about the employment arrangements for staff of Infrastructure Australia, including those who are seconded to it. Proposed section 39AA makes specific provision for the engagement of consultants to formalise what has been occurring in practice.[71]

Planning and reporting

Item 39 inserts proposed Part 3A—Planning and reporting, and proposed Part 3B—Finance, into the Infrastructure Australia Act.

Within proposed Part 3A, proposed section 39B sets out the requirement for a corporate plan covering a period of three financial years to be given to the Minister each financial year. The plan must include the matters set out in proposed subsection 39B(3) of the Infrastructure Australia Act, being:

·    a statement of the objectives that Infrastructure Australia will pursue

·    the strategies and policies that Infrastructure Australia will adopt to achieve those objectives

·    performance indicators for the assessment of Infrastructure Australia’s performance of its functions and

·    such other matters (if any) as the Minister directs.[72]

Infrastructure Australia is to consult with the Minister and various other stakeholder bodies in preparing the plan.[73] Importantly though, the plan, or a variation of it does not take effect unless it has been endorsed by the Minister, in writing.[74] Whilst on its face it would appear that such a requirement would dilute the independence of Infrastructure Australia, these provisions represent a common form of drafting for entities which are governed by the CAC Act.[75] The table at Appendix 2 of this Bills Digest sets out a range of other ministerial controls for Commonwealth authorities under the CAC Act.

Finance

Proposed section 39D provides for money to be paid to Infrastructure Australia in accordance with the appropriation made by the Parliament, subject to any directions by the Finance Minister about the amounts paid or the times at which it is to be paid. Proposed section 39DB sets out the restrictions on financial transactions that can be undertaken by Infrastructure Australia.

Item 9 in Part 4 of Schedule 2 of the Bill provides for the abolition of the Infrastructure Australia special account and for the transfer of any amount standing in credit in the special account at the transition time to Infrastructure Australia as established by this Bill.

Other matters

Item 41 amends section 40 so that the Minister may delegate his, or her, functions and powers under paragraph 5D(1)(c) or sections 6, 8 or 18 of the Infrastructure Australia Act to the Secretary of the relevant Department or to an SES employee in the Department. Proposed section 40A provides that Infrastructure Australia may delegate any or all of its powers or functions to a member of the Board or the CEO. Likewise proposed sections 40B and 40C allow for delegation by the Board to the CEO and by the CEO to certain SES employees respectively.

Part 2 of Schedule 1

The provisions of Part 2 of Schedule 1 of the Bill amend section 415 of the Income Assessment Act which was inserted by the Tax Laws Amendment (2013 Measures No. 2) Act 2013.[76] The relevant provisions commenced on 11 July 2013.

The Revised Explanatory Memorandum for the originating Bill states that section 415 of the Income Assessment Act provides a tax incentive for entities that carry on a nationally significant infrastructure project that has been designated by the Infrastructure Coordinator. That ‘tax incentive uplifts the value of such entities’ carry forward tax losses by the long-term bond rate; and exempts such entities from the continuity of ownership, same business, trust loss and bad debt deduction tests’.[77]

Sections 415-50–415-80 of the Income Assessment Act set out the process by which the Infrastructure Coordinator is to assess applications, to designate infrastructure projects in order that they are able to access the relevant tax incentives, and to notify the Commissioner of Taxation of that decision. Items 43–95 of Part 2 of Schedule 1 of the Bill remove references to the Infrastructure Coordinator and replace them with references to the responsible person in section 415 Income Assessment Act.

Item 98 of Part 2 of Schedule 1 of the Bill inserts a definition of the term responsible person into section 415-95 of the Income Assessment Act. Under proposed subsection 415-95(3) the Infrastructure Minister must, by legislative instrument, determine:

·    a position within an Agency that is usually occupied by an SES employee and/or an office under a law of the Commonwealth and/or a body corporate incorporated for a public purpose by an Act and

·    provisions of Subdivision 415-C of Part 3-45 of Chapter 3 of the Income Assessment Act and the infrastructure project designation rules for each position, office or body so determined.[78]

Under proposed subsection 415-95(1) of the Income Tax Assessment Act, a person is the responsible person if the person occupies a position, or holds an office, specified in a determination made under proposed subsection 415-95(3). The Infrastructure Minister must consult with the Treasurer before making (or varying or revoking) such a determination.

Item 12 in Part 7 of Schedule 2 of the Bill is a transitional provision which operates so that things done by the Infrastructure Coordinator for the purposes of Division 415 of the Income Tax Assessment Act are taken to have been done by the responsible person.

There is no indication in the Explanatory Memorandum about whether the responsible person will be the CEO of Infrastructure Australia as established by this Bill. However, it is open to the Minister, in consultation with the Treasurer to determine that is the case. Equally though, the responsible person could sit within any agency such as the Australian Taxation Office or the Department of Infrastructure.

Concluding comments

The purpose of the Bill is to establish Infrastructure Australia as an independent governing entity that is both legally and financially separate from the Commonwealth. The Bill achieves that.

The amendments also improve the lines of control between the Minister, the new Board of Infrastructure Australia and the authority’s CEO by making the role of the Coordinator (renamed the CEO) subordinate to the Board. In turn, the Board is responsible to the Minister and each member of the Board must satisfy the directors’ duties imposed on them by the CAC Act.

The Minister for Infrastructure and Regional Development, speaking on behalf of the Bill, expressed the view that:

Infrastructure Australia, however, has not been successful in fundamentally changing the way projects are identified as national priorities. Whilst it has delivered priority project lists, projects are derived from state and territory government project proposals and the prioritisation is based on the extent to which the project business case is advanced rather than the extent to which the project will contribute to improved national productivity.

Moreover, the current structure of Infrastructure Australia does not provide the degree of independence and transparency needed to provide the best advice to government about the infrastructure priorities that will reverse Australia's productivity slide. [79]

Whilst the Bill does clarify the functions of Infrastructure Australia, particularly in terms of its function of evaluating proposals for investment, it is not possible to say that Infrastructure Australia is truly independent of the Minister. Proposed section 5A of the Infrastructure Australia Act allows the Minister to make a determination to either limit the types of proposal which Infrastructure Australia may evaluate or require the authority to consider proposals which do not meet the description of being ‘nationally significant’.

Importantly, Infrastructure Australia remains an advisory body only. It will still be for the government of the day to make the final judgement about the funding of infrastructure projects.

Appendix 1

Level of government

Economic infrastructure

Social infrastructure

Commonwealth

Aviation services (such as air navigation)

Telecommunications

Postal services

National roads (shared) Local roads (shared)

Railways (shared)

Tertiary education

Public housing (shared)

Health facilities (shared)

State

Roads (urban, rural, local) (shared)

Railways (shared)

Ports and sea navigation

Aviation (some regional airports)

Electricity supply

Dams, water and sewerage systems

Public transport (train, bus)

Educational institutions (primary, secondary and technical) (shared)

Community health services (base hospitals, small district hospitals, and nursing homes) (shared)

Public housing (shared)

Sport, recreation and cultural facilities

Libraries

Public order and safety (courts, police stations, traffic signals)

Local

Roads ( local) (shared)

Sewerage treatment, water and drainage supply

Aviation (local airports)

Electricity supply

Public transport (bus)

Libraries

Community centres and nursing homes

Recreation facilities, parks and open spaces

Source: R Webb, The Commonwealth Government’s role in infrastructure provision, Research paper, 8, 2003–04, Parliamentary Library, Canberra, 2004, accessed 28 November 2013.

Appendix 2

Ministerial controls in respect of Commonwealth authorities under the CAC Act

Minister

Activity

Source

Finance Minister

Require and receive interim reports

s. 13

Receive and require reports, documents and information about operations of the authority and its subsidiaries

s. 16

Grant exemption from requirement to align a subsidiary’s accounting period

s. 31

Engage a registered company auditor to investigate and report on an exemption application (regarding alignment of a subsidiary’s accounting period)

s. 31

Give directions about procurement of property or services (including to comply with the Commonwealth Procurement Guidelines

s. 47A

Make Finance Minister’s Orders

s. 48

Make General Policy Orders

s. 48A

Responsible Minister

Give an annual report

s. 9

Received a subsidiary’s audit report and financial statements

s. 12

Require budget estimates

s. 14

Receive information and documents about the involvement with a company, partnership. Trust, unincorporated joint venture or other significant business activity

s. 15

Be informed of the operations of the authority and its subsidiaries

s. 16

Receive and require reports, documents and information about operations of the authority and its subsidiaries

s. 16

Make declarations and class orders about a director’s material personal interest

s. 27K

C Lawson, , ‘The legal structures of responsible government and Ministerial responsibility’, Melbourne University Law Review, 35(3), 2011, pp. 1005–1048, at pp. 1040–1041, accessed 2 December 2013.

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[1].              Infrastructure Australia Act 2008, accessed 26 November 2013.

[2].              Commonwealth Authorities and Companies Act 1997, accessed 26 November 2013. It should be noted that the Public Governance, Performance and Accountability Act 2013 commences on 1 July 2014, it is not expected to have an effect on the creation of the Board and CEO of Infrastructure Australia by this Bill.

[3].              Income Tax Assessment Act 1997, accessed 26 November 2013.

[4].              R Webb, Infrastructure Australia Bill 2008, Bills digest, 69, 2007–08, Parliamentary Library, Canberra, 2008, pp. 4–6, accessed 26 November 2013

[5].               Business Council of Australia, Infrastructure action plan for future prosperity, 2005, p. 3, accessed 26 November 2013.

[6].               Ibid.

[7].               Full details of those reports and their findings are set out in R Webb, Infrastructure Australia Bill 2008, Bills digest, 69, 2007–08, Parliamentary Library, Canberra, 2008, pp. 4–6, accessed 26 November 2013.

[8].               Ibid., p. 14.

[9].               K Rudd, Rudd details Infrastructure Australia—planning for our future, media release, 2 August 2007, accessed 26 November 2013.

[10].               Parliament of Australia, ‘Infrastructure Australia Amendment Bill homepage’, Australian Parliament website, accessed 26 November 2013.

[11].              Nation-building Funds Act 2008, accessed 28 November 2013.

[12].              R Webb, C Dow and R de Boer, Nation-building Funds Bill 2008, Bills digest, 67, 2008–09, Parliamentary Library, Canberra, 2008, p. 7, accessed 28 November 2013.

[13].               Infrastructure Australia Act, subsection 5(1), accessed 10 December 2013.

[14].               Infrastructure Australia Act, subsection 8(1), accessed 10 December 2013.

[15].               Infrastructure Australia Act, paragraph 5(2)(b), accessed 10 December 2013.

[16].               Infrastructure Australia Act, section 29, accessed 10 December 2013.

[17].               Infrastructure Australia Act, subsection 28(1), accessed 10 December 2013.

[18].               Infrastructure Australia Act, section 30, accessed 10 December 2013.

[19].              Infrastructure Australia Act, paragraph 28(2)(a), accessed 10 December 2013.

[20].              S Crean, A strong future for Australia’s exports, Australian Labor Party policy document, Election 2007, p. 12, accessed 28 November 2013.

[21].              Financial Management and Accountability Act 1997, accessed 10 December 2013.

[22].              Australian National Audit Office, Conduct by Infrastructure Australia of the first national infrastructure audit and development of the infrastructure priority list, Audit report, 2, 2010–11, Commonwealth of Australia, 2010, accessed 28 November 2013.

[23].              Public Service Act 1999, accessed 26 November 2013.

[24].               J Uhrig, Review of the corporate governance of statutory authorities and office holders, Commonwealth of Australia, June 2003, accessed 26 November 2013.

[25].               Department of Finance, Governance arrangements for Australian Government bodies, August 2005, p. x, accessed 26 November 2013.

[26].              CAC Act, overview, accessed 10 December 2013.

[27].              Infrastructure Australia, A report to the Council of Australian Governments, Commonwealth of Australia, December 2008, accessed 9 December 2013.

[28].              K Rudd, Rudd details Infrastructure Australia—planning for our future, op. cit.

[29].              Infrastructure Australia, National infrastructure priorities: infrastructure for an economically, socially and environmentally sustainable future, Commonwealth of Australia, May 2009, accessed 28 November 2013.

[30].              Australian Government, ‘Boosting Australia's productive capacity: the role of infrastructure and skills’, Budget paper no. 1: 2008–09, pp. 4-6, accessed 28 November 2013.

[31].              Infrastructure Australia, National infrastructure priorities: infrastructure for an economically, socially and environmentally sustainable future, op. cit., p. 8.

[32].              Australian National Audit Office, Conduct by Infrastructure Australia of the first national infrastructure audit and development of the infrastructure priority list, Audit report, 2, 2010–11, Commonwealth of Australia, 2010, p. 23, accessed 28 November 2013.

[33].              General news, ‘Tanner slams politics of spending’, The Australian, 23 March 2012, p. 1, accessed 28 November 2013.

[34].              M Dunckley, M Whitbourn and S Morris, ‘Coalition seething at transport report’, The Australian Financial Review, 14 July 2012, p. 3, accessed 28 November 2013.

[35].              Ibid.

[36].              Standing Committee for the Selection of Bills, Report No. 10 of 2013, Senate, Canberra, 4 December 2013, accessed 6 December 2013.

[37].              D Chester, ‘Second reading speech: Infrastructure Australia Amendment Bill 2013’, House of Representatives, Debates, 10 December 2013, p. 70, accessed 11 December 2013.

[38].              A Albanese, ‘Second reading speech: Infrastructure Australia Amendment Bill 2013’, House of Representatives, Debates, 10 December 2013, p. 65, accessed 11 December 2013.

[39].              Parliament of Australia, ‘Infrastructure (Priority Funding) Amendment Bill 2013 homepage’, Australian Parliament website, accessed 29 November 2013.

[40].              A Bandt, ‘First reading speech: Infrastructure (Priority Funding) Amendment Bill 2013’, House of Representatives, Debates, 27 May 2013, p. 3646, accessed 29 November 2013.

[41].              L Rhiannon, ‘Matters of public interest: road infrastructure’, Senate, Hansard, 27 February 2013, p. 1094, accessed 29 November 2013.

[42].              J Westacott, ‘Infrastructure the top priority for new government’, The Weekend Australian, 7 September 2013, p. 25, accessed 28 November 2013.

[43].              Business Council of Australia, Decision time on infrastructure funding and financing, media release, 28 November 2013, accessed 29 November 2013.

[44].              Infrastructure Partnerships Australia, Infrastructure Australia reform thoughtful, thorough supported by industry, media release, 20 November 2013, accessed 29 November 2013.

[45].              Explanatory Memorandum, Infrastructure Australia Amendment Bill 2013, p. 1, accessed 10 December 2013.

[46].              The Statement of Compatibility with Human Rights can be found at page 2 of the Explanatory Memorandum to the Bill.

[47].              CAC Act, sections 21–27P.

[48].              CAC Act, sections 8–20.

[49].              CAC Act, section 28.

[50].              CAC Act, section 5 defines a director as (a) for a Commonwealth authority that has a council or other governing body—a member of the governing body; (b) for a Commonwealth authority that does not have a council or other governing body—a member of the authority; or (c) for a Commonwealth company—a person who is a director of the company for the purposes of the Corporations Act 2001.

[51].              C Lawson, ‘The legal structures of responsible government and Ministerial responsibility’, Melbourne University Law Review, 35(3), 2011, pp. 1005–1048, at pp. 1021–1022, accessed 2 December 2013.

[52].              Infrastructure Australia Act, paragraphs 5(2)(a) and (b) respectively.

[53].              Infrastructure Australia Act, paragraphs 5(2)(e), (f), (i) and (k) respectively.

[54].              Infrastructure Australia Act, proposed paragraph 5A(1)(a).

[55].              A legislative instrument can be subject to disallowance if either a Senator or Member of the House of Representatives moves a motion of disallowance within 15 sitting days of the day that the legislative instrument is tabled. The motion to disallow must be resolved or withdrawn within a further 15 sitting days of the day that the notice of motion is given. However, it should be noted that if there is no notice of motion to disallow a legislative instrument, then there is no debate about its contents.

[56].              Infrastructure Australia Act, proposed subsection 5A(2).

[57].              Infrastructure Australia Act, paragraphs 5(2)(g) and (h) respectively.

[58].              Infrastructure Australia Act, proposed subsection 5B(2).

[59].              Infrastructure Australia Act, proposed subsection 5B(3).

[60].              Infrastructure Australia Act, proposed paragraphs 5B(1)(a) and (b).

[61].              Infrastructure Australia Act, proposed paragraph 5B(1)(c).

[62].              This is in equivalent terms to existing paragraphs 5(2)(c) of the Infrastructure Australia Act.

[63].              Infrastructure Australia Act, subsections 6(1) and 6(6) respectively.

[64].              Infrastructure Australia Act, proposed section 7.

[65].              Infrastructure Australia Act, sections 8–12.

[66].              CAC Act, section 22.

[67].              CAC Act, section 23.

[68].              CAC Act, section 24.

[69].              CAC Act, section 25.

[70].              CAC Act, section 27F.

[71].              See for example, Juturna Consulting on behalf of Infrastructure Australia, COAG road freight incremental pricing trials, August 2011, accessed 10 December 2013.

[72].              Where the Minister makes such a directive in writing it is not a legislative instrument.

[73].              Infrastructure Australia Act, proposed subsection 39B(6).

[74].              Infrastructure Australia Act, proposed subsections 39B(7) and (8).

[75].              See for example National Film and Sound Archive of Australia Act 2008, accessed 2 December 2013 and Safe Work Australia Act 2008, accessed 2 December 2013.

[76].              Tax Laws Amendment (2013 Measures No. 2) Act 2013, accessed 28 November 2013.

[77].              Revised Explanatory Memorandum, Tax Laws Amendment (2013 Measures No. 2) Bill 2013, p. 4, accessed 28 November 2013.

[78].              Income Tax Assessment (Infrastructure Project Designation) Rule 2013, accessed 2 December 2013.

[79].              W Truss (Minister for Infrastructure and Regional Development), ‘Second reading speech: Infrastructure Australia Amendment Bill 2013’, House of Representatives, Debates, 20 November 2013, p. 1, accessed 11 December 2013.