BILLS DIGEST NO. 90, 2019–20              16 March 2020

Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020

Michael Klapdor
Social Policy Section

Date introduced: 13 February 2020

House:  House of Representatives

Portfolio: Agriculture, Drought and Emergency Management

Commencement: Schedule 1 on 1 July 2020. Schedule 2 on the day 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 the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at March 2020.

Purpose of the Bill

The Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020 (the Bill) amends the Farm Household Support Act 2014 (the FHS Act) to:

•       remove the business income reconciliation process whereby Farm Household Allowance (FHA) recipients’ income estimates would be checked against their tax returns and full financial statements in order to verify they were eligible for the FHA and received the correct payment rate and

•       remove the legislated time limit for FHA claimants to complete their farm financial assessment—an eligibility requirement for the FHA. The current time limit is 28 days with extensions of a further 28 days granted in some circumstances. A time limit will still apply but this will be determined on an individual basis.

The Minister for Agriculture, Drought and Emergency Management, David Littleproud, described the measures as the final instalment of the Government’s response to the 2019 Independent Review of the FHA program.[1] The removal of the business income reconciliation process was recommended by the Independent Review and was announced in the Government Response to the Independent Review on 27 September 2019. [2] The Independent Review recommended removing the requirement for claimants to complete a farm financial assessment altogether.[3] The change to the time limit was not previously announced by the Government.

Background

Farm Household Allowance

The FHA is an income support payment which assists eligible farmers and their partners who are experiencing financial hardship. It is paid at the same rate as the social security payment Newstart Allowance (or the same rate as Youth Allowance if the recipient is aged under 22 years).[4] The payment is time-limited: farmers can only receive the payment for up to four cumulative years in every ten year period starting from 1 July 2014.[5]

From 16 December 2019, farmers and their partners who reach their four year maximum period by 1 July 2020 are eligible for a one-off lump sum ‘relief payment’—the payment is worth $7,500 for a single recipient or $6,500 for a member of a couple ($13,000 for a couple combined).[6]

FHA recipients are granted a Health Care Card which enables access to discounted medicines under the Pharmaceutical Benefits Scheme and other concessions. Recipients can also receive a $10,000 activity supplement to pay for approved activities including training or professional advice (and associated travel and accommodation). Recipients required to have a Farm Financial Assessment can receive a separate supplement worth up to $1,500 to assist with the cost of the assessment.[7]

A temporary supplement, the FHA Supplement, was payable to FHA recipients during one or both supplement payments periods: 1 September 2018 to 1 December 2018 and 2 December 2018 to 1 June 2019. The supplement amount for each period was $3,000 each for members of a couple and $3,600 for singles.[8]

The FHA was introduced in 2014 via the FHS Act and replaced a number of financial supports offered to farmers during times of drought, in particular, the Exceptional Circumstances Relief Payment. The previous Exceptional Circumstances arrangements had been found to be inequitable and ineffective as they could result in farm businesses being less responsive to drought conditions.[9]

The FHA was designed to support farmers in financial difficulty regardless of the specific cause or whether they were located within a specific drought declared area.

Number of recipients

According to the Department of Agriculture, Water and the Environment, as at 6 March 2020, close to 14,000 people had received the FHA since it was introduced in 2014.[10] There were approximately 7,100 people receiving the FHA as at 6 February 2020.[11]

Expenditure

Actual expenditure for the FHA in 2018–19 was $114.2 million but this was expected to decrease to $103.5 million in 2019–20.[12]

Payment rates

The current payment rates for the FHA are set out in Table 1.

Table 1: Farm Household Allowance payment rates

Recipient circumstances

Maximum basic rate

Energy Supplement

Total

Single, aged under 22, no dependent children

$462.50

$7.00

$469.50

Single, aged 22 or over, no dependent children

$559.00

$8.80

$567.80

Single, aged 60 or over, no dependent children, after 9 continuous months on payments

$604.70

$9.50

$614.20

Single, aged under 22, with dependent children

$606.00

$9.20

$615.20

Single, aged 22 or over, with dependent children

$604.70

$9.50

$614.20

Partnered, aged 22 or over

$504.70

$7.90

$512.60

Partnered, aged under 22, no dependent children

$462.50

$7.00

$469.50

Partnered, aged under 22, with dependent children

$507.90

$7.70

$515.60

Source: Services Australia (SA), A guide to Australian Government payments: 1 January–19 March 2020, SA, Canberra, 2020. Other supplementary payments may be payable depending on a recipient’s circumstances, including: Pharmaceutical Allowance, Rent Assistance, Telephone Allowance, Remote Area Allowance and bereavement payments.

Other supports available

The FHA is only one of the Australian Government supports available to farmers in difficulty, particularly during drought. Other supports available include the Farm Management Deposits scheme, concessional taxation arrangements, concessional loans, cash payments under the Drought Community Support Initiative, counselling and mental health supports.[13]

Eligibility for the FHA

To be eligible for the FHA, an individual must be a farmer or partner of a farmer and meet residency requirements, income and assets tests as well as mutual obligation requirements. The income and assets tests and mutual obligation requirements are different from those that apply to Newstart Allowance and are designed to allow farmers to remain on their farm rather than being forced to sell off some or all of their farm assets in order to qualify for support. Certain waiting or preclusion periods may also apply before an eligible recipient can start receiving the FHA.[14]

Income test

To meet the FHA income test, a claimant must have income below the cut-off point for Newstart Allowance or Youth Allowance, whichever applies (the cut-off point is the point at which a person’s Newstart Allowance rate is reduced to zero under the Newstart Allowance income test).[15] The current income test cut-off for a single Newstart Allowance recipient is $1,075.34 per fortnight and for a partnered recipient it is $983.34 (each).[16]

The income test as it currently applies can reduce a person’s FHA payment rate if their income exceeds $104 per fortnight. However, under amendments made by the Farm Household Support Amendment (Relief Measures) Act (No. 2) 2019, no payment rate reductions will occur under the income test. These amendments will commence on proclamation or six months from 11 December 2019 (whichever occurs first). Under the new income test arrangements, an individual will either be eligible for the FHA and receive the full payment rate or ineligible and receive a zero rate. There will be no part-rate payments.[17]

Deductions can apply in determining assessable income. Allowable deductions include any amounts that would reduce a person’s ordinary income under section 1075 of the Social Security Act 1991 (SS Act). This section relates to permissible deductions of business income such as expenses necessary for the conduct of a business with the purpose of earning a taxable income.[18]

Under the Farm Household Support Minister’s Rule 2014 farm business losses can be used as a deduction against any other assessable income under the income test. The definition of farm business includes the farm enterprise and farm-related businesses—those that use the same equipment or other physical assets. A limit on the loss amount a person and their partner (if any) can deduct from their assessable income in this way applies—$100,000 in a financial year. A person and their partner cannot have their assessable income reduced below zero under the farm business loss provisions.[19]

Assets test

Currently, there are two parts of the assets test: one applies to non-farm assets and the other to farm assets.

The non-farm and liquid assets test assesses liquid assets, such cash held in bank accounts, term deposits and shares; and non-farm assets such as jewellery, furniture, investment properties, businesses and vehicles. The family home and up to two hectares of land surrounding it (on a single title and used only for domestic purposes) is exempt from the non-farm assets test.[20] A farm asset is any asset that is used or held wholly or mainly for the purposes of a farm enterprise and includes land used for the purpose of a farm enterprise, water resources or access rights, livestock, crops, plant or equipment, and the unpaid portion of a loan used to purchase farm assets.[21]

The combined value of assessable non-farm assets must not exceed the asset limits for Newstart Allowance. The current asset test limits are:

•       single homeowner: $263,250

•       single non-homeowner: $473,750             

•       couple homeowner combined: $394,500

•       couple non-homeowner combined: $605,000.[22]

The farm assets test assesses the net value of the farm’s assets. To be eligible for the FHA, the total value of farm assets must not exceed $5 million.[23]

In some cases, hardship provisions can apply which allow for some assets to be made exempt from the assets test. This can occur where a person is unable to rearrange their financial affairs, is in severe financial hardship and is unable to sell or borrow against an asset.[24]

Under amendments made by the Farm Household Support Amendment (Relief Measures) Act (No. 2) 2019, the farm and non-farm assets tests will be combined into one assets test with a value limit of $5.5 million. This limit will not be indexed. These amendments will commence on proclamation or six months from 11 December 2019 (whichever occurs first).

Mutual obligation requirements

The mutual obligation requirements for the FHA require a recipient to complete a Farm Financial Assessment and enter into a Financial Improvement Agreement.[25]

The Farm Financial Assessment considers the financial position of the farmer, their partner and the farm. As noted above, up to $1,500 can be provided to help cover the cost of consulting a prescribed advisor to complete the assessment.

The Financial Improvement Agreement is a plan for working towards financial self-reliance and sets out activities to be undertaken to improve the farmer’s financial situation. Activities can include undertaking training or study, obtaining professional advice, seeking or being willing to undertake paid work or any other activities approved by the Department of Agriculture, Water and the Environment.[26]

Recent policy changes

Farm Household Support Amendment (Temporary Measures) Act 2018

In August 2018, the Coalition Government introduced and passed the Farm Household Support Amendment (Temporary Measures) Act 2018 to temporarily increase the farm assets value limit to $5 million from 1 September 2018 to 30 June 2019 and provide for two instalments of the FHA Supplement.[27]

Then Minister for Agriculture and Water Resources, David Littleproud, stated that ‘these temporary measures are designed to help our farmers in need in the short term while we undertake an independent review of the program’.[28]

2019–20 budget measure—forced disposal of livestock

In the 2019–20 Budget, the Government announced that it would provide $3.1 million over two years from 2018–19 to exempt net income from the forced sale of livestock from the FHA income test, when that income is invested in a Farm Management Deposit.[29]

The measure was implemented via the Farm Household Support (Forced Disposal of Livestock) Minister’s Rules 2019 which modified the definition of income in the SS Act. To meet the requirements, the disposal (including killing) of livestock must occur wholly or mainly for one of the following reasons:

•       an action by the Australian Government or a state or territory government that has the effect that land or water cannot be used to support the livestock commercially (for example, compulsory acquisition of an estate in land or changing a law governing how land or water may be used), other than an action taken with the farmer’s free consent

•       drought or natural disaster affecting the availability of pasture, fodder or water so that the farm could not reasonably support the livestock

•       reasonable concern for the welfare of the livestock

•       a requirement by or under a law of the Commonwealth, a state or a territory to dispose of the livestock.[30]

An amount received for the forced disposal of livestock must be deposited in a Farm Management Deposit or Centrelink must be notified that it will be deposited within 42 days.[31]

Independent Review of the Farm Household Allowance

The Independent Review of the Farm Household Allowance was completed in February 2019.[32] The Review Panel was chaired by Michele Lawrence, a dairy farmer and member of the Agriculture Industry Advisory Council.

The Review made six broad recommendations:

1.      decoupling the FHA from the SS Act with the aim of simplifying the application process and tailoring the eligibility settings to farm businesses

2.      strengthening mutual obligation requirements to make them more meaningful and enable farmers to plan through current hardships and future business shocks or to leave the industry with dignity

3.      revise the Rural Financial Counselling Service to focus on business coaching

4.      improve communication of the FHA’s purpose and requirements

5.      distinguish the FHA from drought and promote its broader purpose of supporting farmers during financial hardship irrespective of the cause

6.      build in regular assessment of the performance of the scheme.[33]

Farm Household Support Amendment Act 2019

In July 2019, the Coalition Government introduced and the Parliament passed the Farm Household Support Amendment Act 2019.[34] That Act:

•       made permanent the temporary increase in the FHA farm assets value limit to $5 million

•       removed indexation of the farm assets value limit to movements in the Consumer Price Index (CPI) and

•       clarified the treatment of allowable deductions for the purposes of the FHA income test so that farm business deductions apply to farm business income, and off-farm deductions apply to off-farm income.[35]

The Act implemented only part of one of the actions associated with the Independent Review’s recommendations: maintaining the $5 million farm asset limit.[36] However, the amendments to indexation were counter to the Review’s suggestion that the limit continue to be indexed to movements in the CPI.[37]

Farm Household Support Amendment (Relief Measures) Act (No. 1) 2019

In November 2019, the Parliament passed the Farm Household Support Amendment (Relief Measures) Act (No. 1) 2019.[38] That Act:

•       increased the maximum time a person is able to access the FHA from four years over a lifetime to four years in each specified ten year period

•       changed the allowable deduction regime to provide for losses from a farm enterprise and farm-related businesses to be deducted from the amount of income assessed under the FHA income test

•       introduced a one-off lump sum ‘relief payment’ for those who have exhausted their four year maximum FHA period by 1 July 2020—the payment will be worth $7,500 for a single recipient or $6,500 for a member of a couple ($13,000 for a couple combined) and

•       allowed for the Minister for Agriculture to prescribe further lump sum payments—including the amount of the payment and the eligibility conditions—through the Minister’s Rule (a legislative instrument).[39]

The measures had been announced on 17 October 2019 as the next instalment of the Government’s response to the 2019 Independent Review.[40]

The changes to the maximum time a person can receive the FHA were recommended by this Review.[41]

The Review recommended much broader changes to the income test arrangements than those implemented by that Act, including a decoupling of the FHA from the social security system.[42]

The Review found that linking the FHA program to drought via supplementary or relief payments could lead to perverse outcomes—it recommended the Government provide relief payments through a program separate from the FHA.[43]

Farm Household Support Amendment (Relief Measures) Act (No. 2) 2019

In December 2019, the Parliament passed the Farm Household Support Amendment (Relief Measures) Act (No. 2) 2019. That Act:

•       changes the income test for the FHA so that part-rate payments will not be calculated. The income test will be ‘sudden-death’: farmers and their partners will either be eligible for FHA under the income test and receive the maximum payment rate or they will be ineligible under the income test and not receive any FHA

•       combines the FHA farm assets test and non-farm assets test into one assets test with a value limit of $5.5 million and clarifies the assessment of water entitlements to ensure they are not double-counted under the assets test

•       removes the requirement for farm financial assessments to be conducted by a person prescribed by the Minister’s Rule. The person undertaking the assessment will still be required to have no interest in the farm or any related assets and must have appropriate qualifications or expertise. However, the requirement they be part of professional body whose members provide financial advice will be removed

•       increases the maximum FHA activity supplement from $4,000 to $10,000 and expands the scope of costs the supplement can be used for to include travel and accommodation associated with approved activities. The supplement can currently be used to fund approved activities including training or professional advice.[44]

The measures are to commence on the earlier of a day to be fixed by proclamation, or six months after the date of Royal Assent (11 December 2019).

Committee consideration

Senate Standing Committee for the Selection of Bills

On 27 February 2020, the Senate Selection of Bills Committee recommended the Bill not be referred to a committee for inquiry.[45]

Senate Standing Committee for the Scrutiny of Bills

The Senate Scrutiny of Bills Committee had no comment on the Bill.[46]

Policy position of non-government parties/independents

The Australian Labor Party has stated it supports the Bill.[47] In his second reading speech on the Bill, Shadow Minister for Agriculture and Resources, Joel Fitzgibbon, criticised the four years in ten time limit for receipt of the FHA, particularly as it applies to those in areas of ongoing drought. He also noted that many Labor MPs were ‘bewildered by the flexibility of the Farm Household Allowance in so many areas that isn’t available to other welfare recipients’.[48]

Katter’s Australian Party MP Bob Katter spoke on the Bill in the House of Representatives but did not indicate whether or not he supported the Bill.[49]

Position of major interest groups

At the time of writing, major stakeholder groups do not appear to have commented on the Bill.

Financial implications

The Explanatory Memorandum states that the ‘cost for the suite of changes to the FHA program is approximately $127 million, which includes the measures in the Bill’.[50] No detail is provided for the costs of the measures included in the Bill or which measures are included in the $127 million figure.

Previous legislation introduced in response to the Independent Review of the FHA have included some details of the financial impact:

•       Farm Household Support Amendment Bill 2019: $34.3 million over four years beginning in the 2019–20 financial year (described as the ‘costs to the payment’)[51]

•       Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019: $47 million through to June 2023 (not the net fiscal impact as this figure excludes administration costs and offsets from tax revenue)[52]

•       Farm Household Support Amendment (Relief Measures) Bill (No. 2) 2019: $30 million through to June 2023 (not the net fiscal impact as this figure excludes administration costs and offsets from tax revenue).[53]

The 2019–20 Mid-Year Economic and Fiscal Outlook stated that $114.5 million in funding would go towards changes to the Farm Household Allowance over the four years from 2019–20:

including expanding and simplifying eligibility arrangements, providing a single rate of payment, and strengthening the case management approach to support farmers in hardship. The Government will also provide a one-off relief payment of $7,500 for singles and $12,000 for couples to current and former recipients who have exhausted their four year entitlement to payment by 30 June 2020.[54]

It is unclear why there is no specific costing for the measures proposed in the Bill.

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. The Government considers that the Bill is compatible.[55]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[56]

Key issues and provisions

Business income reconciliation

The FHA income test uses the social security concept of ‘ordinary income’ which includes income from employment, real estate and businesses, deemed income from investments and boarders or lodgers.[57] Maintenance income (child support) and some exempt lump sum amounts are not treated as ordinary income. Gross income before tax is assessed. The income test does not assess taxable income.

Estimates of business income

Under the social security income test, the assessment of business income uses the previous year’s tax assessment.[58] However, if the previous year’s tax assessment does not provide an accurate indication of current income, then an estimate may be made on available evidence, such as a business profit and loss statement. As a matter of policy, such estimates should be reassessed every three months and/or when a new, accurate, tax assessment becomes available.[59]

The FHS Act includes specific provisions for the use of estimates of business income in determining the rate of FHA. The FHA Guidelines indicate that it is standard practice for estimates to be used as ‘farm business income can be difficult to predict due to factors such as commodity prices and seasonal conditions’.[60] The estimate must be considered reasonable by the Secretary (of the Department of Agriculture, Water and the Environment—as delegated to Services Australia officers). Estimated business income is calculated by adding the estimated taxable income for the financial year with any re-credited business deductions, including:

•       carried forward losses

•       capital expenditure

•       investments in farm management deposits

•       superannuation contributions

•       obsolescence and

•       donations to charities.[61]

Revised estimates can be provided at any time during a financial year and, if considered reasonable, can be used to determine the person’s FHA payment rate/eligibility for the remainder of the financial year.[62]

Reconciliation

If required by Services Australia, FHA recipients must submit their personal and business tax returns and their financial statements (or notify Services Australia if they are not required to lodge a tax return).[63] These documents must be provided even if the farmer (and their partner) is no longer in receipt of the FHA. These documents are used to reconcile the FHA recipient’s income estimates with their actual income, and to determine if they were correctly paid.

The reconciliation process can result in a person receiving a top-up payment if they did not receive their full entitlement; or a debt being raised if they received an overpayment. Where the person received the correct amount then no further action is taken.

Where an FHA recipient fails to comply with a notice from Services Australia to provide details of their actual business income, then a debt equal to the entire amount of FHA they received during the financial year may be raised against them until such time as they comply with the notice.[64]

Issues raised by Independent Review

The Independent Review of the FHA stated: ‘Estimating income and incurring a debt resulting from BIR [business income reconciliations] were significant concerns and sources of both confusion and stress for farmers receiving the FHA’.[65] The review panel found that these concerns were due to three issues: variability of income; income for social security purposes versus taxation purposes; and, complexity.

The variability of farm income is one of the reasons given for allowing estimates to be provided rather than documented information. The Independent Review found:

Although operating with uncertainty is not unique to farming businesses, the nature of farm income can make it difficult for people to determine the forward income reportable under the program and therefore prevent FHA overpayments.[66]

The different definition of income used under social security law compared to tax law was described as adding ‘additional layers of complexity and confusion for farmers estimating their income’.[67] The difference reflects the different purposes of assessing income under social security law—assessing eligibility for government assistance—compared to tax law—assessing a person’s tax liability.

The Independent Review’s first recommendation was for the FHA to be ‘decoupled’ from the SS Act based on its finding that ‘using the social security framework to provide support to farmers added unnecessary complexity and simply did not work for farm business operators’.[68] Following this decoupling, the review panel proposed that the FHA income and assets test be redesigned using existing taxation classifications and processes for income treatment and changing the income reporting and assessment process ‘so it recognises the irregularity of farm income over multiple years and reduces the likelihood of farmers being overpaid and incurring a debt’.[69]

The Review found significant concern amongst stakeholders and farmers over debts arising from the business income reconciliation process—that is, where the reconciliation process identified that an FHA recipient had underestimated their income and received a higher amount of FHA than they were entitled to under the FHS Act. The Review heard that some individuals did not want to apply for the FHA as they were concerned they would end up with a debt while others took issue with the timing of the process with debts being raised years after the relevant financial year.[70]

The Review considered that its proposed changes to the income reporting and assessment framework would remove the need for a reconciliation process (as it considered that income estimates would be more accurate). It recommended replacing the reconciliation process with ‘targeted fraud compliance’—that is, targeted sampling of selected FHA recipient’s records in order to control for fraud. The report noted: ‘The Panel considers only significant predictable or intentional discrepancies should be pursued’.[71]

Proposed changes

The Bill proposes removing the provisions in the FHS Act relating to business income estimates and reconciliation. The Explanatory Memorandum states that ‘this means, a person’s rate of payment will be based on their current income’.[72] The assessment of business income will follow the process used in the SS Act with no specific reconciliation process set out in the FHS Act. Minister Littleproud stated:

An estimate of current income will be used to calculate the rate of payment. The estimate can be updated as many times as needed during the year, but crucially it will not be used to look backwards over the year. This means farmers will not worry that a debt will be raised at the end of the year through this business income reconciliation process.[73]

The Minister also stated that ‘regular sampling of records will be undertaken to ensure the right person receives the right payment at the right time’.[74] It is unclear if this process will follow the social security policy guidelines for three monthly reviews of estimates of business income.[75]

The proposal implements part of one of the Independent Review’s recommendations—to replace the business income reconciliation process with targeted fraud compliance. However, the Government has rejected the main recommendation to decouple the FHA from the social security system and has not implemented the proposals to use the tax law definition of income rather than the social security definition.[76] The Government Response, which included the announcement of this measure, stated: ‘The Review Panel had recommended completely decoupling FHA from the social security system. We are confident that with the changes announced today, there is no need to remove the payment from its links to social security’.[77]

Income estimates and reconciliation for other government payments

The current method for assessing business income—allowing for estimates to be used with a reconciliation process once actual income is known—provides for the fact that farm business income can be irregular and variable. It also ensures that recipients only receive the correct rate of payment.

The use of income estimates with a formal reconciliation process at the end of the financial year is standard practice for recipients of Family Tax Benefit and Child Care Subsidy.[78] Both payments require families to estimate their income for the financial year with a formal reconciliation process taking place using information contained in the recipients’ tax returns (or information on income from government payments already held by Services Australia). Both Family Tax Benefit and Child Care Subsidy include some safeguards against debts arising due to overpayments—Family Tax Benefit provides for end-of-year supplements to eligible families which can be used to offset any debts arising from an overpayment and Child Care Subsidy withholds five per cent of a family’s estimated entitlement during the financial year which is then paid as a lump sum at the end of the year (or used to reduce any debt from an overpayment).[79]

The FHA reconciliation arrangements do not include any similar safeguards against debts from overpayments and the Independent Review made clear that these potential debts were a significant concern for farmers and stakeholders. Notably, the SS Act does not include any similar provisions to the FHS Act regarding the use of income estimates and a formal reconciliation process. This is possibly because it is much less likely for social security income support recipients to have business income—particularly with the much lower asset limits that apply compared to the FHA (i.e. the value of business assets make it much harder for business owners to qualify for income support).

Key provisions

Item 1 of Schedule 1 repeals the definition of business income at subsection 5(1) of the FHS Act. This definition refers to the meaning given by subsection 68(3) which is repealed by item 4. The definition is used for the purposes of the provisions allowing for estimates of business income and to be used in calculating a person’s FHA rate and for the reconciliation process. The general income test for the FHA relies on Benefit Rate Calculator B (for those who have turned 22) or the Youth Allowance Rate calculator (for those who have not turned 22) in the SS Act. The SS Act has its own definitions covering different forms of income including business income which will apply for FHA purposes.

Item 4 repeals Subdivision D of Division 8 of Part 2 of the FHS Act (sections 68–70). This removes the provisions covering the use of estimates of business income and debts arising from payments of FHA based on estimates of business income.

Extending time limit for farm financial assessment

As discussed in the ‘Background’ section of this Bills Digest, it is a mutual obligation requirement for the FHA that a claimant complete a Farm Financial Assessment. The Farm Financial Assessment is a ‘comprehensive assessment of the financial position of a farm enterprise and the person for whom the assessment is conducted’.[80] The purpose of the assessment is to ‘develop and evaluate options to improve the person’s financial position through an analysis of their resources, liabilities, barriers and goals’.[81] In some cases, where a person has previously received the FHA and their circumstances have not changed substantially, they may not be required to complete a new Farm Financial Assessment.

Some parts of the Farm Financial Agreement need to be completed by a financial adviser. Currently, there is a requirement that this adviser meet the requirements for being a prescribed adviser under the Farm Household Support Minister’s Rule 2014.[82]

Amendments in the Farm Household Support Amendment (Relief Measures) Act (No. 2) 2019 remove the requirement for farm financial assessments to be conducted by a person prescribed by the Minister’s Rule. The person undertaking the assessment will still be required to have no interest in the farm or any related assets and must have appropriate qualifications or expertise. However, the requirement they be part of professional body whose members provide financial advice will be removed. These changes are to commence on the earlier of a day to be fixed by proclamation, or six months after the date of Royal Assent (11 December 2019).

Current time limit

Currently, a person required to complete a Farm Financial Assessment must do so within 28 days of the notice being provided to the FHA claimant. If the assessment is not completed within this timeframe then the FHA will not be payable to the claimant (if the Secretary is satisfied that this is reasonable). This can mean the rejection of a claim that is yet to be granted, or the suspension of the person’s payment if their claim has already being granted.[83]

A person can request an extension to complete the assessment of up to 28 days. If the person does not complete the assessment within the extended period then a granted claim will be cancelled.[84]

Issues raised by the Independent Review

The Independent Review raised a number of issues with Farm Financial Assessment and Financial Improvement Agreement requirements for the FHA. The review panel stated that it was concerned the requirements were generally seen as ‘bureaucratic hurdles or ‘tick boxes’ for accessing the payment, rather than tools to help farmers improve their long-term financial circumstances’.[85] The review report stated that this was likely because both requirements are not sufficiently flexible or tailored to individual circumstances.[86]

Concerns were raised regarding the time frame, with the review report stating that those coming on to the FHA were under a tremendous amount of stress and that there was a perception that much of the information required for the Farm Financial Assessment had already been provided as part of the ‘demanding application process’.[87] Regarding the time limit:

The Panel considers that some recipients need more time to recover before making significant decisions about their business and personal future. In some cases, time is also needed to work out the real causes of the financial hardship and the actions needed to get on a more sustainable footing—for example, where financial distress is not necessarily caused by drought.[88]

The review report also cited evidence that many recipients were receiving assistance from rural financial counselling services and that this assistance duplicated some of the FHA’s mutual obligation requirements (such as assessing recipient’s current financial situation).[89]

The review panel recommended removing the requirement for FHA recipients to undertake a Farm Financial Assessment or to sign on to a Financial Improvement Agreement. Instead, the review suggested that FHA recipients meet with a rural financial counsellor at least every three months to have structured discussions about their situation and opportunities for change.[90]

Proposed changes

The Bill proposes to remove the specific 28 day time period in which a Farm Financial Assessment needs to be undertaken. Instead, the FHS Act will only require that the assessment be undertaken within a ‘specified period’. This will be determined by Services Australia taking into consideration the location of the FHA recipient and their farm, and the availability of an adviser to do the assessment.[91]

Key provisions

Paragraph 85(2)(d) of the FHS Act currently requires a written notice that a person must have a Farm Financial Assessment conducted to specify the period ‘of no more than 28 days’ within which the assessment must be conducted. Item 1 of Schedule 2 amends this paragraph so that a written notice must specify the period ‘within which the person must have the farm financial assessment conducted’. No maximum time limit is set.

Paragraph 85(3) currently provides that an extension can be granted to this period of no more than 28 days. Item 2 replaces the reference to ‘no more than 28 days’ with ‘a specified period’. This will allow any extensions to the initial period to be determined by the Secretary of the Department of Agriculture, Water and the Environment (or Services Australia acting as a delegate).

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[1].              D Littleproud, ‘Second reading speech: Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020’, House of Representatives, Debates, (proof), 13 February 2020, p. 1.

[2].              M Lawrence, G Somerset and R Slonim, Rebuilding the FHA: a better way forward for supporting farmers in financial hardship: an independent review of the Farm Household Allowance (Independent Review of the FHA), report prepared for the Department of Agriculture and Water Resources (DAWR), Canberra, February 2019, p. 21; S Morrison (Prime Minister), M McCormack (Minister for Infrastructure, Transport and Regional Development), B McKenzie (Minister for Agriculture), D Littleproud (Minister for Water Resources, Drought, Rural Finance, Natural Disaster and Emergency Management), Backing our farmers and drought affected communities, media release, 27 September 2019; Australian Government, Australian Government response to the independent review and report of the Farm Household Allowance program, Department of Agriculture, Water and the Environment (DAWE), [2019].

[3].              Lawrence et al., Independent Review of the FHA, op. cit., p. 33.

[4].              Services Australia (SA), ‘Farm Household Allowance’, SA website, last updated 22 January 2020.

[5].              Prior to 1 August 2018, the maximum cumulative period was three years. This was extended to four years via the Farm Household Support Amendment Act 2018. See M Klapdor, ‘New Bill to extend the Farm Household Allowance’, FlagPost, Parliamentary Library blog, 27 June 2018. The maximum period was changed to four years in each specified ten year period via the Farm Household Support Amendment (Relief Measures) Act (No. 1) 2019. See M Klapdor, Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019, Bills digest, 48, 2019–20, Parliamentary Library, Canberra, 8 November 2020.

[6].              SA, ‘Farm Household Allowance’, op. cit.

[7].              DAWE, ‘Farm Household Allowance’, DAWE website, last reviewed 12 February 2020.

[8].              M Klapdor, Farm Household Support Amendment (Temporary Measures) Bill 2018, Bills digest, 14, 2018–19, Parliamentary Library, Canberra, 20 August 2018, pp. 3, 10.

[9].              DAWE, ‘History of drought policy and programs’, DAWE website, last reviewed 4 February 2020.

[10].              DAWE, ‘Farm Household Allowance data dashboard’, DAWE website, last reviewed 12 March 2020.

[11].              Ibid.

[12].              Australian Government, Portfolio additional estimates statements 2019–20: Agriculture, Water and Environment Portfolio, p. 70.

[13].              DAWE, ‘Drought and rural support: assistance measures’, DAWE website, last reviewed 4 February 2020; Department of Infrastructure, Transport, Regional Development and Communications (DITRDC), ‘Drought Communities Programme’, DITRDC website, last updated 21 February 2020.

[14].              These include the Newly Arrived Resident’s Waiting Period, the seasonal worker preclusion period and the income maintenance period. See DAWR, Farm Household Allowance: guidelines, DAWR, Canberra, July 2019, pp. 18–23.

[15].              SA, ‘Farm Household Allowance: income and assets tests’, SA website, last updated 9 January 2020.

[16].              SA, ‘Income test for Newstart Allowance, Partner Allowance, Sickness Allowance and Widow Allowance’, SA website, last updated 18 December 2019.

[17].              M Klapdor, Farm Household Support Amendment (Relief Measures) Bill (No. 2) 2019, FlagPost, Parliamentary Library blog, 4 December 2019.

[18].              Department of Social Services (DSS), ‘4.12.7.20 Allowable and non-allowable deductions’, Social security guide, DSS website, last reviewed 20 September 2017.

[19].              Farm Household Support Minister’s Rule 2014, section 7A.

[20].              SA, ‘Farm Household Allowance: income and assets test’, op. cit.

[21].              DAWR, Farm Household Allowance: guidelines – legislative changes from 5 April 2017, DAWR, Canberra, April 2017, p. 4.

[22].              SA, A guide to Australian Government payments: 1 January–19 March 2020, SA, Canberra, 2020, p. 35.

[23].              The farm asset value limit was temporarily increased to $5,000,000 (from $2,550,000) between 1 September 2018 to 30 June 2019. This increase was made permanent from 1 July 2019 as a result of amendments in the Farm Household Support Amendment Act 2019. These amendments also removed indexation of the farm asset value limit—previously the value limit was indexed on 1 July of each year in line with movements in the Consumer Price Index. M Klapdor, Farm Household Support Amendment Bill 2019, Bills digest, 8, 2019–20, Parliamentary Library, Canberra, 2019, p. 9.

[24].              DAWR, Farm Household Allowance: guidelines, op. cit., p. 24.

[25].              SA, ‘Farm Household Allowance: how to work with your case officer’, SA website, last updated 25 July 2019.

[26].              DAWR, Farm Household Allowance: guidelines, op. cit., pp. 43–44.

[27].              Parliament of Australia, ‘Farm Household Support Amendment (Temporary Measures) Bill 2018 homepage’, Australian Parliament website.

[28].              D Littleproud, ‘Second reading speech: Farm Household Support Amendment (Temporary Measures) Bill 2018’, House of Representatives, Debates, 16 August 2018, p. 7511.

[29].              Australian Government, Budget measures: budget paper no. 2: 2019–20, pp. 46–47.

[30].              Farm Household Support (Forced Disposal of Livestock) Minister’s Rules 2019, Schedule 1.

[31].              Ibid.

[32].              Lawrence et al., Independent Review of the FHA, op. cit.

[33].              Ibid., p. x.

[34].              Parliament of Australia, ‘Farm Household Support Amendment Bill 2019 homepage’, Australian Parliament website.

[35].              Klapdor, Farm Household Support Amendment Bill 2019, op. cit., p. 3.

[36].              Lawrence et al., Independent Review of the FHA, op. cit., p. 25.

[37].              Ibid.

[38].              Parliament of Australia, ‘Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019 homepage’, Australian Parliament website.

[39].              For further information on these measures, see Klapdor, Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019, op. cit.

[40].              B McKenzie (Minister for Agriculture), Making the FHA work better for farmers, media release, 17 October 2019.

[41].              Lawrence et al., Independent Review of the FHA, op. cit., p. 39.

[42].              Ibid., pp. 17, 20, 21–24.

[43].              Ibid., pp. 21–22, 54–55.

[44].              For further information, see Klapdor, Farm Household Support Amendment (Relief Measures) Bill (No. 2) 2019, op. cit.

[45].              Senate Standing Committee for the Selection of Bills Committee, Report, 3, 2020, The Senate, 27 February 2020, [p. 3].

[46].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 3, 2020, The Senate, 26 February 2020, p. 18.

[47].              J Fitzgibbon, ‘Second reading speech: Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020’, House of Representatives, Debates, (proof), 25 February 2020, p. 54.

[48].              Ibid.

[49].              B Katter, ‘Second reading speech: Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020’, House of Representatives, Debates, (proof), 25 February 2020, p. 61.

[50].              Explanatory Memorandum, Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020, p. 3.

[51].              Explanatory Memorandum, Farm Household Support Amendment Bill 2019, p. 3.

[52].              Explanatory Memorandum, Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019, p. 3.

[53].              Explanatory Memorandum, Farm Household Support Amendment (Relief Measures) Bill (No. 2) 2019, p. 4.

[54].              J Frydenberg (Treasurer) and M Cormann (Minister for Finance), Mid-year economic and fiscal outlook 2019–20, p. 192.

[55].              Explanatory Memorandum, Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020, pp. 8–10.

[56].              Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 3, 2020, Australian Parliament, Canberra, 26 February 2020, p. 19.

[57].              DSS, ‘1.1.O.30 Ordinary income’, Social security guide, DSS website, last reviewed 11 August 2014.

[58].              DSS, ‘4.7.1.20 Assessment of income for sole traders & partnerships’, Social security guide, DSS website, last reviewed 6 May 2019.

[59].              Ibid.

[60].              DAWR, Farm Household Allowance: guidelines, op. cit., p. 33.

[61].              Ibid.

[62].              Ibid., p. 34.

[63].              Ibid.

[64].              Ibid., p. 35.

[65].              Lawrence et al., Independent Review of the FHA, op. cit., p. 17.

[66].              Ibid., p. 18.

[67].              Ibid., p. 19.

[68].              Ibid., p. 9.

[69].              Ibid., p. 19–20.

[70].              Ibid., p. 20.

[71].              Ibid., p. 21.

[72].              Explanatory Memorandum, Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020, p. 2.

[73].              Littleproud, ‘Second reading speech: Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2020’, op. cit.

[74].              Ibid.

[75].              DSS, ‘4.7.1.20 Assessment of income for sole traders & partnerships’, op. cit.

[76].              Australian Government, Australian Government response to the independent review and report of the Farm Household Allowance program, op. cit.

[77].              Ibid.

[78].              DSS, ‘6.4.1.30 Reconciliation Process’, Family assistance guide, DSS website, last reviewed 13 August 2018.

[79].              Ibid.

[80].              DAWR, Farm Household Allowance: guidelines, op. cit., p. 56.

[81].              Ibid.

[82].              Farm Household Support Minister’s Rule 2014, section 5.

[83].              DAWR, Farm Household Allowance: guidelines, op. cit., p. 56.

[84].              Ibid.

[85].              Lawrence et al., Independent Review of the FHA, op. cit., p. 29.

[86].              Ibid.

[87].              Ibid., p. 31.

[88].              Ibid., p. 32.

[89].              Ibid., p. 31.

[90].              Ibid., p. 33.

[91].              Explanatory Memorandum, op. cit., pp. 2–3.