Several mechanisms are included within the Commonwealth Budget to provide flexibility to the Government for dealing with, or reflecting, unforeseen or unexpected occurrences. 

One of those mechanisms is the Advance to the Finance Minister (AFM), which provides a flexible source of appropriation that may, subject to certain conditions, be expended on any purpose the Government chooses.

Another mechanism—the Contingency Reserve—adjusts the presentation of the overall budget balance to reflect the general tendency of programs to cost more than anticipated, and for certain known contingencies that the Government considers likely to occur.

The AFM attracted attention in 2017 when its use to conduct the same-sex marriage postal ballot by the Australian Bureau of Statistics was the subject of a High Court challenge. More recently, the Advance to the Finance Minister has been used to provide increased capacity for unforeseen additional COVID-19 expenditures.

Historical background

In the first Appropriation Act passed by the Australian Parliament (the Appropriation Act 1901–02) the Parliament provided for an advance to the Treasurer of £100,000. The stated purpose of the advance was:

To enable the Treasurer to make advances to Public Officers and to pay expenses of an unforeseen nature which will afterwards be submitted for Parliamentary Appropriation ...[1]

Such advances continued to be provided for in subsequent Appropriation Acts. 

For the 1978–79 financial year the Parliament began providing an advance to the Finance Minister instead of the Treasurer (Advance to the Finance Minister or AFM); reflecting the split in 1976 of the Department of the Treasury and the creation of the Department of Finance.[2]

How it works

Section 10 of the Appropriation Act (No. 1) 2019–2020, Appropriation (Coronavirus Economic Response Package) Act (No. 1) 2019–2020 and the Supply Act (No. 1) 2020–2021 (No. 1 Acts) illustrate how the AFM works.

Subsection 10(2) of the No. 1 Acts allow the Finance Minister to make a Determination under the AFM mechanism. The Determination is a non-disallowable legislative instrument.

The Determination records the schedule to which an additional allocation is being made and the amount.

The Determination is deemed to have the same effect as if the Appropriation Act were amended to increase the appropriation to the entity by that amount.

The Finance Minister may make a Determination only if satisfied that there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for already, in any Appropriation Act because:

• something was omitted or understated in error or
• the expenditure was unforeseen at the last moment that it was possible to include it as an item in the Appropriation Bill prior to introduction.

A similar provision is found in the Appropriation Act (No. 2) 2019–2020, Appropriation (Coronavirus Economic Response Package) Act (No. 2) 2019–2020 and the Supply Act (No. 2) 2020–2021 (No. 2 Acts). The difference being that the No. 1 Acts deal with the ‘the ordinary annual services of the Government’ and No. 2 Acts concern ‘other annual services of the Government’.

Typically, the AFM is established in the first Appropriation Acts each year and then replenished, if needed, whenever supplementary Appropriation Acts are passed.

The Finance Minister may not make Determinations for amounts that total more than the cap set in subsection 10(3) of the No. 1 Acts and subsection 12(3) of the No. 2 Acts.

Advances to the finance Minister for the 2019-20 financial year

The amounts for appropriation to the AFM in 2019–20 were initially:

• up to $295 million for the ordinary annual services of the Government—Supply Act (No. 1) 2019-2020 and Appropriation Act (No. 1) 2019–2020
• up to $380 million in relation to the other annual services of the Government—Supply Act (No. 2) 2019-20 and Appropriation Act (No. 2) 2019–2020 

These appropriations to the AFM in 2019-20 were subsequently increased in March 2020 to account for unforeseen expenditures in relation to COVID-19:

• up to $800 million for the ordinary annual services of the Government—Appropriation (Coronavirus Economic Response Package) Act (No. 1) 2019–2020
• up to $1,200 million for the other annual services of the Government—Appropriation (Coronavirus Economic Response Package) Act (No. 2) 2019–2020

The appropriations to the AFM were further increased in April 2020:

• up to $16,000 million for the ordinary annual services of Government—Appropriation Act (No. 5) 2019-2020
• up to $24,000 million for the other annual services of Government—Appropriation Act (No 6) 2019-20

However, under subsection 10(5) of the Appropriation Act (No. 5) 2019-2020 and subsection 12(5) the Appropriation Act (No. 6) 2019-2020 any amounts drawn from these AFMs were to reduce the amounts available under the Supply Act (No. 1) 2020-21 and Supply Act (No. 2) 2020-21 respectively.

Advances issued under the AFM in 2019-20 totalled $1,974 million. This includes $91.5 million issued under Appropriation Act (No. 6) 2019-2020 which have reduced the available balance for appropriations under the 2020-21 Supply Acts accordingly.

Advances to the Finance Minister for 2020-21

The amounts for appropriation to the AFM in 2020–21 already passed are:

• up to $16,000 million for the ordinary annual services of the Government—Supply Act (No. 1) 2020–2021
• up to $24,000 million in relation to the other annual services of the Government—Supply Act (No. 2) 2020–2021.

As at the date of the 2020-21 Budget, advances issued under the 2020-21 Supply Acts total $40 million and $91.5 million was allocated from the advance under Appropriation Act (No.6) 2019-20, with the balance of the AFM under the Appropriation Act (No. 6) 2019-2020 reduced accordingly. The total balance available for the AFM under Supply Act (No.1) 2020-21 and Supply Act (No.2) 2020-21 is $38,253.6 million.

Appropriation Bill (No.1) 2020-21 and Appropriation Bill (No.2) 2020-21 introduced into the House of Representatives on 6 October 2020, propose to set the AFM to $10,000 million for the remainder of 2020-21.

A list of Determinations made by Finance Ministers, including their amount and benefitting portfolio, is provided at Table 1.

High Court consideration

In the Advance to the Finance Minister Determination (No. 1 of 2017–2018), made on 9 August 2017, the Finance Minister determined that a payment of $122 million be made to the Australian Bureau of Statistics (ABS) from the Advance to the Finance Minister. The Explanatory Statement to the Determination explains that this payment was made so that the ABS could conduct a voluntary, postal, plebiscite on the subject of same-sex marriage. The ABS had an existing statutory authority to carry out that type of work and to spend money to do so under section 9 of the Census and Statistics Act 1905 (Cth) and section 13 of the Census and Statistics Regulation 2016 (Cth).

In Wilkie v Commonwealth the Member for Denison, Andrew Wilkie, and others challenged this use of the AFM on several grounds. These included that the use set out in the Finance Ministers’ Determination on that occasion did not satisfy the criteria set out in subsection 10(1) of the Appropriation Act (No. 1) 2017–2018,including that it was not urgent and unforeseen. The High Court found the determination had been validly made.[3]

Another basis of the challenge was that the Determination did not sufficiently describe the purposes for which the moneys were to be expended, and was therefore invalid as an appropriation in blank. In rejecting that argument, the High Court held that ‘the degree of specificity of the purpose of an appropriation is for Parliament to determine.’[4] Further, and critically, the High Court said that the appropriation was not effected by the Finance Minister making a Determination—the appropriation was effected by section 12 of the Act. The Minister’s Determination was merely a decision to allocate already appropriated money to a particular purpose.

Table 1: list of Advances to the Finance Minister issued since 2010–11

• References

  [1].   Appropriation Act 1901–02 (Cth), Schedule 2, Part 1, Division 25A.

  [2].   A history of the inclusion within Appropriation Acts (No. 1) of Advances to the Finance Minister (and, before then, of Advances to the Treasurer) is set out by the High Court in its judgment in Wilkie v Commonwealth (2017) 263 CLR 487, [2017] HCA 40,  from paragraph 72.

  [3].   Wilkie v Commonwealth, op. cit., at [151].

  [4].   Ibid., at [91].

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