Bills Digest no. 144 2007–08
Farm Household Support Amendment (Additional Drought
Assistance Measures) Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Farm Household Support Amendment
(Additional Drought Assistance Measures) Bill
2008
Date
introduced: 29 May
2008
House: House of Representatives
Portfolio: Agriculture, Fisheries and
Forestry
Commencement:
On the day of the Royal
Assent.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To increase access and benefits
to farmers and small business operators under the Farm
Household Support Act 1992 (the Farm Household Support Act),
through the Exceptional Circumstances Relief Payments (ECRP)
Scheme, by:
- Allowing ECRP claimants to earn more off-farm income than
previously allowed
- Broadening the scope of eligible applicants to the ECRP Scheme
by including small business operators situated in farming towns
which are covered by a declaration of exceptional circumstances,
and
- Bringing the rules relating to overseas absences for the ECRP
Scheme in line with the overseas absence rules for the Newstart
Allowance.
The following background to the Exceptional Circumstances (EC)
assistance is extracted from the Bills
Digest for the Farm Household Support Amendment Bill
2007:
|
Exceptional circumstances are
those climatic and other events of sufficient rarity and severity
as to be considered outside the scope of reasonable and responsible
risk management strategies. Relatively short periods of income
decline due to fluctuations in both seasonal and market conditions
are not included as farmers are expected to have strategies in
place to deal with these. This means, for example, that a drought
as defined in meteorological terms does not automatically qualify
for EC.
For a region or industry to be
declared eligible for EC assistance the event must be rare and
severe, the effects of the event must result in a severe downturn
in farm income over a prolonged period and the event must not be a
predictable part of the process of structural adjustment.
EC assistance is the mechanism
by which direct, short-term, financial assistance is provided to
farmers for the purposes of both welfare support to farm households
and farm business assistance. The EC Relief Payment (ECRP) is the
welfare component of EC and equivalent to the Newstart Allowance.
EC Interest Rate Subsidies (ECIRS) is the business assistance
element of EC although the level of support under this provision
has been phased down.
Following the removal of drought
from the Natural Disaster Relief Arrangements in 1989, Commonwealth
and State Ministers agreed on a National Drought Policy in August
1992. The (then) Rural Adjustment Scheme (RAS) was the nominated
vehicle for providing assistance to farmers in times of exceptional
circumstances including, but not limited to drought. One of the key
features in major changes to the RAS announced in September 1992
was the introduction of the Exceptional Circumstances provisions
which included differentiation between financial assistance to the
farm business and the farm household.
In 1993 EC declarations were
made in relation to two non-drought events: heavy rainfall in
Southern Australia and the collapse of wool prices. Since then all
EC declarations are believed to have either been for drought or for
a combination of developments with drought being a major factor. In
September 1994 the Drought Relief Payment (DRP) was introduced to
provide welfare support for farm households in drought EC areas and
this was renamed the Exceptional Circumstances Relief Payment
(ECRP) in late 1997.
|
In late 2006, the then Prime Minister announced changes to the
ECRP Scheme to make some small business owners eligible for EC
assistance. The Act was extended to allow small business owners,
who could claim that at least 70% of their usual turnover was from
goods and services provided for farming activities in EC declared
areas. The 2006 extensions were enacted with the passage of the
Farm Household Support Amendment Act 2007.
On 25 September 2007, more changes were
announced to the ECRP Scheme to extend eligibility even
further.[1]
Non-farming small business owners who live in farming towns, and
therefore could claim some dependency on the economy within those
communities, would also be eligible for ECRP. These changes were
immediately effective, however were not enforced by legislation.
They are being enacted by the current Bill.
The increase of allowed off-farm income was included in the 2007
changes, to allow recipients of ECRP to earn up to $20 000 in
alternative income. This amount is considered exempt from income
assessment for the purposes of calculating an applicant s income
support.
The proposed changes relating to overseas absences have
attracted little attention or commentary. It is noted in the
Bills
Digest for the Farm Household Support Amendment (Restart and
Exceptional Circumstances) Bill 1997 (through which the ECRP Scheme
was first introduced) that the ECRP Scheme was to be equal to the
Newstart Allowance Scheme in payment rate. Other aspects of the
Farm Household Support Act mirror the Newstart Allowance scheme,
such as assets testing (section 10). Therefore, considering the
parallels between the two schemes, it is logical that the schemes
treat overseas absences in the same way.
When the measures which are formalised in this Bill were
introduced by the previous Government, they received bipartisan
support. Then Shadow Minister for Primary Industries, Fisheries and
Forestry, Kerry O Brien, welcomed the
former Prime Minister s commitment to extend drought
assistance.[2]
In the lead up to the introduction of this Bill members of the
Opposition have released media
statements voicing support for the changes to the
scheme.[3]
In his second reading speech for the Bill, the Minister
stated:
We supported the former government s
introduction of these changes while we were in opposition and we
will now honour that commitment by formalising them in
legislation.[4]
Payments under the extended scheme commenced on 25 September
2007; therefore, there has been an additional unbudgeted
expenditure to Government in the interim. The Explanatory
Memorandum states that the amendments are an additional cost to the
government, with an approved 2007-08 appropriation allocation of
$85 million to cover the cost.[5] The Bill enables the costs of past payments to be
appropriated from the Consolidated Revenue Fund.
The 2008-09 Budget Statement for the Department of Agriculture,
Fisheries and Forestry states that the estimated appropriation
available for the ECRP scheme for 2007-08 is $386 868
000.[6]
As reports show that drought assistance in Australia is at an
all-time high,[7] and
likely to continue growing, it is probable that the budget
allocation for these measures will need to be increased in the
future.
Schedule 1 of the Bill contains proposed
amendments to the Farm Household Support Act to increase access to
ECRP.
Item 3 inserts proposed subsection
6C(2) which extends the period for which a person can
receive ECRP until 30 June 2009 or such later day as
prescribed.
Item 4 creates a new category of eligible
applicants for the ECRP scheme. Applicants are now eligible if they
own a small business which is situated wholly or partly in a town
which has been EC declared. Relevant towns must be determined by
the Minister (proposed paragraph 7(c)) and have
populations of no more than 10,000 and be substantially reliant on
income derived from the supply of goods or services to farm
enterprises, farmers, farm workers or their families.
A map of Australia s EC declared areas is available
here.[8]
Under proposed subsection 8A(9), a
determination by the Minister under proposed paragraph
8A(7)(c) is not a legislative instrument; therefore, it is
not subject to registration, Parliamentary scrutiny or
disallowance.
Item 8 ensures that multiple entitlements to
the ECRP scheme are not created by the amendments in this Bill.
Items 9 17 contain proposed amendments to
existing sections 24A and 24AA of the Farm Household Support Act,
to increase the amount of money that ECRP recipients can earn from
non-farming income (referred to as off-farm salary ). The amount is
increased from $10 000 to $20 000. Subsequently, the proposed
amendments ensure that $20 000 of such income is disregarded when
assessing ECRP payments. The effect of this change is backdated to
off-farm salary earned from 1 July 2007 (item 10),
ensuring that the change applies to income assessments for the
2007-08 financial year.
Items 18 and 19 make consequential amendments
to the Social Security Act 1991 (the Social Security Act)
to provide for the proposed new category of eligible applicants to
the ECRP scheme.
Part 2, items 20 24 contain proposed
application and transitional provisions. These proposed provisions
backdate the application of the proposed new eligibility criteria
to ECRP applications made on or after 25 September 2007 and is
therefore retrospective in effect. As a matter of practice, there
is no prohibition on a Bill which seeks to have retrospective
impact. In this case, the eligibility changes have been in effect
since that date without legislative basis, so the amendments simply
formalise the current arrangements.
Part 3, items 25 29 contain provisions to
validate the payments under the new eligibility criteria that
occurred after 25 September 2007 (the date the new criteria came
into operation). Referred to as pre-commencement
payments, the Bill proposes to validate them, as well
as validating any ancillary social security benefits (such as
health care cards) which may have been conferred consequentially
(item 28). Item 27 also validates
amounts paid using the new formulae provided in this Bill, to
increase the allowable off-farm salary changes (see items
9-17 above).
Item 29 provides that past payments and
entitlements under Part 3 are funded through appropriation of the
Consolidated Revenue Fund.
Schedule 2 of the Bill proposes amendments to
the Farm Household Support Act to allow for portability of
exceptional circumstances relief payment. Item 3
of Schedule 2 inserts a new section
49A into the Farm Household Support Act, to apply the same
conditions relating to overseas absences as those for Newstart
Allowance.
The current Newstart Allowance conditions on overseas absence is
set out in Part 4.2[9] of the Social Security Act. They allow recipients to
travel overseas, without having their payments terminated, under
the following conditions:
- to seek eligible medical treatment
- to attend to an acute family crisis
- for a humanitarian purpose.
Newstart Allowance has a maximum portability period (during
which their right to payment is not affected by absence) of 13
weeks - section 1217 of the Social Security Act 1991. This
will also apply to recipients of ECRP. The proposed new section
also provides that the Secretary of the Department of Agriculture,
Fisheries and Forestry may approve other types of absences by
regulation.
Any future amendments to Part 4.2 of the Social Security Act
relating to the Newstart Allowance scheme will automatically apply
to the ECRP scheme.
Unlike the eligibility and off-farm salary changes contained in
Schedule 1, the proposed amendments in
Schedule 2 are not currently operating. They will
only apply in relation to absences that start on or after
commencement of the Act (item 4).
PaoYi Tan
18 June 2008
Bills Digest Service
Parliamentary Library
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