Bills Digest no. 118 2014–15
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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.
Dinty Mather, Daniel Weight and Tarek Dale
12 June 2015
Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Statement of Compatibility with Human Rights
Key issues and provisions
Date introduced: 12
House: House of
Links: The links to Bills,
their Explanatory Memoranda and second reading speeches can be found on the
Bills’ home pages for the Appropriation
Bill (No. 1) 2015-16 and Appropriation
Bill (No. 2) 2015-16, or through the Australian
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
The second reading of Appropriation
Bill (No. 1) is the Treasurer’s budget speech and in this way it underpins the
fiscal strategy of the Commonwealth Government.
Appropriation Bill (No. 1) 2015–2016 and Appropriation
Bill (No. 2) 2015–2016 seek to appropriate money from the consolidated revenue
fund (CRF) for the ordinary and other services of the Commonwealth Government
respectively. They do not include standing appropriations, which regularly make
up about 80 per cent of government expenditure. The parliamentary departments have
a separate appropriation Bill.
This Bills Digest contains background material including
the constitutional and other requirements for Appropriation Bills.
The purpose of the Appropriation Bill (No. 1) 2015–2016 (the
No. 1 Bill) is to seek an appropriation from the CRF of $80,966 million
for the ordinary services of Government.
Of this appropriation:
million is for the departmental activities of government entities
million is for activities that government entities administer on behalf of the
The purpose of the Appropriation Bill (No. 2) 2015–2016 (the
No. 2 Bill) is to seek an appropriation for the other services of Government.
The No. 2 Bill seeks to appropriate $15,005 million from the CRF:
million for payments to states, ACT and NT and local governments and
million for non-operating activities.
There are no new administered outcomes.
Part 1 of each Bill deals with preliminary matters,
including when the Acts commence, and how to interpret them.
Part 2 of each Bill outlines the quantum and types
of appropriation from the CRF.
Part 3 of each Bill establishes the Advance to the Finance
Minister (AFM) for 2015–16.
Part 4 of the No. 2 Bill deals with the drawing
right limits (an administrative restriction on spending, but not an
Part 4 of the No. 1 Bill and Part 5 of the
No. 2 Bill provide for several technical matters, including details relating to
special accounts, formally appropriating the amounts required from the CRF, and
the conditions applying to payments to state, territory and local governments.
Schedule 1 of the No. 1 Bill and Schedule 2 of
the No. 2 Bill provide detailed estimates about the appropriations to both non-corporate
entities and to corporate entities as defined by the Public Governance,
Performance and Accountability Act 2013.
Schedule 1 of the No. 2 Bill lists the Ministers
responsible for determinations on payments to or for the states, ACT, NT and
There are certain unique constitutional requirements that a
Bill proposing to appropriate moneys must satisfy. An appropriation Bill must
also comply with certain presentational requirements. The No. 1 and No. 2
Bills do not deal with standing appropriations or with parliamentary departments.
Appropriation from the CRF
Section 81 of the Constitution provides that:
All revenues or moneys raised or received by the Executive
Government of the Commonwealth shall form one Consolidated Revenue Fund [CRF],
to be appropriated for the purposes of the Commonwealth ...
Section 83 of the Constitution provides that no money
may be withdrawn from the CRF ‘except under appropriation made by law’.
The effect of these two sections is that all money
received by the Commonwealth must be paid into the CRF, and must not be spent
before there is an appropriation authorising specific expenditure.
Appropriation Acts do not create a source of power for the
Commonwealth to spend money; they merely release that money from the CRF. The
Commonwealth’s power to spend money must be found either in an authority in the
Constitution (other than the appropriation provision) or under a valid
law of the Commonwealth.
Powers of the House of
Representatives to appropriate
Section 53 of the Constitution provides that proposed
laws appropriating money may not originate in the Senate.
Further, under section 56 of the Constitution, all proposed laws for the
appropriation of money, may only be introduced following a recommendation by
By convention the
Governor–General acts only upon the advice of the Executive, so section 56
prevents non–government members of the House of Representatives introducing
Bills that would propose to appropriate money from the CRF.
Powers of the Senate to amend
The Senate may not amend proposed laws appropriating
revenue or moneys for the ordinary annual services of the Government. The
Senate may, however, return to the House of Representatives any such proposed
laws requesting, by message, the omission or amendment of any items or
The Senate may amend proposed laws appropriating revenue
for purposes other than for the ordinary annual services of the Government, as
long as it does not ‘increase any proposed charge or burden on the people.’
Conceivably, the Senate could amend an appropriation Bill for the other
services of Government so as to, for example, redirect the proposed
appropriation to another purpose, or reduce the proposed appropriation to nil.
The Senate may also request that, if new measures are included in a Bill for
the ‘ordinary annual services of Government’, the Bill be returned to the House
with a message requesting those new measures be omitted from the Bill.
The ‘ordinary annual services of Government’
versus ‘other services of Government’
Section 54 of the Constitution requires that there
be a separate law appropriating funds for the ‘ordinary annual services of
Government’, and that other matters must not be dealt with in the same Bill.
However, what constitutes the ‘ordinary annual services of the Government’ and
the ‘other’ services of the Government is not defined in the Constitution.
A working distinction between ordinary and other annual
services was agreed in a ‘Compact’ between the Senate and the Government in
The Compact has subsequently undergone several amendments. During 2010 the
Senate Standing Committee on Appropriations and Staffing recommended the Senate
restate the Compact in a consolidated form.
On 22 June 2010, the Senate resolved as follows:
reaffirm its constitutional right to amend proposed laws appropriating revenue
or moneys for expenditure on all matters not involving the ordinary annual
services of the Government.
(2) That appropriations for expenditure on:
(a) the construction of public works and
(b) the acquisition of sites and buildings;
of plant and equipment which are clearly definable as capital expenditure (but
not including the acquisition of computers or the fitting out of buildings);
(d) grants to the states under section 96 of
(e) new policies not previously authorised by
(f) items regarded as equity injections and
(g) existing asset replacement (which is to be
regarded as depreciation),
are not appropriations for the ordinary annual services of
the Government and that proposed laws for the appropriation of revenue or
moneys for expenditure on the said matters shall be presented to the Senate in
a separate appropriation bill subject to amendment by the Senate.
(3) That, in respect of payments to international
initial payment in effect represents a new policy decision and therefore should
be in Appropriation Bill (No. 2); and
payments represent a continuing government activity of supporting the
international organisation and therefore represent an ordinary annual service
and should be in Appropriation Bill (No. 1).
all appropriation items for continuing activities for which appropriations have
been made in the past be regarded as part of ordinary annual services.
Adherence to the Compact has not always been strict, and
the High Court has held that any disagreements between the Houses are not
Any disputes, therefore, are to be determined between the Houses themselves.
Departmental and administered
Australian Accounting Standard 1050 Administered Items requires
that government agencies distinguish between revenues and expenses that they
administer for the Government, and those over which they have some control.
Generally, administered expenses are the costs of programs that entities run
for the Government, while departmental expenses are the costs incurred in
running these entities.
Appropriation Bills, therefore, distinguish between
‘administered’ expenses and ‘departmental’ expenses. An administered
appropriation may be used only for the program or outcome that it is
appropriated for, while a departmental appropriation may be moved between
different departmental activities.
Outcomes and programmes
While the level of detail necessary for an Appropriation
Act to be valid is generally low, in the Pharmaceutical Benefits case
the High Court held that:
... there cannot be appropriations in blank, appropriations for
no designated purpose, merely authorising expenditure... 
The Appropriation Bills must, therefore, also describe—in
general terms—what the money is to be utilised for. The Bills use four methods
for describing the purposes of the proposed appropriations.
Appropriations for ‘outcomes’ of
non-corporate Commonwealth entities
For non-corporate Commonwealth entities, the purposes of
operating appropriations (both departmental and administered) are specified
with reference to the ‘outcomes’ of those entities. Outcomes ‘are the intended
results, impacts or consequences of actions by the Government on the Australian
Appropriations for corporate
As corporate Commonwealth entities are legally distinct
from the Commonwealth itself,
money cannot be appropriated directly to those entities. Instead, amounts are
appropriated to relevant Departments for on‑payment to corporate Commonwealth
entities within Departments’ portfolios.
Non-operating appropriations are amounts designated for
the capital needs of entities. Typically, these amounts are equity injections
into entities, or money for the purchase or development of the assets of
entities. Under the Compact, they can be proposed only in a Bill dealing with
the ‘other’ annual services of Government.
Appropriations for payments to the
Under section 96 of the Constitution, the
Commonwealth may make payments to the states with or without conditions, and
amounts intended for payment to the states are identified separately. Again,
because of the Compact, amounts to the states can be proposed only in a Bill
dealing with the ‘other’ annual services of Government. Amounts to the
Australian Capital Territory and the Northern Territory are included with the
amounts for the states.
Advance to the Finance Minister
The AFM is the appropriation of monies to the Finance
Minister without any particular outcome or purpose specified.
The AFM is established in the first two Appropriation Acts each year, and is
subsequently replenished whenever supplementary Appropriation Acts are passed.
The Finance Minister may allocate the money appropriated as AFM to outcomes
already provided for in that same Appropriation Act where the Finance Minister
is satisfied that there is an urgent need for expenditure, in the current year
that is not provided for, or is insufficiently provided for, in the existing
of an erroneous omission or understatement or
the additional expenditure was unforeseen until after the last day on which it
was practicable to provide for it in the Appropriation Bills before those Bills
were introduced into the House of Representatives.
The amount of appropriation allocated to the AFM each year
has typically been limited to $295 million for the ordinary annual services of Government,
and $380 million for the other annual services of Government. The Finance
Minister tables an annual report in Parliament on the use of the AFM.
Special or ‘standing’
appropriations, and appropriations for parliamentary departments, not included
In addition to the annual appropriation Bills, a number of
other pieces of legislation have appropriations (special or ‘standing’
appropriations) that enable payments to be made for a variety of programs and
purposes. The annual Appropriation Bills do not affect these appropriations.
Some examples include:
payments and pensions are enabled by a special appropriation in the Social
Security Act 1999
payments are enabled by a special appropriation in the Health Insurance Act
of the interest and principal on Australia’s debt are provided for by standing
appropriations in sections 13AA, 13A, and 13B of the Commonwealth Inscribed
Stock Act 1911 and
to the states and territories are provided for by a special appropriation in
the Federal Financial Relations Act 2009.
Appropriations for the parliamentary departments (the
Department of the House of Representations, the Department of the Senate, the
Department of Parliamentary Services and the Parliamentary Budget Office) are
provided through a separate Bill – in this financial year, the Appropriation
(Parliamentary Departments) Bill (No. 1) 2015–2016.
The No. 1 Bill seeks to appropriate $80,966 million from
The No. 2 Bill seeks to appropriate $15,005 million from the CRF.
The total amount of money sought to be appropriated by the two Bills is $95,972 million.
The Statement of Compatibility with Human Rights can be
found at page three of the Explanatory Memorandum to the No. 1 Bill and page
four of the No. 2 Bill. As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bills’ 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 Bills are compatible.
First covered are changes in the Bills from last year,
followed by the key provisions. The Parliamentary Library’s Budget Review
provides commentary on budget measures.
Changes in Bill No.1
Schedule 1, page ten, of the No. 1 Bill shows
that appropriations are expected to increase from an estimated actual
$79,836 million during the 2014–15 financial year to an expected $80,996
million in 2015–16, an increase of 1.4 per cent:
appropriations increase by $1,528 million (3.0 per cent)
appropriations decrease by $397 million (-1.3 per cent).
Changes in Bill No. 2
Schedule 2, page 15, of the Bill No. 2 shows
that total expected appropriations in Bill No. 2 increase by 83.1 per cent
from $8,197 million to $15,005 million:
to the states, ACT, NT and local government increase by 31.6 per cent from $580
million to $764 million, largely due to increases to the Infrastructure
and Regional Development, Education and Training and Attorney‑General’s
are no New Administered Outcomes
(capital) increased by 87.0 per cent from 2014–15 to 2015–16, from $7,617
million to $14,241 million.
Part 1 of each of the No. 1 and No. 2 Bills deal
with preliminary matters, including when the Acts commence and how to interpret
the Acts. Clause 4 of each of the No. 1 and No. 2 Bills provides that
the accompanying Portfolio Budget Statements may be used as extrinsic materials
to interpret the Acts.
Part 2 of each of the No. 1 and No. 2 Bills
outlines the quantum and types of appropriation from the consolidated revenue
In the No. 1 Bill, the money is appropriated to incorporated
and non-incorporated government entities as either a departmental or
administered appropriation—according to proposed Schedule 1 of
In the No. 2 Bill, the money is appropriated to incorporated
and non-incorporated Government entities according to proposed Schedule 2 of
that Bill as either:
to the states, territories and local governments (see also clause 16 below)
administered programs or
(or ‘capital’) appropriations.
These three types of appropriations cannot be included in
the No. 1 Bill as they do not relate to the ‘ordinary annual services of
Part 3 of both the No. 1 and No. 2 Bills establish
the Finance Minister’s advances (AFM) for 2015–16.
Part 4 of the No. 2 Bill deals with the debt limit
(formally known as drawing right limits). Clause 13 sets appropriation
limits for provisions of specific Acts. Clause 14 provides that the debt
limits, set under clause 13, are adjusted to take into account any GST
liability that may arise in relation to particular payments.
Part 4 of the No. 1 Bill and Part 5 of the No.
2 Bill provide for several technical matters:
ensure that if an appropriation is made for purposes that are covered by a
Special Account, then the Special Account is replenished by the same amount as
the appropriation: clause 11 in the No. 1 Bill and clause 15 in
the No. 2 Bill
contain the provisions formally appropriating moneys from the CRF: clause 12
in the No. 1 Bill and clause 17 in the No. 2 Bill and
16 of the No. 2 Bill seeks to ensure that payments made by the states,
territories and local governments from financial assistance provided by the
Commonwealth accord with the conditions established by the Minister listed in Schedule
Schedule 1 in the No. 1 Bill and Schedule 2 in the No. 2
Bill provide more detailed information about the appropriations to be made to
both the incorporated and non-incorporated government entities.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
of Australia, ‘Appropriation
Bill (No. 1) 2015-2016 homepage’, Australian Parliament website,
clause 6, accessed 11 June 2015.
of Australia, ‘Appropriation
Bill (No. 2) 2015-2016 homepage’, Australian
Parliament website, clause 6, accessed 11 June 2015.
AFM is, broadly speaking, the appropriation of moneys to the Finance Minister
without any particular outcome or purpose specified, to enable the Finance
Minister to allocate moneys where there is an urgent need for expenditure, in
the current year, that is not provided for, or is insufficiently provided for,
in the existing Appropriation Act, subject to certain conditions. The framework
for the AFM is discussed in more detail below.
. Public Governance,
Performance and Accountability Act 2013, accessed 11 June 2015.
. Constitution, section
81, accessed 3 June 2015.
v Commissioner of Taxation (2009) 238 CLR 1,  HCA 23,
accessed 3 June 2015.
Harris, ed., House of
Representatives practice, fifth edn, Department of the House of
Representative, Canberra, 2005, p. 410, accessed 11 June 2015.
Evans and R Laing, eds, Odgers’
Australian Senate practice, thirteenth edn, The Senate,
Canberra, 2012, chapter 13, accessed 26 May 2015.
Standing Committee on Appropriations and Staffing, 50th
report: ordinary annual services of the government, The Senate,
Canberra, June 2010, accessed 3 June 2015.
127, 2008–10, pp. 3642–3, accessed 26 May 2015.
v Commonwealth (1911) 12
CLR 321, per Griffith CJ at 336, accessed 3 June 2015.
Accounting Standards Board (AASB), ‘AASB
1050 administered items’, AASB website, December 2013, accessed 3 June
v Commonwealth (2005) 224 CLR 494, 
HCA 61, per Gummow, Hayne, Callinan and Heydon JJ at paragraph 123,
accessed 3 June 2015.
(Vic); Ex rel Dale v Commonwealth (1945) 71
CLR 237 , per Latham CJ at 253, accessed 3 June 2015.
for the preparation of the 2015-16 portfolio budget statements,
Department of Finance, March 2014, p. 66, accessed 4 June 2015.
. Public Governance,
Performance and Accountability Act 2013, section 11.
of Finance, ‘Advance
to the Finance Minister’, Department of Finance website, accessed 4 June
Bill (No. 1) 2015-2016, clause 6.
Bill (No. 2) 2015-2016, clause 6.
Parliamentary Library, Budget review 2015–16, Research
paper series, 2015–16, Parliamentary Library, Canberra, May 2015, accessed 11
actual numbers are appropriations ‘estimated’ to have been actually spent in
the portfolio in the previous financial year.
Bill (No. 1) 2015-2016, Schedule 1, p. 10.
Bill (No. 2) 2015-2016, Schedule 2, p. 15.
portfolio budget statements are relevant documents for the purposes of section
15AB of the Acts Interpretation Act 1901.
Bill (No. 1) 2015-2016, Schedule 1.
Bill (No. 2) 2015-2016, Schedule 2.
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