Bills Digest No. 8, 2019–20
PDF version [573KB]
Social Policy Section
22 July 2019
Purpose of the Bill
Policy position of non-government
Position of major interest groups
Statement of Compatibility with Human
Key issues and provisions
Date introduced: 4 July 2019
House: House of Representatives
Commencement: 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
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
All hyperlinks in this Bills Digest are correct as
at July 2019.
The Farm Household Support Amendment Bill 2019 (the Bill)
amends the Farm
Household Support Act 2014 to:
permanent the temporary increase in the Farm Household Allowance (FHA) farm
assets value limit to $5 million
indexation of the farm assets value limit to movements in the Consumer Price
Index (CPI) and
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.
The change in the farm assets value limit will apply
retrospectively to 1 July 2019. The change to the treatment of deductions will
apply from the 2019–20 financial year onwards.
The change in the farm assets value limit was a 2019
Liberal-National Coalition election commitment and is based on a recommendation
of the February 2019 Independent Review of the Farm Household Allowance.
The FHA is an income support payment which supports
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).
The payment is time-limited: farmers can only receive the payment for up to
four cumulative years.
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 $4,000 activity supplement
to pay for approved activities including training or professional advice.
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.
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.
The FHA was introduced in 2014 via the Farm Household
Support Act 2014 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.
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. It is intended to give farmers ‘breathing
space to implement plans and seek training to become financially
self-sufficient, so they are better placed to sustain their farming business’.
According to the Department of Agriculture, as at 14 June
2019, more than 11,900 people had received the FHA since it was introduced.
There were 6,892 people receiving the FHA as at 14 June 2019.
Estimated actual expenditure appropriated for the FHA in 2018–19
was $163.4 million but this was expected to decrease to $59.7 million in
2019–20 (not including the impact of the measures proposed in the Bill).
The current payment rates for the FHA are set out in Table
Table 1: Farm Household Allowance payment rates
Maximum basic rate
Single, aged under 22, no dependent children
Single, aged 22 or over, no dependent children
Single, aged 60 or over, no dependent children, after 9
continuous months on payments
Single, aged under 22, with dependent children
Single, aged 22 or over, with dependent children,
Partnered, aged 22 or over
Partnered, aged under 22, no dependent children,
Partnered, aged under 22, with dependent children,
Source: Department of Human Services (DHS), A
guide to Australian Government payments: 1 July–19 September 2019, DHS, Canberra, 2019. 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.
The FHA is only one of the Australian Government supports
available to farms in difficulty, particularly during drought. Other supports
available include the Farm Management Deposits scheme, concessional taxation
arrangements, concessional loans, counselling and mental health supports.
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.
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).
The current income test cut-off for a single Newstart Allowance recipient with
no children is $1,069.84 per fortnight and for a partnered recipient with no
children it is $979.00 (each).
Expenses incurred in deriving business income can be
deducted when calculating a person’s assessable income (this can include
depreciation on plant or equipment used in producing assessable income).
Currently, some off-farm income may be deducted when
calculating total income. Off-farm income is any amount earned, derived or
received that was not produced by an activity of the farm enterprise (such as
agistment payments, interest payments and rental income). The deduction can
only be used where the ordinary farm income from the farm enterprise is less
than zero. The deduction only applies to amounts used for off-farm income being
used to pay interest on a loan related to the farm enterprise. A maximum of
$80,000 of off-farm income can be deducted from assessable income under the
income test in this way, if the FHA claimant meets all the applicable
requirements for this deduction.
Income from the forced disposal of livestock is exempt for
the purposes of the income test provided the FHA recipient invests that income
by depositing it in a farm management deposit account (or intends to deposit
within 42 days of receiving the payment)—see ‘2019–20 budget measure—forced
disposal of livestock’ section of this Bills Digest.
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
Farm assets include 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.
The combined value of assessable non-farm assets must not
exceed the asset limits for Newstart Allowance. The current asset test limits
homeowner combined: $394,500
non-homeowner combined: $605,000.
The farm assets test assesses the net value of the farm’s
assets. Currently, to be eligible for the FHA, the total must not exceed $2,685,000.
A temporary increase in the assets limit to $5,000,000 applied from 1 September
2018 to 30 June 2019 (see ‘2018 Temporary Measures Bill’ section of this Bills
The Bill proposes to make this increase permanent and apply retrospectively from
1 July 2019.
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.
Mutual obligation requirements
The mutual obligation requirements for the FHA require a
recipient to complete a Farm Financial Assessment and enter into a Financial
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 and Water Resources.
Temporary Measures Bill
In August 2018, the Coalition Government introduced and
passed the Farm
Household Support Amendment (Temporary Measures) Bill 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 during the same
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’.
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, where that income
is invested in a Farm Management Deposit.
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 Social Security Act 1991. To meet the
requirements, the disposal (including killing) of livestock must occur wholly
or mainly for one of the following reasons:
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
or natural disaster affecting the availability of pasture, fodder or water so
that the farm could not reasonably support the livestock
concern for the welfare of the livestock
requirement by or under a law of the Commonwealth, a state or a territory to
dispose of the livestock.
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.
Review of the Farm Household Allowance
The Independent Review was completed in February 2019.
The Review Panel was chaired by Michele Lawrence, a dairy farmer and member of
the Agriculture Industry Advisory Council.
The Review made six recommendations:
- decoupling the FHA from the Social Security Act
1991 with the aim of simplifying the application process and tailoring
the eligibility settings to farm businesses
- 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
- refocus the Rural Financial Counselling Service to focus on business
- improve communications of the FHA’s purpose and requirements
- distinguish the FHA from drought and promote its broader purpose of
supporting farmers during financial hardship irrespective of the cause
- build in regular assessment of the performance of the scheme.
One of the actions under Recommendation 1 was to maintain
the temporary farm asset value limit of $5 million, but also continuing
indexation of the limit to movements in the CPI (that is, maintaining its real
value in line with inflation).
The Review did not make any recommendations regarding
deductions for the purpose of the income test—though it did recommend using
existing tax classifications for the purposes of calculating income rather than
social security definitions (as part of the Review’s recommendation to decouple
the FHA from the Social Security Act 1991).
Standing Committee for the Selection of Bills
In its second report of 2019, the Senate Selection of
Bills Committee deferred consideration of the Bill to its next meeting.
Standing Committee for the Scrutiny of Bills
At the time of writing, the Senate Standing Committee for
the Scrutiny of Bills had not considered the Bill.
position of non-government parties/independents
At the time of writing, non-government parties and
independents had not stated a position on the measures in the Bill.
major interest groups
At the time of writing, major interest groups had not
expressed a position on the Bill.
The change to the farm assets test limit is expected to
cost $34.3 million over four years from 2019–20.
The Explanatory Memorandum states that there is no additional cost from the
changes affecting income test deductions.
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.
Joint Committee on Human Rights
At the time of writing, the Parliamentary Joint Committee
on Human Rights had not considered the Bill.
of Independent Review’s recommendations
The Bill implements only part of one of the actions
associated with the Independent Review’s recommendations: maintaining the $5
million farm asset limit. The Bill runs counter to the Review’s suggestion that
the limit continue to be indexed to movements in the Consumer Price Index.
The Review recommended a significant overhaul of the FHA
but the Government has not issued a formal response to the Review and is yet to
commit to any of the remaining recommendations.
the $5 million farm asset limit
Item 1 of Schedule 1 of the Bill repeals and
substitutes section 34 of the Farm Household
Support Act 2014 to set the farm assets value limit at $5 million. This
will mean farmers with farm assets valued up to $5 million will be able to
access the FHA, a significantly higher level of farm assets than allowable
prior to September 2018.
In relation to the temporary farm asset limit increase,
the Government had advised that an additional 8,000 farmers would become
eligible for the FHA.
No estimates have been provided as to the number of farmers who will become
eligible for the FHA as a result of the permanent increase in the asset limit.
limit will decline in real value
Currently, section 34 provides for indexation of the farm
assets value limit annually on 1 July according to movements in the CPI. Proposed
section 34 does not provide for indexation of the amount and item 3
removes table items 3 and 5 from section 95 to remove the provisions
providing for indexation of these amounts under the Social Security Act 1991.
This means that the new farm asset limit will not maintain its value in real
Item 2 repeals and substitutes section 67 of
the Farm Household Support Act to set out new rules for allowable
deductions for the purposes of determining a FHA’s claimant’s income.
Current system of allowable
The FHA uses the social security income test—either the
income test applicable to benefits such as Newstart Allowance (for people aged
22 years or more) or the income test applicable to Youth Allowance (for those
who have not turned 22).
The meaning of ordinary income at section 1072 of the Social Security Act
1991 is, for the purposes of calculating a rate of FHA, modified by
section 67 of the Farm
Household Support Act 2014. Section 67 provides for a person’s ordinary
income to be reduced by allowable deductions.
Currently, where a person who is operating a business that
is wholly or partly a farm enterprise incurs an allowable deduction, the
person’s ordinary income for that tax year can be reduced by ‘so much of the
amount as relates to the farm enterprise’.
Allowable deductions are set out in the Minister’s Rule and subsection 67(3)
provides that the Minister’s Rule may also prescribe a maximum amount for any
allowable deductions. Allowable deductions set out in the Minister’s Rule
expenses incurred while earning taxable income or necessary for the conduct of
a business with the purpose of earning taxable income
on plant and equipment used or ready to be used in producing assessable income
payable on a loan made on a commercial basis at least one year before making a
claim for FHA (where the circumstances of the loan meet certain criteria set
out in the Minister’s Rules).
will link deductions to the relevant income type
Proposed section 67 provides that FHA recipients
can claim allowable deductions against relevant income types—on-farm income and
off-farm income—up to the value of the income earned in each category.
Proposed subsection 67(2) allows for amounts
incurred while carrying on a farm enterprise and prescribed as an allowable
deduction to reduce that person’s ordinary income for the tax year by so much
as the amount relates to the farm enterprise (and does not exceed the income
earned from the farm enterprise). Proposed subsection 67(4) allows for an
FHA recipient’s ordinary income to be reduced by amounts that would reduce the
ordinary income of a business that is not a farm enterprise under Division 1A
of Part 3.10 of the Social
Security Act 1991. Reductions under proposed subsection 67(4)
cannot exceed the total income earned by the person from the
Proposed subsection 67(5) will allow the Minister’s
Rule to prescribe allowable deductions for the purposes of subsection 67(2) and
to prescribe circumstances in which proposed subsections 67(2) and (4)
do not apply. Proposed subsection 67(6) will allow the Minister’s Rule
to set a maximum amount for any allowable deductions.
The amendments will mean that any allowable deductions are
linked to the source of income: either from the person’s farm or from a
Item 4 provides for the increased farm asset limit
to apply from 1 July 2019 and to claims made before the commencement of the
amendments. This means that the FHA will be taken to be payable to anyone who
makes a claim in the period from 1 July 2019 to the commencement of the
amendments, where the only reason it would not have been payable was because
their farm assets were greater than $2.685 million but below $5 million.
Item 5 provides for the amendments relating to
allowable deductions to apply for the 2019–20 tax year onwards.
Party of Australia, Our
plan for supporting farmers in drought, Liberal Party of Australia
policy document, Election 2019, p. 1; Independent Review of the Farm Household
Allowance (M Lawrence, chair), Rebuilding
the FHA: a better way forward for supporting farmers in financial hardship,
Department of Agriculture and Water Resources (DAWR), Canberra, 2019.
of Human Services (DHS), ‘Farm
Household Allowance’, DHS website, 27 June 2019.
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.
of Agriculture (DoA), ‘Farm
Household Allowance’, DoA website, last reviewed 28 May 2019.
Household Support Amendment (Temporary Measures) Bill 2018, Bills
digest, 14, 2018–19, Parliamentary Library, Canberra, 2018, p. 3.
of drought policy and programs’, DoA website, last reviewed 12 June 2018.
Household Allowance, factsheet, DAWR, Canberra, August 2018, p. 1.
Household Allowance dashboard’, DoA website, last reviewed 18 June 2018.
budget statements 2019–20: budget related paper no. 1.1: Agriculture and
Water Resources Portfolio, p. 39.
. DoA, ‘Drought and rural assistance: assistance measures’, DoA website, last reviewed 7 February 2019.
include the Newly Arrived Resident’s Waiting Period, the seasonal worker
preclusion period and the income maintenance period. See Department of
Agriculture and Water Resources (DAWR), Farm
Household Allowance: guidelines, DAWR, Canberra, July 2019, pp. 18–23.
Household Allowance: income and assets test’, DHS website, last updated 28
test for Newstart Allowance, Partner Allowance, Sickness Allowance and Widow
Allowance’, DHS website, last updated 2 May 2019.
of Social Services (DSS), ‘220.127.116.11
Allowable & Non-allowable deductions’, Social security guide,
DSS website, 20 September 2017.
Household Allowance: guidelines, op. cit., pp. 36–39.
Household Allowance: Income and assets test’, op. cit.
Household Allowance: guidelines – legislative changes from 5 April 2017,
DAWR, Canberra, 2017, p. 4.
of Human Services (DHS), A
guide to Australian Government payments: 1 July–19 September 2019, DHS, Canberra, 2019, p. 35.
farm asset value limit $2.55 million referred in the DoA guidelines and the
$2.6 million referred to in DHS’ A guide to Australian Government payments:
1 July–19 September 2019 has not been adjusted to take account of
indexation. The limit is indexed on 1 July each year under Part 3.16 of the Social
Security Act 1991. Indexation of this amount was frozen until 1 July 2017
as a result of the Social
Services and Other Legislation Amendment (2014 Budget Measures No. 6) Act
2014. The indexed amount, applying from 1 July 2019, is $2.685 million
as is referenced in the Explanatory Memorandum to the Bill. Explanatory
Memorandum, Farm Household Support Amendment Bill 2019, p. 4.
Household Allowance: guidelines, op. cit., pp. 40–41.
Household Allowance: mutual obligation requirements’, DHS website, page
last updated 4 December 2018.
Household Allowance: guidelines, op. cit., p. 43.
reading speech: Farm Household Support Amendment (Temporary Measures) Bill 2018’,
House of Representatives, Debates, (proof), 16 August 2018, p. 2.
measures: budget paper no. 2: 2019–20, pp. 46–47.
1, Farm Household
Support (Forced Disposal of Livestock) Minister’s Rules 2019.
Review of the Farm Household Allowance, op. cit.
Selection of Bills Committee, Report,
2, 2019, The Senate, Canberra, 4 July 2019, [pp. 4–5].
Memorandum, op. cit., p. 3.
Turnbull (Prime Minister), M McCormack (Deputy Prime Minister, Minister for
Infrastructure and Transport) and D Littleproud (Minister for
relief for farming families takes drought relief to $576 million,
media release, 5 August 2018.
Rate Calculator B at Part 3.6 of Chapter 3 of the Social Security Act
1991 is used for those aged 22 or over while the Youth Allowance Rate
Calculator at Part 3.5 of Chapter 3 of the Social Security Act is used
for those who have not reached 22 years of age.
Household Support Act 2014.
6 (which refers to permissible deductions of business income set out in section
1075 of the Social
Security Act 1991) and Rule 7, Farm Household Support
Minister’s Rule 2014.
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