SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION AMENDMENT (RETIREMENT ASSISTANCE FOR FARMERS) BILL 1998
MAY 1998
© Commonwealth of Australia 1998
ISSN 1440-2572 |
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MEMBERSHIP OF THE COMMITTEE
Members
| Senator Sue Knowles, Chairman |
LP, Western Australia |
| Senator Andrew Bartlett, Deputy Chair |
AD, Queensland |
| Senator Kay Denman |
ALP, Tasmania |
| Senator Alan Eggleston |
LP, Western Australia |
| Senator Michael Forshaw |
ALP, New South Wales |
| Senator Ross Lightfoot (from 15 May 1998) |
LP, Western Australia |
Former Members during the inquiry
| Senator Karen Synon (until 29 April 1998) |
LP, Victoria |
| Senator Kay Patterson (from 30 April 1998 to 14 May
1998) |
LP, Victoria |
Participating Members
| Senator Eric Abetz |
LP, Tasmania |
| Senator Bob Brown |
Greens, Tasmania |
| Senator the Hon Bob Collins |
ALP, Northern Territory |
| Senator Mal Colston |
Ind, Queensland |
| Senator Barney Cooney |
ALP, Victoria |
| Senator the Hon Rosemary Crowley |
ALP, South Australia |
| Senator Chris Evans |
ALP, Western Australia |
| Senator the Hon John Faulkner |
ALP, New South Wales |
| Senator Brenda Gibbs |
ALP, Queensland |
| Senator Brian Harradine |
Ind, Tasmania |
| Senator Sue Mackay |
ALP, Tasmania |
| Senator Dee Margetts |
GWA, Western Australia |
| Senator Shayne Murphy |
ALP, Tasmania |
| Senator Belinda Neal |
ALP, New South Wales |
| Senator Kay Patterson |
LP, Victoria |
| Senator the Hon Margaret Reynolds |
ALP, Queensland |
| Senator Sue West |
ALP, New South Wales |
| Senator John Woodley |
AD, Queensland |
1. THE INQUIRY
1.1 The Social Security and Veterans' Affairs Legislation Amendment (Retirement
Assistance for Farmers) Bill 1998 was introduced into the House of Representatives
on 11 March 1998. On 25 March 1998, the Senate, on the recommendation
of the Selection of Bills Committee (Report No. 3 of 1998), referred
the provisions of the Bill to the Committee for report by 13 May 1998.
The reporting date was subsequently extended to 27 May 1998.
1.2 The Committee considered the Bill at a public hearing on 15 May 1998.
Details of the public hearing are referred to in Appendix 2. The Committee
received 13 submissions relating to the Bill and these are listed at Appendix
1.
2. THE BILL
2.1 The Social Security and Veterans' Affairs Legislation Amendment (Retirement
Assistance for Farmers) Bill 1998 proposes amendments to the Social
Security Act 1991 and the Veterans' Entitlements Act 1986 to
enable eligible low income pension age farmers (including veterans) and
their partners to transfer their farm and farm assets, up to a maximum
of $500 000, to the next generation without affecting their access to
the age or service pension. [1]
2.2 The Bill gives effect to a measure announced by the Prime Minister
in September 1997 known as the Retirement Assistance for Farmers Scheme
(RAFS). The scheme is part of the Government's Agriculture – Advancing
Australia package. The measure was developed from a recommendation
from the Special Rural Task Force (SRTF), which was established to examine
the impact of the social security assets test on rural clients. [2]
2.3 The Bill provides for the scheme's commencement from 15 September
1997, the date the intention to introduce the measure was announced by
the Government. The scheme will also be available to pension-age farmers
who transferred their properties during the five years prior to 14 September
1997. It is intended that the scheme will operate for three years only,
that is, until 14 September 2000. [3]
2.4 To be eligible for RAFS, farmers will have to:
- own farms to the value of not more than $500 000 (net of farm debt)
per farm;
- show a long term involvement on the farm (or in farming) – the
farmer must have owned the farm for at least 15 years, or been involved
in farming for any period(s) totalling 20 years;
- have an average income of less than the applicable pension rate over
the 3 years prior to the transfer (for both farm and non-farm activities);
- be of pension age or will reach that age before 15 September 2000.
For farmers who are members of a couple, at least one member of the
couple must either be of pension age or will reach that age before 15
September 2000. [4]
2.5 The member of the younger generation, to whom the farm and assets
are transferred, will need to show that he/she had been actively involved
with the farm during the last 3 years before the transfer.
2.6 The Minister in the Second Reading Speech stated that the purpose
of the scheme `is to meet welfare and adjustment objectives of farmers
by providing a three-year “window of opportunity” for low income,
pension age farmers and their partners to gift their farm to the younger
generation without affecting their access to the age pension, and to retire
from farming with dignity'. [5] The Minister
also noted that:
The measure is targeted at those families who are in hardship because
their businesses are capable of supporting only one family but are being
required to provide a living for two or more families. It will remove
a significant impediment to the intergenerational transfer of the family
farm. It represents a considerable concession for farmers. [6]
2.7 The Department of Social Security (DSS) noted the specialised nature
of this Scheme indicating that RAFS `offers a significant advantage for
farmers which is not available to others seeking access to the age pension,
including the owners of other family businesses in rural towns, which
rely on the viability of the surrounding farms'. [7]
3. ISSUES
3.1 The introduction of this Scheme received general support in evidence
received by the Committee, although a number of issues were raised relating
primarily to its operation. [8]
Farm equity ceiling
3.2 The Departments of Social Security and Veterans' Affairs (DVA) stated
that the limit of $500 000 on the net value of the farm is aimed at targeting
those farm families in hardship because they own farming properties that
are marginal as a result of the farm being required to provide a living
for two or more families. [9] DSS stated that
there are 53 900 farmers (19.6 per cent) aged 62 years or over,
that is, in the target group in terms of age. Of these 32 340 (60
per cent) own farms with a net asset value of less than $500 000. [10]
3.3 The Department of Primary Industries and Energy (DPIE) noted that
the asset limit refers to the net value of the asset, that is,
net of any debt. Any liabilities relating to the farm can be used to reduce
the value of the farm. [11]
3.4 DSS and DPIE noted that when considering the value of the farm, it
is important to have regard to several factors, which may impact on the
net value of the farm. These include:
– the value of the house and surrounding land of up to two hectares
(the curtilage) will be deducted from the value of the farm being gifted
where the farmer retains a life interest in the farm house or excises
the farm house and curtilage from the remainder of the farm; and
– only the retiring farmer's equity in the farm will be deducted
in determining eligibility for the scheme where the farm is owned in partnership
with an eligible descendant(s). [12]
3.5 A number of groups, including the National Farmers' Federation (NFF),
claimed that the limit of $500 000 on gifted assets was set too low, and
will result in few farmers qualifying for pensions under the scheme. [13] One submission cited figures that suggested that
only 600 applicants would be eligible. [14] DSS, however, estimated that 2 100 individuals
(including partners) will qualify for pensions under RAFS. Of this number,
1 800 will qualify through DSS and 300 through DVA. [15]
3.6 The NFF and some other groups argued that the limit on gifted assets
should be raised to $800 000. [16] One witness conceded that if it was not practical
to raise the ceiling to $800 000 then there should be greater flexibility
within the proposed limits. [17] DSS responded,
however, that if the allowable asset limit were raised to $800 000 this
would effectively allow farms with a gross value of $1.1 million to qualify
under RAFS and would extend the potential eligibility for RAFS to some
85 per cent of pension age farmers, assuming they meet the other eligibility
criteria. [18] DSS stated that the total cost
of raising the asset limit to $800 000 plus increasing the allowable
income limits to $20 000 per annum would be $131 million over
the course of the scheme – effectively doubling the cost of the scheme.
It would also increase the number of DSS clients eligible for RAFS to
3 500 people. [19] DSS stated that an assets
limit at that level would not be in keeping with the targeting of the
measure at those families who are in hardship because their businesses
are capable of supporting only one family. [20]
Income threshold
3.7 As noted above, the income test will apply on the basis of average
income received by the individual or couple over the 3 years preceding
the transfer of the farm. Some farmers groups and others argued that the
income level is too restrictive and should be increased as the income
test requirements may exclude some farm families from eligibility under
the scheme. [21]
3.8 DSS emphasised, however, that RAFS is targeted to farm families who
are in financial hardship. The Department also noted that this income
test was recommended by the SRTF in order to ensure that the benefits
of the moratorium on gifting was targeted to farmers most in need. [22]
3.9 DSS and DPIE noted that the pension income test definition of `income',
while not the same as taxable income, does allow for many of the same
deductions, including interest paid on farm loans. The Departments also
noted that income support payments from DSS and DVA or under the Farm
Household Support Act 1992, such as Drought Relief Payments, and Austudy
payments will not be counted as income under the income test. In addition,
only the income of the retiring farmer and their spouse will be taken
into account. If the farm is run in partnership, the business partners'
income is not included in the calculation of income. It was also noted
that farm losses can be offset against income from other sources. [23]
Taxation implications
3.10 Some witnesses raised a number of issues in relation to the taxation
implications of the proposed legislation including farm divestment in
relation to companies and trust arrangements. [24]
DPIE advised that a range of taxation issues is currently under discussion
with the Australian Taxation Office. [25]
3.11 In relation to trusts, DSS stated that farmers who have a legal
interest in a farm through their role as trustee of a family trust can
also qualify under RAFS. It is expected that most farmers in this situation
who seek to access the age pension under RAFS will be those who have outstanding
loans relating to the establishment of the trust. In order to recover
such outstanding loans farmers will need to remove the farm from the trust
and gift the farm to an eligible descendant. Farmers who do not seek to
recover an outstanding loan can qualify under RAFS by transferring title
to the farm and their trusteeship of the family trust to an eligible descendant.
[26]
3.12 With regard to private companies, DSS advised that if a farmer is
a shareholder in a private company that runs a farm and wishes to participate
in RAFS he/she could dissolve the private company, then gift the farm
and farming assets to an eligible descendant. Another option available
to the retiring farmer would be to remove the farm from the private company,
recover related outstanding loans and gift the farm to an eligible descendant.
[27]
4. RECOMMENDATION
4.1 The Committee reports to the Senate that it has considered the Social
Security and Veterans' Affairs Legislation Amendment (Retirement Assistance
for Farmers) Bill 1998 and recommends that the Bill proceed.
Senator Sue Knowles
Chairman
May 1998
SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION
AMENDMENT (RETIREMENT ASSISTANCE FOR FARMERS) BILL 1998
ADDITIONAL COMMENTS ON BEHALF OF SENATOR FORSHAW AND SENATOR DENMAN
The Opposition members of the Committee do not oppose the Bill. Indeed
we support the principle upon which the Bill is based, namely, to promote
the intergenerational transfer of family farms.
However we are concerned that ultimately the Government's proposed scheme
will do little to promote the objective.
When the scheme was first announced in late 1997 it was estimated, that
some 10,000 families would be able to take advantage. However in evidence
to the Committee the Department of Social Security estimated that 2,100
persons would be expected to apply over the 3 years of the scheme. Given
that in a majority of cases it will be joint owners of farms who apply
the number of farms actually affected by the scheme would be considerably
less than 2,100. (See Hansard 15 May 1998, page 25)
Further, various witnesses including the National Farmers' Federation
and the NSW Farmers' Association claimed that the asset limit of $500,000
was too low and that few farmers would qualify for pensions under the
scheme. This may well be the case but simply increasing the asset limit
is not the answer. Indeed it may negate the primary focus of the scheme
which is directed at families who are in severe hardship because the farming
enterprise cannot support the entire family and successive generations.
Concerns about the taxation and other legal implications of property
transfers under the scheme were also raised during the committee's hearings.
Whilst we note that the Department of Primary Industries and Energy advised
that these issues were being discussed with the Australian Taxation Office
we are concerned that the potential problems raised in evidence by Mr
Parker and Mr Thompson are resolved so that eligible persons are not otherwise
prohibited from access to the scheme.
Senator Michael Forshaw Senator Kay Denman
(ALP, New South Wales) (ALP, Tasmania)
Social Security and Veterans' Affairs Legislation Amendment
(Retirement Assistance for Farmers) Bill 1998
MINORITY REPORT
Senator John Woodley
The Australian Democrats wholeheartedly welcome the introduction of this
legislation into the Federal Parliament.
The issue of the intergenerational transfer of farms and the consequent
implications for a person's eligibility to the Age Pension is one the
Australian Democrats have been concerned about and pursued for a number
of years now.
Background
The Democrats recognise the desirability of encouraging the intergenerational
transfer of farming properties in terms of:
(i) the maintenance of the family farm and the accumulated wealth of
farming knowledge and experience that entails;
(ii) the maintenance of the viability and structure of many farming communities;
(iii) basic fairness; and
(iv) the encouragement of sustainable agricultural.
Intergenerational transfer of farming properties is, and always has been,
an essential component of the Australian farming industry.
As Dr Craik, Executive Director of the National Farmers Federation, said
in her evidence to the Committee:(CA2):
The legalistic view is that the older generation owns the land because
their name is on the title deeds. But the true position is that these
aged Australians consider that they really own very little, that the land
and family assets are held in trust for future generations.
To date, however, many retiring farmers have paid a high price in terms
of Age Pension foregone for having handed their farms on to the next generation.
An amendment moved by the Australian Democrats back in 1994 was the impetus
for a Community Affairs Committee inquiry held to examine the impact on
farming families of the income and assets tests which apply to a range
of social security payments.
When that Committee reported to the Senate in September 1995 the Democrats
submitted a minority report stating that we believed the value of family
farms should be exempted from the various social security means tests.
We also identified in that report that the social security penalties for
intergenerational transfer of farms are a major issue for Australia's
family farmers. In an attempt to initiate moves to address that issue,
the Democrats included in that minority report a draft bill outlining
a system to allow intergenerational transfer of farms without incurring
social security penalties.
Whilst that draft bill differs in detail to the Bill currently under
consideration, the overall principle of assisting farmers to retire from
farming with dignity through a simpler handing on of the farm is shared
by both.
Further, as Dr Kingma, Assistant Secretary of the Rural Division of the
Department of Primary Industries and Energy testified (CA1):
...retirement from farming of the older generation of farmers should
assist their process of adjustment through creating an environment where
the younger generation is able to introduce innovative practices and explore
new ways of doing things, which is very important as agriculture approaches
the 21st century.
The Democrats are pleased that the current government has recognised
this problem and have now sought to address it.
The proposed scheme will not only provide a window of opportunity for
farmers to transfer their farms without social security penalty but, as
Dr Kingma said (CA1), it will also:
...raise the importance with farm families of...succession planning,
the need to obtain advice on how to transfer the farm between generations
and the need for business planning generally.
Overall concerns
The Democrats recognise that with any measure such as this, it will always
be a matter of judgement just how far the benefits of the scheme should
be extended. This decision requires the balancing of a number of factors.
We believe, however, that it would be unfortunate if financial considerations
were to be given such weight as to negate the positive aspects of the
scheme.
We are in no way suggesting that the financial impact of the scheme should
not be a primary consideration - it clearly is very important in terms
of the most effective use of public funds. There is, however, a point
at which what should be a very positive scheme is stymied by restrictive
conditions introduced to minimize the cost to government.
That the scheme in its current form may be too restrictive was noted
by a number of those who gave evidence to the Committee.
The Executive Director of the National Farmers Federation stated (CA2):
...we are concerned that the limits placed on the package mean that it
will be available to too few people.
Ms Wilkes-Bowes from the New South Wales Farmers Federation said (CA3):
The association is very supportive of the policy behind this scheme (but),
like NFF, we see the impediments that have been put in terms of eligibility
criteria limiting the usefulness of the scheme substantially. We see the
equity threshold and the income threshold needing to be raised to make
the scheme a true tool for structural adjustment—which is what the
government intended the policy for in the first place.
The Reverend Noel Park, Managing Director of Lifeline Darling Downs and
South West Queensland, said (CA18):
Rev. Park—Our response to the proposed amendments is not
about the concept but about the conditions, which in our experience have
meant that our staff have not been able to find any families who would
qualify under the conditions as proposed.
Senator WOODLEY—Noel, do you know of any families in your
area who will be eligible for take-up of this scheme?
Rev. Park—We have not been able to identify them at this
stage. We have four workers in the field. They have talked to a number
of families and we also supervise six other rural family support workers
in the area. We have not been able to identify those who can see that
they would qualify, although there are a number who would like to.
Finally, Ms Corrine Menere, Rural Family Support Worker from the Care
Balonne Association in St George Queensland stated (CA19) that of the
700 farming families in the shire in which she works she's had contact
with about 400 of those and doesn't expect any to meet the eligibility
criteria.
The various eligibility criteria of the scheme mean that, of the 54,000
farmers who meet the age requirements, only around 700 a year are expected
to be assisted under the scheme (i.e., 2,100 in total).
Specific concerns and recommendations:
1. “Window of opportunity”
- the scheme is available for 3 years from 15/9/97
- The Government has set a sunset clause on the scheme on the basis
that, after that 3-year period, farmers should have had the opportunity
to more adequately plan their retirement from farming.
- No significant justification was provided as to why the starting date
of the scheme was set at 15th of September last year other than it was
a policy decision by the Government. It seems likely that this was done
simply in the belief that it would add more clout to the Prime Minister's
announcement on that date.
- Whilst that may (or may not) have been true, the reality is that the
scheme is effectively non-operational at this stage. To date, no applications
have been granted and, not surprisingly, rural counsellors are prudently
advising people not to transfer their farms in reliance of this scheme
until the legislation is passed.
- It now appears the enacting legislation will not be passed until sometime
after late June meaning nearly a year of `operation' will have passed
before the scheme is of practical benefit to farmers and can be accessed
with any certainty.
- The NFF Executive Director stated that the Farmers Federation is not
concerned that the window of opportunity applies for just 3 years (CA4).
Dr Craik pointed out that (CA5):
A feature of farm organisations in more recent years has been encouraging
farmers to develop succession plans. The state farming organisations with
accountants and lawyers have started to provide assistance and facilitate
their members in developing those, and we support it. The proposal here
is to pick up those who have been caught in a window with a time factor
where they have not done that. This gives the chance to deal with that
group of people in the next three to five years, plus building on what
has already happened in succession planning. We would hope that in the
future people do plan more adequately for their retirement.
The Australian Democrats share that hope. We note, however, the evidence
of Ms Wilkes-Bowes that (CA4):
...the New South Wales Farmers Association feels that it is too short
a window of opportunity, particularly given that the scheme is taking
some time to get up and running. We have suggested that it should be open
for five years from the date of announcement to provide a decent window
of opportunity and to give people time to start their succession planning
earlier.
Further, the Rural Spokesperson for the Australian Society of Certified
Practising Accountants, Mr Tony Parker stated (CA13):
Here (is) an opportunity to have a transfer without financial hardship
to the younger generation and....allow mum and dad to retire with dignity.
There needs to be a time frame to achieve the result. I believe that three
years is not long enough because by the time the legislation is passed
it is going to be June or even later—let us assume it goes through
by the end of June.....and the first 12 months will have been lost. That
leaves two years of actual legislation in front of the community at large.....I
would strongly support, in view of what has happened and what is emerging,
the need to have the legislation for five years, because not all farmers
will move that quickly
The Democrats are strongly influenced by the evidence of Mr Parker being,
as he is, an accountant working day-to-day with the very people this legislation
is designed to assist.
As such, the Democrats recommend the introduction of a five (5) year
window of opportunity to apply from 15 September 1997.
2. Low income
the farmer's average income over the past 3 years must be below the
maximum pension rate
The Assistant Secretary to the Rural Division of the Department of Primary
Industries and Energy, Dr Kingma stated (CA1):
...the RAF scheme is targeted to those farm families in hardship because
their businesses are supporting two or more families when in fact the
resources are sufficient to support only one family. So the scheme is
for farm families in serious financial hardship.
Given that the maximum levels of the Age Pension are set at very modest
levels (i.e., single ($9042pa) or couple ($15085pa)), it is difficult
to imagine that such an income could have supported two families for the
past three years.
As the Rev. Noel Park, said (CA18):
Our concern with the figures in the proposed amendments and the proposal
is that, if you have got a farm that is only currently generating a level
of less than the pension for the older generation, then it is really not
a terribly viable proposition for a younger generation to take over. In
most cases, that would have meant the younger generation has had to work
off farm just to survive, which then makes it difficult with the eligibility.
The Democrats believe that the proposed income limit is far too restrictive
and is one of the major limitations which put at risk the positive aspects
of this scheme.
The Democrats believe a more appropriate threshold is that suggested
by the National Farmers Federation (Sub.7) and the South Australian Farmers
Federation (Sub.9) - that is, the total amount pensioners can earn before
their pension is reduced. This figure is obtained by adding the maximum
rate of pension to the maximum amount of outside income able to be earned
before an income test reduction is incurred.
We note the comments of the Policy Officer for the Australian Pensioners
and Superannuants Federation, Mr Gerard Thomas, when he said (CA23):
It seemed rather curious to us that, under these arrangements for assistance
to farmers, there is a strict requirement that is applied to no other
income support for retired people in this country, particularly when you
consider, for example, recent measures in the budget—which we welcomed—with
Commonwealth health cards for people on modest and high incomes. It struck
us as a bit incongruous that people have to have incomes below $9,000
rather than traditionally at least a part pension and a concession card......Again,
that means that the potential ability of the scheme to assist a lot of
farmers can be put into question.
We also note the comments of The Hon Bruce Scott MP in a letter he has
apparently sent to his constituents where he said (see attachment to Sub.1):
I also recommended that an amendment of the farmer's income test to permit
the earning of income equivalent to what age pension recipients would
be entitled to earn from all sources before it begins to affect their
entitlement would make the income test more just and reasonable.
Mr Scott MP is Federal Member for Maranoa in Queensland, one of the areas
that stand to benefit from this scheme and, as such, is acutely aware
of the difficulties being faced by farming families. He is also Minister
for Veterans' Affairs and it has been estimated that around 300 veterans
will benefit from this scheme.
Currently, to receive the maximum rate of pension, pensioners can also
earn outside income up to around $4,500 per year for couples and $2,600
for singles. This means their total combined income (i.e., pension plus
outside income) before the pension reduces is around $19,661 for couples
and $11,600 for singles.
Setting the allowable income level for retirement assistance to farmers
at these levels has the added benefit that the figures will be increased
each year in line with inflation and wages growth. That is, they will
receive the indexation and any above-indexation rises granted to the pension
as a result of the recent pegging of the pension to 25% of MTAWE.
3. Eligible farmers
- farmers must have owned the farm being gifted for 15 years or been
in farming for at least 20 years
The Democrats believe this requirement is too stringent and has the potential
to lead to inequities. For example, a farmer who has owned his current
farm for 14 years and his previous farm for 3 years would be ineligible
to transfer his current farm.
We believe that an appropriate test would be to simply require that a
farmer has been in farming for at least 15 years.
We also believe that the Secretary should be provided with a discretion
to disregard any breaks from farming of up to 6 months where the Secretary
is of the opinion that any such break was due to the sale and purchase
of successive farms or to exceptional circumstances (eg ill health).
On this point, the Rural Policy Director of the National Farmers Federation,
Mr Robert Douglas, said (CA5):
We originally were quite concerned with that same point. We have received
assurances that the test would be administered flexibly in cases such
as buying and selling a farm. You sell one farm before you go out and
buy another. There are very few farmers who are going to sell before they
buy. We had received assurances that this would not be an issue, but we
were initially concerned. Perhaps the legislation could be changed to
make that administrative flexibility legislative certainty. We certainly
would support that.
The Democrats agree that legislative certainty in this regard is preferable
and, as such, support amendment of the legislation to provide such a Secretarial
discretion.
- a 'qualifying farmer' must have “contributed a significant part
of his or her labour and capital to the development of a farm or farms
and have derived a significant part of his or her income from that farm
or those farms” (s.17A(3))
Evidence was given to the Committee that, during drought or due to other
exceptional circumstances, some farmers may have generated more income
from off-farm sources.
The Rural Family Support Worker from St George in Queensland, Ms Menere,
stated (CA21):
A lot of families still had at least one member of the family on the
land but were seeking jobs—for example, working in the cotton area
or driving dozers—so their income was actually lifted during that
time. There were a great deal of people who were actually doing that during
the drought—not so much in the last year but definitely prior to
that.
Once again, the Democrats believe consideration should be given to providing
a Secretarial discretion within this requirement.
That is, we believe that the legislation should be amended to require
that a farmer has “derived a significant part of his or her income
from the farm or, in the opinion of the Secretary, would have except for
exceptional circumstances."
Such exceptional circumstances would include, but not be limited to,
those situations in which a farmer had been previously issued with an
“exceptional circumstances drought certificate”.
4. Eligible farms
- the value of the farm (net of farm debt) must be not more than $500,000
ABARE figures show that the average net value of all farms is around
$1.05m. The figures for the various sectors of farming are: sheep $1.1m;
beef cattle $1.35m; dairy cattle $0.9m; grain $1.2m; cotton $2.1m; vegetables
$0.8m; poultry $0.9m; pigs $1.2m; sugar $1.0m;
At the same time however, as the NFF highlighted (CA2):
If you look at the figures from ABARE, they have estimated that the average
broadacre farm had a business profit of negative $1,400 in 1996-97.
Ms Corrine Menere, the Rural Family Support Worker from South West Queensland,
stated that she had held a number of information days for families in
her shire dealing with the integrated rural policy package for farming
and that:
Many families showed interest in this scheme, but upon receiving the
financial details from them they were unable to meet the criteria. This
is due to the majority of the property values in south-west Queensland
being over $500,000.
The NFF recommend lifting the assets ceiling to $800,000 (CA3). Further,
the Farmers Federation stated (CA3):
- the retirement assistance package is the only welfare package that
we are aware of where there is actually a sudden death cut-off—that
is, you either qualify or you do not. There is not a graduation and
part payments. We see that as inequitable and suggest that the existing
social security tapers that are in place are provided for the withdrawal
of benefits.
As the NFF highlight, the application of a `sudden-death' cut-off means
a person whose farm is $1 below the limit may qualify for full assistance
while a person whose farm is $1 above qualifies for nothing. This will
not only lead to injustices but also encourages the use of artificial
means of minimising asset levels.
The legislation makes provision for the retiring farmer to excise the
farm house and two hectares to live on in retirement. Where this is done,
the value of the house and that adjacent land will not be included within
the $500,000 limit. Evidence was given to the Committee, however, that
this course of action is not without its difficulties.
The Rev Noel Park from Lifeline in South West Queensland stated (CA18):
My understanding of the problem for most of the local government areas
with which we are involved is that it simply is not possible to excise
areas of that size in rural subdivisions. It may be possible in a rural
residential area but, on farming land, probably somewhere in the area
of four hectares would be the absolute minimum that most councils would
look at.
Rural accountant, Mr Tony Parker, said (CA-8):
I submit to you and state on the record that, in New South Wales, the
creation of a two-hectare block is covered by an environmental plan and
the concessional allotment rules. It is up to all local government councils
to determine whether they will adopt the concessional allotment rules.......On
23 December, the Gunning Shire Council, which is very close to your borders,
ceased to accept any more applications for concessional allotments. That
is the case in the majority of councils in New South Wales. Even if your
local council accepts that, the council will then look at it and say,
`We may require a section 94 capital contribution to the infrastructure
in the shire,' like more roads, et cetera. I have spoken to the town planners
at Yass and other councils and the cost can range from $1,000 to $30,000.....What
I would like to state to you is the transfer costs to keep the principal
residence is not without considerable financial impact.
The Democrats believe that the $500,000 limit on farming properties is
too restrictive. Whilst noting recommendations to increase this limit
to $800,000 we also note the desirability of a tapered withdrawal of support.
One option which the Democrats believe is worthy of further examination
is to, under the existing gifting provisions, simply disregard the first
$500,000 of any farm gifted. This would mean, for example, that a home-owning
farming couple with no other financial assets could gift a farm worth
up to $678,500 and receive the full pension or up to $877,500 and receive
a part pension.
A single home-owner would be able to gift a farm worth $625,750 and receive
the full pension or up to $745,750 and receive a part-pension.
The joint advantages of such a scheme, from the Democrats' point of view,
are that it would both raise the assets threshold slightly and at the
same time introduce a tapered withdrawal of payments rather than a sudden
death withdrawal as the scheme currently proposes.
5. Transferring the whole farm
- the retiring farmer must transfer all farm assets
The Democrats believe this provision needs to be administered in a flexible
manner to allow a retiring farmer to retain, for example, a four-wheel-drive/utility
or a sheep dog - assets which could, in the strict sense, be seen as farm
assets needing to be transferred. We hope the Minister may be able to
provide an assurance to the Senate that such a flexible attitude will
be adopted.
6. Younger generation:
- farms can be handed on to a "child, step child or adopted child
of the person"; "a descendent in direct line of a child";
or any other person, who in the opinion of the Secretary, should be
treated as eligible (s.17A(1))
The Democrats believe that eligible descendants should specifically include
nephews and nieces. We note that the Secretarial discretion may allow
transfers to nephews and nieces but believe it would be preferable to
include them in the legislation. This would provide greater certainty
for farming families and would ensure more consistent decision making.
- eligible descendants must have, during the 3 years prior to transfer,
either been actively involved with the farm or, in the opinion of the
Secretary, would have been so involved but for exceptional circumstances
beyond their control (s.1185B(d))
Some concern was expressed at the inquiry that a descendant forced to
work off-farm may be excluded from eligibility (e.g., Rev Noel Park, Lifeline
(CA18); Ms Corrine Menere, Care Balonne Association Inc. (CA20)).
The Democrats believe the legislation should be clarified to ensure that
the exceptional circumstances mentioned in proposed section 1185B(d) include,
but are not limited to, those situations in which a farmer had been issued
with an “exceptional circumstances drought certificate”.
This would ensure that descendants forced to work off farm due to the
financial impact of drought will not be excluded from the scheme.
Conclusion
The Australian Democrats believe that the above recommendations represent
sensible and essential improvements to the Retirement Assistance for Farmers
Scheme. We will seek to implement these recommendations when the legislation
is debated in the Senate.
Senator John Woodley
Australian Democrats Senator for Queensland
APPENDIX 1 - SUBMISSIONS RECEIVED BY THE COMMITTEE
| 1 |
Lifeline Darling Downs and South West Queensland |
| 2 |
Mr A J Parker, OAM |
| 3 |
Commins Hendriks |
| 4 |
Mr R E Philips |
| 5 |
Ms Loretta Bowman |
| 6 |
Care Balonne Association Inc. |
| 7 |
National Farmers' Federation Australia |
| 8 |
NSW Farmers' Association |
| 9 |
South Australian Farmers Federation |
| 10 |
Department of Social Security |
| 11 |
Commonwealth Department of Primary Industries and
Energy |
| 12 |
Australian Pensioners' & Superannuants' Federation |
| 13 |
Department of Veterans' Affairs |
APPENDIX 2 - PUBLIC HEARING
A public hearing was held on the Bill on 15 May 1998 in Senate Committee
Room 2S1.
Committee Members in attendance
Senator Sue Knowles (Chairman)
Senator Kay Denman
Senator Alan Eggleston
Senator Michael Forshaw
Senator John Woodley
Witnesses
National Farmers' Federation
Dr Wendy Craik, Chief Executive Officer
Mr Robert Douglas, Director, Rural Policy
Mr Mark Grimson, Assistant Director, Rural Policy
NSW Farmers' Association
Ms Dee Wilkes-Bowes, Director, Rural Affairs
Mr A J Parker, Accountant
Commins Hendriks
Mr W J Thompson, Solicitor
Lifeline Darling Downs and South West Queensland via teleconference
Rev. Noel Park, Managing Director
Care Balonne Association Inc. via teleconference
Ms Corrine Menere, Rural Family Support Worker
Australian Pensioners' & Superannuants' Federation via
teleconference
Mr Gerard Thomas, Policy Officer
Ms Sarah Fogg, Executive Officer
Department of Social Security
Mr Rob Nolan, Assistant Secretary, Special Payments Branch
Ms Glenys McIver, Director, Means Test Policy, Retirement Programs Branch
Mr Lloyd Scholes, Director, Special Benefit and Rural Section, Special
Payments Branch
Ms Heather Kempf, Assistant Director, Special Benefit and Rural Section,
Special Payments Branch
Department of Primary Industries and Energy
Dr Onko Kingma, Assistant Secretary, Rural Division
Department of Veterans' Affairs
Mr Bob Hay, Branch Head, Income Support
FOOTNOTES
[1] Submission No.10, pp.2-3; Submission No.13,
pp.1-2; Submission No.11, pp.1-2; Submission No.13, pp.1-2.
[2] Submission No.10, pp.1-2; Submission No.11,
pp.1-2.
[3] Submission No.10, pp.1-3.
[4] Explanatory Memorandum, p.i.
[5] Minister's Second Reading Speech, House
of Representatives, Hansard, 11.3.98, p.692. See also Committee
Hansard, 15.5.98, p.1; Explanatory Memorandum, p.ii.
[6] Minister's Second Reading Speech, p.692.
[7] Submission No.10, p.2.
[8] Committee Hansard, 15.5.98, pp.3,18,22;
Submission No.1, p.1; Submission No.5, p.1; Submission No.7, p.1; Submission
No.8, p.1; Submission No.9, p.2.
[9] Committee Hansard, 15.05.98, pp.23-24;
Submission No.10, p.5.
[10] Committee Hansard, 15.5.98, p.24;
Submission No.10, p.4. The figures are based on Australian Bureau of Agricultural
and Resource Economics data.
[11] Submission No.11, p.3.
[12] Submission No.10, p.5; Submission No.11,
p.3.
[13] Committee Hansard, 15.5.98, pp.2,18-20;
Submission No.7, p.1. See also Submission No.1, p.3; Submission No.6,
p.3; Submission No.8, p.2.
[14] Submission No.8, p.1.
[15] Submission No.10, p.4 ; Committee Hansard,
15.5.98, p.24.
[16] Committee Hansard, 15.5.98, pp.3,20;
Submission No.7, p.1. See also Submission No.8, p.2; Submission No.9,
p.2; Submission No.12, p.2.
[17] Committee Hansard, 15.5.98, p.10.
[18] For further details relating to these
figures see Submission No.10, p.6.
[19] For further details see Committee Hansard,
15.5.98, p.31.
[20] Submission No.10, p.6.
[21] Committee Hansard, 15.5.98, pp.3,22;
Submission No.7, p.1; Submission No.8, p.2; Submission No.9, p.2.
[22] Committee Hansard, 15.5.98, p.31;
Submission No.10, p.6.
[23] Submission No.10, p.6; Submission No.11,
p.3.
[24] Committee Hansard, 15.5.98, pp.6-17;
Submission No.3, pp.8-11; Submission No.2, pp.15-22.
[25] Submission No.11, p.4. See also Committee
Hansard, 15.5.98, pp.30-31.
[26] Submission No.10, p.9.
[27] Submission No.10, p.9.