The basis on which levies are collected and used
This chapter considers the collection of the cattle transaction levy and
its use. It explores the components of the levy and their allocation with focus
on the R&D and marketing components.
The rural sector includes a wide range of industries which largely
comprise small family businesses. The incentive and capacity for businesses
such as these to invest in marketing and R&D is low, resulting in potential
under-investment in relation to these functions for the sector.
As a means of overcoming this, Commonwealth taxing powers are used to
facilitate marketing and R&D services for rural industries through the
imposition of levies. Industry levies are statutory, production-based payments
which are often matched by government and then used to fund marketing and
Levies are collected by the Department of Agriculture (department) on
behalf of the red meat sector and distributed to recipient bodies as set out in
the legislation. Schedule 3 of the Primary Industries (Excise) Levies Act
1999 (Levies Act) and Section 8 of the Primary Industries (Customs)
Charges Act 1999 impose levies in relation to cattle transactions.
Red meat and livestock industry structure
The Australian Meat and Live-stock Industry Act 1997 (AMLI Act)
provides the legislative framework for the structural and funding arrangements
of the red meat industry and its marketing and R&D activities. A Memorandum
of Understanding (MOU) between the red meat industry and Commonwealth sets out
the roles, responsibilities and funding arrangements in relation to the red
meat industry. Agreed on 27 April 1998, the MOU serves as a statement of
principles between industry bodies and the Commonwealth.
The red meat industry structure comprises the following bodies under the
MOU together with the Commonwealth Government:
Red Meat Advisory Council (RMAC);
six peak industry councils
(PICs): Cattle Council of Australia (CCA), Sheepmeat Council of Australia
(SCA), Australian Lot Feeders' Association (ALFA), Australian Meat Industry
Council (AMIC), the Australian Livestock Exporters' Council (ALEC), and the
Goat Industry Council of Australia (GICA); and
three service providers: Meat and Livestock Australia (MLA), the
Australian Meat Processor Corporation (AMPC), and the Australian Livestock
Export Corporation (LiveCorp).
Responsibilities and functions under the MOU are divided between RMAC
and the PICs which serve as policy and strategy bodies while MLA, AMPC and
LiveCorp are service delivery companies.
Please note that, while this chapter provides background information
about the role and nature of the relevant bodies, more substantive discussion
of their performance is contained in later chapters.
Custodian of MOU—Red Meat Advisory Council
As part of the 1997–98 restructure, RMAC was formed by the PICs to
provide a 'single industry touch-point' for the Australian Government when
dealing with cross-sectoral and whole-of-industry matters. It comprises members
of five PICs:
CCA representing the grass-fed cattle production sector;
SCA representing the sheepmeat production sector;
ALFA representing the grain-fed cattle production sector;
AMIC representing red meat processors, retailers, wholesalers and
smallgoods operators; and
ALEC representing the livestock export sector.
RMAC has five principal functions including the provision of advice to
the Minister for Agriculture (Minister) on cross-sector or whole-of-industry
matters. RMAC is responsible to develop and monitor the Meat Industry Strategic
Plan (MISP) which provides the industry's overarching strategic framework while
serving as the custodian of the MOU.
RMAC is also charged with managing the investment reserves (the Industry
Reserve Fund) to generate income to support RMAC and its members to fulfil
their MOU obligations and provide capital funding if and as needed for
multi-sector crisis management. As a representative body, RMAC is also
responsible to facilitate a forum for its members (PICs) to discuss
multi-sector and whole-of-industry policy issues.
Peak industry councils
A PIC is recognised as a prescribed industry body for the purposes of
section 59 of the AMLI Act and is a signatory to the MOU.
Under the terms of the MOU, PICs are responsible to develop the
strategic objectives, give direction and set policy for their respective
industry sector. PICs are also required to give policy advice to the Minister
in respect of the industry sector they represent. For the purposes of this
inquiry, the CCA is the key PIC.
Cattle Council of Australia
CCA is the prescribed peak representative body for Australian grass-fed
cattle producers under the MOU. CCA's membership includes 15,000 cattle
producer members through state farming organisations (SFOs) as well as 152
Under the Primary Industries (Excise) Levies Act 1999 and the Primary
Industries (Customs) Charges Act 1999, the Minister has declared CCA and
ALFA to be bodies whose recommendations must be taken into consideration in
determining levy amounts for the grass-fed and grain-fed cattle sectors
respectively. MLA's constitution reflects this requirement and stipulates that the
peak councils have the exclusive right to propose resolutions regarding
adjustment of the CTL.
Under the MOU, CCA is responsible to represent and progress the
interests of Australian grass-fed cattle producers. Clause 5 of the MOU details
the roles of CCA and other PICs which includes oversight of levy expenditure.
MLA noted that CCA is closely consulted for direction on all MLA's marketing
and R&D programs relating to the grass-fed industry.
The four core functions of CCA include advocacy (which is funded from
members' voluntary contributions), as well as strategic direction and planning
(which draws on RMAC funding) and industry oversight and strategic policy
Through the investment of levies, service providers offer marketing and
R&D services to their respective industry sector. There are three service
providers under the MOU which are all corporations limited by guarantee under
the Corporations Act 2001.
Under the MOU:
MLA serves CCA, SCA, ALFA and GICA;
AMPC serves AMIC; and
LiveCorp serves ALEC.
The three service providers are responsible under the MOU to provide
management, funding and administrative arrangements for industry activities to
be undertaken. For the purposes of this inquiry, MLA is the key service
provider. It undertakes research and marketing on behalf of over 48,787 beef,
sheep and goat producer members of whom 41,460 are engaged in the raising,
finishing or trading of grass-fed cattle, including 22,809 specialist grass-fed
CCA, SCA, ALFA and GICA and
relationship with MLA
The four PICs which represent producers are responsible to develop the
strategic objectives for their respective industry sector in collaboration with
MLA. They are also responsible for developing jointly with MLA the goals for
achieving the vision and strategic imperatives for the industry sector each
In 1998, CCA, SCA, ALFA and GICA established MLA as a producer-owned
service company to deliver marketing, promotion, R&D and other agreed
functions for the whole of industry.
Having regard to their relationship to MLA, the roles and
responsibilities of the four PICs under the MOU are to:
assess performance of services delivered by MLA or arranged by
MLA to be delivered by other persons towards achieving the goals identified in
propose levy motions at general meetings of MLA, make
recommendations to the Minister on the operating level of levies required to
fund MLA's activities and consult widely within its industry sector on MLA's
Along with activities on behalf of producers, MLA is required to
undertake joint functions, core functions and services for AMIC and ALEC as
stipulated under the MOU.
MLA is both the declared marketing and declared research body in
accordance with sections 60(1) and (2) respectively of the AMLI Act. As the
industry research body, MLA undertakes services for the processing sector and
livestock exporters sector. Under the MOU, this role requires MLA to jointly
develop with AMPC and LiveCorp and their respective PICs, goals for achieving
the vision and strategic imperatives for the industry sectors they represent.
Under section 66 of the AMLI Act, matching Commonwealth funding for
industry research is paid to MLA as the declared industry research body. The
two other service providers, AMPC and LiveCorp are recognised as 'approved
donors' under section 61(1) of the AMLI Act for the purposes of matching
Commonwealth R&D funding.
A Statutory Funding Agreement between MLA and the Australian Government
facilitates matching Commonwealth R&D funding and the management of levy
monies. Therefore, it is only the R&D projects undertaken by AMPC and
LiveCorp with MLA that are eligible for matching Commonwealth R&D funding,
while AMPC and LiveCorp both operate independently, and in conjunction with
ALEC and relationship with LiveCorp
The roles and responsibilities of ALEC are similar to those of the other
PICs. Amongst other things, ALEC is responsible to develop jointly with
LiveCorp (and MLA where services are provided by MLA) goals for achieving the
vision and strategic imperatives for the industry sector it represents. ALEC is
also required to assess the performance of services delivered by MLA (or
arranged by MLA to be delivered by others) towards achieving the goals
identified in the MISP.
LiveCorp serves as the service provider to ALEC and has roles and
responsibilities to its PIC consistent with that of other service providers.
Where services are provided by or through MLA, ALEC is required to develop jointly
with MLA and ALEC goals for achieving the vision and strategic imperatives of
the industry sector it represents. ALEC must also consider and agree with
LiveCorp the amounts of money required to fund LiveCorp and MLA pursuant to the
MOU and support LiveCorp in securing its funding requirements.
AMIC and relationship with AMPC and
AMIC serves as the PIC for retailers, processors and smallgoods
manufacturers. It has the same roles and responsibilities as other PICs under
the MOU. AMIC develops jointly with AMPC and MLA (where services are provided
by MLA), goals to achieve the vision and strategic imperative for the processing
AMPC is the processing sector service company responsible to provide
management, funding and administrative arrangements for the meat processing
It conducts marketing and R&D on behalf of the processor sector or directs
these funds to MLA to carry out agreed projects as requested in accordance with
AMPC invests its R&D and marketing revenue into three programs on behalf
of the processing sector. These include a joint program with MLA as defined in
the MOU, a core R&D program, and the Plant Initiated Projects (PIP)
program. In 2013, processors paid $18.06 million in levies with half of project
expenditure directed towards joint investment with MLA.
Diagram 2.1: Memorandum of
Understanding arrangements 
Cattle transaction levy
The cattle transaction levy (CTL) is collected under the Primary
Industries Levies and Charges Collection Act 1991 which enables collection
through intermediaries. The CTL is composed of a number of different levies
including grass-fed cattle at $5.00 per head; lot-fed cattle (grain-fed) at
$5.00 per head; and bobby calves at $0.90 per head.
The CTL is imposed on grass-fed cattle and bobby calves defined as
'cattle' are bovine animals other than buffalo; and
'bobby calves' are bovine animals other than buffalo or lot-fed
cattle, with a live-weight of less than 80 kg or, if slaughtered, a dressed
weight of less than 40 kg.
The separate components of the $5 grass-fed cattle transaction levy
marketing ($3.66) and R&D ($0.92) distributed to MLA;
animal health ($0.13) distributed to Animal Health Australia
residue testing ($0.29) distributed to the National Residue
All lot-fed cattle and grass-fed cattle producers are required to pay
the levy on transactions involving cattle. The CTL is imposed on each of the
each transaction by which ownership of cattle is transferred from
one person to another—the levy is payable by the person who owned the cattle
immediately before the transaction was entered into;
the delivery of cattle to a processor other than because of a
sale to a processor —the levy is payable by the person who owned the cattle
immediately prior to delivery;
the slaughter of cattle by a processor where the cattle were
purchased by the processor and held for more than 60 days before slaughter—the
levy is payable by the person who owned the cattle at the time of slaughter;
the slaughter of cattle by a processor where the levy would not
be payable under any of the three preceding actions—the levy is payable by the
person who owned the cattle at the time of slaughter.
The committee inquiry is focused on the marketing and R&D components
in relation to grass-fed cattle and bobby calves. The research and R&D
components of the levy are distributed under Part 3 of the AMLI Act to
MLA as the declared industry marketing body for marketing levies and industry research
body for research and development levies.
Background to the cattle
In January 1997, the 12 Levy Principles were introduced. Any proposal to
amend an existing statutory levy or introduce a new levy must comply with the
A framework was established to manage the red meat marketing and R&D levies
with a view to enabling industry to manage its own affairs. This involved
privatising the marketing and R&D statutory authorities and removing
government involvement in the day-to-day management of levy funds.
As part of the levy governance arrangements, MLA and the other service
providers are responsible and accountable to company members (levy payers)
through the Corporations Act 2001, while the government has responsibility
to establish the tax and set minimum standards for accountability to Parliament
and levy payers.
The role of government in these arrangements was confined to powers of
intervention and mechanisms to guarantee appropriate standards of governance.
This is achieved through the combination of legislation, appropriation, deeds
of grant and an industry MOU.
The MLA Memorandum and Articles of Association (or constitution) that
relate to levies recognise two classes of members: peak councils and producers.
Eligibility to become a peak council member is available to bodies which are:
prescribed industry bodies for the purpose of section 59 of the AMLI
declared by the Minister to be a body whose recommendations about
amounts to be prescribed under the levy Acts are to be taken into consideration;
signatory to the MOU (except the GICA).
The four classes of producer recognised under the MLA Memorandum and
Articles of Association include cattle producers, lot feeders, sheep producers
and goat producers. A person is eligible to be a producer member if they
produce livestock and pay levies.
In 1998 the CTL was set at $3.50 a head.
In 2005 the government, through the Minister, accepted recommendations from
industry to increase the CTL from $3.50 to $5 with the additional $1.50 to be
channelled into marketing.
The increased levy was implemented in January 2006 with a sunset clause under
the Primary Industries (Excise) Levies Amendment Regulations 2005. The sunset
clause stipulated the need for an independent review of the increased levy and
prescribed that the levy would return to $3.50 in January 2011 without
demonstrated industry support for retaining it at $5.
In 2009 an independent Beef Marketing Funding Committee (review
committee) conducted a beef levy review. The purpose of the review was to
evaluate the effectiveness of the increased marketing component of the cattle
levy and to determine the most appropriate level of funding for beef marketing
and trade development.
The review committee found that the additional $1.50 per head of cattle
had delivered five times the investment back to producers and concluded that
the $5 levy per head of cattle was a modest but appropriate investment in the
future of the industry and should be retained.
The review committee also recommended that the performance yardstick in future
reviews be a minimum return on investment to producers of three times the
overall marketing levy.
It also recommended that any future reviews of the levy be undertaken as
a result of industry need, triggered by the peak councils, and not according to
a pre-determined timeframe.
On the recommendations of the review committee, a vote at the MLA annual
general meeting (AGM) and via a non-member poll was conducted to establish
whether levy payers wanted to retain the levy at $5. Of the levy payers who
voted, 72.5 per cent supported retention of the levy at $5 a head. The $5 levy
was allocated into components. Of the $4.58 provided to MLA, $0.92 was
allocated for R&D purposes and $3.66 for marketing activities on behalf of
Management and investment of marketing and R&D levy components
In 2012–13, grass-fed cattle levies amounted to $53.9 million as
Diagram 2.2: Marketing and R&D
levy components 2012–13 
Amount per head
Grass-fed cattle marketing –
subsection 6(1)(a) of the Act
Bobby calves marketing –
subsection 6(2)(a) of the Act
Grass-fed cattle R&D –
subsection 6(1)(b) of the Act
Bobby calves R&D –
subsection 6(2)(b) of the Act
The marketing and R&D components of the grass-fed cattle levies are
distributed to MLA under sections 63 and 64 respectively of the AMLI Act as a
declared industry marketing body and declared industry research body.
MLA is a company limited by guarantee under the Corporations Act 2001.
Its Memorandum and Articles of Association have effect as a contract between
the company and each member, between the company and each director and company
secretary, as well as between members.
The roles and responsibilities of MLA are set out in Clause 6 of the MOU.
It is required to undertake activities on behalf of producers and to prepare both
a business plan for a three year period and an operating plan setting out the
proposed activities of MLA in consultation with PICs.
As a service company, MLA's five-year corporate planning is informed by
and flows from the MISP, industry strategic plans and national R&D
priorities. MLA's five-year corporate plan is translated into annual operating
plans that define MLA's marketing and R&D strategies and programs.
MLA’s governance, strategy and funding responsibilities are specified in
its Deed of Agreement with the Australian Government. MLA's governance
arrangements are set out in its Memorandum and Articles of Association, or
constitution. Article 4 of MLA's
Articles of Association details the appointment, duties and remuneration of
MLA's governing board of directors.
The $4.58 of the levy received by MLA (for marketing and R&D) is
directed by MLA into its four strategic imperatives. The funding of those
imperatives is as follows:
Maintaining and improving market access—$0.62
Increasing productivity across the supply chain—$0.73
Supporting industry integrity and sustainability—$0.37.
Imperative 1: Maintaining and
improving market access
With the objective of developing and delivering industry systems that
underpin product integrity, MLA focuses on assisting industry to better integrate
and sustainably deliver its on-farm risk management systems which include
Livestock Production Assurance (LPA) and National Livestock Identification
System (NLIS). MLA is also engaged in assisting government and PICs to secure
free trade agreements to eliminate the current tariffs on red meat exports to
Korea and Japan, while identifying as a high priority the technical trade
barriers that impede red meat export sales.
Imperative 2: Growing demand
As part of growing demand, MLA is engaged in developing practices and
programs that help industry deliver consistent and optimal eating quality.
Initiatives in this regard include enhancing the nutritional reputation of red
meat, developing new products, the aggressive promotion of beef in the domestic
market and aggressive promotion of beef in export markets.
Imperative 3: Increasing
productivity across the supply chain
The objective of increasing productivity across the supply chain is to
identify and deliver opportunities to increase on-farm and off-farm
productivity and capability, deliver valued supply chain and market information
and support industry to improve animal health and biosecurity.
Imperative 4: Supporting industry
integrity and sustainability
The objective of imperative four is to support both on-farm and off-farm
environmental sustainability while providing solutions to meet high standards
of animal welfare without reducing productivity levels.
MLA funding and revenue
In 2012–13, MLA reported total revenue of $162.2 million to invest in
marketing and R&D programs.
MLA funding comes from a number of sources including:
transaction levies on livestock sales;
Commonwealth dollar-for-dollar matched funding for R&D
co-investments by processors, livestock exporters, wholesalers,
food service and retailers; and
commercial investments by individual businesses along the supply
The component of MLA's revenue derived from grass-fed cattle levies over
the past three years was $56.2 million in 2010–11, $52.5 million in 2011–12 and
$54.2 million in 2012–13. In 2012–13, this levy contribution amounted to
approximately 33 per cent of the MLA's total revenue of $162.2 million.
MLA invests more than $50 million of grass-fed cattle levies each year
in marketing and R&D programs.
In 2012–13, MLA invested $56.4 million of the grass-fed cattle levy funds on
marketing ($44.9 million) and R&D ($11.5 million) while retaining a surplus
of $12 million in grass-fed cattle levies. MLA noted that it had been
deliberately running small deficits for several years to maintain reserves at
an appropriate level in line with the MLA board's levy reserving policy.
The Australian Government matches eligible R&D expenditure by most
rural R&D corporations on a dollar-for-dollar basis up to a cap of 0.5 per
cent of an industry's gross value of production. Eligible expenditure for MLA
is made up of R&D industry levies as well as funds received from the declared
approved donors, AMPC and LiveCorp, as well as the MLA subsidiary, MLA Donor
As part of its role to engage in joint functions, one of the key
programs of MLA is a core RD& extension (RD&E) program for the red meat
industry. The RD&E program is administered by AMPC and delivered by AMPC
and MLA. Using producer and processor levies as well as matching government
funding, the program is delivered under the red meat industry MOU. The joint
program is designed to address issues that affect the entire red meat industry
such as climatic and environmental changes, sustainability, technology,
livestock management and capability. In 2012–13 the joint program received the
Diagram 2.3: Core RD&E program
MLA producer levies contribution
AMPC processor levies contribution
Australian Government contribution
Total expenditure 2012–13
Navigation: Previous Page | Contents | Next Page