2.1
The Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019 (the bill) makes three key changes to the FHA program, namely:
(a)
increasing the off‑farm income offset threshold;
(b)
increasing the amount of time in which a person can access the FHA; and
(c)
allowing for the payment of a lump-sum payment to particular FHA participants.
2.2
Consultation on the bill was undertaken with the Department of Prime Minister and Cabinet, the Attorney-General's Department, the Department of Social Services and the Department of Human Services.
2.3
The amendments, presented in the bill's three schedules, are discussed below. This chapter also presents a number of submitter views on the bill.
Increasing the maximum payment time
2.4
Currently, the FHA is available for a cumulative four‑year period—or 1460 days—over a person's lifetime. The bill amends the FHS Act to provide that eligible farmers and their partners can access the FHA for four years in every specified ten‑year period.
2.5
Item 6 of Schedule 1 of the bill amends subsection 6(1) of the FHS Act to provide that a 'specified 10 year period' is a period of 10 years beginning on 1 July 2014, or a tenth anniversary of 1 July 2014. The bill's EM explains that:
The purpose of this provision is to commence the first specified 10 year period on 1 July 2014, with a new period to commence immediately following the conclusion of each specified ten year period.
2.6
In introducing the bill, the Hon David Littleproud MP, Minister for Water Resources, Drought, Rural Finance, Natural Disaster and Emergency Management, drew attention to the purpose of the amendment, which:
…acknowledges that farmers may experience more than one period of hardship in their lifetime, often due to cyclical and unpredictable impacts to agricultural production in Australia. These changes will better reflect the real financial position of our farmers.
2.7
The next specified ten‑year period will commence on 1 July 2024. Prior to this date, eligible farmers and their partners will continue to be entitled to access payments for up to four cumulative years.
2.8
Schedule 1 makes a number of other technical amendments to reflect the changed FHA payment period.
Submitter views
2.9
The New South Wales Farmers' Association (NSW Farmers) supported the increase to the maximum payment time. NSW Farmers argued that the changes to the payment timeframe recognised that the payment was not just for drought‑affected families, 'but for any circumstances farmers find themselves in giving rise to financial hardship'. The organisation continued that:
In the dynamic nature of farming, which is exposed to many risks and external influences, this is a necessary feature to be included in the FHA. This is an important support mechanism to enable farmers and their partners to be confident and comfortable to make management decisions moving forward.
2.10
NSW Farmers did, however, call for greater clarity on what support would be available in periods when a farmer was not able to receive the FHA, and for further information on the interventions and support available for farmers approaching the exhaustion of their four year payment period.
2.11
Globe Accounting called the expansion to the payment terms a 'very positive move', noting that it would encourage farmers to use the FHA as a safety net when required, rather than use it as a long‑term welfare dependency measure.
2.12
The Isolated Children's Parents' Association of Australia (ICPA) was also in favour of the expansion of the FHA program, observing that the changes proposed were a positive step forward and an acknowledgement that rural and remote families needed support during times of hardship. The ICPA called for the FHA program (or a similar program) to be expanded to assist families with significant out‑of‑pocket educational expenses, which were 'even more challenging to cover in times of rural hardship'. The ICPA went on to state that:
In times of drought, when families’ income can be severely impacted or even non-existent, trying to pay school fees and keeping their children in school is a huge concern for rural families.
Expanded off-farm income offset threshold
2.13
Unlike other social security recipients, some FHA recipients can, in certain circumstances, claim deductions from their total ordinary income for the purposes of the FHA income test. The Department of Agriculture advised that the current circumstances under which an off-farm income offset deduction can be claimed are 'highly restrictive'. The Department submitted that:
…only amounts on interest paid that relate to a farm are able to be offset. In addition, this policy is only available where the person's commercial lender has applied very restrictive conditions to repayments. As a result, most FHA recipients do not qualify for the offset.
2.14
Schedule 2 of the bill makes amendments to both the FHS Act and the Minister's Rule to increase the maximum off‑farm income offset amount from $80 000 to $100 000, per couple per financial year. The $100 000 offset is not available to both individuals in a couple if they are FHA recipients—rather, they are entitled to share a single $100 000 offset. The amendment allows FHA recipients, or couples, who have incurred a farm business loss to have their income reduced by $100 000 under the FHA's income test (but, ordinary income must not be reduced below zero).
2.15
Under the proposed provisions, an FHA recipient, and their partner if applicable, can reduce their ordinary income for the tax year by the amount of loss being carried by their farm enterprise and any directly related businesses (up to certain limits). As the EM explains, to determine if a person's farm businesses have made a loss, any farm enterprises and any directly related businesses must be assessed together.
2.16
The EM explains that the purpose of these amendments is to:
…allow FHA recipients who are facing financial hardship to access the FHA program with a fairer assessment of their income and losses, with more business activities being assessed together with a farm enterprise.
2.17
In speaking to the amendments, Minister Littleproud stated that:
…for the first time, farmers generating income from agistment can offset those gains against either the farm loss or the loss of another related business. This recognises that many farms have multiple arms to their operation. They are pretty clever at making money when there's money to be made. In addition to running the farm business they often have contracting businesses, like harvesting or spraying, or earn money by value-adding to their produce.
2.18
Further, the EM notes that as many farms are inter‑generational, the broadened offset will be available to all FHA recipients involved with the farm business, with the loss that may be claimed equal to the recipient's share of that loss. The EM provides an example of this, explaining that:
…if a farm business has a loss of $200 000, and there are two couples that are both receiving FHA, each couple is entitled to offset their share of that loss.
2.19
The bill also provides a range of new definitions, at Clause 7B of Item 3, relating to the income offset.
Submitter views
2.20
Livestock SA expressed its support for the expanded income offset threshold, arguing that it was important that farming families were not penalised for seeking alternative sources of income. Further, Livestock SA noted that raising the threshold to $100 000 brought the threshold more in line with real debt situations.
2.21
NSW Farmers was likewise supportive of these amendments, welcoming the expansion and simplification of the income offset provisions while calling for greater clarification and simplification around the application process for the offset. In supporting the changes in the bill, NSW Farmers stated that:
Farming families frequently have multiple streams of income, including off-farm income, which become intricately entwined in the farming business. This measure will go towards addressing the situation that has arisen where farmers experience financial hardship and operate at a loss, but due to off-farm income have been ineligible to receive FHA.
Lump sum relief payment
2.22
Schedule 3 of the bill inserts new Part 4B into the FHS Act, allowing for relief payments in certain circumstances to FHA recipients.
2.23
The EM notes that the relief payment will be payable to an FHA recipient who has exhausted 1460 days of FHA, prior to 1 July 2020. In such circumstances, the bill (at Clause 89F of Item 3) provides for a one‑off lump sum relief payment of $7500 for a single recipient, or $6500 for a recipient who is a member of a couple (with $6500 also payable where both members of the couple qualify for the relief payment—$13 000 in total).
2.24
Schedule 3 also provides the Minister with a power to determine, under the Minister's Rule, who may qualify for future relief payments, and the amount of that payment. The Minster's Rule, which is made under the FHS Act, is considered a legislative instrument for the purposes of the Legislation Act 2003, and is subject to tabling and disallowance procedures.
2.25
Therefore, there are two ways in which a person may qualify for the relief payment—by reaching the 1460 day (four year) FHA threshold prior to 1 July 2020, or if they satisfy the circumstances prescribed by the Minister's rules, if any are in place.
2.26
In the event that a relief payment is made to a person in error, the bill provides that the amount is not a debt due to the Commonwealth (unless the relief payment is obtained by fraud).
2.27
Schedule 3 also makes a number of consequential amendments to clarify how the FHA and relief payments interact with the Social Security Act 1991 and the Social Security (Administration) Act 1999.
Submitter views
2.28
Globe Accounting was very supportive of the lump sum payment, stating that it was 'extremely helpful', and an acknowledgement that the drought was now more severe than it had been over the previous four years.
2.29
Livestock SA supported these amendments, due to the fact that the biggest problem facing farmers coming out of drought was the availability of capital. Regarding the lump sum payment, Livestock SA stated that 'though the sum is not great the impact on the farming family in these situations can be very significant'.
2.30
While welcoming the introduction of the relief payment, NSW Farmers suggested that further information and clarity was required about the payment. The organisation was of the view that the amount of the relief payment 'may be an effective transitional payment to support a person who is no longer eligible to receive FHA', but that the payment should not be considered an exit payment. It was pointed out by NSW Farmers that the Minister's Rule could provide scope for an 'adequate exit payment for those farmers who have decided their business is no longer viable'.
2.31
Ms Michele Lawrence, Professor Robert Slonim and Ms Georgie Somerset, the members of the independent FHA review panel, offered conditional support for all of the proposed amendments in the bill, noting they addressed the 'immediate short‑term urgent financial need that household farming businesses face' and that additional changes to the program would follow. However, the panel members argued that the bill's proposed amendments do not address the 'systemic concerns underpinning the broader recommendations' of their report. The panel members submitted to the committee that the government should implement legislation to:
…explicitly and forcefully recognize that farming households are small business owners, which is the fundamental and critically necessary step towards addressing farmers and rural communities longer term financial as well as personal and general well-being. Without this recognition, it is hard to imagine the current changes will be more than a temporary ‘bandaid’ solution and that long term viability prospects for smaller farm household businesses and rural communities will remain in severe jeopardy for the next drought, crop failure, price shock, flood, shift in international market conditions, technological change or any other recognized challenge for small farm household businesses’ financial viability.
Committee views
2.32
The committee acknowledges that farmers experience a number of hardships, often more than once in their lives, and often beyond their control. Right now, Australian farmers are doing it particularly tough, which impacts both on agricultural production and on their families. This bill responds to these experiences, by making it easier to access the FHA, and by increasing the frequency with which farmers can receive support under the FHA program.
2.33
The committee acknowledges that many farmers have already benefitted from the FHA program, and views the important amendments brought forward by this bill as practical and timely. While farmers make decisions about the future of their farms and try to improve their circumstances, the FHA will provide much‑needed financial support and ease some of the pressures facing farmers every day.
2.34
Once implemented, the measures in this bill will make it easier for Australian farmers to ask for and receive financial assistance when times are difficult, whether that be due to drought or to other causes. The government will continue to introduce legislative amendments and programs to improve the lives of farmers across the country.
2.35
The prompt enactment of this bill will make sure farmers can receive ongoing financial assistance, while also providing a broader scope for off-farm income streams which do not jeopardise the eligibility of farmers for the FHA. Given the importance of these measures, the committee recommends that the bill be passed as a matter of priority.
2.36
The committee recommends that the Farm Household Support Amendment (Relief Measures) Bill (No. 1) 2019 be passed.
2.37
Senator Susan McDonald