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2019
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FARM HOUSEHOLD SUPPORT AMENDMENT BILL 2019
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Agriculture,
Senator the Hon. Bridget McKenzie)
FARM HOUSEHOLD SUPPORT AMENDMENT BILL 2019
GENERAL OUTLINE
The Farm Household Support Amendment Bill 2019 (the Bill) will amend the Farm
Household Support Act 2014 (the FHS Act) to maintain the farm assets value limit at
$5.0 million. It will also amend the treatment of income from business such that allowable
deductions can be claimed against related income, that is, either income from the farm
enterprise (on-farm income) or income from a business other than the farm enterprise
(off-farm) income earned by a Farm Household Allowance (FHA) recipient.
The FHA program gives eligible farmers and their partners a maximum of four cumulative
years income support to meet basic household needs while they make decisions about the
future of their farm businesses and take action to improve their circumstances. It is paid at the
same rate as other social security allowances.
FHA is subject to an income test similar to Newstart Allowance and a tailored, two tier assets
test. The first tier relates to net non-farm assets and is the same as Newstart Allowance. Once
the first tier is satisfied, a second tier restricts FHA to those whose assets do not exceed the
net farm assets value limit (whether they are single or partnered).
The amendments will maintain the temporary farm assets value limit at $5.0 million, which
was in effect from 1 August 2018 to 30 June 2019. This limit acknowledges that farmers
cannot easily convert assets for self-support without impacting the ability of their farm
business to produce income.
The provisions of the Bill will also ensure that where a person makes a claim for Farm
Household Allowance from 1 July 2019 until the amendments commence, and the person's
farm assets exceed $2.685 million, the farm assets value limit of $5.0 million will be
retrospectively applied to their claim.
The Bill will also clarify that allowable deductions should be offset against the type of
income to which they relate.
Increase of the farm assets value limit to $5.0 million
The farm assets value limit has, to date, been indexed in line with CPI on 1 July each year.
On 1 July 2018, the farm assets value limit was increased to $2.638 million. However
between 1 September 2018 and 30 June 2019, the farm assets value limit was increased on a
temporary basis to $5.0 million. The temporary increase was effected by the amendments to
the FHS Act, and the Farm Household Support (Farm Assets Value Limit) Minister's Rules
2018. This limit lapsed on 30 June 2019.
The Bill will maintain the farm assets value limit at $5.0 million from 1 July 2019 and
remove the CPI indexation.
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Treatment of allowable deductions against income type
Farm business deductions will apply to an FHA recipient's farm business (or on-farm)
income (unless the off-farm income offset provisions in the Farm Household Support
Minister's Rule 2014 apply), and off-farm deductions will apply to off-farm income.
These amendments will ensure that deductions are offset against the type of income to which
they relate, and better align the payment with other social security payments.
FINANCIAL IMPACT STATEMENT
There is a modest financial impact as a consequence of maintaining the farm assets value
limit at $5.0 million. There is no additional cost to amend the treatment of allowable
deductions so they can only be claimed against related income.
The costs to the payment have been estimated at $34.3 million over four years beginning in
the 2019-20 financial year.
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STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Farm Household Support Amendment Bill 2019
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
The Farm Household Support Amendment Bill 2019 (the Bill) will amend the Farm
Household Support Act 2014 (the FHS Act) to maintain the farm assets value limit at
$5.0 million. It will also amend the treatment of income from business such that allowable
deductions can be claimed against related income, that is, either income from the farm
enterprise (on-farm income) or income from a business other than the farm enterprise
(off-farm) income earned by a Farm Household Allowance (FHA) recipient.
The farm assets value limit was set at $5.0 million until 30 June 2019. However, from
1 July 2019, it is legislated to revert to $2.685 million (CPI indexed). This Bill maintains the
limit at $5.0 million from 1 July 2019 and removes CPI indexation.
The Bill also amends the FHS Act to ensure allowable deductions are offset against the
income to which they relate.
Human rights implications
In relation to maintaining the farm assets value limit at $5.0 million, the Bill engages, or has
the potential to engage, the following rights:
Article 9 of the International Covenant on Economic, Social and Cultural
Rights (the ICESCR) - right to social security
Article 11(1) of the ICESCR - right to an adequate standard of living, including food,
water and housing
Article 12(1) of the ICESCR - right to health
Article 6 of the ICESCR - right to work and rights in work.
The amendment to the FHS Act to ensure allowable deductions are applied against related
income does not engage any related rights.
Right to Social Security
Article 9 of the ICESCR recognises the right to social security. The United Nations
Committee on Economic, Social and Cultural Rights (CESCR) has stated that the term 'social
security' in Article 9 encompasses the right to access and maintain benefits, whether in cash
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or in kind to secure protection from (a) lack of work related income; (b) unaffordable
healthcare; or (c) insufficient family support.1
By maintaining the farm assets value limit at $5.0 million, the Bill promotes the right to
social security by making the FHA program available to a greater number of farmers and
farmers' partners facing hardship.
Summary
The Bill engages and promotes the right to social security enshrined in Article 9 of the
ICESCR.
Right to an adequate standard of living, including food, water and housing
Article 11(1) of the ICESCR recognises the right to an adequate standard of living, including
food, water and housing. States have an obligation to ensure the availability and accessibility
of the resources necessary for the progressive realisation of this right. The CESCR has stated
that the core content of the right to adequate food implies both the availability and (economic
and physical) accessibility of food.2
Given that the livelihood of farmers is subject to a range of factors beyond their control, the
Bill seeks to promote this right by making financial and social support to a greater number
farmers and farmers' partners at times of hardship where they demonstrate a limited capacity
to self-support.
The right to an adequate standard of housing is protected to a lesser extent under the Bill
given that FHA recipients are, subject to eligibility criteria, able to access rent assistance.
Summary
The Bill engages and promotes the right to an adequate standard of living, enshrined in
Article 11(1) of the ICESCR.
Right to health
Article 12(1) of the ICESCR recognises the right of all individuals to enjoy the highest
attainable standard of physical and mental health.
The CESCR has stated that this right is not confined to the right to health care.3 The CESCR
considers that article 12 more broadly acknowledges that the right to health embraces a wide
range of socio-economic factors that promote conditions in which people can lead a healthy
life, and extends to the underlying determinants of health, such as food and nutrition,
housing, access to safe and potable water and adequate sanitation, safe and healthy working
conditions, and a healthy environment.
The Bill extends all elements of the FHA program, including ancillary benefits contained in
Part 2, Division 8, Subdivisions A and B, to recipients with net farm assets up to $5.0
million. In particular, FHA recipients are granted automatic access to a Health Care Card
1 CESCR, General Comment No 19 (2008), paragraph 2.
2 CESCR, General Comment No 12 (1999), paragraphs 8 and 13.
3 CESCR, General Comment No 14 (2000), paragraph 4.
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(under Part 5 of the Bill that applies the social security law to FHA); and, subject to
eligibility criteria, other applicable mainstream social assistance measures.
The Health Care Card assists FHA recipients with certain health costs by allowing access to
specific services at a concessional rate.
The Bill acts to extend all applicable social assistance measures, including the Health Care
Card, to FHA recipients with net farm assets up to $5 million. In doing so, the Bill promotes
the right to health.
Summary
The Bill engages and promotes the right to health in Article 12(1) of the ICESCR.
Right to work
Article 6 of the ICESCR protects the right to work. Article 6(2) provides that, to achieve the
full realisation of this right, States should take steps to include "technical and vocational
guidance and training programmes, policies and techniques to achieve steady economic,
social and cultural development and full and productive employment under conditions
safeguarding fundamental political and economic freedoms to the individual".
The Bill seeks to permanently broaden access to the FHA program. While receiving payment,
FHA recipients are able to access an Activity Supplement to undertake agreed training and
assessment activities as prescribed in their Financial Improvement Agreement. By making the
program available to farmers and farmers' partners with net farm assets up to $5.0 million on
an ongoing basis, the Bill will provide opportunities for a greater number of farmers and their
partners to access the Activity Supplement for the purpose of increasing their technical and
vocational training skills. Indirectly, engaging in technical and vocational training will
support recipients to increase their access to work. As a result, the Bill engages and promotes
the right to work contained in Article 6 of the ICESCR.
Summary
The Bill engages and promotes the right to work in Article 6 of the ICESCR.
Conclusion
The Bill is compatible with human rights because, wherever it engages a right recognised
under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the provision seeks
to promote that right. The Bill contains no limitations on any right recognised in that Act.
(Circulated by authority of the Minister for Agriculture,
Senator the Hon. Bridget McKenzie)
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NOTES ON AMENDMENTS
Preliminary
Clause 1 Short Title
Clause 1 provides for the short title of the Act to be the Farm Household Support Amendment
Act 2019.
Clause 2 Commencement
Clause 2 provides for the commencement of each provision in the Bill, as set out in the table.
Clause 3 Schedules
Clause 3 provides that legislation that is specified in a Schedule to the Bill is amended or
repealed as set out in the applicable items in the Schedule concerned, and any other item in a
Schedule to the Bill has effect according to its terms.
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Schedule 1--Amendments
Overview
Schedule 1 of the Bill operates to amend the Farm Household Support Act 2014, by
maintaining the farm assets value limit at $5.0 million and ensuring allowable deductions are
applied against the relevant income type for those deductions.
The intention of the Bill is to ensure that farmers and their partners with net farm assets up to
$5.0 million can apply for the Farm Household Allowance program, and recipients can claim
deductions against the relevant income type for those deductions.
Farm Household Support Act 2014
Item 1 Section 34
This item repeals section 34 of the Farm Household Support Act 2014, and substitutes a new
section providing that Farm Household Allowance is not payable to a person if their farm
assets exceeds $5.0 million.
There is no provision for the farm assets value limit to be indexed.
Item 2 Section 67
This item repeals section 67 of the Farm Household Support Act 2014 and substitutes a new
section providing that Farm Household Allowance recipients can claim allowable deductions
against relevant income types - on-farm (income earned by the person from the farm
enterprise) or off-farm (a person's ordinary income from a business that is not wholly or
partly a farm enterprise) - up to the value of the income earned in each category. Subsection
67(2) applies to allowable deductions relating to on-farm income; subsection 67(4) applies to
allowable deductions relating to off-farm income.
The new subsection 67(5) provides that allowable deductions may be prescribed in Minister's
rules made under the Farm Household Support Act 2014, including any circumstances where
subsections 67(2) and/or (4) do not apply.
In effect, subsections 67(2) and (4) ensure that allowable deductions prescribed in Minister's
Rules made under the Farm Household Support Act 2014 are applied against their income
type. That is, allowable deductions on-farm are applied against income earned from the
recipient's farm enterprise, while allowable deductions off-farm are applied against ordinary
income earned by the recipient from those off-farm sources.
Additionally, subsections 67(2) and (4) prescribe that the maximum amount of allowable
deductions that a Farm Household Allowance recipient can claim either on-farm or off-farm,
cannot exceed the amounts of income they earned in each category.
For example, Matt owns Mira farm and earns income from his farm enterprise as well as
ordinary income from personal investments and by working part time as a piano teacher. In
the 2019-20 financial year, Matt's farm enterprise will turnover $25,000, and he will have on-
farm allowable deductions of $10,000. Also in 2019-20, he will earn $1,000 from his other
investments, and $8,000 in from teaching piano, but will have allowable deductions of $9,000
relating to the piano teaching.
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Applying section 67, Matt can claim the full $10,000 of his allowable deductions relating to
his farm enterprise against the $25,000 of the farm enterprise's earnings (or on-farm income).
This is because the farm enterprise income, against which his on-farm allowable deductions
can be claimed, is greater than the total value of his allowable deductions relating to his farm
enterprise for that financial year. This means the $15,000 profit affects his rate of Farm
Household Allowance.
In relation to his piano teaching business, Matt's allowable deductions from a business other
from a farm enterprise exceeds the ordinary income he earned from that business (off-farm
income). As section 67 provides that the maximum amount of allowable deductions
claimable relating to off-farm income cannot be more than the amount of off-farm income he
earned, Matt can claim up to $8,000 in allowable deductions against his ordinary income.
This mean his off-farm business income is zero for social security purposes.
The gross amount from his investments are applied, and no deductions are available to that
income.
Matt's income for the financial year is the sum of the $15,000 on-farm and $1,000 off-farm
investment income (that is, $16,000).
Item 3 Section 95 (table items 3 and 5)
This item repeals items 3 and 5 of section 95.
Item 4 Transitional provision
This item provides a transitional provision between 1 July 2019 and the day prior to
commencement of Schedule 1 of the Farm Household Support Amendment Act 2019 (the
transitional period).
This item ensures that where a person makes a claim for Farm Household Allowance during
the transitional period, and the person's farm assets exceed $2.685 million, the farm assets
value limit of $5.0 million is retrospectively applied to their claim.
Item 5 Application provision
This item provides that the amendments to section 67 of the Farm Household Support Act
2014 apply from the 2019-20 financial year onwards.
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