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2019-2020-2021
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FARM HOUSEHOLD SUPPORT AMENDMENT (DEBT WAIVER) BILL 2021
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Agriculture, Drought and Emergency
Management, the Hon. David Littleproud MP)
FARM HOUSEHOLD SUPPORT AMENDMENT (DEBT WAIVER) BILL 2021
GENERAL OUTLINE
The Farm Household Support Amendment (Debt Waiver) Bill 2021 (the Bill) would waive the
repayment of certain classes of debts in relation to the Farm Household Allowance (FHA)
program through amendments to the Farm Household Support Act 2014 (the FHS Act).
The FHA program provides time-limited, means-tested income support to farmers and their
partners experiencing financial hardship. Farmers are eligible for the FHA for a maximum of
4 years (recorded as a 1,460 day clock) in every 10 year period (beginning 1 July 2014). The days
do not need to be consecutive and can be taken only if, and when needed.
Previously, FHA recipients' income estimate was reconciled annually through a process
called business income reconciliation (BIR). The FHS Act provided that the rate of FHA was
determined on the basis of an estimate by a person and their partner of their farm's income up
to 12 months in advance. This estimate was reconciled against actual income at the end of the
next financial year. A new determination of the person's rate of FHA was then made based on
the farm's actual income. If the new determination reduced the rate of FHA payable for a
period during which the farmer had already received FHA, resulting in an overpayment of
FHA, there would be a debt to the Commonwealth of that amount.
The BIR determined whether a recipient received a 'top up' payment, no adjustment or
incurred a debt. The BIR was removed from the FHS Act with effect from 1 July 2020 as part
of a process to simplify the FHA following a 2018 independent review. While the BIR was
removed in 2020, some FHA recipients incurred debts from this process between 1 July 2015
and 30 June 2020 or have not yet been assessed.
The Bill would permanently waive the repayment of certain classes of debts for FHA
recipients arising from the BIR process for FHA payments between 1 July 2015 and 30 June
2020. The Bill would assist farmers suffering financial hardship and eliminate the negative
effects of the BIR process. To enhance fairness it would ensure that an FHA recipient who
already has a BIR debt does not also receive the double benefit of having their clock re-
credited if they choose to have their debt waived.
Under the current system if an FHA recipient incurred a debt that covered a full day's
payment, that day was no longer counted as 'paid' and the clock was re-credited. For
example, a person who had been paid 260 days of FHA would have had their clock reduced to
1,200 days. If 100 of those days were raised as a debt, the clock would have been re-credited
resulting in 1,300 days of payment remaining. The re-crediting of days occurred on the basis
that the debt is recoverable, and would be repaid. Under this Bill an individual would not
receive the double benefit of having their debt repayment waived and their clock re-credited.
In the example above an individual who had their 100 day debt waived would not have those
days re-credited and would have 1,200 days of payment remaining.
Under the Bill the Secretary would not be able to waive a BIR debt where a debt had already
been raised, the FHA recipient had been re-credited days, and had subsequently used all of
their 1,460 days of payment. The FHA recipient would remain liable for the whole debt. This
is because if the debt was waived it would amount to the recipient having spent more than the
allowed 1,460 days on payment and would result in the creation of a further debt. The impact
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of this provision is limited to a portion of the 2,300 BIR debts that have already been raised
where the person has already accessed four years of payment.
The Bill also provides a method for determining how many days an FHA recipient is eligible
to have waived, where they have been re-credited days but have not spent more than 1,460
days on payment. The Secretary would be able to waive a portion of a BIR debt where an
FHA recipient still had days on the clock left to trade. Where a recipient's BIR debt is more
than the days they have left to trade, they could choose to trade the days they have as partial
payment for the debt and pay the outstanding part. For example, if an FHA recipient's debt
relates to a payment of 25 days and they have 5 days left on the clock, the amount of debt that
relates to 5 days is available to be waived. The 20 days of debt would remain outstanding to
be paid.
FHA recipients with days to trade would have the choice of whether to accept the waiver. It is
possible that some recipients would regard having days of FHA left to draw down in the
future as more meaningful to them than the waiver. The Secretary would not waive a debt in
these cases unless instructed to do so by the FHA recipient.
Under the current system a re-credit of days does not occur where a BIR debt covers part of a
day. For example, a person may have received $45 as the maximum amount payable for a
day. Where the rate for that person on that day was later determined through BIR to be $25
(as there was income that should have been taken into account), meaning $20 was overpaid,
this would be raised as a debt. However, because $25 was still payable on that day, no
adjustment would be made to the clock. The Bill would not change this.
The Bill would also provide an end date of 30 June 2023 for FHA recipients to supply their
full financial statements for the BIR process. Any FHA recipients who do not provide this
information would have their payment for the full financial year raised as a debt. The end date
of 30 June 2023 provides sufficient time for FHA recipients to comply with their obligation
and provides a definitive end to the BIR process. However, the Bill allows these new debts to
be waived, thus allowing closure of the BIR system as no transactions will remain
outstanding.
BIR debts for the 2014-15 financial year were previously waived through a legislative
instrument in 2016 (F2016L00689) and would not be affected by these amendments.
Consultation occurred with appropriate Commonwealth agencies, including Services
Australia.
FINANCIAL IMPACT STATEMENT
The measures in the Bill are expected to have a financial impact of approximately
$14.7 million to the underlying cash balance through to 30 June 2024. The total financial
impact to the fiscal balance until 30 June 2024 is $65.6 million. This figure includes
$51.0 million in foregone revenue of debts that would otherwise have been repaid.
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STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
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.
The full statement of compatibility with human rights is attached to this explanatory
memorandum.
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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 (Debt
Waiver) Amendment Act 2021.
Clause 2 Commencement
Clause 2 provides for the commencement of each provision in the Act, as set out in the table.
Item 1 in the table provides that the whole of the Act would commence on the day after
the Act receives the Royal Assent.
Subclause 2(2) provides that any information in column 3 of the table is not part of the Act. It
also clarifies that information may be inserted in column 3 of the table, or information in it
may be edited, in any published version of the Act.
Clause 3 Schedules
Clause 3 provides that legislation that is specified in a Schedule to the Act is amended or
repealed as set out in the applicable items in the Schedule concerned, and any other item in a
Schedule has effect according to its terms. This is a technical provision to give operational
effect to the amendments contained in the Schedules.
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Schedule 1--Amendments
Overview
1. Schedule 1 to the Bill amends the Farm Household Support Act 2014 (FHS Act) to
permanently waive the repayment of certain classes of debts for farm household
allowance (FHA) recipients arising from the business income reconciliation (BIR)
process for FHA payments for days between 1 July 2015 and 30 June 2020. It would also
ensure that a recipient's clock is not re-credited if their debt is waived.
Farm Household Support Act 2014
Item 1 At the end of subsection 6(1A)
2. Item 1 inserts a note at the end of subsection 6(1A) to alert the reader to section 102A,
which deals with the waiver of certain debts and treats FHA as being payable to a person
on certain days.
Item 2 After section 102
3. Item 2 inserts a new clause 102A after section 102 of the FHS Act.
Debts arising before commencement
4. Subclauses 102A(1) to 102A(4) establishes the power of the Secretary to give a debt
waiver where the debt was raised prior to the commencement of this Bill.
5. Subclause 102A(1) establishes that if an FHA recipient has already had a debt raised for
the payment of FHA in the period 1 June 2015 to 30 June 2020 under the old section 70
(as in force immediately before 1 July 2020), or a debt was due to the Commonwealth
under the old paragraph 69(1)(b) (as in force immediately before 1 July 2020) before the
commencement of this Bill, then the Secretary may, on behalf of the Commonwealth,
waive the Commonwealth's right to recover the whole or a part of the debt.
6. Before the BIR was repealed with effect from 1 July 2020, section 69 provided that the
rate of FHA could be reassessed where the Secretary subsequently considered that new
information about the person's amount of business income was available, and the
person's actual business income differed from the estimate on which the rate was
originally based. This allowed for reconciliation of the FHA's recipient's actual income
and this may result in a debt, no change or a top up payment being owed.
7. The old section 70 of the FHS Act also provided for a BIR debt to arise where a person
has not complied with a notice under s 68 or 69 of the Social Security (Administration)
Act 1999. That is, where an FHA recipient failed to provide the relevant financial
information, the entire payment for the financial year was raised as a debt known as a
non-lodger debt.
8. Subclause 102A(2) operates to allow the Secretary to give a waiver only if the FHA
recipient has not exhausted their allocation of 1,460 days in the ten year period beginning
on 1 July 2014. This means that FHA recipients need to have days remaining on their
clock to be eligible for the waiver. An FHA recipient, in effect, would trade days
remaining on the clock for the debt waiver. Otherwise, the FHA recipient would have
both the benefit of the re-credited days and the benefit of a waiver of the debt those days
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relate to. For example, a person who received 1,460 days on payment but had a debt
raised of 60 days would have had those 60 days re-credited. If they subsequently used
those 60 days and had their debt waived, they would have received 1,520 days on
payment. If a person has no days remaining to trade, they cannot have their debt waived.
Subclause 102A(2) gives effect to the policy intention that FHA is only payable for 1,460
days in a ten year period.
9. Subclause 102A(3) requires the Secretary to ensure that an eligible FHA recipient's debt
waiver must not allow the recipient to exceed their allocation of 1,460 days. This means
that if an FHA recipient has 5 days remaining on the clock, but has a debt that is the
equivalent of 10 days, they may receive a debt waiver for 5 days. This gives effect to the
policy intention that FHA is only payable for 1,460 days in a ten year period. If a
recipient has days on the clock, they are able to choose whether to access the waiver and
have their debt waived, or keep the debt active, and also keep the re-credited days.
10. Subclause 102A(4) provides the method statement by which the Secretary determines the
number of days an FHA recipient is eligible to have waived.
11. The first step is to determine the dollar amount of the existing debt that an FHA recipient
is eligible to have waived within the rules of subclauses 102A(2) and (3). The second step
is to divide that amount by the nominated daily rate of $45, the result of which is then to
be rounded down to the nearest whole in step three. This would result in the number of
days an FHA recipient would have available to trade as part of the debt waiver process.
12. Rounding down ensures that the FHA recipient receives the most beneficial calculation of
days. For example, if a person has a debt of $85, this would be divided by 45 resulting in
1.9 and rounded down to 1 day. This means the person only has to trade 1 day for almost
2 days of payment.
13. As a person can only trade days where it would not result in them receiving more than
1,460 days on payment, the method statement may result in only a partial waiver being
given. The residual debt would still need to be repaid. For example, an FHA recipient has
a debt of $1,200. When divided by $45 the debt equates to 26.6 days. Using the rounding
at Step 3, the person could offer to trade 26 days to have the whole amount waived. The
person has 10 days FHA remaining and this equates to $450. If the person chose to trade
all of their days, $450 would be waived and they would have $750 left to pay.
14. Subclause 102A(5) establishes the power of the Secretary to give a debt waiver where an
FHA recipient raised a debt on part of an amount of FHA and this debt became due prior
to the commencement of this Bill (i.e. a part day pre-commencement debt). In this
circumstance, the Secretary may, on behalf of the Commonwealth, waive the
Commonwealth's right to recover the whole or a part of the debt (whether or not the debt
has already been recovered in whole or in part).
15. For clarity, a day 'payable' is any day where any payment was made. For example, if the
maximum payable for a day was $45 and a debt was raised for $15 for the day, $30 was
still paid. No change to the clock would occur because some payment was made.
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Debts arising after commencement
16. Subclauses 102A(6) and 102A(7) establish the power and operation of the debt waiver
where the debt was raised after the commencement of this Bill. There are a number of
BIR transactions outstanding.
17. Subclause 102A(6) provides a debt waiver where an FHA recipient has a debt raised as a
result of the old section 70, and the debt becomes due on or after the commencement of
this Bill. This occurs where an FHA recipient does not supply their full financial
statements and therefore incurs a debt referred to as a 'non-lodger debt'. In these cases,
payment for the entire financial year is raised as a debt. In this circumstance, the amount
of the debt is taken to have been waived and the recipient's clock is managed so that no
extra days are ultimately credited.
18. Subclause 102A(7) provides a debt waiver where an FHA recipient has a debt raised on
or after the commencement of this Bill as a result of a determination under the old
paragraph 69(1)(b) which covered the BIR process. In this circumstance, the amount of
the debt is taken to have been waived and the recipient's clock is managed so that no
extra days are ultimately credited. As the raising of the debt and the waiver will be
applied on the same day the clock adjustment will have no practical effect on the FHA
recipient.
19. Subclause 102A(8) establishes the power of the Secretary to give a debt waiver where an
FHA recipient has a debt raised for part of an amount of FHA and the debt was raised on
or after the commencement of this Bill (ie a part-day debt). In this circumstance, the
amount of that debt is taken to have been waived. Part-day payments of FHA do not
affect the clock and therefore there is no need to re-credit days if a waiver is given.
No limit on other waiver provisions
20. Subclause 102A(9) is a technical clause providing that clause 102A does not limit the
application of Chapter 5 of the Social Security Act in connection with debts arising in
relation to payments of FHA, and rules made under section 92 of the FHA Act to the
extent those rules modify that Chapter. For example, clause 102A does not limit the 2016
instrument effecting waivers for the 2014-15 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 (Debt Waiver) Bill 2021
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 Allowance (FHA) program provides time-limited, means-tested income
support to farmers and their partners experiencing financial hardship. Farmers are eligible for the
FHA for 4 years (recorded as a 1,460 day clock) in every 10 year period (beginning 1 July 2014).
Previously, FHA recipients' income estimate was reconciled annually through a process called
business income reconciliation (BIR). The BIR determined whether a recipient received a 'top up'
payment, no adjustment or incurred a debt. If an individual incurred an FHA debt for a full day's
payment, the clock was re-credited before any repayment was made. For example, if a person had
a debt raised for 30 days of payment this in effect means those days were not payable and would
have 30 days added back to their clock. While the BIR was removed in 2020, some FHA
recipients incurred debts from this process between 1 July 2015 and 30 June 2020 or have not yet
completed the BIR process for that period and may incur a debt.
The Bill would permanently waive the repayment of certain classes of debts for FHA recipients
arising from the BIR process for FHA payments between 1 July 2015 and 30 June 2020. It would
also ensure that a recipient's clock is not re-credited if they choose to have their debt waived. This
includes the refund of debts already paid in full or in part.
In practice, this would mean that where the Secretary waives a debt relating to the payment of
FHA, the number of days for which FHA may be payable to the recipient would be reduced by a
corresponding amount. In other words, where a person's debt relates to the payment of 25 days of
FHA, the waiver of this debt would reduce the number of days on the recipient's clock by 25
days. This ensures that the waiver of debt does not result in a person receiving both the benefit of
a waiver and the benefit of re-credited days which could result in them receiving more than the
maximum 1,460 days for which they are eligible.
The Bill would assist farmers suffering financial hardship and eliminate the negative effects of the
BIR process.
Human rights implications
The Bill may engage the following rights under the International Covenant on Economic,
Social and Cultural Rights (ICESCR):
Article 11(1) - right to an adequate standard of living
Article 6 - right to work
Right to an adequate standard of living
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 UN Committee on
Economic, Social and Cultural Rights has stated that the core content of the right to adequate
food implies both the availability and (economic and physical) accessibility of food.
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The livelihood of FHA recipients is subject to a range of factors beyond their control
including natural disasters such as bushfires, flooding and drought. The Bill seeks to support
the livelihood of FHA recipients experiencing financial hardship by waiving debts related to
the BIR process for the period 1 July 2015 to 30 June 2020. The BIR process was removed
from legislation in 2020 following an independent review of the FHA which found it was
overly complex and confusing. Waiving BIR debts reduces uncertainty for farmers in
hardship who may not yet have completed the BIR process for this period and may incur
debts for those financial years. It also provides financial assistance to FHA recipients who
have had a debt raised for this period and would no longer have to repay that debt, including
repayment of debts already paid in full or in part
To the extent that the Bill reduces uncertainty and supports the livelihood of FHA recipients,
the Bill may promote the right to an adequate standard of living in Article 11(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".
While this right does not amount to an obligation to protect particular industries, Australian
farmers have endured particular hardship in recent years from a range of factors beyond their
control such as flooding and drought. The Bill promotes the right to work by supporting the
agricultural and farming industry and removing the risk of an unanticipated debt, alleviating
this financial stress and allowing farmers to focus their efforts on the recovery process.
To the extent the Bill supports FHA recipients to achieve steady economic development and
recovery and continue to participate in the agricultural and farming industries, the Bill may
be seen to promote the right to work in Article 6 of the ICESCR.
Conclusion
The Bill is compatible with human rights because it promotes the rights in Articles 6 and 11
of the ICESCR.
The Hon. David Littleproud MP
Minister for Agriculture, Drought and Emergency Management
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