Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
APPROPRIATION BILL (NO. 2) 2011-2012
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Finance and Deregulation,
Senator the Honourable Penny Wong)
Table of Acronyms and Defined Terms
AOFM The Australian Office of Financial Management
AFM Advance to the Finance Minister
AI Act Acts Interpretation Act 1901
CAC Act Commonwealth Authorities and Companies Act
1997
CIS Act Commonwealth Inscribed Stock Act 1911
CGS Commonwealth Government Securities
CRF Consolidated Revenue Fund
FMA Act Financial Management and Accountability Act 1997
FMA Regulations Financial Management and Accountability
Regulations 1997
GST Goods and Services Tax
LI Act Legislative Instruments Act 2003
PB Statements Portfolio Budget Statements
House of Representatives page 1 Appropriation Bill (No. 2) 2011-2012
Outline
Appropriation Bill (No. 2) 2011-2012
General Outline
1 This explanatory memorandum accompanies Appropriation Bill (No. 2)
2011-2012 (the Bill).
2 The main purposes of the Bill are to propose appropriations from the
Consolidated Revenue Fund (CRF) for services that are not the ordinary annual
services of the Government and amend the Commonwealth Inscribed Stock Act
1911 (`the CIS Act') to increase the limit on the face value of stock and
securities that can be on issue under the Treasurer's standing borrowing
authority.
3 Appropriations for the ordinary annual services of the Government must
be contained in a separate Bill from other appropriations in accordance with
sections 53 and 54 of the Australian Constitution. Consequently, the Bill
proposes appropriations that are not for the ordinary annual services of the
Government. Annual appropriations that are for the ordinary annual services of
the Government are proposed in Appropriation Bill (No. 1) 2011-2012. Other
annual appropriations that are not for the ordinary annual services of the
Government are proposed in Appropriation (Parliamentary Departments) Bill
(No. 1) 2011-2012.
4 This Explanatory Memorandum should be read in conjunction with the
2011-2012 Portfolio Budget Statements (PB Statements) which contain details
of the appropriations set out in Schedule 2 of the Bill. The PB Statements are
published and tabled in the Parliament in relation to the Bill.
5 In addition to increasing the limit on the face value of stock and securities
that can be on issue, the Bill amends the CIS Act to:
· repeal the `special circumstances' provision in section 5A, to establish a
single limit on the total face value of stock and securities on issue; and
· create two special appropriations for the costs and expenses incurred by
the Commonwealth in relation to the issue or sale of stock and the costs
and expenses incurred by the Commonwealth in relation to managing
stock sold or issued; and the costs and expenses incurred by the
Commonwealth in repurchasing or redeeming stock prior to maturity.
House of Representatives page 2 Appropriation Bill (No. 2) 2011-2012
Outline
Structure of appropriations in the Bill
6 The Bill provides for the appropriation of specified amounts for
expenditure by Australian Government agencies (primarily being agencies
under the Financial Management and Accountability Act 1997 (FMA Act)
plus payments to bodies under the Commonwealth Authorities and Companies
Act 1997 (CAC Act bodies).
7 Part 1 of the Bill deals with definitions, the interpretative role of the PB
Statements and the concept of notional payments.
8 Part 2 of the Bill proposes appropriations to make payments of the
amounts in Schedule 2 for State, ACT, NT and local government items
(clause 7), administered items (clause 8), administered assets and liabilities
items (clause 9), other departmental items (clause 10) and CAC Act body
payment items (clause 11).
9 Part 3 of the Bill specifies the ways in which the amounts in Schedule 2
may be adjusted.
10 Part 4 deals with the general drawing rights limits applicable for the
current year (current year is defined in clause 3 of the Bill) to the Building
Australia Fund, Education Investment Fund and the Health and Hospitals Fund
established by the Nation Building Funds Act 2008. This Part also deals with
the general drawing rights limits, for the current year, for the purposes of
section 9 and section 16 of the Federal Financial Relations Act 2009, which is
detailed under the subheadings "General purpose financial assistance" and
"National partnership payments". Part 4 also deals with adjustments to the
general drawing rights limit for the Goods and Services Tax (GST).
11 Part 5 of the Bill deals with amendments to the CIS Act.
Part 6 deals with the contingency for the Department of Human Services
(clause 20), credits to Special Accounts (clause 21), the conditions that apply to
payments of State, ACT, NT and local government items (clause 22) and
provides for amounts to be appropriated as necessary (clause 23). Clause 21
recognises that the appropriations proposed in the Bill may also be varied by
the FMA Act.
Financial Impact
12 The Bill will appropriate the amounts specified in Schedule 2.
House of Representatives page 3 Appropriation Bill (No. 2) 2011-2012
Outline
13 In relation to the amounts for Department of Human Services in
Schedule 2, clause 18 provides that if the Human Services Legislation
Amendment Act 2011 has not commenced on or before 1 July 2011, then the
Department of Human Services items in Schedule 2 are replaced by the items
set out in Schedule 3 for the Department of Human Services, Centrelink and
Medicare Australia.
14 The amendments proposed to the CIS Act relate exclusively to the
Government's own borrowing and do not impose regulations on business.
House of Representatives page 4 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
Notes on clauses
Part 1--Preliminary
Clause 1--Short title
1 This clause specifies that the short title of the Bill, once enacted, will be
Appropriation Act (No. 2) 2010-2011.
Clause 2--Commencement
2 Clause 2 provides for the Bill to commence as an Act on the day of the
Royal Assent.
Clause 3--Definitions
3 Clause 3 defines the key terms used in the Bill, such as "administered
item", "GST qualifying amount", "other departmental item", "current year",
and "State, ACT, NT and local government items".
Clause 4--Portfolio Budget Statements
4 Clause 4 declares that the PB Statements are extrinsic material under
paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act) that may be
used to ascertain the meaning of certain provisions in accordance with
subsection 15AB(1) of the AI Act. The purpose of the PB Statements is to
provide information on the proposed allocation of resources to Government
outcomes by agencies within each portfolio. The PB Statements provide
information to enable Parliament to understand the purpose of appropriations
proposed in the Bill. The term "PB Statements" is defined in the Bill, at
clause 3, to mean the Portfolio Budget Statements.
Clause 5--Notional payments, receipts etc.
5 Clause 5 ensures that payments between agencies result in a debit from
the appropriation for the paying agency. For example, the payments of the
amounts in Schedule 2 from one FMA Act agency to another do not require, in
a constitutional sense, an appropriation, because both agencies operate within
the CRF. However, for reasons of financial discipline and transparency, the
practice has arisen for these payments between agencies to be treated as though
they required an appropriation, and to debit an appropriation when such
notional payments are made.
House of Representatives page 5 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
6 Clause 5 provides that notional transactions between agencies are to be
treated as if they were real transactions. Notional transactions, therefore, require
the use of a drawing right and the debiting of an appropriation made by
Parliament. When an FMA Act agency makes a payment, whether to another
FMA Act agency or another part of the same agency (such as a different
"business unit" within the agency), it is to be treated as a "real" payment. This
means that the appropriation made by Parliament is extinguished by the amount
of the notional payment, even though no payment is actually made from the
CRF. Similarly, a notional receipt in such a situation is to be treated by the
receiving agency (where relevant) as if it were a real receipt. This does not
mean every internal transfer of public money involves a notional payment and
receipt. As explained in Regulation 19 of the Financial Management and
Accountability Regulations 1997 (FMA Regulations), some transfers of public
money from one official account to another do not involve a notional payment
or debiting an appropriation.
Part 2--Appropriation items
Clause 6--Summary of appropriations
7 Clause 6 sets out the total of the appropriations in Schedule 2 of the Bill.
Importantly, the amounts in Schedule 2 may be adjusted under the provisions in
Part 3 of the Bill. In particular:
· State, ACT, NT and local government items and administered items may
be reduced in accordance with clause 12;
· Administered assets and liabilities items and other departmental items
may be reduced in accordance with clause 13;
· CAC Act body payment items may be reduced in accordance with
clause 14; and
· items may be increased by a determination under clause 15 (Advance to
the Finance Minister).
8 The amounts in Schedule 2 of the Bill may be adjusted further in
accordance with sections 30, 30A, 31 and 32 of the FMA Act. Specifically:
· Section 30 allows an agency to re-credit, to an appropriation that had been
relied upon for an initial payment by the agency, an amount equivalent to
the repayment. The re-crediting, or reinstatement, authorised by
section 30, can result in the total amount paid from the CRF in gross
House of Representatives page 6 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
terms exceeding the amount specified in an item. Section 30 also applies
to notional transactions between and within agencies.
· Appropriations may be adjusted by amounts recovered by an agency from
the Australian Taxation Office for Goods and Services Tax (GST),
in accordance with section 30A of the FMA Act. The amounts specified
in Schedule 2 exclude recoverable GST. The appropriations shown
represent the net amount that Parliament is asked to allocate to particular
purposes. Section 30A has the effect of increasing an appropriation by the
amount of the GST qualifying amount arising from payments in respect of
the appropriation. As a result, there is sufficient appropriation for
payments under an appropriation item, provided that the amount of those
payments, less the amount of recoverable GST, can be met from the
initial amount shown against the item in Schedule 2. Section 30A also
applies to notional transactions between and within agencies.
· Departmental items may be increased to take into account certain other
amounts received by an agency, if those receipts are prescribed by the
FMA Regulations, in accordance with section 31 of the FMA Act. For
example, FMA Regulation 15 prescribes amounts that offset costs in
relation to the activities of an agency and amounts that relate to an
employee's leave (including amounts received under the paid parental
leave scheme that was established on 1 January 2011). FMA
Regulation 15 also establishes a mechanism for agencies to hold money in
a trust or similar arrangement as departmental.
· Items may be adjusted to take into account the transfer of functions
between agencies, in accordance with section 32 of the FMA Act. It is
possible that adjustments under section 32 may result in new items and/or
outcomes being created in an Appropriation Act. It might also result in
amounts being transferred between Appropriation Acts.
Clause 7-- State, ACT, NT and local government items
9 Clause 7 provides administered appropriations for financial assistance to
the States, ACT, NT and local governments. State, ACT, NT and local
government items are appropriated separately for outcomes, making it clear
what the funding is intended to achieve. The amount specified in Schedule 2 for
an outcome may be applied by an agency for the purpose of making payments
to any of the States, ACT, NT or local government authorities for the purpose
of achieving that outcome.
House of Representatives page 7 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
10 Clauses 7 and 22 delegate Parliament's power under section 96 of the
Constitution to impose terms and conditions on payments of financial assistance
to the States to the responsible Ministers listed in Schedule 1 of the Bill.
Schedule 1 also lists the Ministers who may determine the amounts and timing
of those payments. There is a process in clause 12 for dealing with State, ACT,
NT and local government items that are not fully expensed or spent during the
year. New administered outcomes are those administered by an agency on
behalf of the government (e.g. certain grants, benefits and transfer payments).
These payments are usually made pursuant to eligibility rules and conditions
established by the government or Parliament. Specifically, the Finance Minister
manages payments to State, ACT, NT and local governments through the
issuing of drawing rights in accordance with sections 26 and 27 of the
FMA Act. Drawing rights control who may spend money from appropriations,
and allow for conditions and limits to be set by the Finance Minister (or the
Finance Minister's delegate) in relation to those activities.
Clause 8--Administered items
11 Subclause 8(1) provides for the appropriation of new administered
outcome amounts to be applied by an agency for the purpose of contributing to
the outcome for an agency. An administered item is defined in clause 3 to be an
amount set out in Schedule 2 opposite an outcome for an agency under the
heading "New Administered Outcomes". As with administered items in
Appropriation Bill (No. 1) 2011-2012, New Administered Outcomes are
appropriated separately for outcomes (i.e. unlike departmental items, the split
across outcomes is not notional), making it clear what the funding is intended to
achieve. Schedule 2 specifies how much can be expended on each outcome.
New Administered Outcomes are proposed when:
· an agency seeks administered operating appropriations for the first time
(including existing agencies that have received departmental operating
appropriations in the past);
· annual administered operating appropriations are proposed for the first
time, for programs previously funded by special appropriations; and
· an agency's outcomes are changed to reflect new program objectives,
strategies and/or activities.
12 The purposes for which each administered item can be spent are set out in
subclause 8(2). Subclause 8(2) provides that where the PB Statements indicate a
particular activity is in respect of a particular outcome, then expenditure on that
activity is taken to be expenditure for the purpose of contributing to achieving
House of Representatives page 8 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
that outcome. The outcomes are not, however, necessarily tied to the existence
of a particular agency (e.g. abolishing a department will not affect the valid
operation of an appropriation for an administered item for an outcome of that
department, because the purpose of the appropriation does not depend on the
existence of the department).
13 New administered outcomes are those administered by an agency on
behalf of the Government (e.g. certain grants, benefits and transfer payments).
These payments are usually made pursuant to eligibility rules and conditions
established by the Government or the Parliament. Specifically:
· administered items are tied to outcomes (departmental items are not);
· administered items must be spent in accordance with rules and conditions
established by the Government or the Parliament; and
· there is a process in clause 12 for dealing with administered items that are
not fully expensed or spent during the financial year.
14 The Finance Minister manages payments from administered items by
agencies through the issuing of drawing rights in accordance with sections 26
and 27 of the FMA Act. Drawing rights control who may spend money from
appropriations, and allow for conditions and limits to be set by the
Finance Minister (or the Finance Minister's delegate) in relation to those
activities.
Clause 9--Administered assets and liabilities items
15 Clause 9 provides amounts in Schedule 2 to acquire administered assets,
enhance existing administered assets and/or discharge administered liabilities
relating to activities administered by agencies on behalf of the Government.
Administered assets and liabilities appropriations are provided for functions
managed by an agency on behalf of the Government. Administered assets and
liabilities items can be applied for any outcomes of the agency in Schedule 2 of
this Bill, or Schedule 1 to Appropriation Bill (No. 1) 2011-2012.
16 Amounts appropriated for administered assets and liabilities items can be
subject to a reduction process in accordance with clause 13 of the Bill. Under
clause 13, the Minister responsible for an agency may make a written request to
ask the Finance Minister to make a determination to reduce an item of an
agency. If the Finance Minister is responsible for the agency,
the Chief Executive of the agency may make the request.
House of Representatives page 9 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
17 The Finance Minister manages payments from administered assets and
liabilities items by agencies through the issuing of drawing rights,
in accordance with sections 26 and 27 of the FMA Act. Drawing rights control
who may spend money from appropriations, and they allow for conditions and
limits to be set by the Finance Minister (or the Finance Minister's delegate) in
relation to those activities.
Clause 10--Other departmental items
18 Clause 10 appropriates departmental non-operating appropriations in the
form of equity injections and loans, over which the agency also exercises
control. This clause provides that the amount specified in other departmental
items for an agency may be applied for the departmental expenditure of the
agency. In short:
· equity injections" can be provided to agencies to, for example, enable
investment in assets to facilitate departmental activities and for
Designated Collecting Institutions to purchase heritage and cultural
assets; and
· "loans" can be provided to agencies when an investment in future
departmental activities is expected to result in a direct return such as an
efficiency saving (these are generally not formal loans established in
contracts).
19 Other departmental items are not expressed in terms of a particular
financial year and do not automatically lapse. Other departmental items are
available until they are spent. For example, equity injection appropriations
provide funding to meet the cost expected to be incurred in the Budget year to
acquire a new asset; however, for a number of reasons, some part of the
appropriation might not be required until a later financial year. Amounts
appropriated for other departmental items can be subject to a reduction process
in accordance with clause 13 of the Bill.
20 The Finance Minister manages the payment from other departmental
items by agencies through the issuing of drawing rights in accordance with
sections 26 and 27 of the FMA Act. Drawing rights control who may spend
from appropriations, and allow for conditions and limits to be set by the
Finance Minister (or the Finance Minister's delegate) in relation to those
activities.
House of Representatives page 10 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
Clause 11--CAC Act body payment items
21 Clause 11 provides for direct appropriations of money for CAC Act
bodies to be paid from the CRF by the relevant department. Clause 11 provides
that payments for CAC Act bodies must be used for the purposes of those
bodies.
22 A CAC Act body is defined in clause 3 to be a Commonwealth authority
or a Commonwealth company within the meaning of the CAC Act. Many
CAC Act bodies receive funding directly from appropriations. However, these
bodies are legally separate from the Commonwealth, and as a result, do not
debit appropriations or make payments from the CRF.
23 CAC Act body payments are initiated by requests to the relevant portfolio
agencies from the CAC Act bodies. The Finance Minister manages
appropriations for CAC Act bodies through the issuing of drawing rights in
accordance with sections 26 and 27 of the FMA Act. Drawing rights control
who may spend money from appropriations and allow for conditions and limits
to be set by the Finance Minister (or the Finance Minister's delegate) in relation
to those payments. CAC Act bodies hold the amounts paid to them on their own
account.
24 Subclause 11(2) provides that if a CAC Act body is subject to another Act
that requires amounts appropriated by Parliament for the purposes of that body
to be paid to the body, then the full amount of the CAC Act body payment must
be paid to the body. The purpose of subclause 11(2) is to clarify that subclause
11(1) is not intended to qualify any obligations in other legislation regulating a
CAC Act body, where that other legislation requires the Commonwealth to pay
the full amount appropriated for the purposes of the body.
25 The full amount of the CAC Act body payments specified in Schedule 2
may be reduced in accordance with clause 14. Subclause 14(6) provides that
subclause 11(2) does not prevent the CAC Act body payments in Schedule 2
being reduced.
26 In addition to the annual appropriations, some CAC Act bodies may also
receive public money from related entities such as a portfolio department and
from special appropriations managed by those departments. Many CAC Act
bodies also receive funds from external sources.
House of Representatives page 11 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
Part 3--Adjusting appropriation items
27 Part 3 of the Bill provides for reductions or increases to the amounts
specified in Schedule 2. The reduction provisions are contained in clauses 12
through 14 inclusive. The Advance to the Finance Minister provision that can
increase the amounts specified in Schedule 2 is contained in clause 15.
28 The reduction provisions were amended in the 2010-11 Budget Bills to
introduce additional mechanisms for initiating the reduction of unspent items.
The purpose of those changes was to increase the efficiency of the reduction
process particularly when surplus appropriations result from government
decisions.
Clause 12--Reducing State, ACT, NT and local government
items and administered items
29 Clause 12 provides for amounts of State, ACT, NT and local government
items and administered items which are not required at the end of the current
year to be extinguished. If the Government then decides that the amounts
should be spent in a later financial year, it must request Parliament to
appropriate these amounts in future Appropriation Bills.
30 Clause 12 limits the amount that may be applied for those items to the
amount reported in an agency's annual report. Subclause 12(1) provides that if
the amount published in the annual report is less than the amount of the item,
then the relevant item is taken to be reduced to the amount specified in the
annual report. The amount of the item specified in Schedule 2 of the Bill may
be increased or reduced by the other clauses of Part 3 of the Bill or in
accordance with sections 30, 30A and 32 of the FMA Act. The amount in the
annual report must therefore be compared with the amount for the item in
Schedule 2, together with any adjustments that have been made to that amount.
31 Subparagraph 12(2)(a)(i) retains a power for the Finance Minister to
make a written determination specifying that subclause 12(1) does not apply in
relation to the item. Subparagraph 12(2)(a)(ii) enables the Finance Minister to
determine that an amount published in the financial statements of an agency is
taken to be an amount specified in his or her determination. The power in
paragraph 12(2)(b) is to ensure that the amount published for the item can be
corrected if, for example, the amount is erroneous. Additionally, the power in
paragraph 12(2)(b) is to provide the Finance Minister with the capacity to make
a written determination in those cases where an agency has failed to specify a
required amount in its annual report. In those cases, the amount specified in the
House of Representatives page 12 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
determination as the required amount will be taken to be the required amount
for the purposes of subclause 12(1).
32 Subclause 12(3) provides that a determination made under subclause
12(2) is a legislative instrument.
33 Despite subsection 44(2) of the Legislative Instruments Act 2003 (LI Act),
which provides that instruments made under annual Appropriation Acts are not
subject to disallowance, subclause 12(3) provides that a determination reducing
a State, ACT, NT and local government items or an administered item is subject
to disallowance in accordance with section 42 of the LI Act. Parliament retains
the power to disallow a determination to reduce one or more of these items
because the determination will reduce the amount of an appropriation
authorised by Parliament. Subclause 12(3) also confirms subsection 54(2) of the
LI Act, which provides that instruments made under Appropriation Acts are not
subject to sunsetting.
Clause 13--Reducing administered assets and liabilities items
and other departmental items
34 Clause 13 provides a process for reducing administered assets and
liabilities items and other departmental items. Generally, these items remain
available until the appropriation is spent or reduced in accordance with
clause 13. This clause enables surplus departmental item appropriation amounts
to be reduced to promote the efficient, effective, economical and ethical
management of any surplus appropriations. Agencies should only spend all of
an administered assets and liabilities item or an other departmental item if there
are government decisions to support that expenditure. Examples of where
clause 13 may be appropriate to reduce an administered assets and liabilities
item or an other departmental item include:
· an excessive amount of appropriation was made in error;
· an amount is reclassified and appropriated again under another kind of
appropriation (e.g. where an amount appropriated as departmental is to be
reclassified as administered and a new administered appropriation is
provided). The existing departmental appropriation remains legally
available even though there is no Government authority to spend the
funds;
· efficiency savings result in a program costing less than expected; or
House of Representatives page 13 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
· a program is abolished under government policy before the appropriation
is expended.
35 Paragraph 13(1)(a) enables the Prime Minister, or a Minister acting on
behalf of the Prime Minister, to request the Finance Minister to reduce an
administered assets and liabilities item or an other departmental item for an
agency. Paragraph 13(1)(b) enables the Minister responsible for a particular
agency to request the Finance Minister to reduce an administered assets and
liabilities item or an other departmental item for an agency for which they are
responsible. Paragraph 13(1)(c) enables the Chief Executive of an agency for
which the Finance Minister is responsible, to request the Finance Minister to
reduce an administered assets and liabilities item or an other departmental item
for that agency. Subclause 13(6) assists readers by noting that a request under
subclause 13(1) is not a legislative instrument within the meaning of section 5
of the LI Act, on the basis that it is requesting a determination to be made and it
is the determination that has substantive effect.
36 Subclause 13(2) enables the Finance Minister to make a written
determination to reduce an administered assets and liabilities item or an other
departmental item. The Finance Minister is not obliged to act on a request to
reduce excess appropriations. However, if the Finance Minister does:
· the determination must be for the amount specified in the request:
subclause 13(2);
· the determination may not reduce the item below nil: subclause 13(3); and
· the item in Schedule 2 will be taken to be reduced in accordance with the
determination of the Finance Minister: subclause 13(4).
37 Subclause 13(7) provides that a determination made under
subclause 13(2) is a legislative instrument.
38 Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 13(7) provides that a determination reducing an administered assets
and liabilities item or other departmental item, is subject to disallowance in
accordance with section 42 of the LI Act. Parliament retains the power to
disallow a determination to reduce a departmental item because any such
determination will reduce the amount of an appropriation authorised by
Parliament. Subclause 13(7) also confirms subsection 54(2) of the LI Act,
which provides that instruments made under annual Appropriation Acts are not
subject to sunsetting.
House of Representatives page 14 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
39 Subclause 13(5) provides that a determination made under
subclause 13(2) once made, must not be rescinded, revoked, amended or varied.
Subclause 13(5) applies despite 33(3) of the AI Act. This subclause intends to
exclude the operation of 33(3) of the AI Act from determinations made under
subclause 13(2). The purpose of subclause 13(5) is to ensure that the
appropriation, if reduced under the clause, cannot be restored by means of a
later determination.
Clause 14--Reducing CAC Act body payment items
40 Clause 14 provides a similar process for reducing CAC Act body payment
items to the process for reducing administered assets and liabilities items and
other departmental items. Paragraph 14(1)(a) enables the Prime Minister, or a
Minister acting on behalf of the Prime Minister, to request that the Finance
Minister reduce a CAC Act body payment item for an agency. Paragraph
14(1)(b) enables the Minister responsible for a particular agency to request the
Finance Minister to reduce a CAC Act body payment item for a body for which
they are responsible. Paragraph 14(1)(c) enables the Secretary of the
Department of Finance and Deregulation to request the Finance Minister to
reduce a CAC Act body payment item for a body in the Finance and
Deregulation portfolio. Subclause 14(7) assists readers by noting that a request
under subclause 14(1) is not a legislative instrument within the meaning of
section 5 of the LI Act, on the basis that it is requesting a determination to be
made and it is the determination that has substantive effect.
41 Subclause 14(2) enables the Finance Minister to make a written
determination to reduce a CAC Act body payment item. The Finance Minister
is not obliged to act on a request to reduce an excess CAC Act body payment
item. However, if the Finance Minister does:
· the determination must be for the amount specified in the request:
subclause 14(2);
· the determination may not reduce the CAC Act body payment item below
nil: subclause 14(3); and
· the CAC Act body payment item in Schedule 2 will be taken to be
reduced in accordance with the determination of the Finance Minister:
subclause 14(4).
42 Subclause 14(6) provides that the full amount that is required to be paid to
a CAC Act body by subclause 11(2) of the Bill may be reduced in accordance
with this clause 14.
House of Representatives page 15 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
43 Subclause 14(8) provides that a determination made under
subclause 14(2) is a legislative instrument.
44 Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 14(8) provides that a determination reducing a CAC Act body
payment item is subject to disallowance in accordance with section 42 of the
LI Act. Parliament retains the power to disallow a determination to reduce a
CAC Act body payment item because any such determination will reduce the
amount of an appropriation authorised by Parliament. Subclause 14(8) also
confirms subsection 54(2) of the LI Act, which provides that instruments made
under annual Appropriation Acts are not subject to sunsetting.
45 Subclause 14(5) provides that a determination made under subclause
14(2) once made, must not be rescinded, revoked, amended or varied.
Subclause 14(5) applies despite 33(3) of the AI Act. This subclause intends to
exclude the operation of 33(3) of the AI Act from determinations made under
subclause 14(2). The purpose of subclause 14(5) is to ensure that the
appropriation, if reduced under the clause, cannot be restored by means of a
later determination.
Clause 15--Advance to the Finance Minister
46 Clause 15 enables the Finance Minister to provide additional
appropriations for items when satisfied there is an urgent need for that
expenditure, and the existing appropriation is inadequate. This additional
appropriation is referred to as the Advance to the Finance Minister (AFM).
Subclause 15(1) establishes the criteria about which the Finance Minister must
be satisfied before determining to add an amount to an item of an agency. The
Finance Minister will only consider issuing an amount under subclause 15(1) if
satisfied there is an urgent need for expenditure that is not provided for, or is
insufficiently provided for, in Schedule 2, because of an omission or
understatement, or because of unforeseen circumstances1. Generally, the other
appropriation adjustment options in Part 3 of the Bill or under sections 30, 30A
and 32 of the FMA Act must have been exhausted before the Finance Minister
will make a determination under subclause 15(2).
47 Subclause 15(2) enables the Finance Minister to make a determination to
add an amount from the AFM to an item in Schedule 2, to a new item not
already in Schedule 2, or to a new outcome.
1
Under the AFM guidelines, expenditure is urgent if required within two weeks. The guidelines
are available at http://www.finance.gov.au/budget/budget-process/appropriation-bills.html.
House of Representatives page 16 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
48 A further AFM provision will be requested in the Additional Estimates
Appropriation Bills for the current year if pressures at that time suggest the
AFM in this Bill will be close to being exhausted before the end of the financial
year.
49 Clause 15(3) provides that the total amount that can be determined under
the AFM provision is $380 million.
50 Subclause 15(4) provides that a determination under subclause 15(2) is a
legislative instrument, which must be tabled in Parliament but is not subject to
disallowance or sunsetting.
51 A subclause 15(2) determination is not subject to disallowance as this
would frustrate the purpose of the provision, which is to provide additional
appropriation for urgent expenditure. Further, an AFM is not subject to the
sunsetting provisions of the LI Act, because the amount allocated from the
AFM would be extinguished when it is spent. Also, if the determination did
expire after a period, then the recipient of money paid from the AFM would be
liable to repay that money as if the amount had not been appropriated in the first
place.
Part 4--General drawing rights limits
Clause 16--General drawing rights limits
52 Clause 16 relates to the general drawing rights limits for the Nation-
building Funds Act 2008 and the Federal Financial Relations Act 2009. The
general drawing rights limits provide Parliament with a mechanism by which it
may review the maximum amounts that can be paid under each of these Acts in
a financial year. Note that this clause is not an appropriation for either of the
Nation-building Funds Act 2008 or the Federal Financial Relations Act 2009.
Nation-building Funds Act 2008
53 For the purposes of section 109 of the Nation-building Funds Act 2008,
subclause 16(1) provides the general drawing rights limit for the Building
Australia Fund (BAF) for the current year.
54 The BAF is established under section 12 of the Nation-building Funds Act
2008. It consists of the investments of the BAF and the BAF Special Account,
which is a Special Account recognised under section 21 of the FMA Act and
established under section 13 of the Nation-building Funds Act 2008. The
general drawing rights limit applies to the main purposes of the BAF, namely
making payments in relation to the creation or development of transport
House of Representatives page 17 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
infrastructure, communications infrastructure, energy infrastructure and water
infrastructure. The general drawing rights limit does not apply to payments for
eligible Nation Broadband Network matters.
55 For the purposes of section 199 of the Nation-building Funds Act 2008,
subclause 16(2) provides the general drawing rights limit for the Education
Investment Fund (EIF) for the current year.
56 The EIF is established under section 131 of the Nation-building Funds
Act 2008. It consists of the investments of the EIF and the EIF Special Account,
which is a Special Account recognised under section 21 of the FMA Act and
established under section 132 of the Nation-building Funds Act 2008. The
general drawing rights limit applies to the main purposes of the EIF, namely
making payments in relation to the creation or development of higher education
infrastructure, research infrastructure, vocational education and training
infrastructure, and eligible education infrastructure, as well as any transitional
Higher Education Endowment Fund payments.
57 For the purposes of section 267 of the Nation-building Funds Act 2008,
subclause 16(3) provides the general drawing rights limit for the Health and
Hospitals Fund (HHF) for the current year.
58 The HHF is established under section 214 of the Nation-building Funds
Act 2008. It consists of the investments of the HHF and the HHF Special
Account, which is a Special Account recognised under section 21 of the
FMA Act and established under section 215 of the Nation-building Funds Act
2008. The general drawing rights limit applies to the main purposes of the
HHF, namely making payments in relation to the creation or development of
health infrastructure.
59 It is important to note that this Bill will not appropriate amounts to be
paid from the BAF, EIF or HHF. The intention for specifying general drawing
rights limits in subclauses 16(1) to 16(3) inclusive is to set maximum limits on
the amounts that may be covered by drawing rights issued by the Finance
Minister under the FMA Act for the current year, for the purposes to which the
limits apply.
60 Under section 27 of the FMA Act, the Finance Minister is able to issue
drawing rights, without which no public money may be spent, thereby
providing a control mechanism over spending. That power has been delegated
to various officials. Clause 16 places a limit over the amount of drawing rights
that may be issued.
House of Representatives page 18 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
61 Specifying a general drawing rights limit, and thereby limiting the ability
to issue drawing rights to that limit, is an effective mechanism to manage
expenditure of public money as the official or Minister making a payment of
public money cannot do so without the authority of a valid drawing right under
the FMA Act. The purpose of so doing is to provide Parliament with a
transparent mechanism by which it may review the rate at which amounts
committed to the BAF, EIF and HHF are expended.
62 The general drawing rights limits for the current year for the BAF,
EIF and HHF are specific to the current year applicable to this Act and will not
limit the general drawing rights limits that may be specified in regard to any
other year.
Federal Financial Relations Act 2009
63 For the purposes of paragraph 9(3)(b) of the Federal Financial Relations
Act 2009, subclause 16(4) provides the general drawing rights limit for general
purpose financial assistance for the current year.
64 This general drawing rights limit applies for the current year to the
amount that the Treasurer can credit to the COAG Reform Fund and the total
amount covered by drawing rights authorising debits from that Fund for the
purposes of making a grant of general purpose financial assistance to a State,
the Australian Capital Territory or the Northern Territory.
65 The COAG Reform Fund was established by section 5 of the
COAG Reform Fund Act 2008, which is a Special Account under section 21 of
the FMA Act. The purposes of the COAG Reform Fund Special Account are
provided at section 6 of the COAG Reform Fund Act 2008.
66 If a general drawing rights limit is not indicated in an Appropriation Act
for the purposes of paragraph 9(3)(b) of the Federal Financial Relations
Act 2009 for a financial year, amounts cannot be credited to the COAG Reform
Fund under paragraph 9(2)(a) of the Federal Financial Relations Act 2009,
and drawing rights must not be issued authorising debits from the
COAG Reform Fund for the purposes to which the limit applies.
67 For the purposes of paragraph 16(3)(b) of the Federal Financial Relations
Act 2009, subclause 16(5) provides the general drawing rights limit for national
partnership payments for the current year.
68 This general drawing rights limit applies for the current year to the
amount that the Treasurer can credit to the COAG Reform Fund and the total
amount covered by drawing rights authorising debits from that Fund for the
House of Representatives page 19 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
purposes contained in paragraphs 16(1)(a) to (c) inclusive of the Federal
Financial Relations Act 2009. These purposes relate to making a grant of
financial assistance to a State to support the delivery by the State of specified
outputs or projects, facilitate reforms by the State, or reward the State for
nationally significant reforms.
69 If a general drawing rights limit is not indicated in an Appropriation Act
for the purposes of paragraph 16(3)(b) of the Federal Financial Relations
Act 2009 for a financial year, amounts cannot be credited to the COAG Reform
Fund under paragraph16(2)(a) of the Federal Financial Relations Act 2009 and
drawing rights must not be issued authorising debits from the COAG Reform
Fund for the purposes to which the limit applies.
70 It is important to note that this Bill will not appropriate amounts to be
paid under sections 9 and 16 of the Federal Financial Relations Act 2009.
The intention for specifying general drawing rights limits in subclauses 16(4)
and 16(5) is to set maximum limits on the amounts that may be covered by
drawing rights issued by the Finance Minister under the FMA Act for the
current year, for the purposes to which those limits apply.
71 Under section 27 of the FMA Act, the Finance Minister is able to issue
drawing rights, without which no public money may be spent, thereby
providing a control mechanism over spending. That power has been delegated
to various officials. Clause 16 places a limit over the amount of drawing rights
that may be issued.
72 Specifying a general drawing rights limit, and thereby limiting the ability
to issue drawing rights to that limit, is an effective mechanism to manage
expenditure of public money as the official or Minister making a payment of
public money cannot do so without the authority of a valid drawing right under
the FMA Act. The purpose of so doing is to provide Parliament with a
transparent mechanism by which it may review the rate at which amounts are
committed for expenditure.
Clause 17--Adjustments for GST
73 The effect of this clause will be to increase a general drawing rights limit
by the amount of any GST qualifying amount in respect of an amount paid from
a fund named in clause 16.
74 Some payments from the BAF, EIF, HHF and the COAG Reform Fund
may include a GST qualifying amount and the relevant general drawing rights
limit is adjusted accordingly. The appropriation itself is not affected by
House of Representatives page 20 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
clause 17 because that is increased by the operation of section 30A of the FMA
Act. Essentially, clause 17 clarifies that the amounts specified for the general
drawing rights limits for 2011-12 are exclusive of any GST qualifying amounts
that may arise in respect of acquisitions made in reliance on that limit.
Part 5--Amendment of the Commonwealth Inscribed
Stock Act 1911
Clause 18--Amendments
75 Clause 18 provides for the CIS Act to be amended in relation to the
legislative limit on Commonwealth Government Securities (CGS) issuance and
special appropriations for borrowing and debt management activities. These
amendments relate to the Government's announcement in the 2011-12 Budget
on the future of the CGS market.
Legislative limit on CGS
76 The Government can borrow money by issuing stock and securities such
as Treasury Bonds. The CIS Act provides a standing authority to the Treasurer
to borrow in Australian currency to a maximum face value of $75 billion, and
an additional $125 billion on declaration of special circumstances.
77 The CIS Act has been amended in recent years. In 2008, amendments
were made to provide the Treasurer with a standing borrowing authority and
impose a limit on the face value of stock and securities on issue to not exceed
$75 billion.
78 Further amendments to the CIS Act in 2009 inserted a `special
circumstances' provision authorising the Treasurer to issue additional stock and
securities to a face value not exceeding $125 billion upon declaration of special
circumstances.
79 The amendments in this Bill will increase the legislative limit on
borrowing to allow the Government to meet its financing requirements over the
forward estimates and will facilitate the maintenance of a liquid and efficient
market for CGS in the years to come after the budget returns to surplus.
80 Subclause 18(1) amends the standing borrowing authority in section 5 of
the CIS Act to enable the Treasurer to issue stock and securities up to a total
face value of $250 billion.
81 Subclause 18(2) repeals the `special circumstances provision' in section
5A that authorises the Treasurer to issue up to an additional $125 billion of
House of Representatives page 21 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
stock and securities by making a declaration that a special circumstance exists
justifying the increase.
82 A declaration currently in force under section 5A will cease to have effect
when section 5A is repealed.
83 The Treasurer will still be required to issue a direction under the CIS Act
specifying the total amount of stock and securities that can be on issue within
the legislative limit (section 51JA).
Appropriations for borrowing and debt management activities
84 The Governor-General has authority in the CIS Act to undertake the sale
or issuance of stock, and to manage the debt portfolio. The Australian Office of
Financial Management, which is part of the Department of the Treasury, is the
agency responsible for government debt management and undertakes this
activity under delegations from the Treasurer.
85 In undertaking these activities the Government from time to time incurs
specific costs and expenses in relation to borrowing and debt management
activities. These can include items such as syndication fees.
86 In addition, there will now be a modest level of new management costs
associated with the trading of CGS on a retail exchange platform primarily
relating to registry and clearing and settlement fees. This is an initiative
announced by the Government as part of the Competitive and Sustainable
Banking Package in 2010.
87 Previously, these specific types of costs and expenses have been funded
through annual appropriations. However, the infrequency and uncertainty that
characterises these costs and expenses means that it is difficult to estimate an
appropriate level of funding. A special appropriation arrangement would be
preferable as the annual budget cycle can be relatively inflexible to the need for
timely debt management decisions.
88 Subclause 18(3) establishes a special appropriation in the CIS Act for the
costs and expenses incurred in relation to the issue or sale of stock and to
managing stock that has been issued.
89 The costs and expenses in relation to the issue or sale of stock is to
provide for those costs directly associated with the issuance of stock, such as
syndication fees.
House of Representatives page 22 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
90 The costs and expenses in relation to the management of stock, such as
Registry fees and clearing and settlement fees will be met from this special
appropriation as these fees are variable and cannot be estimated with certainty.
91 This special appropriation is not intended to provide for incidental costs
and expenses, such as for travelling and accommodation.
92 An additional debt management activity involves the redemption and
repurchase of existing stock and securities on issue prior to maturity. Currently,
this activity is undertaken through the Treasurer's investment powers in the
Financial Management and Accountability Act 1997.
93 Subclause 18(3) also establishes a special appropriation in the CIS Act for
the costs and expenses incurred in repurchasing or redeeming stock prior to
maturity.
94 A special appropriation for the repurchase of stock on issue prior to
maturity in the CIS Act would provide a better legislative foundation for this
activity, as the CIS Act is the Government's primary debt management
legislation.
95 These two special appropriations will provide greater flexibility in
managing the debt portfolio and thereby support the efficient management of
the Government's debt portfolio.
Clause 19--Application
96 Subclause 19(1) provides that the amendment made by subsection 18(1)
will apply to stock and securities on issue from the date of commencement of
the amendment Act, regardless of whether the stock and securities were issued
before or after commencement.
97 Subclause 19(2) and subclause 19(3) provide that the amendments made
by subsection 18(3) will apply to costs and expenses incurred by the
Commonwealth after the commencement of the item, regardless of whether the
stock was issued or sold before or after commencement of the item.
Part 6--Miscellaneous
Clause 20--Contingency--Department of Human Services
98 Clause 20 provides a contingency for the appropriation provided to the
Department of Human Services in the items in the tables in Schedule 2 to be
replaced by the items in the tables in Schedule 3. It is anticipated
House of Representatives page 23 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
that Centrelink and Medicare Australia will be merged into the Department of
Human Services on 1 July 2011 by the Human Services Legislation Amendment
Act 2011, and that therefore Centrelink and Medicare Australia will cease to
exist as separate agencies. Therefore the Department of Human Services' table
in Schedule 2 includes no appropriations for Centrelink and Medicare Australia.
If this legislation does not commence on 1 July 2011 as anticipated, then
Schedule 3 will apportion the appropriation between the three agencies so they
can continue operating.
Clause 21--Crediting amounts to Special Accounts
99 Clause 21 provides that if the purpose of an item in Schedule 2 is also the
purpose of a Special Account (regardless of whether the item expressly refers to
the Special Account), then amounts may be debited against the appropriation
for that item and credited to the Special Account. Special Accounts may be
established under the FMA Act by a determination of the Finance Minister
(section 20) or by another Act (section 21). The determination or Act that
establishes the Special Account will specify the purposes of the Special
Account.
Clause 22--Conditions etc. applying to State, ACT, NT and
local government items
100 Clause 22 deals with Parliament's power under section 96 of the
Australian Constitution to provide financial assistance to the States. Clause 22
delegates the power to the responsible Ministers listed in Schedule 1 of the Bill,
by providing the Ministers named in Schedule 1 with the power to determine:
· conditions under which payments to the States, the ACT and NT and
local councils may be made: paragraph 22(2)(a); and
· the amounts and timing of those payments: paragraph 22(2)(b).
101 Subclause 22(4) provides that determinations made under subclause 22(2)
are not legislative instruments, because these determinations are not altering the
appropriations approved by Parliament. Determinations under subclause 22(2)
will simply determine how appropriations for State, ACT, NT and local
government items will be paid. The determinations are issued when required.
However, payments can be made without either determination.
102 Although financial assistance is provided to the ACT, NT and local
government authorities without reference to section 96 of the Constitution,
those payments are administered in the same way. Therefore the Ministers
House of Representatives page 24 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
identified in Schedule 1 may set the amounts and timing and impose terms and
conditions on those payments. Subclause 22(5) also notes that clause 22 will
not limit the powers of the Commonwealth under section 96 of the Constitution
to provide financial assistance to a State which is not appropriated by a State,
ACT, NT and local government item.
Clause 23--Appropriation of the Consolidated Revenue Fund
103 Clause 23 provides that the CRF is appropriated as necessary for the
purposes of the Bill. Significantly, this clause means that there is an
appropriation in law when the Acts commence. That is, the appropriations are
not made or brought into existence just before they are paid but when the Royal
Assent is given. The words "as necessary" in this clause indicate that the
amounts appropriated may be affected by the FMA Act, in particular
sections 30, 30A and 32 (see clause 6), after the Bill receives the Royal Assent.
Schedule 1--Payments to or for the States, ACT, NT and
local government
104 In accordance with clause 22, Schedule 1 lists the Ministers responsible
for determinations on payments to or for the States, ACT, NT and local
government.
Schedule 2--Services for which money is appropriated
105 Schedule 2 specifies the services for which amounts will be appropriated
by the Bill. Schedule 2 contains a summary table which lists the total amounts
for each portfolio. A separate summary table is included with further detail for
each portfolio, with other tables detailing the appropriations for each agency.
106 Schedule 2 includes, for information purposes, a figure for the previous
financial year labelled the Actual Available Appropriation. The figure is printed
in italics under each appropriation amount to provide a comparison with the
proposed appropriations. The Actual Available Appropriation does not affect
the amounts available at law.
107 More details about the appropriations in Schedule 2 are contained in the
PB Statements and the second reading speech.
House of Representatives page 25 Appropriation Bill (No. 2) 2011-2012
Notes on clauses
Schedule 3--Alternative items for the Department of
Human Services
108 Schedule 3 specifies the services for which amounts will be appropriated
by the Bill for the Human Services Portfolio in the event that the Human
Services Legislation Amendment Act 2011 has not passed Parliament by
1 July 2011. Schedule 3 contains a summary table which lists the total amounts
for the Human Services Portfolio, with other tables detailing the appropriations
for each agency.
109 Schedule 3 includes for information purposes, a figure for the previous
financial year printed in italics under each appropriation amount, labelled the
"Actual Available Appropriation". This is consistent with the approach used in
Schedule 2. That figure provides a comparison with the proposed
appropriations. The Actual Available Appropriation does not affect the amounts
available at law.
House of Representatives page 26 Appropriation Bill (No. 2) 2011-2012