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2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
NATION-BUILDING FUNDS BILL 2008
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Finance and Deregulation,
The Honourable Lindsay Tanner MP)
Glossary
The following abbreviations and acronyms are used in this Explanatory
Memorandum.
|Abbreviation/acronym |Definition |
|ABS |Australian Bureau of Statistics |
|Act |Nation-building Funds Bill 2008 as |
| |passed by the Parliament |
|Acts Interpretation Act |Acts Interpretation Act 1901 |
|Agency |Future Fund Management Agency |
|BAF |Building Australia Fund |
|BAF portfolio Minister |Infrastructure Minister or |
| |Communications Minister or |
| |Energy Minister or Water Minister |
|BAF Portfolio Special |BAF Infrastructure Portfolio Special |
|Accounts |Account or BAF Communications |
| |Portfolio Special Account or BAF |
| |Energy Portfolio Special Account or |
| |BAF Water Portfolio Special Account |
|Bill |Nation-building Funds Bill 2008 |
|COAG |Council of Australian Governments |
|Communications Department |Department of Broadband, |
| |Communications and the Digital Economy|
|Communications Minister |Minister for Broadband, Communications|
| |and the Digital Economy |
|Consumer Protection Act |Telecommunications (Consumer |
| |Protection and Service Standards) Act |
| |1999 |
|Corporations Act |Corporations Act 2001 |
|Education Department |Department of Education, Employment |
| |and Workplace Relations |
|Education Minister |Minister for Education, Employment and|
| |Workplace Relations |
|EIF |Education Investment Fund |
|EIF designated Ministers |Education Minister and Research |
| |Minister |
|EIF portfolio Minister |Education Minister or Research |
| |Minister |
|EIF Portfolio Special |EIF Education Portfolio Special |
|Accounts |Account or EIF Research Portfolio |
| |Special Account |
|Energy Department |Department of Resources, Energy and |
| |Tourism |
|Energy Minister |Minister for Resources and Energy |
|Finance Department |Department of Finance and Deregulation|
|Finance Minister |Minister for Finance and Deregulation |
|Financial Sector |Financial Sector (Shareholdings) Act |
|(Shareholdings) Act |1998 |
|FMA Act |Financial Management and |
| |Accountability Act 1997 |
|Funds |BAF, EIF and HHF |
|Future Fund Act |Future Fund Act 2006 |
|Future Fund Board |Future Fund Board of Guardians |
|GGS |General Government Sector |
|Health Department |Department of Health and Ageing |
|Health Minister |Minister for Health and Ageing |
|HEEF |Higher Education Endowment Fund |
|HEEF Act |Higher Education Endowment Fund Act |
| |2007 |
|HHF |Health and Hospitals Fund |
|Infrastructure Australia |Infrastructure Australia Act 2008 |
|Act | |
|Infrastructure Department |Department of Transport, |
| |Infrastructure, Regional Development |
| |and Local Government |
|Infrastructure Minister |Minister for Transport, |
| |Infrastructure, Regional Development |
| |and Local Government |
|ITAA |Income Tax Assessment Act 1997 |
|Legislative Instruments Act|Legislative Instruments Act 2003 |
|NBN |National Broadband Network |
|Research Department |Department of Innovation, Industry, |
| |Science and Research |
|Research Minister |Minister for Innovation, Industry, |
| |Science and Research |
|responsible Ministers |Finance Minister and Treasurer |
|Water Department |Department of the Environment, Water, |
| |Heritage and the Arts |
|Water Minister |Minister for Climate Change and Water |
Outline
The Nation-building Funds Bill 2008 is part of a package of three Bills
giving effect to the Government's 2008-09 Budget announcement to establish:
. three new financial asset funds to provide financing sources to meet the
Government's commitment to Australia's future by investment in critical
areas of infrastructure such as transport, communications, energy, water,
education and health; and
. a COAG Reform Fund as a vehicle through which:
- capital transfers from the Funds may be disbursed to the States and
Territories; and
- funding provided in future budgets may be disbursed to the States and
Territories.
The Bill:
. Establishes three separate funds - the BAF, EIF and HHF - which, like the
Future Fund, are financial asset funds consisting of cash and
investments.
- The BAF is focussed on capital investment in transport infrastructure
(such as roads, rail, urban transport and ports), communications
infrastructure (such as broadband), energy infrastructure and water
infrastructure.
- The EIF is focussed on capital investment in higher education
infrastructure and vocational education and training infrastructure
(that is, capital expenditure and renewal and refurbishment in
universities and vocational education and training institutions,
research facilities and major research institutions).
- The HHF is focussed on capital investment in health infrastructure,
such as the renewal and refurbishment of hospitals, medical technology
equipment and major medical research facilities and projects.
. Grants the Treasurer and the Finance Minister, as the responsible
Ministers, the power to credit funds to the BAF, EIF and HHF through
Special Accounts (which are also established by the Bill).
- The Government will provide initial transfers to the BAF from the
remaining proceeds of the Telstra 3 sale, the assets of the
Communications Fund (which will be closed), and $7.5 billion from the
2007-08 budget surplus.
- The Government will provide initial transfers to the EIF from the
assets of the Higher Education Endowment Fund (which will be closed)
and $2.5 billion from the 2007-08 budget surplus.
- The Government will provide an initial transfer to the HHF of
$5 billion from the 2007-08 budget surplus.
- The Government may add to the BAF, EIF and HHF from future surpluses
as appropriate.
. Gives the Future Fund Board statutory responsibility for managing the
investments of the BAF, EIF and HHF. These powers are the same as
provided for in the Future Fund Act.
. Expands the Agency's operational activities as a result of the Future
Fund Board's role in relation to the BAF, EIF and HHF. The Agency's role
will remain the same - to provide executive support for the Future Fund
Board and be responsible for the operational activities associated with
the investment of the BAF, EIF and HHF.
. Requires the responsible Ministers to issue Investment Mandates - a
collection of Ministerial directions - to the Future Fund Board regarding
the investment of the BAF, EIF and HHF. The purposes of the Investment
Mandates are same as provided for in the Future Fund Act.
. Provides for Infrastructure Australia to give advice to:
- the Infrastructure Minister regarding potential payments from the BAF
in relation to the creation or development of transport
infrastructure;
- the Communications Minister regarding potential payments from the BAF
in relation to the creation or development of communications
infrastructure (except for eligible national broadband network
matters);
- the Energy Minister regarding potential payments from the BAF in
relation to the creation or development of energy infrastructure; and
- the Water Minister regarding potential payments from the BAF in
relation to the creation or development of water infrastructure.
. Establishes the EIF Advisory Board to give advice to:
- the Education Minister regarding potential payments from the EIF in
relation to the creation or development of higher education
infrastructure, vocational education and training infrastructure and
eligible education infrastructure; and
- the Research Minister regarding potential payments from the EIF in
relation to the creation or development of research infrastructure.
. Establishes the HHF Advisory Board to give advice to the Health Minister
regarding potential payments from the HHF in relation to the creation or
development of health infrastructure.
. Provides that a BAF portfolio Minister, an EIF portfolio Minister or the
Health Minister is required to obtain and have regard to such advice
where he or she recommends a payment may be directed from the BAF, EIF or
HHF respectively, including where the payment will be channelled through
the COAG Reform Fund.
. Requires the Infrastructure Minister to formulate BAF evaluation
criteria, in consultation with the Communications Minister, Energy
Minister, Water Minister, the Treasurer and the Finance Minister, to be
applied by Infrastructure Australia in giving advice to the
Infrastructure Minister, the Communications Minister, the Energy Minister
or the Water Minister.
. Requires the Education Minister and the Research Minister together, as
the 'EIF designated Ministers', to formulate EIF evaluation criteria, in
consultation with the Treasurer and the Finance Minister, to be applied
by the EIF Advisory Board in giving advice to the Education Minister or
the Research Minister.
. Requires the Health Minister to formulate HHF evaluation criteria, in
consultation with the Treasurer and the Finance Minister, to be applied
by the HHF Advisory Board in giving advice to the Health Minister.
- The evaluation criteria framework is designed to ensure rigour around
the use of resources from the BAF, EIF and HHF.
. Provides for the Finance Minister to direct payments from the BAF, EIF
and HHF Special Accounts.
- Payments will be channelled through BAF Portfolio Special Accounts,
EIF Portfolio Special Accounts and the HHF Health Portfolio Special
Account to support expenditure in relevant infrastructure.
- Where grant payments to States and Territories will be channelled
through the COAG Reform Fund, the Finance Minister may direct that an
amount be debited from the BAF, EIF or HHF and transferred to the
applicable BAF Portfolio Special Account, EIF Portfolio Special
Account or the HHF Health Portfolio Special Account, and subsequently
credited to the COAG Reform Fund for that purpose.
. Provides for the annual Appropriation Acts to declare that a specified
amount is the general drawing rights limit in relation to a financial
year. This will limit the amount that may be covered by drawing rights
under the FMA Act, and hence, the amount that can be paid from the BAF,
EIF and HHF to support expenditure in relevant infrastructure in a
financial year.
- This mechanism is consistent with the Government's objective that
payments from the BAF, EIF and HHF are transparent and subject to
parliamentary scrutiny.
- Special arrangements apply to the determination of a general drawing
rights limit covering the period up to 30 June 2009 in order to give
effect to the Government's announcement to fast track its nation-
building agenda in response the global financial crisis. The general
drawing rights limit, in relation to the financial year ending
30 June 2009, will be that declared by the Finance Minister in
writing.
. Allows spending proposals from the BAF, EIF and HHF to include the
acquisition, in the name of the Commonwealth, of financial assets (such
as shares, debentures and trust units) in a company involved in the
creation or development of relevant infrastructure.
. Provides for the overall level of debits from the BAF, EIF and HHF in a
financial year to be consistent with the Government's objective that the
level of spending from the Funds should depend primarily on the
macroeconomic conditions.
Financial Impact Statement
. The Government may make contributions to the BAF, EIF and HHF from
realised budget surpluses.
. Transfers to the BAF, EIF and HHF will not impact on the budget bottom
line since the Government will be transferring funds within the GGS.
. The Government is committed to providing:
- initial transfers to the BAF from the remaining proceeds of the
Telstra 3 sale, the assets of the Communications Fund (which will be
closed), and $7.5 billion from the 2007-08 budget surplus.
- initial transfers to the EIF from the assets of the Higher Education
Endowment Fund (which will be closed) and $2.5 billion from the 2007-
08 budget surplus.
- an initial transfer to the HHF of $5 billion from the 2007-08 budget
surplus.
. It is intended that both the capital contributions and the earnings of
the BAF, EIF and HHF will be available over time to finance specific
infrastructure projects. There is no cap on annual disbursements from
the BAF, EIF and HHF. However, the annual Appropriation Acts will set a
general drawing rights limit for each financial year. This will limit
the amount that may be covered by drawing rights under the FMA Act, and
hence, the amount that can be paid for the BAF, EIF and HHF to support
relevant infrastructure expenditure in that year, including payments that
are channelled through the COAG Reform Fund.
. The BAF, EIF and HHF will be created within the GGS. All earnings and
expenditure from the Funds will impact on the budget aggregates.
. All expenses associated with investment and administration of the BAF,
EIF and HHF by the Future Fund Board, including funds manager's fees,
will be met from the BAF, EIF or HHF respectively. There is provision
for common costs of the BAF, EIF, HHF and the Future Fund to be
apportioned.
NATION-BUILDING FUNDS BILL 2008
NOTES ON CLAUSES
Chapter 1-Preliminary
Clause 1 - Short Title
Clause 1 provides for the Act to be cited as the Nation-building Funds
Act 2008.
Note: The clauses in the Bill will become sections of the Act on Royal
Assent.
Clause 2 - Commencement
Clause 2 is the commencement provision for the Bill. The commencement
dates for specific provisions are included in the table in subclause 2(1).
Item 1 of the table provides that the short title and commencement
provisions (and anything not elsewhere covered by the table) commence on
the day on which the Bill receives Royal Assent.
Item 2 of the table provides that all other provisions commence on
1 January 2009. However, commencement of these provisions is subject to
the Nation-building Funds (Consequential Amendments) Act 2008 receiving
Royal Assent before 1 January 2009.
Clause 3 - Simplified outline
Clause 3 is an information provision which is intended to provide a high
level introduction to the contents of the Bill, in order to aid
readability.
Clause 4 - Definitions
Clause 4 provides definitions of the terms and expressions used in the
Bill. While these terms are largely self-explanatory, the following more
significant defined terms are noted:
Agency means the Future Fund Management Agency, which will assist the
Future Fund Board in managing the assets of the various Funds.
BAF evaluation criteria refers to the evaluation criteria to be developed
by the Infrastructure Minister (in consultation with the
Communications Minister, the Energy Minister and the Water Minister) under
clause 120 and which are to be applied by Infrastructure Australia in
giving advice about transport infrastructure, communications
infrastructure, energy infrastructure and water infrastructure.
Building Australia Fund (or BAF) is the Fund to be established by Chapter 2
of the Bill to fund approved transport infrastructure and communications
infrastructure payments.
Building Australia Fund Investment Mandate is the investment mandate for
the BAF to be provided to the Future Fund Board by the Treasurer and the
Finance Minister.
business entity means a company, a partnership, a trust or a body politic.
COAG Reform Fund means the Fund to be established under the COAG Reform
Fund Bill 2008 for the purpose of making grants of financial assistance in
relation to infrastructure projects to the States and Territories.
Education Investment Fund (or EIF) is the Fund to be established by
Chapter 3 of the Bill to fund approved education and research
infrastructure payments.
Education Investment Fund Investment Mandate is the investment mandate for
the EIF to be provided to the Future Fund Board by the Treasurer and the
Finance Minister.
EIF Advisory Board means the board to be established by clause 170. The
principal function of the board is to advise the EIF designated Ministers
in relation to infrastructure matters referred to it by those Ministers.
EIF designated Ministers are the Education Minister and the
Research Minister.
EIF evaluation criteria means the evaluation criteria to be developed by
the Education Minister and the Research Minister under clause 172 and which
are to be applied by the EIF Advisory Board in giving advice about
education infrastructure and research infrastructure.
Future Fund Board means the Future Fund Board of Guardians, appointed under
the Future Fund Act, and which will have responsibilities in relation to
the management and investment of the Funds.
Health and Hospitals Fund (or HHF) is the Fund to be established by
Chapter 4 of the Bill to fund approved health infrastructure payments.
Health and Hospitals Fund Investment Mandate is the investment mandate for
the HHF to be provided to the Future Fund Board by the Treasurer and the
Finance Minister.
HHF Advisory Board means the board to be established by clause 245. The
principal function of the board is to advise the Health Minister in
relation to infrastructure matters referred to it by that Minister.
HHF evaluation criteria means the evaluation criteria to be developed by
the Health Minister under clause 247 and which are to be applied by the HHF
Advisory Board in giving advice about health infrastructure.
higher education institution means an institution that is specified in a
legislative instrument to be made by the EIF designated Ministers.
national broadband network means a national telecommunications network for
the high-speed carriage of communications. The terms "carriage",
"communications" and "telecommunications network" have the same meanings as
in the Telecommunications Act 1997. It is intended that the concept of "a
national telecommunications network" would involve network that would have
a presence in each State of Australia and in the Australian Capital
Territory and the Northern Territory. A note to this definition takes the
reader to subclause 7(2) which makes it clear that a national broadband
network is not necessarily required to extend to any or all of the external
territories.
research institution means an institution that is specified in a
legislative instrument to be made by the EIF designated Ministers.
responsible Ministers means the Treasurer and the Finance Minister who
share certain responsibilities, including in relation to the crediting of
amounts to the Funds and the setting of the Investment Mandates for the
Future Fund Board.
vocational education and training provider means a person or body that is
specified in a legislative instrument to be made by the EIF designated
Ministers.
Clause 5 - Financial assets
Clause 5 provides a definition of financial asset, which is intended to be
widely read, consistent with the definition of financial asset used for
budget reporting purposes. This definition is derived from the Australian
Bureau of Statistics (ABS) manual of concepts and classification principles
used for publishing government finance statistics. The ABS publication is
based on a similar manual produced by the International Monetary Fund.
Consistent with the BAF, EIF and HHF being financial asset Funds, the
Future Fund Board can only invest the BAF Special Account, EIF Special
Account and HHF Special Account in financial assets. Allowing the Future
Fund Board to invest directly in non-financial assets would be inconsistent
with the objectives of the policy and the Government's broader fiscal
policy and budget management. The restriction extends to direct
investments in real property, jewellery or artwork, for example. However,
the Future Fund Board may gain exposure to these types of assets through
pooled property investments or other investment vehicles (listed and
unlisted).
Regulations may also be made to clarify that an asset specified in the
regulations is a financial asset for the purposes of the Act. It is not
intended that regulations would contradict the definition of a financial
asset in the ABS publication - merely that it would provide the Future Fund
Board with certainty in relation to whether certain assets would meet this
definition. For the same reason, the regulations may also clarify that an
asset is not a financial asset.
The note at the end of clause 5 assists the reader by referring to
subsection 13(3) of the Legislative Instruments Act in respect of any
specification of an asset under the regulations. The effect of
subsection 13(3) of that Act is that the regulations, which specify assets
for the purposes of this clause, may do so by reference to a class or
classes of assets.
Clause 6 - Crown to be bound
Clause 6 provides that the Act binds the Crown in each of its capacities
but does not make the Crown liable to be prosecuted for an offence.
Clause 7 - Extension to external Territories
Clause 7 provides that the Act extends to every external Territory,
including Norfolk Island. The effect of subclause 7(2) is to make it clear
that a national broadband network (for the purposes of the Act) would not
necessarily be required to extend to any external Territory.
Clause 8 - Extra-territorial application
Clause 8 provides for the geographical reach of this Act to be very wide -
applying both within and outside of Australia - due to the possibility that
the BAF, EIF and HHF may be invested in overseas markets.
CHAPTER 2 - BUILDING AUSTRALIA FUND
Part 2.1-Introduction
Clause 9 - Object
Clause 9 sets out the objects of Chapter 2, namely to enhance the
Commonwealth's ability to make payments in relation to the creation or
development of transport infrastructure, the creation or development of
communications infrastructure, eligible national broadband network matters,
the creation or development of energy infrastructure and the creation or
development of water infrastructure.
Clause 10 - Simplified outline
Clause 10 is an information provision which provides an overview of
Chapter 2 to assist with readability.
Part 2.2-Building Australia Fund
Division 1-Introduction
Clause 11 - Simplified outline
Clause 11 is an information provision which provides an overview of
Part 2.2 to assist with readability.
Division 2-Establishment of the Building Australia Fund etc.
Clause 12 - Establishment of the Building Australia Fund
Clause 12 establishes a financial asset fund - the Building Australia Fund
(BAF) - consisting of amounts credited to a Building Australia Fund Special
Account (see clause 13 below) and investments of the BAF. The distinction
between the cash and asset components relates to the need for cash to be
duly appropriated, rather than a desire to distinguish between cash and
other types of investments held in the BAF.
An investment of the Building Australia Fund is defined in Part 2.3 to
include money invested in financial assets (including returns on those
investments), derivatives acquired under clause 42 and other financial
assets that the Future Fund Board becomes a holder of through a securities
lending arrangement or otherwise.
Clause 13 - Establishment of the Building Australia Fund Special Account
Clause 13 establishes the Building Australia Fund Special Account (the Fund
Account) - a Special Account for the purposes of section 21 of the FMA Act.
A Special Account is an appropriation mechanism that sets aside an amount
within the Consolidated Revenue Fund to be expended for specific purposes.
Any amounts credited to the BAF Special Account are quarantined from the
rest of the Consolidated Revenue Fund and can only be debited from the BAF
for the purposes set out in clauses 18, 19 and 20, or for the purposes of
channelling funds to a BAF Portfolio Special Account and to the COAG Reform
Fund, in order to make BAF related payments.
The note immediately following clause 13 is included to assist the reader
by clarifying that, in addition to the processes set out in clauses 14, 15,
16 and 17, amounts can be credited to the BAF Special Account by an
Appropriation Act.
Division 3-Credits of amounts to the Building Australia Fund
Clause 14 - Initial credits of amounts to the Building Australia Fund
Special Account
The BAF will receive initial credits through instalments comprising an
amount of $7.5 billion from the 2007-08 budget surplus, a portion of the
proceeds of the Telstra 3 sale and the assets of the Communications Fund.
Clause 14 provides the mechanism for amounts to be credited to the BAF
Special Account on a particular date or by set instalments on particular
dates. This mechanism will allow for relevant amounts from the 2007-08
budget surplus to be credited to the BAF.
Subclause 14(1) provides that initial contributions to the BAF will be
credited to the BAF Special Account through a written determination or
determinations by the responsible Ministers. These contributions can be
credited either in one lump sum or by instalments.
Subclause 14(2) provides that the responsible Ministers must ensure that,
by 30 June 2009, the BAF is credited with $7.5 billion. This amount
comprises of funds to be credited to the BAF from the 2007-08 budget
surplus.
The notes at the end of subclause 14(2) assist the reader. Note 1 refers
to clause 16, which provides for the balance of the Communications Fund
Special Account to be credited to the BAF. Note 2 refers to clause 33,
which provides for the BAF to inherit the investments of the Communications
Fund. Note 3 refers to clause 17, which provides for the balance of the
Telstra Sale Special Account to be credited to the BAF.
Subclause 14(3) provides that the responsible Ministers must not make a
determination under subclause 14(1) after 30 June 2009 - the date by which
the credit of $7.5 billion must be made to the BAF.
Additional contributions to the BAF will be a subsequent credit under
subclause 15(1). For example, any amounts credited to the BAF from future
budget surpluses would be credited under subclause 15(1) (see below).
Subclause 14(4) provides that determinations for crediting the initial
contributions to the BAF Special Account cannot be revoked.
Subclause 14(5) deems that a determination to credit the initial
contribution to the BAF is a legislative instrument for the purposes of
section 5 of the Legislative Instruments Act. As such the instrument is
required to be tabled in Parliament and published on the Federal Register
of Legislative Instruments.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds required to establish the BAF are about to be
transferred. The same approach was taken in equivalent provisions in the
Future Fund Act.
Clause 15 - Subsequent credits of amounts to the Building Australia Fund
Special Account-determinations by the responsible Ministers
Clause 15 allows for future Government contributions to be made to the BAF,
which could be made out of future realised surpluses, subject to other
policy priorities.
Subclause 15(1) provides that Government contributions to the BAF,
subsequent to the initial contribution, are made through determinations by
the responsible Ministers. Such further credits can be made either in one
lump sum or by instalments.
The note at the end of subclause 15(1) assists the reader by referring to
subsection 33(3) of the Acts Interpretation Act. This subsection deals
with variations and revocations of instruments and provides that a power to
make an instrument also includes a power to vary or revoke an instrument
unless the contrary intention appears.
Subclause 15(2) requires the responsible Ministers to have regard to the
object of the Chapter in making determinations to credit further amounts to
the BAF. Therefore, subsequent credits from the BAF will be made with
reference to the need for future investment in transport, communications,
energy and water infrastructure.
Subclause 15(3) provides that a determination to credit subsequent amounts
to the BAF is a legislative instrument for the purpose of section 5 of the
Legislative Instruments Act. As such, the instrument is required to be
tabled in Parliament and published on the Federal Register of Legislative
Instruments.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds are about to be transferred. The same approach was
taken in equivalent provisions in the Future Fund Act.
Clause 16 - Credit of amount to the Building Australia Fund Special Account-
balance of the Communications Fund Special Account
The Communications Fund was established by Part 9C of the Consumer
Protection Act, which is proposed to be repealed by the Nation-building
Funds (Consequential Amendments) Bill 2008. The Communications Fund will
be closed and its balance transferred to the BAF. The Communications Fund
consists of the Communications Fund Special Account and the investments of
the Communications Fund.
Clause 16 provides for the balance of the Communications Fund Special
Account (created under the proposed to be repealed section 158ZH of the
Consumer Protection Act), as at immediately before the commencement of this
section, to be credited to the BAF. This credit will be made once the
section commences.
The BAF inherits the investments of the Communications Fund under
clause 33.
Clause 17 - Credit of amount to the Building Australia Fund Special Account-
balance of the Telstra Sale Special Account
The Government has announced that proceeds from the Telstra 3 sale will be
credited to the BAF.
Clause 17 provides that the responsible Ministers may make a written
determination that, at a specified time, the balance of the Telstra Sale
Special Account is to be credited to the BAF Special Account.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds required to establish the BAF are about to be
transferred. The same approach was taken in equivalent provisions in the
Future Fund Act.
Note that the Telstra Sale Special Account was established as a Special
Account under subsection 20(1) of the FMA Act, and it is intended that the
account will be abolished, once the balance is credited, under
subsection 20(3) of the FMA Act.
Division 4-Debits of amounts from the Building Australia Fund
Clauses 18 to 20 set out the purposes for which the BAF Special Account may
be debited. These purposes are split across three categories: purposes
relating exclusively to the Fund, purposes relating to transitional
arrangements for the transfer of investments from the Communications Fund,
and purposes not related exclusively to the BAF, but which could be
attributed to the BAF, Future Fund, EIF and HHF (for example, paying the
remuneration and allowances of Future Fund Board members).
Clause 18 - Purposes of the Building Australia Fund Special Account-
payments purposes and purposes related exclusively to the Building
Australia Fund
Clause 18 sets out the purposes for which the BAF Special Account may be
debited that relate exclusively to the BAF.
These purposes are:
. making payments in relation to the creation or development of transport
infrastructure, the creation or development of communications
infrastructure, eligible national broadband network matters, the creation
or development of energy infrastructure and the creation or development
of water infrastructure; and
. the payment of various expenses (associated with the investment and
administration of the BAF) that can be exclusively attributed to the BAF.
While the range of such costs are as set out in clause 18, examples
include paying the expenses of an investment of the BAF and paying
expenses incurred by the Future Fund Board under a contract with
investment managers.
The terms 'the creation or development of transport infrastructure', 'the
creation or development of communications infrastructure', 'the creation or
development of energy infrastructure' and 'the creation or development of
water infrastructure' are intended to provide flexibility and a broad scope
in relation to transport, communications, energy and water infrastructure
projects that may be considered for funding from the BAF. A payment in
relation to the creation or development of transport infrastructure,
communications infrastructure, energy infrastructure and water
infrastructure can also have the extended meaning provided under clauses
21, 22, 24 and 25 respectively (see below).
While allowing for flexibility for infrastructure projects eligible to be
considered for funding, the Government has indicated a clear focus for the
BAF, EIF and HHF to assist with financing investment in the creation or
development of infrastructure, consistent with a broader nation-building
objective. Accordingly, it is intended that funding would be directed
towards capital expenditure, which could include associated labour costs
related to the creation or development of infrastructure (where required).
However, consistent with the Government's intention that the BAF provide
financing for the creation or development of relevant infrastructure, it is
not intended that expenditure of a recurrent nature relating to running
costs (such as staff wages and maintenance) would be financed from the BAF.
Accordingly, where specific projects have an ongoing cost component, it is
intended that such funding would be sourced through other means. This
could include direct funding from the budget (outside the BAF), or funding
by the States or Territories in relation to proposals that are brought
forward as part of the COAG reform agenda.
The term eligible national broadband network matter defines particular
matters (related to the NBN) for which payments may be made from the BAF,
in addition to transport infrastructure, communications infrastructure,
energy infrastructure and water infrastructure. Again, the focus is on the
creation and development of relevant infrastructure, consistent with the
Government's objectives for the BAF.
The purpose of paragraph 18(1)(l) is to allow the BAF to be used to
discharge any other expenses or liabilities incurred by the Future Fund
Board that are exclusively incurred in connection with the BAF. It is also
intended to capture miscellaneous costs that may arise and are not covered
by the other existing purposes.
A note at the end of subclause 18(1) assists the reader by referring to
section 21 of the FMA Act, which deals with debits from Special Accounts.
Subclause 18(2) provides that paragraphs 18(1)(b) and (c), relating to
communications infrastructure and eligible national broadband network
matters, do not limit each other in their application.
Subclause 18(3) provides that a payment under paragraphs 18(1)(a),
(b), (c), (d) or (e) may be made by way of a grant of financial assistance
or by a payment that is not a grant of financial assistance. This provides
flexibility in relation to payments from the BAF.
Other payments (i.e. payments that are not grants) include payments for the
acquisition, in the name of the Commonwealth, of financial assets (such as
shares, debentures and trust units) in a company involved in the creation
or development of relevant infrastructure. Other payments could also
include public-private partnership payments.
The Commonwealth would also have the flexibility to make a payment (other
than by a grant of financial assistance) to a State or Territory under an
ordinary contractual obligation.
Note that under clauses 63, 70, 77 and 84, the Finance Minister may direct
that a specified amount is to be debited from the BAF Special Account and
credited to the BAF Infrastructure Portfolio Special Account, the BAF
Communications Portfolio Special Account, the BAF Energy Portfolio Special
Account or the BAF Water Portfolio Special Account, respectively. Such a
direction is to allow that amount to be debited from the BAF Infrastructure
Portfolio Special Account, the BAF Communications Portfolio Special
Account, the BAF Energy Portfolio Special Account or the BAF Water
Portfolio Special Account for the purposes of making a specified payment in
relation to the creation or development of transport infrastructure, the
creation or development of communications infrastructure, an eligible
national broadband network matter, the creation or development of energy
infrastructure or the creation or development of water infrastructure (see
clauses 63, 70, 77 and 84 below).
Further note that, under clauses 89, 94, 99 and 104, the Finance Minister
may direct that a specified amount is to be debited from the BAF Special
Account and transferred, through the relevant BAF Portfolio Special
Account, to the COAG Reform Fund Account (which will be established as a
Special Account under the FMA Act on commencement of the COAG Reform Fund
Act 2008). Such a direction is to allow that amount to be subsequently
debited from the COAG Reform Fund for the purposes of making a specified
grant of financial assistance to a State or Territory in relation to the
creation or development of relevant transport, communications, energy and
water infrastructure (see clauses 89, 94, 99 and 104 below and also see
section 6 the COAG Reform Fund Act 2008, which sets out the purposes of the
COAG Reform Fund).
Clause 19 - Purposes of the Building Australia Fund Special Account-
transitional
The BAF inherits the investments of the Communications Fund under
clause 33. Clause 19 provides transitional arrangements to allow the BAF
to be debited to pay any costs, expenses, obligations or liabilities
incurred by the Commonwealth in connection with the Communications Fund,
where those costs, expenses, obligations or liabilities were incurred (but
not discharged) before the commencement of the BAF.
This includes costs relating to the acquisition of financial assets under
the proposed to be repealed section 158ZO of the Consumer Protection Act
(paragraph 19(a)), expenses of an investment of the Communications Fund
under the proposed to be repealed section 158ZP of that Act
(paragraph 19(b)) and the costs relating to the acquisition of derivatives
under the proposed to be repealed section 158ZQ of that Act
(paragraph 19(c)), together with any other miscellaneous costs, expenses,
obligations or liabilities that were incurred before commencement of the
BAF (paragraph 19(d)).
Note 1 at the end of clause 19 assists the reader by referring to
section 21 of the FMA Act, which relates to debits from Special Accounts.
Note 2 informs the reader that the Communications Fund was established by
the proposed to be repealed section 158ZG of the Consumer Protection Act.
Clause 20 - Purposes of the Building Australia Fund Special Account-
purposes not related exclusively to the Building Australia Fund
Clause 20 relates to payment of various expenses for purposes that are not
exclusively attributable to the BAF, but could be attributed to the BAF,
Future Fund, EIF or HHF. The intention of subclauses 20(a) to (g) is to
allow common costs of the BAF, Future Fund, EIF and HHF to be paid
initially by one Fund (with subsequent apportionment between the Funds).
A note at the end of clause 20 assists the reader by referring to
section 21 of the FMA Act, which relates to debits from Special Accounts.
Clause 21 - Extended meaning of payment in relation to the creation or
development of transport infrastructure
Clause 21 extends the meaning of the phrase payment in relation to the
creation or development of transport infrastructure as it relates to the
BAF Special Account. The purpose of this clause is to allow payments from
the BAF for the acquisition, in the name of the Commonwealth, of financial
assets in entities involved in the creation or development of transport
infrastructure (including incidental or ancillary matters). Flexibility is
provided for the acquisition of shares, debentures and trust units in
companies, as well as for the acquisition of other types of financial
assets in other business entities. The extended definition is intended to
provide flexibility in how the Government invests in the creation or
development of transport infrastructure.
Shares, debentures or units acquired under paragraphs 21(a), (b) or (c)
allow for investment at the time a relevant company is formed, as well as
investment in relevant existing companies. Paragraph 21(d) similarly
applies in relation to business entities.
Paragraph 21(b), relating to debentures, covers the provision of financial
assistance to a company by way of loan. This is consistent with the
definition of 'debenture' in the Act, which provides that the term has the
same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
this clause will be in the name of the Commonwealth and will be managed by
the Commonwealth. It is intended that the Infrastructure Minister will
manage the Commonwealth's ownership obligations as well as exposures and
risks associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the BAF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 121 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 22 - Extended meaning of payment in relation to the creation or
development of communications infrastructure
Clause 22 extends the meaning of the phrase payment in relation to the
creation or development of communications infrastructure, as it relates to
the purposes of the BAF Special Account. The purpose of this clause is to
allow payments from the BAF for the acquisition, in the name of the
Commonwealth, of financial assets in entities involved in the creation or
development of communications infrastructure (including incidental or
ancillary matters). Flexibility is provided for the acquisition of shares,
debentures and trust units in companies, as well as for the acquisition of
other types of financial assets in other business entities. The extended
definition is intended to provide flexibility in how the Government invests
in the creation or development of communications infrastructure outside of
the NBN.
Shares, debentures or units acquired under paragraphs 22(a), (b) or (c)
allow for investment at the time a relevant company is formed, as well as
investment in relevant existing companies. Paragraph 22(d) similarly
applies in relation to business entities.
Paragraph 22(b), relating to debentures, covers the provision of financial
assistance to a company by way of loan. This is consistent with the
definition of 'debenture' in the Act, which provides that the term has the
same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
this clause will be in the name of the Commonwealth and will be managed by
the Commonwealth. It is intended that the Communications Minister will
manage the Commonwealth's ownership obligations as well as exposures and
risks associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the BAF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 121 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 23 - Eligible national broadband network matter
In the 2008-09 Budget, the Government announced that it would provide up to
$4.7 billion in funding for the NBN, as part of its broader commitment in
relation to finance critical infrastructure in areas such as transport,
communications, education and health.
Clause 23 defines the term eligible national broadband network matter as it
relates to purposes of the BAF Special Account. Eligible national
broadband network matters relate to the creation or development of a
national broadband network and the supply of a broadband carriage service
over a national broadband network, and incidental or ancillary matters.
National broadband network is defined in the Bill to mean a national
telecommunications network for the high-speed carriage of communications.
The terms "carriage", "communications" and "telecommunications network"
have the same meanings as in the Telecommunications Act 1997. It is
intended that the concept of "a national telecommunications network" would
involve network that would have a presence in each State of Australia and
in the Australian Capital Territory and the Northern Territory. A note to
this definition takes the reader to subclause 7(2) which makes it clear
that a national broadband network is not necessarily required to extend to
any or all of the external territories.
The definition of eligible national broadband network matter is not
intended to prescribe a particular form of funding or investment, rather it
is intended to provide flexibility in how the Government may ultimately
invest in the NBN. This might include a combination of forms of investment
covered by clause 23. While the Government has indicated that its
preference is for an equity investment, it has also indicated that it will
consider other options with a view to achieving the optimal outcome.
Shares, debentures or units acquired under paragraphs 23(a), (b) or (c)
allow for investment at the time a relevant company is formed, as well as
investment in relevant existing companies. Paragraph 23(d) similarly
applies in relation to business entities.
Paragraph 23(b), relating to debentures, covers the provision of financial
assistance to a company by way of loan. This is consistent with the
definition of 'debenture' in the Act, which provides that the term has the
same meaning as in the Corporations Act.
Assets for use in connection with a national broadband network referred to
in paragraph 23(g) covers the acquisition of physical assets (such as
physical infrastructure to be used in connection with the network).
An acquisition of shares, debentures, units or financial assets under this
clause will be in the name of the Commonwealth and will be managed by the
Commonwealth. It is intended that the Communications Minister will manage
the Commonwealth's ownership obligations as well as exposures and risks
associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the BAF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 121 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 24 - Extended meaning of payment in relation to the creation or
development of energy infrastructure
Clause 24 extends the meaning of the phrase payment in relation to the
creation or development of energy infrastructure as it relates to the BAF
Special Account. The purpose of this clause is to allow payments from the
BAF for the acquisition, in the name of the Commonwealth, of financial
assets in entities involved in the creation or development of energy
infrastructure (including incidental or ancillary matters). Flexibility is
provided for the acquisition of shares, debentures and trust units in
companies, as well as for the acquisition of other types of financial
assets in other business entities. The extended definition is intended to
provide flexibility in how the Government invests in the creation or
development of energy infrastructure.
Shares, debentures or units acquired under paragraphs 24(a), (b) or (c)
allow for investment at the time a relevant company is formed, as well as
investment in relevant existing companies. Paragraph 24(d) similarly
applies in relation to business entities.
Paragraph 24(b), relating to debentures, covers the provision of financial
assistance to a company by way of loan. This is consistent with the
definition of 'debenture' in the Act, which provides that the term has the
same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
this clause will be in the name of the Commonwealth and will be managed by
the Commonwealth. It is intended that the Energy Minister will manage the
Commonwealth's ownership obligations as well as exposures and risks
associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the BAF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 121 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 25 - Extended meaning of payment in relation to the creation or
development of water infrastructure
Clause 25 extends the meaning of the phrase payment in relation to the
creation or development of water infrastructure as it relates to the BAF
Special Account. The purpose of this clause is to allow payments from the
BAF for the acquisition, in the name of the Commonwealth, of financial
assets in entities involved in the creation or development of water
infrastructure (including incidental or ancillary matters). Flexibility is
provided for the acquisition of shares, debentures and trust units in
companies, as well as for the acquisition of other types of financial
assets in other business entities. The extended definition is intended to
provide flexibility in how the Government invests in the creation or
development of water infrastructure.
Shares, debentures or units acquired under paragraphs 25(a), (b) or (c)
allow for investment at the time a relevant company is formed, as well as
investment in relevant existing companies. Paragraph 25(d) similarly
applies in relation to business entities.
Paragraph 25(b), relating to debentures, covers the provision of financial
assistance to a company by way of loan. This is consistent with the
definition of 'debenture' in the Act, which provides that the term has the
same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
this clause will be in the name of the Commonwealth and will be managed by
the Commonwealth. It is intended that the Water Minister will manage the
Commonwealth's ownership obligations as well as exposures and risks
associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the BAF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 121 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 26 - Future Fund Board must ensure that there is sufficient money in
the Building Australia Fund Special Account to cover authorised payments
etc.
Clause 26 requires the Future Fund Board to take all reasonable steps to
ensure that the amount of money standing to the credit of the BAF Special
Account is sufficient to cover amounts to be debited from the BAF to
support expenditure in relevant infrastructure - namely, payments in
relation to the creation or development of transport infrastructure, the
creation or development of communications infrastructure, eligible national
broadband network matters, the creation or development of energy
infrastructure and the creation or development of water infrastructure. It
also includes payments to be channelled through BAF Portfolio Special
Accounts, and through the COAG Reform Fund for grants of financial
assistance to States and Territories, in relation to relevant
infrastructure.
A note at the end of clause 26 is inserted to assist the reader by
clarifying that the Future Fund Board may need to liquidate non-cash assets
in accordance with clause 34 in order to comply with this clause.
Division 5-Inter-fund transfers
Clauses 27 to 29 - Transfers from the Building Australia Fund to the Future
Fund, Education Investment Fund, and Health and Hospitals Fund
Clauses 27 to 29 allow for amounts to be transferred between the BAF and
the Future Fund, EIF and HHF. The purpose of this is to cover the
situation where one Fund pays entirely for an expense that should properly
be apportioned between two or more Funds. The clauses allow the
Finance Minister to direct one Fund is to be debited and the other Fund or
Funds credited by a specified amount.
Corresponding transfers from the Future Fund, EIF and HHF into the BAF are
provided for in this Bill.
Subclauses 27(3), 28(3) and 29(3) make it clear that directions of the
Finance Minister are not legislative instruments. These provisions are
merely declaratory in nature. Directions of this type are administrative
in character because they are merely the application of a legal power in a
particular case; they do not determine or alter the content of the law
itself.
Part 2.3-Investment of the Building Australia Fund
Clause 30 - Simplified outline
Clause 30 is an information provision which provides an overview of
Part 2.3 to assist with readability.
Clause 31 - Objects of investment of the Building Australia Fund
Subclause 31(1) is intended to reinforce that amounts are invested by the
Future Fund Board for the main objects of enhancing the Commonwealth's
ability to make payments in relation to the creation or development of
transport infrastructure, the creation or development of communications
infrastructure, eligible national broadband network matters, the creation
or development of energy infrastructure and the creation or development of
water infrastructure.
Subclause 31(2) sets out that the ancillary objects of the investment of
the BAF are for enhancing the ability of the Commonwealth and the Future
Fund Board to discharge costs, expenses, obligations and liabilities and
make payments for the ancillary purposes as set out in paragraphs 18(1)(f)
to (l), 19(a) to (d) and 20(a) to (g).
Clause 32 - Investment of the Building Australia Fund
Clause 32 is modelled on the investment powers under section 39 of the FMA
Act. However, subclause 32(1) expands those powers to specifically provide
for the investment of the BAF in a broad range of financial assets, which
could include cash, interest bearing securities and global property
securities, with the use of derivatives for risk management. Specific
conditions on the acquisition of derivatives are separately covered in
clause 42. This approach to investment of the BAF is consistent with
similar arrangements for the Future Fund.
Investments of the BAF will be made in the name of the Future Fund Board
(rather than the Commonwealth) to reinforce the position that the Future
Fund Board manages the BAF at arm's length from the Government. However,
beneficial ownership of the BAF remains with the Commonwealth at all times.
Subclause 32(3) provides that money invested in financial assets are
'investments of the BAF' and may be realised, disposed of or redeemed by
the Future Fund Board.
Clause 33 - Building Australia Fund to inherit investments of the
Communications Fund
The Communications Fund will be closed and its balance transferred to the
BAF.
Clause 33 is a transitional provision relating to transfer of assets of the
Communications Fund to the BAF. It provides for the financial assets of
the Communications Fund, which are held by the Commonwealth (and have
continuously been held by the Commonwealth since commencement of the
section), to become investments of the BAF.
The Commonwealth's rights and powers associated with the assets may be
exercised by the Future Fund Board and are taken to be a BAF investment
function of the Future Fund Board.
The BAF inherits the balance of the Communications Fund Special Account
under clause 16.
Clause 34 - Management of investments of the Building Australia Fund
Clause 34 sets out various matters relating to the management of
investments of the BAF.
Subclauses 34(1) and (2) provide that income derived from an investment of
the BAF, including a return of capital or another form of financial
distribution, must be credited to the BAF Special Account. This is
consistent with the requirements under sections 81 and 83 of the
Constitution (which, in effect, provide that public money forms part of the
Consolidated Revenue Fund and can only be spent if authorised by an
appropriation made by law). In practice, any money that has not been
invested must be held in an official bank account. The requirement to hold
the money in an official bank account is covered in the FMA Act.
Subclauses 34(3) to (5) relate to the arrangements that will apply in
relation to the realisation of assets. While subclauses 34(3) to (4) are
self explanatory, subclause 34(5) allows the Future Fund Board to
authorise, prior to an investment maturing, that the proceeds of this
investment be automatically reinvested with the same entity. This avoids
the need for the proceeds of realisation of the investment to be treated as
public money and credited to the Consolidated Revenue Fund only to be then
reappropriated and reinvested. Any reinvestment is an investment of the
BAF.
Subclause 34(6) provides that section 39 of the FMA Act does not apply to
an investment of the BAF. Section 39 of the FMA Act authorises the
Finance Minister to invest public money in only a limited range of
investments, such as government bonds and bank deposits. However,
clause 32(1) provides for the investment of the BAF in a broader range of
financial assets, which could include cash, interest bearing securities and
global property securities, with the use of derivatives for risk
management.
Clause 35 - Building Australia Fund Investment Mandate
It is appropriate that the Government, as manager of the economy and owner
of the BAF, has a mechanism for articulating its overall expectations for
how the BAF will be invested and managed by the Future Fund Board.
Clause 35 establishes a framework that enables the Government to give
strategic guidance to the Future Fund Board while preserving the Board's
role in managing the investment of the BAF at arm's length from the
Government. This approach is consistent with that existing in relation to
the Future Fund.
Subclause 35(1) provides that the responsible Ministers have the power to
give the Future Fund Board written directions in relation to the
performance of its investment functions and the exercise of its powers.
The responsible Ministers must issue at least one direction to ensure that
an Investment Mandate is in force at all times and to provide clarity and
certainty to the Future Fund Board. Note that Building Australia Fund
investment function is defined in section 4.
Subclause 35(2) provides that any direction issued under subclause 35(1)
has effect subject to the limitations set out in clause 36 - Limitation on
Building Australia Fund Investment Mandate.
The fact that a direction has already been issued does not prohibit the
responsible Ministers from issuing additional directions. All of these
directions together comprise the Investment Mandate (see subclauses 35(1)
and 35(4)).
While the responsible Ministers can issue new directions at any time, the
intention is that the Investment Mandate will reflect the nature of the
Government's policy. Any new directions will therefore only be issued in
light of significant policy changes or material changes in the investment
environment faced by the BAF.
Subclause 35(3) provides that in setting an Investment Mandate, the
responsible Ministers must have regard to maximising the return on the BAF,
consistent with international best practice for institutional investment,
enhancing the Commonwealth's ability to make payments in relation to the
objects of the BAF (set out in clause 9), and any other matters the
Ministers consider to be relevant. This requirement will give the Future
Fund Board and the Parliament assurance that the responsible Ministers must
consider the scope of their directions from an investment perspective,
while ensuring that there is flexibility to take account of broader policy
issues and national interest considerations.
Subclauses 35(5) and 35(6) provide that the Investment Mandate may include,
but is not limited to, statements about policies the Future Fund Board must
pursue in relation to risk and return and the allocation of the BAF to
particular asset classes. This may include restrictions or thresholds for
investing the BAF in certain jurisdictions or asset classes and statements
of the Government's tolerance for losses.
Subclause 35(7) provides that any policies are subject to the limitations
set out in clause 36.
Subclause 35(8) ensures that the Future Fund Board is not given conflicting
directions regarding the Government's tolerance for risk, its expectations
for returns and any associated allocation of the BAF across asset classes.
To avoid doubt, subclause 35(9) makes it clear that the scope of the
responsible Ministers' power to issue directions to the Future Fund Board
in relation to the investment of the BAF is bound by the Act. For example,
the responsible Ministers could not direct the Future Fund Board to use
derivatives in a manner that contradicts clause 42 (which deals with the
acquisition of derivatives by the Future Fund Board).
Subclause 35(10) provides that the Investment Mandate will not formally
commence until at least 15 calendar days after it is issued. This is to
allow the Future Fund Board time to adjust to any revised directions issued
by the responsible Ministers. Importantly, the Future Fund Board will be
able to know with certainty when the new direction will come into force.
Subclause 35(11) provides that directions under subclause 35(1), that set
out certain rules that the Future Fund Board must comply with, are
legislative in character and are therefore legislative instruments for the
purposes of section 5 of the Legislative Instruments Act. However, any
directions issued by the responsible Ministers as part of the Investment
Mandate are exempt from parliamentary disallowance provided by section 44
of the Legislative Instruments Act and exempt from sunsetting provided by
section 54 of the Legislative Instruments Act).
As legislative instruments, any directions given to the Future Fund Board
under this clause are required to be registered on the Federal Register of
Legislative Instruments and tabled in the Parliament.
This approach enables the public and Parliament to hold the Government
accountable for the directions it issues to the Future Fund Board without
impeding the Government's ability to manage its finances.
Subclauses 35(12) and 35(13) provide that, subject to the restrictions set
out in the Act and the expectations of the Government as articulated in the
Investment Mandate, the Future Fund Board has a statutory obligation to
seek to maximise returns, consistent with international best practice for
institutional investment and enhancing the Commonwealth's ability to make
payments in relation to the objects of the BAF (set out in clause 9).
This provision (together with subclause 35(8)) establishes a clear
hierarchy of priorities for the Future Fund Board - the responsibility to
maximise returns is subordinate to the investment parameters set out by the
Parliament and the Government. This framework provides appropriate
flexibility while still ensuring suitable accountability for any directions
the Government gives the Future Fund Board regarding the investment of the
BAF.
It also provides the Future Fund Board with clarity as to the extent of its
accountability - the Future Fund Board must be able to demonstrate that it
is pursuing policies and strategies that are clearly directed at maximising
investment returns in a manner that is consistent with best practice.
It is expected that the Future Fund Board will adopt a best practice
approach to a range of issues by learning from the experiences of other
investors and funds of national significance.
The purpose of subclause 35(13) is to clarify that the subclause is the
default position in the event that a direction under subclause 35(1) is not
issued or is revoked. However, a direction issued by the Ministers under
subclause 35(1) will override subclause 35(12).
Clause 36 - Limitation on Building Australia Fund Investment Mandate
Clause 36 aims to ensure that the BAF is not invested in a way that is
inconsistent with its objectives. A similar clause exists in the Future
Fund Act.
Subclause 36(1) specifies that the responsible Ministers cannot direct the
Future Fund Board to use the assets of the BAF to invest in a particular
financial asset, for example, shares in a particular infrastructure
company. It also prevents the responsible Ministers from issuing a
Ministerial direction that has the effect of requiring the Future Fund
Board to use the assets of the BAF to support a particular business entity,
a particular activity or a particular business.
This clause does not limit the ability of the Investment Mandate to set out
the policies as intended under the Bill, such as those to be pursued by the
Future Fund Board in relation to matters of risk and return.
This clause does not limit the Commonwealth's ability to acquire shares in
a company, debentures in a company, units in a unit trust, or other
vehicles that are allowed for the creation or development of relevant
infrastructure under clauses 21, 22, 23, 24 and 25. Such investments are
external to the BAF and are not made by the Future Fund Board.
Clause 37 - Future Fund Board to be consulted on Building Australia Fund
Investment Mandate
Consistent with the Future Fund arrangements, the responsible Ministers are
required to consult the Future Fund Board on any changes or additions to
the Investment Mandate. Subclauses 37(1) and 37(3) achieve this by
requiring the responsible Ministers to send a draft of the new direction to
the Future Fund Board and inviting the Board to make a submission within a
specified time limit.
The specified time limit will be determined on a case by case basis with
regard to relevant circumstances and priorities at the time. It may be the
case that urgent changes are required in the national interest. In this
situation, it would be reasonable for the Future Fund Board to be asked to
consider a draft direction quickly. However, where there is less urgency,
or the change in the Investment Mandate is quite substantial, it would be
reasonable to provide the Future Fund Board with more time to consider a
draft direction.
Subclause 37(2) provides that any submission received by the responsible
Ministers from the Future Fund Board must be tabled in the Parliament with
the new direction. In this way, the Future Fund Board will be able to
ensure that their views on the expected impact on their ability to maximise
returns are publicly known.
Clause 38 - Compliance with Building Australia Fund Investment Mandate
Subclause 38(1) provides that it is the responsibility of the Future Fund
Board to take all reasonable steps to ensure that all policies and
decisions regarding the operation and investment of the BAF are in
accordance with any directions (Investment Mandate) issued by the
responsible Ministers. Since the Investment Mandate is intended to provide
broad guidance to the Future Fund Board, it may contain directions that
require the Board to apply its judgement on whether or not the BAF is
complying with the Mandate.
Subclause 38(2) provides that if the Future Fund Board becomes aware of a
breach of the Investment Mandate or judges that a policy does not comply
with the Investment Mandate, it must inform the responsible Ministers in
writing as soon as is practicable, including a proposed strategy to bring
the operations of the BAF into accordance with the Investment Mandate.
Similarly, subclauses 38(3) and 38(4) provide that if the Government
identifies areas where the Future Fund Board is not complying with the
Investment Mandate, the responsible Ministers can issue written directions
to the Board to take action to remedy the situation. The Future Fund Board
is required to comply with any such directions, noting that the responsible
Ministers are the final arbiters on what is intended by the Investment
Mandate.
Subclause 38(5) provides that any transactions undertaken by the Future
Fund Board that are deemed later not to have complied with the Investment
Mandate, are still valid and the Board is required to honour any commitment
made. This protects third parties who enter into transactions with the
Future Fund Board or its agents in good faith.
Subclause 38(6) makes it clear that a direction under subclause 38(3) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Clause 39 - Future Fund Board must not trigger the takeover provisions of
the Corporations Act 2001
To minimise market distortion and eliminate the potential for conflicts of
interest for the Government as a market regulator, the Future Fund Board is
prohibited from triggering the takeover provisions under section 606 of the
Corporations Act.
Section 606 of the Corporations Act essentially prohibits acquisitions in
relevant interests in the voting shares of a listed company, or unlisted
company with more than 50 share holders, if a person's voting power
increases from a figure at or below 20% to a figure above 20% (or from a
figure above 20% to a higher figure above 20% but below 90%) - unless the
shares are acquired in one of the circumstances set out at section 611 of
that Act.
However, it is the Government's intention that the takeover threshold be
adhered to quite strictly in relation to listed companies and unlisted
companies with more than 50 shareholders. Therefore, subclause 39(1)
provides that the exceptions provided under section 611 of the Corporations
Act (that is, exceptions to the prohibition in section 606) do not apply in
relation to acquisitions by the Future Fund Board.
The prohibition on the Future Fund Board is not expected to have a material
impact on the investment efficiency of the BAF as such limits are quite
similar to those often used by other fund managers. However, the Future
Fund Board will need to have regard to the entirety of its interest (i.e.
through investment of the BAF, Future Fund, EIF and HHF) in a particular
company when the Board is proposing a particular acquisition in the context
of the BAF.
Subclause 39(2) provides that if for some reason the Future Fund Board has
not complied with section 606 of the Corporations Act (as it is applied to
the Future Fund Board under clause 39), the relevant transactions will
still be valid. The aim of this provision is to ensure third parties are
not adversely affected by any non compliance of the Future Fund Board.
A note at the end of the clause assists the reader by referring to
section 39 of the Future Fund Act, which sets out the application of the
Corporations Act to the Future Fund Board.
Note that the Future Fund Board is also prohibited from acquiring more than
a 20% stake (as defined in the Financial Sector (Shareholdings) Act with a
few minor adjustments) in a foreign publicly listed company. This
prohibition is found in section 84C of the Future Fund Act, but applies to
the Future Fund Board's activities in relation to the BAF, Future Fund, EIF
and HHF. Therefore, the Future Fund Board must take account of the overall
level of its investment in a foreign listed company in complying with this
provision.
Clause 40 - Borrowing
Clause 40 prohibits the Future Fund Board from borrowing money, except for
short term borrowing associated with the settlement of transactions or in
other circumstances prescribed in regulations (see subclause 40(3) below).
Consistent with the Future Fund Board's broader role in relation to
managing the assets of a number of funds (including the Future Fund), the
eligibility of short term borrowing for transaction settlement is in line
with the treatment of superannuation funds under the Superannuation
Industry (Supervision) Act 1993.
The overall aim of this clause is to ensure that the Future Fund Board is
able to operate efficiently without exposing the budget to undue risk.
Subclause 40(3) provides that regulations may be made to specify
circumstances in which it is considered appropriate for the Future Fund
Board to be able to borrow. Regulations may also be used to clarify any
uncertainty on whether a particular activity constitutes borrowing. While
it is not anticipated that the Future Fund Board will have a need to
borrow, this provision allows for unforseen events or changes in the
investment environment without the need to amend the primary legislation.
The regulations would be disallowable by either House of the Parliament.
Clause 41 - Building Australia Fund investment policies
Subclauses 41(1), 41(3) and 41(7) provide that the Future Fund Board is
required to formulate, publish and comply with a number of policies on its
investment activities.
The aim of this provision is to ensure rigour and transparency around how
the Future Fund Board performs its investment function in relation to the
BAF, including risk management and performance assessment and benchmarks.
In addition to the specific matters set out in subclause 41(1)(a) to (d),
the Future Fund Board is required to formulate, publish and comply with
policies and any additional matters specified in regulations (see
paragraph 41(1)(e) and subclause 41(7)).
A note at the end of subclause 41(1) reminds the reader that, under
subsection 33(3) of the Acts Interpretation Act, the Future Fund Board is
able to repeal, rescind, revoke, amend, or vary any such policies.
Subclause 41(2) provides that the policies that the Future Fund Board
develops must not be incompatible with the Investment Mandate.
Subclause 41(4) provides that the Future Fund Board must publish the first
set of policies on the internet as soon as is practicable following the
commencement of this clause.
Subclauses 41(5) and 41(6) provide that the Future Fund Board must conduct
reviews of these policies periodically and where the responsible Ministers
change the Investment Mandate. It is not expected that these reviews would
be a formal process or that the results of the reviews would be required to
be published. However, if the review resulted in any changes to the
policies, it is intended that the updated policies would be published on
the internet.
Subclause 41(8) provides that if the Future Fund Board enters into a
transaction which is not consistent with a policy that it has published
under this clause, the transaction will still be valid. This will ensure
that third parties are not affected by any inconsistency with the Future
Fund Board's policies. However, subclause 41(7) provides that the Future
Fund Board is required to take all reasonable steps to comply with the
policies it develops under subsection 41(1).
Subclause 41(9) makes it clear that the policies of the Future Fund Board
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 42 - Derivatives
Derivatives are widely used by financial market participants as a tool for
risk management. As the sophistication, size and mobility of capital
markets around the world increases, investment managers are looking for
more ways to maximise the returns on investments while minimising the
volatility of results. The types and volumes of derivatives being traded
has grown exponentially as the underlying markets have created demand for
these types of instruments.
Clause 42 provides for the Future Fund Board to make use of derivatives for
certain purposes. This includes as a risk management tool and to achieve
indirect exposure to assets that it could not otherwise achieve. The
Future Fund Board may also use derivatives to reduce the transaction cost
of achieving required exposures. However, subclause 42(1) provides that it
may not use derivatives for speculative purposes or for leverage.
Subclause 42(2) provides that the acquisition of derivatives under this
clause cannot be inconsistent with the requirement under clause 41 for the
Future Fund Board to formulate a policy on its investment strategy and take
all reasonable steps to comply with that policy.
Subclauses 42(3) and 42(4) provide that derivatives must be held in the
name of the Future Fund Board and are taken to be an investment of the BAF.
Similar to other investments, derivatives may be realised by the Future
Fund Board under subclause 34(3).
Clause 43 - Additional financial assets
Clause 43 provides that if the Future Fund Board becomes a holder of
another financial asset, for example through a capital distribution, that
asset becomes an investment of the BAF and is therefore subject to all the
restrictions and requirements for investments of the BAF.
Clause 44 - Securities lending arrangements
Clause 44 provides that the Future Fund Board is able to enter into
securities lending arrangements. Lending of securities is commonplace
among institutional investors. It may also take collateral as part of a
securities lending arrangement. Any collateral it takes is either credited
to the BAF Special Account or becomes an investment of the BAF.
Clause 45 - Investment managers
Subclause 45(1) provides that the Future Fund Board is able to hire one or
more investment managers. Investment manager is defined broadly to include
custodians, transition managers and other investment managers. However,
the Agency is excluded from this definition as it is generally expected
that investment activities, such as acquiring derivatives or investing
money, will be outsourced.
Unless approved by the responsible Ministers, the Future Fund Board must
use investment managers to invest money in financial assets, acquire
derivatives, enter into securities lending arrangements or realise
financial assets.
Subclause 45(2) provides that the responsible Ministers may provide
approval in writing for certain methods of investment, other than through
investment managers, should it be prudent and cost effective to do so.
Subclauses 45(3) and 45(4) provide that the Future Fund Board is required
to ensure that investment managers operate within the Act and must report
on the state of investments of the BAF to the Board and the Agency. It
would be expected that such obligations are set out in the contractual
arrangements between the Future Fund Board and the investment manager.
Clause 46 - Custody of securities
Clause 46 provides that section 40 of the FMA Act does not apply to
investment of the BAF.
Section 40 of the FMA Act requires officials who receive any bonds,
debentures or other securities in the course of their duties to deal with
them in accordance with the Finance Minister's Orders. This provision is
designed for departments of state who carry out a more limited range of
investment activities than is envisaged for the Future Fund Board (and
Agency) in relation to the BAF. Further, making custodians and other
investment managers comply with the Finance Minister's Orders for
investment purposes could impose an undue administrative burden.
While section 40 of the FMA Act is excluded, a framework for how the Future
Fund Board must deal with securities that it receives in relation to the
BAF is covered by clauses 34 and 44.
Clause 47 - Refund of franking credits
Under subsection 84B(1) of the Future Fund Act, the Future Fund Board is
deemed to be an exempt institution that is eligible for a refund of
franking credits under the ITAA. As the Future Fund Board is exempt from
income tax, it may have an investment bias towards assets whose return had
not previously been subject to income tax (such as debt instruments or
unfranked dividends). Refunding franking credits removes any potential
bias against franked dividends.
Clause 47 deals with refund of franking credits and provides that if the
Future Fund Board receives a refund of a tax offset under the ITAA and the
tax offset is attributable to the investment of the BAF, any refund
received is credited to the BAF Special Account.
Clause 48 - Realisation of non-financial assets
Clause 48 requires the Future Fund Board to realise an asset that ceases to
be a financial asset or any asset acquired by the Board (as an investment
of the BAF) that is not a financial asset. This could include
circumstances where the Future Fund Board holds an asset which was
mistakenly acquired by the Board, or given to the Board, or which ceases to
be a financial asset due to a revision of the ABS government finance
statistics manual, for example.
The clause provides that a non-financial asset is treated as a financial
asset up to the time it is realised. Paragraphs 48(1)(b) and 48(2)(b)
ensure that the asset is considered an investment of the BAF and that
relevant provisions relating to investments of the BAF apply to that asset
for the time it is held by the Future Fund Board.
Clause 49 - Additional function of the Future Fund Board
Clause 49 provides that the functions of the Future Fund Board include the
function of investing amounts in accordance with the Act.
Part 2.4-Payments
Division 1-Introduction
Clause 50 - Simplified outline
Clause 50 is an information provision which provides an overview of
Part 2.4 to assist with readability.
The following diagram illustrates how payments may be made from the BAF.
[pic]
It is the Government's policy intention that payments from the BAF will be
channelled through BAF Portfolio Special Accounts in line with BAF
portfolio Ministers responsibilities for managing the delivery of
infrastructure projects. Grant payments will be disbursed to States and
Territories, via the relevant BAF Portfolio Special Account, through the
COAG Reform Fund.
Division 2-Direct payments
Clause 51 - Authorisation of payments
The Finance Minister has a central role in authorising payments (and
directing payments to be channelled through Portfolio Special Accounts and
the COAG Reform Fund - see below) from the BAF for projects agreed to by
the Government through the annual budget process. However, it is the
Government's intention that for any payments that have been authorised (or
directed), relevant portfolio Ministers - in the case of the BAF, the
Infrastructure Minister in relation to transport related matters, the
Communications Minister in relation to communications related matters, the
Energy Minister in relation to energy related matters and the Water
Minister in relation to water related matters - will manage the delivery of
projects (including obligations and any risks) associated with
disbursements from the BAF.
Clause 51 allows the Finance Minister to authorise payments in relation to
the creation or development of transport infrastructure, the creation or
development of communications infrastructure, eligible national broadband
network matters, the creation or development of energy infrastructure and
the creation or development of water infrastructure.
It is not intended that payments in relation to broader communications
related matters will limit each other in their application, which is
confirmed by subclause 51(6). Accordingly, for example, the
Finance Minister may authorise payments in relation to both communications
infrastructure and an eligible national broadband network matter (i.e.
where both aspects might exist in a particular case).
While the Finance Minister could authorise payments under each of
subclauses 51(1), (2), (3), (4) and (5) through separate authorisation
documents, subclause 51(7) allows flexibility for a single document to
cover the authorisation of one or more payment(s) under any of
subclauses 51(1), (2), (3), (4) and (5). The aim of this is to provide for
greater administrative efficiency in the authorisation of disbursements,
where appropriate.
Payments authorised under clause 51 are made directly from the BAF Special
Account to a State, Territory, or a person other than a State or Territory,
noting that a person includes a partnership.
Payments that are channelled through the BAF Infrastructure Portfolio
Special Account, the BAF Communications Portfolio Special Account, the BAF
Energy Portfolio Special Account and the BAF Water Portfolio Special
Account are dealt with separately in clauses 63, 70, 77 and 84 (see below).
It is intended that payments relating to transport infrastructure will be
channelled through the Infrastructure Portfolio Special Account, that
payments relating to communications infrastructure and eligible national
broadband matters will be channelled through the Communications Portfolio
Special Account, that payments relating to energy infrastructure will be
channelled through the Energy Portfolio Special Account and that payments
relating to water infrastructure will be channelled through the Water
Portfolio Special Account. This is consistent with the establishment of
these Portfolio Special Accounts to ensure that clear accountability and
reporting obligations rest with the relevant portfolio departments. It is
also consistent with portfolio Ministers' responsibilities for managing the
delivery of agreed projects. However, the ability for the Finance Minster
to authorise payments directly from the BAF Special Account provides
maximum flexibility as to how funding may be provided in future.
Payments by way of a grant of financial assistance made to a State or
Territory that are channelled through the COAG Reform Fund are dealt with
separately in clauses 89, 94, 99 and 104 (see below). It is intended that
grants of financial assistance that are made to States and Territories will
be initially transferred from the BAF to the relevant Portfolio Special
Account and then channelled through the COAG Reform Fund. This is
consistent with the COAG Reform Fund being the vehicle through which
capital transfers from the Funds, as well as other funding from the budget,
will be distributed to States and Territories.
Subclause 51(8) makes it clear that authorisations of the Finance Minister
are not legislative instruments. These provisions are merely declaratory
in nature. Authorisations of this type are administrative in character
because they are merely the application of a legal power in a particular
case; they do not determine or alter the law itself.
Clause 52 - Recommendations about payments
It is intended that portfolio Ministers will be responsible for preparing
proposals to be brought forward for Government consideration as part of the
annual budget process. As part of this process, portfolio Ministers will
make recommendations to the Finance Minister that payments are to be
authorised from the BAF. In this context, the Government has also made a
commitment that all projects financed from the BAF, EIF and HHF will need
to satisfy rigorous evaluation criteria assessed by independent bodies.
To ensure that all proposals ultimately funded from the BAF have met the
Government's broader commitment, BAF portfolio Ministers must ensure that
relevant advice has been sought from Infrastructure Australia which
supports their recommendation for a payment to be authorised from the BAF.
Note that in relation to communications related matters, subclauses 52(5)
and (6) reflect that Infrastructure Australia will consider projects
relating to communications infrastructure. Infrastructure Australia will
not consider proposals relating to eligible national broadband network
matters as these will be considered through a separate process.
Consistent with the framework, subclauses 52(1), (4), (8) and (11) provide
that the Finance Minister must not authorise a payment from the BAF unless
the relevant BAF portfolio Minister has recommended the authorisation of
the payment.
Subclauses 52(2), (5), (9) and (12) confirm the obligation on the BAF
portfolio Minister to receive relevant advice from Infrastructure Australia
and to ensure that a proposal for a payment from the BAF satisfies the
relevant BAF evaluation criteria (Infrastructure Australia will not provide
advice on proposals relating to eligible national broadband network
matters, as above).
In deciding to make a recommendation that a payment be authorised from the
BAF, subclauses 52(3), (6), (10) and (13) require the BAF portfolio
Minister to have regard to the advice from Infrastructure Australia,
together with any other matter he or she considers relevant.
While Infrastructure Australia will not consider proposals relating to
eligible national broadband network matters, subclause 52(7) provides that
a payment must not be authorised unless the Communications Minister has
recommended the payment.
Clause 53 - Grant to a State or Territory-transport infrastructure
Clause 53 is concerned with grants of financial assistance that are paid to
a State or Territory for the purpose set out in paragraph 18(1)(a) - i.e.
in relation to the creation or development of transport infrastructure.
Note that, in this case, the payment is not channelled through the BAF
Infrastructure Portfolio Special Account or through the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 53(3) provides for the Infrastructure Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
delivery of projects (including obligations and any risks) associated with
disbursements from the BAF.
Clause 54 - Grant to a State or Territory-communications infrastructure
etc.
Clause 54 is concerned with grants of financial assistance that are paid to
a State or Territory for the purposes set out in paragraph 18(1)(b) and (c)
- i.e. in relation to the creation or development of communications
infrastructure and in relation to eligible national broadband matters.
Note that, in this case, the payment is not channelled through the
Communications Portfolio Special Account or through the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 54(3) provides for the Communications Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 55 - Grant to a State or Territory-energy infrastructure
Clause 55 is concerned with grants of financial assistance that are paid to
a State or Territory for the purposes set out in paragraph 18(1)(d) - i.e.
in relation to the creation or development of energy infrastructure. Note
that, in this case, the payment is not channelled through the BAF Energy
Portfolio Special Account or through the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 55(3) provides for the Energy Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 56 - Grant to a State or Territory-water infrastructure
Clause 56 is concerned with grants of financial assistance that are paid to
a State or Territory for the purposes set out in paragraph 18(1)(e) - i.e.
in relation to the creation or development of water infrastructure. Note
that, in this case, the payment is not channelled through the BAF Water
Portfolio Special Account or through the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 56(3) provides for the Water Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 57 - Grant to a person other than a State or Territory-transport
infrastructure
Clause 57 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory for the purpose set out in
paragraph 18(1)(a) - i.e. in relation to the creation or development of
transport infrastructure. Note that, in this case, the payment is not
channelled through the BAF Infrastructure Portfolio Special Account. Also,
these payments are only paid directly to a recipient (and not through the
COAG Reform Fund which is a mechanism to disburse funds to States and
Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 57(3) provides for the Infrastructure Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 58 - Grant to a person other than a State or Territory-
communications infrastructure etc.
Clause 58 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory for the purposes set out in
paragraph 18(1)(b) and (c) - i.e. in relation to the creation or
development of communications infrastructure and in relation to eligible
national broadband matters. Note that, in this case, the payment is not
channelled through the Communications Portfolio Special Account. Also,
these payments are only paid directly to a recipient (and not through the
COAG Reform Fund which is a mechanism to disburse funds to States and
Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State are to be set out in a written agreement
between the Commonwealth and the person.
Subclause 58(3) provides for the Communications Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 59 - Grant to a person other than a State or Territory-energy
infrastructure
Clause 59 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory for the purpose set out in
paragraph 18(1)(d) - i.e. in relation to the creation or development of
energy infrastructure. Note that, in this case, the payment is not
channelled through the BAF Energy Portfolio Special Account. Also, these
payments are only paid directly to a recipient (and not through the COAG
Reform Fund which is a mechanism to disburse funds to States and
Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 59(3) provides for the Energy Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 60 - Grant to a person other than a State or Territory-water
infrastructure
Clause 60 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory for the purpose set out in
paragraph 18(1)(e) - i.e. in relation to the creation or development of
water infrastructure. Note that, in this case, the payment is not
channelled through the BAF Water Portfolio Special Account. Also, these
payments are only paid directly to a recipient (and not through the COAG
Reform Fund which is a mechanism to disburse funds to States and
Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 60(3) provides for the Water Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Division 3-Channelling of payments through the BAF Infrastructure Portfolio
Special Account
Clause 61 - Establishment of the BAF Infrastructure Portfolio Special
Account
In line with the role of portfolio Ministers in managing agreed projects,
clear accountability and reporting of disbursements from the BAF will rest
within relevant portfolio departments. For example, it is intended that
the relevant portfolio department will be responsible for arranging for a
specific payment to be made from the BAF based on the portfolio Minister's
agreement that project milestones (or other conditions) have been
satisfactorily achieved. It will also include ensuring that the FMA Act
obligations, in relation to the efficient and effective use of public
money, are being met in relation to such payments.
Clause 61 establishes the BAF Infrastructure Portfolio Special Account - a
Special Account for the purposes of section 21 of the FMA Act. A Special
Account is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the BAF Special Account and credited to the BAF
Infrastructure Portfolio Special Account can only be subsequently debited
from the BAF Infrastructure Special Account for the purpose in clause 62.
Clause 62 - Purpose of the BAF Infrastructure Portfolio Special Account
Subclause 62(1) describes the purpose of the BAF Infrastructure Portfolio
Special Account, which is for making payments in relation to the creation
or development of transport infrastructure. The note immediately following
subclause 62(1) assists the reader by referring to section 21 of the FMA
Act, which deals with debits from Special Accounts.
Subclause 62(2) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the BAF Special Account.
Clause 63 - Channelling of payments through the BAF Infrastructure
Portfolio Special Account
Clause 63 provides the mechanism for specific amounts to be debited from
the BAF Special Account and credited to the BAF Infrastructure Portfolio
Special Account for the purposes of making payments in relation to the
creation or development of transport infrastructure.
Subclause 63(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF Special Account to the
BAF Infrastructure Portfolio Special Account.
Subclauses 63(2) confirms that such a direction must be given so as to
allow that amount to be debited from the BAF Infrastructure Portfolio
Special Account for making a specified payment in relation to the creation
or development of transport infrastructure. This will ensure that the
agreed purpose is retained when that amount is channelled through the BAF
Infrastructure Portfolio Special Account.
Subclause 63(3) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 63(4) makes it clear that a direction under subclause 63(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 63(5) requires the Finance Minister to give a copy of any
direction to the Infrastructure Minister, on the basis that management of
and responsibility for the BAF Infrastructure Portfolio Special Account
sits within the Infrastructure portfolio.
Clause 64 - Recommendations about payments
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the BAF
Infrastructure Portfolio Special Account, in the same way as other
payments.
Therefore, the Infrastructure Minister must ensure that relevant advice has
been sought from Infrastructure Australia which supports a recommendation
that a specified amount be transferred from the BAF Special Account to the
BAF Infrastructure Portfolio Special Account, for the purposes of making a
payment in relation to the creation or development of transport
infrastructure.
Consistent with this framework, subclause 64(1) provides that a direction
to transfer an amount from the BAF Special Account to the BAF
Infrastructure Portfolio Special Account must not be specified unless the
Infrastructure Minister has recommended the specification of the grant.
Subclause 64(2) confirms the obligation on the Infrastructure Minister to
receive relevant advice from Infrastructure Australia and to ensure that a
proposal relating to a payment from the BAF satisfies the relevant BAF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
BAF Special Account to the BAF Infrastructure Portfolio Special Account for
the purposes of a payment being made, subclause 64(3) requires the
Infrastructure Minister to have regard to the advice from Infrastructure
Australia, together with any other matter he or she considers relevant.
Clause 65 - Payments-debit from the BAF Infrastructure Portfolio Special
Account
Clause 65 reflects the Government's intention that the BAF Infrastructure
Portfolio Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the BAF rest with the
relevant portfolio Minster and his or her department. Accordingly, the BAF
Infrastructure Portfolio Special Account is a vehicle by which payments
from the BAF are authorised in order to support transport infrastructure
expenditure.
The Infrastructure Minister is required to ensure that, as soon as
practicable after an amount is credited to the BAF Infrastructure Portfolio
Special Account, that amount is debited for the purposes of making the
payment. However, if the payment cannot be made, subclause 65(3) provides
for the amount to be re-credited to the BAF Special Account.
Clause 66 - Grant to a State or Territory-transport infrastructure
Clause 66 is concerned with grants of financial assistance that are paid to
a State or Territory through the BAF Infrastructure Portfolio Special
Account. Note that grant payments that are paid to States and Territories
through the COAG Reform Fund are dealt with separately in Division 7 of
Part 2.4 (see below).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 66(3) provides for the Infrastructure Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 67 - Grant to a person other than a State or Territory-transport
infrastructure
Clause 67 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory which are channelled through the
BAF Infrastructure Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 67(3) provides for the Infrastructure Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Division 4-Channelling of payments through the BAF Communications Portfolio
Special Account
Clause 68 - Establishment of the BAF Communications Portfolio Special
Account
As indicated above, clear accountability and reporting of disbursements
from the BAF will rest within relevant portfolio departments.
Clause 68 establishes the BAF Communications Portfolio Special Account - a
Special Account for the purposes of section 21 of the FMA Act. A Special
Account is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the BAF Special Account and credited to the BAF
Communications Portfolio Special Account can only be subsequently debited
from the BAF Communications Special Account for the purposes in clause 69.
Clause 69 - Purposes of the BAF Communications Portfolio Special Account
Subclause 69(1) describes the purposes of the BAF Communications Portfolio
Special Account, which are for making payments in relation to the creation
or development of communications infrastructure and in relation to eligible
national broadband network matters. The note immediately following
subclause 69(1) assists the reader by referring to section 21 of the FMA
Act, which deals with debits from Special Accounts.
Subclause 69(2) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the BAF Special Account.
Clause 70 - Channelling of payments through the BAF Communications
Portfolio Special Account
Clause 70 provides the mechanism for specific amounts to be debited from
the BAF Special Account and credited to the BAF Communications Portfolio
Special Account for the purposes of making payments in relation to the
creation or development of communications infrastructure and in relation to
eligible national broadband network matters.
Subclause 70(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF Special Account to the
BAF Communications Portfolio Special Account.
Subclauses 70(2) confirms that such a direction must be given so as to
allow that amount to be debited from the BAF Communications Portfolio
Special Account for making a specified payment in relation to the creation
or development of communications infrastructure or in relation to an
eligible national broadband matter. This will ensure that the agreed
purpose is retained when that amount is channelled through the BAF
Communications Portfolio Special Account.
Subclause 70(3) provides that directions in paragraphs 70(2)(a) and (b) do
not limit each other, meaning that a direction could be made in respect of
a specified payment relating to both communications infrastructure and in
relation to an eligible national broadband matter (i.e. where both aspects
might exist in a particular case).
Subclause 70(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 70(5) makes it clear that a direction under subclause 70(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 70(6) requires the Finance Minister to give a copy of any
direction to the Communications Minister, on the basis that management of
and responsibility for the BAF Communications Portfolio Special Account
sits within the Communications portfolio.
Clause 71 - Recommendations about payments
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the BAF
Communications Portfolio Special Account, in the same way as other
payments.
Therefore, the Communications Minister must ensure that relevant advice has
been sought from Infrastructure Australia which supports a recommendation
that a specified amount be transferred from the BAF Special Account to the
BAF Communications Portfolio Special Account, for the purposes of making a
payment in relation to the creation or development communications
infrastructure (other than a payment in relation to an eligible national
broadband network matter).
Consistent with this framework, subclause 71(1) provides that a direction
to transfer an amount from the BAF Special Account to the BAF
Communications Portfolio Special Account must not be specified unless the
Communications Minister has recommended the specification of the grant.
Subclause 71(2) confirms the obligation on the Communications Minister to
receive relevant advice from Infrastructure Australia and to ensure that a
proposal relating to a payment from the BAF satisfies the relevant BAF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
BAF Special Account to the BAF Communications Portfolio Special Account for
the purposes of a payment being made, subclause 71(3) requires the
Communications Minister to have regard to the advice from Infrastructure
Australia, together with any other matter he or she considers relevant.
Infrastructure Australia will not consider payments in relation to eligible
national broadband network matters, as these will be considered through a
separate process. Subclause 71(4) deals with this exception and provides
that such a payment must not be specified under this clause unless the
Communications Minister has recommended the payment.
Clause 72 - Payments-debit from the BAF Communications Portfolio Special
Account
Clause 72 reflects the Government's intention that the BAF Communications
Portfolio Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the BAF rest with the
relevant portfolio Minster and his or her department. Accordingly, the BAF
Communications Portfolio Special Account is a vehicle by which payments
from the BAF are authorised in order to support communications
infrastructure expenditure, including in relation to eligible national
broadband network matters.
Accordingly, for amounts that are transferred from the BAF Communications
Portfolio Special Account for the purposes of making a payment in relation
to communications infrastructure or an eligible national broadband network
matter, the Communications Minister is required to ensure that, as soon as
practicable after an amount is credited to the BAF Communications Portfolio
Special Account, that amount is debited for the purposes of making the
payment. However, if the payment cannot be made, subclause 72(3) provides
for the amount to be re-credited to the BAF Special Account.
Clause 73 - Grant to a State or Territory-communications infrastructure
etc.
Clause 73 is concerned with grants of financial assistance that are paid to
a State or Territory through the BAF Communications Portfolio Special
Account. Note that grants payments that are paid to States and Territories
through the COAG Reform Fund are dealt with separately in Division 7 of
Part 2.4 (see below).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 73(3) provides for the Communications Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 74 - Grant to a person other than a State or Territory-
communications infrastructure etc.
Clause 74 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory which are channelled through the
BAF Communications Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 74(3) provides for the Communications Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Division 5-Channelling of payments through the BAF Energy Portfolio Special
Account
Clause 75 - Establishment of the BAF Energy Portfolio Special Account
As indicated above, clear accountability and reporting of disbursements
from the BAF will rest within relevant portfolio departments.
Clause 75 establishes the BAF Energy Portfolio Special Account - a Special
Account for the purposes of section 21 of the FMA Act. A Special Account
is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the BAF Special Account and credited to the BAF
Energy Portfolio Special Account can only be subsequently debited from the
BAF Energy Special Account for the purpose in clause 76.
Clause 76 - Purpose of the BAF Energy Portfolio Special Account
Subclause 76(1) describes the purpose of the BAF Energy Portfolio Special
Account, which are for making payments in relation to the creation or
development of energy infrastructure. The note immediately following
subclause 76(1) assists the reader by referring to section 21 of the FMA
Act, which deals with debits from Special Accounts.
Subclause 76(2) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the BAF Special Account.
Clause 77 - Channelling of payments through the BAF Energy Portfolio
Special Account
Clause 77 provides the mechanism for specific amounts to be debited from
the BAF Special Account and credited to the BAF Energy Portfolio Special
Account for the purposes of making payments in relation to the creation or
development of energy infrastructure.
Subclause 77(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF Special Account to the
BAF Energy Portfolio Special Account.
Subclauses 77(2) confirms that such a direction must be given so as to
allow that amount to be debited from the BAF Energy Portfolio Special
Account for making a specified payment in relation to the creation or
development of energy infrastructure. This will ensure that the agreed
purpose is retained when that amount is channelled through the BAF Energy
Portfolio Special Account.
Subclause 77(3) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 77(4) makes it clear that a direction under subclause 77(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 77(5) requires the Finance Minister to give a copy of any
direction to the Energy Minister, on the basis that management of and
responsibility for the BAF Energy Portfolio Special Account sits within the
Energy portfolio.
Clause 78 - Recommendations about payments
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the BAF Energy
Portfolio Special Account, in the same way as other payments.
Therefore, the Energy Minister must ensure that relevant advice has been
sought from Infrastructure Australia which supports a recommendation that a
specified amount be transferred from the BAF Special Account to the BAF
Energy Portfolio Special Account, for the purposes of making a payment in
relation to the creation or development energy infrastructure.
Consistent with this framework, subclause 78(1) provides that a direction
to transfer an amount from the BAF Special Account to the BAF Energy
Portfolio Special Account must not be specified unless the Energy Minister
has recommended the specification of the grant.
Subclause 78(2) confirms the obligation on the Energy Minister to receive
relevant advice from Infrastructure Australia and to ensure that a proposal
relating to a payment from the BAF satisfies the relevant BAF evaluation
criteria.
In deciding to make a recommendation that an amount be directed from the
BAF Special Account to the BAF Energy Portfolio Special Account for the
purposes of a payment being made, subclause 78(3) requires the
Energy Minister to have regard to the advice from Infrastructure Australia,
together with any other matter he or she considers relevant.
Clause 79 - Payments-debit from the BAF Energy Portfolio Special Account
Clause 79 reflects the Government's intention that the BAF Energy Portfolio
Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the BAF rest with the
relevant portfolio Minster and his or her department. Accordingly, the BAF
Energy Portfolio Special Account is a vehicle by which payments from the
BAF are authorised in order to support energy infrastructure expenditure.
Accordingly, for amounts that are transferred from the BAF Energy Portfolio
Special Account for the purposes of making a payment in relation to energy,
the Energy Minister is required to ensure that, as soon as practicable
after an amount is credited to the BAF Energy Portfolio Special Account,
that amount is debited for the purposes of making the payment. However, if
the payment cannot be made, subclause 79(3) provides for the amount to be
re-credited to the BAF Special Account.
Clause 80 - Grant to a State or Territory-energy infrastructure
Clause 80 is concerned with grants of financial assistance that are paid to
a State or Territory through the BAF Energy Portfolio Special Account.
Note that grants payments that are paid to States and Territories through
the COAG Reform Fund are dealt with separately in Division 7 of Part 2.4
(see below).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 80(3) provides for the Energy Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 81 - Grant to a person other than a State or Territory-energy
infrastructure
Clause 81 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory which are channelled through the
BAF Energy Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 81(3) provides for the Energy Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Division 6-Channelling of payments through the BAF Water Portfolio Special
Account
Clause 82 - Establishment of the BAF Water Portfolio Special Account
As indicated above, clear accountability and reporting of disbursements
from the BAF will rest within relevant portfolio departments.
Clause 82 establishes the BAF Water Portfolio Special Account - a Special
Account for the purposes of section 21 of the FMA Act. A Special Account
is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the BAF Special Account and credited to the BAF Water
Portfolio Special Account can only be subsequently debited from the BAF
Water Special Account for the purpose in clause 83.
Clause 83 - Purpose of the BAF Water Portfolio Special Account
Subclause 83(1) describes the purpose of the BAF Water Portfolio Special
Account, which are for making payments in relation to the creation or
development of water infrastructure. The note immediately following
subclause 63(1) assists the reader by referring to section 21 of the FMA
Act, which deals with debits from Special Accounts.
Subclause 83(2) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the BAF Special Account.
Clause 84 - Channelling of payments through the BAF Water Portfolio Special
Account
Clause 84 provides the mechanism for specific amounts to be debited from
the BAF Special Account and credited to the BAF Water Portfolio Special
Account for the purposes of making payments in relation to the creation or
development of water infrastructure.
Subclause 84(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF Special Account to the
BAF Water Portfolio Special Account.
Subclauses 84(2) confirms that such a direction must be given so as to
allow that amount to be debited from the BAF Water Portfolio Special
Account for making a specified payment in relation to the creation or
development of water infrastructure. This will ensure that the agreed
purpose is retained when that amount is channelled through the BAF Water
Portfolio Special Account.
Subclause 84(3) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 84(4) makes it clear that a direction under subclause 84(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 84(5) requires the Finance Minister to give a copy of any
direction to the Water Minister, on the basis that management of and
responsibility for the BAF Water Portfolio Special Account sits within the
Water portfolio.
Clause 85 - Recommendations about payments
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the BAF Water
Portfolio Special Account, in the same way as other payments.
Therefore, the Water Minister must ensure that relevant advice has been
sought from Infrastructure Australia which supports a recommendation that a
specified amount be transferred from the BAF Special Account to the BAF
Water Portfolio Special Account, for the purposes of making a payment in
relation to the creation or development water infrastructure.
Consistent with this framework, subclause 85(1) provides that a direction
to transfer an amount from the BAF Special Account to the BAF Water
Portfolio Special Account must not be specified unless the Water Minister
has recommended the specification of the grant.
Subclause 85(2) confirms the obligation on the Water Minister to receive
relevant advice from Infrastructure Australia and to ensure that a proposal
relating to a payment from the BAF satisfies the relevant BAF evaluation
criteria.
In deciding to make a recommendation that an amount be directed from the
BAF Special Account to the BAF Water Portfolio Special Account for the
purposes of a payment being made, subclause 85(3) requires the
Water Minister to have regard to the advice from Infrastructure Australia,
together with any other matter he or she considers relevant.
Clause 86 - Payments-debit from the BAF Water Portfolio Special Account
Clause 86 reflects the Government's intention that the BAF Water Portfolio
Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the BAF rest with the
relevant portfolio Minster and his or her department. Accordingly, the BAF
Water Portfolio Special Account is a vehicle by which payments from the BAF
are authorised in order to support water infrastructure expenditure.
Accordingly, for amounts that are transferred from the BAF Water Portfolio
Special Account for the purposes of making a payment in relation to water
infrastructure, the Water Minister is required to ensure that, as soon as
practicable after an amount is credited to the BAF Water Portfolio Special
Account, that amount is debited for the purposes of making the payment.
However, if the payment cannot be made, subclause 86(3) provides for the
amount to be re-credited to the BAF Special Account.
Clause 87 - Grant to a State or Territory-water infrastructure
Clause 87 is concerned with grants of financial assistance that are paid to
a State or Territory through the BAF Water Portfolio Special Account. Note
that grants payments that are paid to States and Territories through the
COAG Reform Fund are dealt with separately in Division 7 of Part 2.4 (see
below).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 87(3) provides for the Water Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Clause 88 - Grant to a person other than a State or Territory-water
infrastructure
Clause 88 is concerned with grants of financial assistance that are paid to
a person other than a State or Territory which are channelled through the
BAF Water Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 88(3) provides for the Water Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Division 7-Channelling of State/Territory grants payments through the COAG
Reform Fund
Subdivision A-Channelling of transport infrastructure grants
Clause 89 - Channelling of State/Territory grants payments through the COAG
Reform Fund
The Government has indicated its intention that the COAG Reform Fund - a
Special Account for the purposes of section 21 of the FMA Act - will be the
vehicle through which grants of financial assistance will be disbursed to
States and Territories. A Special Account is an appropriation mechanism
that sets aside an amount within the Consolidated Revenue Fund to be
expended for specific purposes.
Consistent with portfolio Ministers' responsibilities in relation to
managing payments, the authority to disburse amounts to States and
Territories will be transferred from the BAF Special Account, through the
relevant BAF Portfolio Special Account, to the COAG Reform Fund Special
Account.
For this purpose, clause 89 provides the mechanism for specific amounts to
be debited from the BAF and credited to the BAF Infrastructure Portfolio
Special Account. Such amounts will then be transferred to the COAG Reform
Fund in order to enable specified grants of financial assistance to be paid
to States and Territories in relation to the creation or development of
transport infrastructure.
Subclause 89(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF to the BAF
Infrastructure Portfolio Special Account.
Subclauses 89(2) and (3) confirm that such a direction must be given so as
to allow that amount to be transferred from the BAF Infrastructure
Portfolio Special Account to the COAG Reform Fund for making a specified
grant of financial assistance to a State or Territory in relation to the
creation or development of transport infrastructure. This will ensure that
the agreed purpose is retained when that amount is channelled through the
COAG Reform Fund.
Subclause 89(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 89(5) makes it clear that a direction under subclause 89(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 89(6) requires the Finance Minister to give a copy of any
direction to the Treasurer (on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio)
and also the Infrastructure Minister.
Clause 90 - Recommendations about grants payments-transport infrastructure
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the COAG
Reform Fund, in the same way as other payments.
Therefore, BAF portfolio Ministers must ensure that relevant advice has
been sought from Infrastructure Australia which supports a recommendation
that a specified amount be paid from the BAF, through the relevant BAF
Portfolio Special Account, to the COAG Reform Fund for the purposes of
making a grant of financial assistance to a State or Territory.
Consistent with this framework, subclause 90(1) provides that a direction
to transfer an amount from the BAF, through the BAF Infrastructure
Portfolio Special Account, to the COAG Reform Fund must not be specified
unless the Infrastructure Minister has recommended the specification of the
grant.
Subclause 90(2) confirms the obligation on the Infrastructure Minister to
receive relevant advice from Infrastructure Australia and to ensure that a
proposal relating to a payment from the BAF satisfies the relevant BAF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
BAF, through the applicable BAF Portfolio Special Account, to the COAG
Reform Fund for the purposes of a grant payment being made, subclause 90(3)
requires the Infrastructure Minister to have regard to the advice from
Infrastructure Australia, together with any other matter he or she
considers relevant.
Clause 91 - Transfers from the BAF Infrastructure Portfolio Special Account
to the COAG Reform Fund
Clause 91 applies to amounts that are transferred from the BAF into the BAF
Infrastructure Portfolio Special Account, which will be subsequently
transferred to the COAG Reform Fund to be disbursed to States and
Territories.
Accordingly, for such amounts, subclause 91(2) requires the
Infrastructure Minister to ensure that as soon as practicable after an
amount is credited to the BAF Infrastructure Portfolio Special Account, he
or she directs, in writing, that the amount is to be debited from that
Account and credited to the COAG Reform Fund on a specified day.
Under subclause 91(3), such a direction must be given to allow the amount
to be debited from the COAG Reform Fund for the purposes of making a grant
payment to a State or Territory.
Subclause 91(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 91(5) makes it clear that a direction under subclause 91(2) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 91(6) requires the Infrastructure Minister to give a copy of any
direction to the Treasurer on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio.
Clause 92 - Grants payments-debit from the COAG Reform Fund
Clause 92 reflects the Government's intention that the COAG Reform Fund is
not an asset fund like the BAF, EIF and HHF, but rather will act as a
vehicle by which amounts from the Funds, and direct funding from the
budget, are distributed to States and Territories.
The Treasurer is required to ensure that, as soon as practicable after an
amount is credited to the COAG Reform Fund, that amount is debited for the
purposes of making the grant.
Clause 93 - Grant to a State or Territory-transport infrastructure
Clause 93 is concerned with grants of financial assistance in relation to
transport infrastructure which are paid to a State or Territory through the
COAG Reform Fund.
The note immediately following subclause 93(1) assists the reader by
referring to subclause 92(2) which deals with payments channelled through
the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 93(3) provides for the Infrastructure Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Subdivision B-Channelling of communications infrastructure grants
Clause 94 - Channelling of State/Territory grants payments through the COAG
Reform Fund
Similar to transport infrastructure grants, clause 94 provides the
mechanism for specific amounts to be debited from the BAF and credited to
the BAF Communications Portfolio Special Account. Such amounts will then
be transferred to the COAG Reform Fund in order to enable specified grants
of financial assistance to be paid to States and Territories in relation to
the creation or development of communications infrastructure.
Subclause 94(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF to the BAF
Communications Portfolio Special Account.
Subclauses 94(2) and (3) confirm that such a direction must be given so as
to allow that amount to be transferred from the BAF Communications
Portfolio Special Account to the COAG Reform Fund for making a specified
grant of financial assistance to a State or Territory in relation to the
creation or development of communications infrastructure. This will ensure
that the agreed purpose is retained when that amount is channelled through
the COAG Reform Fund.
Subclause 94(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 94(5) makes it clear that a direction under subclause 94(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 94(6) requires the Finance Minister to give a copy of any
direction to the Treasurer (on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio)
and also the Communications Minister.
Clause 95 - Recommendations about grants payments-communications
infrastructure
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the COAG
Reform Fund, in the same way as other payments.
Therefore, BAF portfolio Ministers must ensure that relevant advice has
been sought from Infrastructure Australia which supports a recommendation
that a specified amount be paid from the BAF, through the BAF Portfolio
Special Account, to the COAG Reform Fund for the purposes of making a grant
of financial assistance to a State or Territory.
Consistent with this framework, subclause 95(1) provides that a direction
to transfer an amount from the BAF, through the BAF Communications
Portfolio Special Account, to the COAG Reform Fund must not be specified
unless the Communications Minister has recommended the specification of the
grant.
Subclause 95(2) confirms the obligation on the Communications Minister to
receive relevant advice from Infrastructure Australia and to ensure that a
proposal relating to a payment from the BAF satisfies the relevant BAF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
BAF, through the BAF Communications Portfolio Special Account, to the COAG
Reform Fund for the purposes of a grant payment being made, subclause 95(3)
requires the Communications Minister to have regard to the advice from
Infrastructure Australia, together with any other matter he or she
considers relevant.
Clause 96 - Transfers from the BAF Communications Portfolio Special Account
to the COAG Reform Fund
Clause 96 applies to amounts that are transferred from the BAF into the BAF
Communications Portfolio Special Account, which will be subsequently
transferred to the COAG Reform Fund to be disbursed to States and
Territories.
Accordingly, for such amounts, subclause 96(2) requires the Communications
Minister to ensure that as soon as practicable after an amount is credited
to the BAF Communications Portfolio Special Account, he or she directs, in
writing, that the amount is to be debited from that Account and credited to
the COAG Reform Fund on a specified day.
Under subclause 96(3), such a direction must be given to allow the amount
to be debited from the COAG Reform Fund for the purposes of making a grant
payment to a State or Territory.
Subclause 96(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 96(5) makes it clear that a direction under subclause 96(2) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 96(6) requires the Communications Minister to give a copy of any
direction to the Treasurer on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio.
Clause 97 - Grants payments-debit from the COAG Reform Fund
Clause 97 reflects the Government's intention that the COAG Reform Fund is
not an asset fund like the BAF, EIF and HHF, but rather will act as a
vehicle by which amounts from the Funds, and direct funding from the
budget, are distributed to States and Territories.
The Treasurer is required to ensure that, as soon as practicable after an
amount is credited to the COAG Reform Fund, that amount is debited for the
purposes of making the grant.
Clause 98 - Grant to a State or Territory-communications infrastructure
Clause 98 is concerned with grants of financial assistance in relation to
communications infrastructure that are paid to a State or Territory through
the COAG Reform Fund.
The note immediately following subclause 98(1) assists the reader by
referring to subclause 97(2) which deals with payments channelled through
the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 98(3) provides for the Communications Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant BAF portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Subdivision C-Channelling of energy infrastructure grants
Clause 99 - Channelling of State/Territory grants payments through the COAG
Reform Fund
Similar to transport and communications infrastructure grants, clause 99
provides the mechanism for specific amounts to be debited from the BAF and
credited to the BAF Energy Portfolio Special Account. Such amounts will
then be transferred to the COAG Reform Fund in order to enable specified
grants of financial assistance to be paid to States and Territories in
relation to the creation or development of energy infrastructure.
Subclause 99(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF to the BAF Energy
Portfolio Special Account.
Subclauses 99(2) and (3) confirm that such a direction must be given so as
to allow that amount to be transferred from the BAF Energy Portfolio
Special Account to the COAG Reform Fund for making a specified grant of
financial assistance to a State or Territory in relation to the creation or
development of energy infrastructure. This will ensure that the agreed
purpose is retained when that amount is channelled through the COAG Reform
Fund.
Subclause 99(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 99(5) makes it clear that a direction under subclause 99(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 99(6) requires the Finance Minister to give a copy of any
direction to the Treasurer (on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio)
and also the Energy Minister.
Clause 100 - Recommendations about grants payments-energy infrastructure
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the COAG
Reform Fund, in the same way as other payments.
Therefore, BAF portfolio Ministers must ensure that relevant advice has
been sought from Infrastructure Australia which supports a recommendation
that a specified amount be paid from the BAF, through the BAF Portfolio
Special Account, to the COAG Reform Fund for the purposes of making a grant
of financial assistance to a State or Territory.
Consistent with this framework, subclause 100(1) provides that a direction
to transfer an amount from the BAF, through the BAF Energy Portfolio
Special Account, to the COAG Reform Fund must not be specified unless the
Energy Minister has recommended the specification of the grant.
Subclause 100(2) confirms the obligation on the Energy Minister to receive
relevant advice from Infrastructure Australia and to ensure that a proposal
relating to a payment from the BAF satisfies the relevant BAF evaluation
criteria.
In deciding to make a recommendation that an amount be directed from the
BAF, through the BAF Energy Portfolio Special Account, to the COAG Reform
Fund for the purposes of a grant payment being made, subclause 100(3)
requires the Energy Minister to have regard to the advice from
Infrastructure Australia, together with any other matter he or she
considers relevant.
Clause 101 - Transfers from the BAF Energy Portfolio Special Account to the
COAG Reform Fund
Clause 101 applies to amounts that are transferred from the BAF into the
BAF Energy Portfolio Special Account, which will be subsequently
transferred to the COAG Reform Fund to be disbursed to States and
Territories.
Accordingly, for such amounts, subclause 101(2) requires the Energy
Minister to ensure that as soon as practicable after an amount is credited
to the BAF Energy Portfolio Special Account, he or she directs, in writing,
that the amount is to be debited from that Account and credited to the COAG
Reform Fund on a specified day.
Under subclause 101(3), such a direction must be given to allow the amount
to be debited from the COAG Reform Fund for the purposes of making a grant
payment to a State or Territory.
Subclause 101(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 101(5) makes it clear that a direction under subclause 101(2) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 101(6) requires the Energy Minister to give a copy of any
direction to the Treasurer on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio.
Clause 102 - Grants payments-debit from the COAG Reform Fund
Clause 102 reflects the Government's intention that the COAG Reform Fund is
not an asset fund like the BAF, EIF and HHF, but rather will act as a
vehicle by which amounts from the Funds, and direct funding from the
budget, are distributed to States and Territories.
The Treasurer is required to ensure that, as soon as practicable after an
amount is credited to the COAG Reform Fund, that amount is debited for the
purposes of making the grant.
Clause 103 - Grant to a State or Territory-energy infrastructure
Clause 103 is concerned with grants of financial assistance in relation to
energy infrastructure that are paid to a State or Territory through the
COAG Reform Fund.
The note immediately following subclause 103(1) assists the reader by
referring to subclause 102(2) which deals with payments channelled through
the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 103(3) provides for the Energy Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant BAF portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Subdivision D-Channelling of water infrastructure grants
Clause 104 - Channelling of State/Territory grants payments through the
COAG Reform Fund
Similar to transport, communications and energy infrastructure grants,
clause 104 provides the mechanism for specific amounts to be debited from
the BAF and credited to the BAF Water Portfolio Special Account. Such
amounts will then be transferred to the COAG Reform Fund in order to enable
specified grants of financial assistance to be paid to States and
Territories in relation to the creation or development of water
infrastructure.
Subclause 104(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the BAF to the BAF Water
Portfolio Special Account.
Subclauses 104(2) and (3) confirm that such a direction must be given so as
to allow that amount to be transferred from the BAF Water Portfolio Special
Account to the COAG Reform Fund for making a specified grant of financial
assistance to a State or Territory in relation to the creation or
development of water infrastructure. This will ensure that the agreed
purpose is retained when that amount is channelled through the COAG Reform
Fund.
Subclause 104(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 104(5) makes it clear that a direction under subclause 104(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 104(6) requires the Finance Minister to give a copy of any
direction to the Treasurer (on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio)
and also the Water Minister.
Clause 105 - Recommendations about grants payments-water infrastructure
The Government's commitment to ensuring rigour in the payment process for
the BAF also applies to payments that are channelled through the COAG
Reform Fund, in the same way as other payments.
Therefore, BAF portfolio Ministers must ensure that relevant advice has
been sought from Infrastructure Australia which supports a recommendation
that a specified amount be paid from the BAF, through the BAF Portfolio
Special Account, to the COAG Reform Fund for the purposes of making a grant
of financial assistance to a State or Territory.
Consistent with this framework, subclause 105(1) provides that a direction
to transfer an amount from the BAF, through the BAF Water Portfolio Special
Account, to the COAG Reform Fund must not be specified unless the Water
Minister has recommended the specification of the grant.
Subclause 105(2) confirms the obligation on the Water Minister to receive
relevant advice from Infrastructure Australia and to ensure that a proposal
relating to a payment from the BAF satisfies the relevant BAF evaluation
criteria.
In deciding to make a recommendation that an amount be directed from the
BAF, through the BAF Water Portfolio Special Account, to the COAG Reform
Fund for the purposes of a grant payment being made, subclause 105(3)
requires the Water Minister to have regard to the advice from
Infrastructure Australia, together with any other matter he or she
considers relevant.
Clause 106 - Transfers from the BAF Water Portfolio Special Account to the
COAG Reform Fund
Clause 106 applies to amounts that are transferred from the BAF into the
BAF Water Portfolio Special Account, which will be subsequently transferred
to the COAG Reform Fund to be disbursed to States and Territories.
Accordingly, for such amounts, subclause 106(2) requires the Water Minister
to ensure that as soon as practicable after an amount is credited to the
BAF Water Portfolio Special Account, he or she directs, in writing, that
the amount is to be debited from that Account and credited to the COAG
Reform Fund on a specified day.
Under subclause 106(3), such a direction must be given to allow the amount
to be debited from the COAG Reform Fund for the purposes of making a grant
payment to a State or Territory.
Subclause 106(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 106(5) makes it clear that a direction under subclause 106(2) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 106(6) requires the Water Minister to give a copy of any
direction to the Treasurer on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio.
Clause 107 - Grants payments-debit from the COAG Reform Fund
Clause 107 reflects the Government's intention that the COAG Reform Fund is
not an asset fund like the BAF, EIF and HHF, but rather will act as a
vehicle by which amounts from the Funds, and direct funding from the
budget, are distributed to States and Territories.
The Treasurer is required to ensure that, as soon as practicable after an
amount is credited to the COAG Reform Fund, that amount is debited for the
purposes of making the grant.
Clause 108 - Grant to a State or Territory-water infrastructure
Clause 108 is concerned with grants of financial assistance in relation to
water infrastructure that are paid to a State or Territory through the COAG
Reform Fund.
The note immediately following subclause 108(1) assists the reader by
referring to subclause 107(2) which deals with payments channelled through
the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 108(3) provides for the Water Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant BAF portfolio Ministers manage the
obligations and risks associated with disbursements from the BAF.
Division 8-Total payments for a financial year
Clause 109 - General drawing rights limit in relation to a financial year
Clause 109 provides for the annual Appropriation Acts to declare that a
specified amount is a general drawing rights limit in relation to a
particular financial year.
The establishment of the BAF as a Special Account under section 21 of FMA
Act means that the balance of the BAF Special Account, as it exists from
time to time, is appropriated for the purposes set out in clauses 18, 19
and 20. This reflects the clear intention to spend all the amounts
credited to the BAF for the purposes identified in the Bill.
However, the Government also intends that payments against the BAF
appropriation will be transparent and subject to parliamentary scrutiny
with the aim of ensuring a managed and orderly rate of expenditure.
Accordingly, while the annual Appropriation Acts will not appropriate
amounts to be paid from the BAF, the intention is that these Acts would
specify a maximum limit on the amount that can be paid out from the BAF in
a particular financial year (including payments that are channelled through
the COAG Reform Fund). The purpose is to provide the Parliament with a
mechanism by which it may supervise the rate at which the committed funds
are to be expended.
The general drawing rights limit for the 2009-10 financial year and beyond
would be included in an Appropriation Act.
In order to give effect to the Government's announcement to fast track its
nation-building agenda in response the global financial crisis, the general
drawing rights limit in relation to the financial year ending 30 June 2009
will be that declared by the Finance Minister in writing. This is because
the Government will not be in a position to finally decide upon proposals
to be funded in this initial period until after the Parliament rises for
2008.
The general drawing rights limit referred to in clause 109 will operate by
restricting the total amount that may be covered by drawing rights under
the FMA Act, and hence, the amount that can be paid out from the BAF in a
financial year to support relevant infrastructure expenditure - namely
making payments in relation to the creation or development of transport
infrastructure, communications infrastructure, energy infrastructure and
water infrastructure. (This includes where such payments are channelled
through BAF Portfolio Special Accounts and the COAG Reform Fund.)
Limiting the ability to issue drawing rights is an effective mechanism
because the FMA Act does not permit expenditure without the person making
the payment having been issued with a valid drawing right.
Subclause 109(2) ensures that drawing rights under the FMA Act are not
issued covering debits from the BAF to support relevant infrastructure
expenditure which are in excess of the general drawing rights limit for
that financial year.
Note that this framework does not apply to payments relating to eligible
national broadband network matters. The Government has committed an amount
of up to $4.7 billion for proposals relating to the NBN. Such proposals
will be disbursed solely through the appropriation made by the BAF Special
Account.
Subclause 109(3) provides that the declaration of the Finance Minister, in
relation to the financial year ending on 30 June 2009, is to be a
legislative instrument. As such, it is required to be tabled in the
Parliament and published on the Federal Register of Legislative
Instruments. However, the declaration will not be disallowable. The
Government considers that this would not be appropriate in the
circumstances of this one-off instrument that will be required to enable
payments to be made from the Funds as early as possible in 2009 to give
effect to the Government's announcement to fast track its nation-building
agenda in response the global financial crisis.
Clause 110 - Drawing rights in relation to other financial years
As the general drawing rights limit for a financial year is particular to
that year and will depend upon the level of spending that is agreed to by
the Government, clause 110 confirms that a general drawing rights limit for
one financial year will not limit the drawing rights that may be issued in
relation to any other year.
Clause 111 - No drawing rights to be issued if there is no general drawing
rights limit in relation to a financial year
Clause 111 has the effect that if annual Appropriation Acts, or a Finance
Minister declaration for the year ending 30 June 2009, do not declare that
an amount is a general drawing rights limit for a financial year, drawing
rights must not be issued covering payments from the BAF to support
relevant infrastructure expenditure. This approach is consistent with the
Government's intention that disbursements from the BAF will be transparent
and allow for appropriate parliamentary scrutiny with the aim of ensuring a
managed and orderly rate of expenditure.
Clause 112 - Total payments to depend primarily on the macroeconomic
circumstances
In establishing the BAF, EIF and HHF, the Government has made a commitment
that spending proposals from the Funds would be delivered in line with the
prevailing macroeconomic conditions.
To meet its commitment, the Government's intention is that spending from
the BAF, EIF and HHF should depend primarily on the macroeconomic
circumstances. In line with this principle, the Government has indicated
an expectation that the Australian Loan Council will advise governments on
the macroeconomic impacts of funding infrastructure spending and whether a
given funding envelope can be delivered within the prevailing macroeconomic
conditions, consistent with the Government's inflation target.
Clause 112 applies to amounts paid out from the BAF to support relevant
infrastructure expenditure. It confirms the Government's policy principle
that payments from the BAF in relation to transport infrastructure,
communications infrastructure (excluding eligible national broadband
network matters), energy infrastructure and water infrastructure should
depend primarily on the macroeconomic circumstances.
This is achieved specifically by subclause 112(2), which requires the
Finance Minister, in debiting amounts to be paid from the BAF Special
Account, to have regard to the principle that amounts paid out from the BAF
to support relevant infrastructure expenditure should depend primarily on
the macroeconomic circumstances.
Subclause 112(2) allows flexibility for the Government to update the
methodology for determining the macroeconomic circumstances. For example,
while the Government has indicated that the Australian Loan Council will
provide relevant advice, it may also wish to take account of other
budgetary factors in setting the spending envelope for the Funds in a given
financial year.
Part 2.5-Reporting obligations etc.
Clause 113 -Finance Minister may require Future Fund Board to prepare
reports or give information
Clause 113 provides that the Finance Minister may write to the Future Fund
Board requiring the Board to prepare a report or specified information on
certain matters relating to the performance of the Board. This report or
information must be provided within the timeframe outlined in the Finance
Minister's request.
Subclause 113(4) provides that the Finance Minister may choose to publish
this report or information.
Subclauses 113(5) and 113(6) make it clear that such reports and documents
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 114 - Keeping the responsible Ministers informed etc.
Clause 114 requires the Future Fund Board to notify the responsible
Ministers of any information the responsible Ministers should know,
including by providing any written information to the Finance Minister.
This could include significant investment results, concerns regarding fraud
and any non compliance with the Board's policy on conflicts of interest.
Clause 115 - Finance Minister may give reports to other Ministers etc.
Clause 115 allows flexibility for the Finance Minister to give reports,
documents and other information to the Treasurer and the BAF portfolio
Ministers. This includes reports and documents under clauses 113 and 114
and any other information obtained by the Finance Minister under the Act.
Part 2.6-Miscellaneous
Clause 116 - Infrastructure Australia to advise Infrastructure Minister
about transport infrastructure
It is the Government's intention that infrastructure spending proposals
relating to transport, communications, energy and water will be rigorously
evaluated by an independent advisory body.
The BAF advisory body function will be undertaken by Infrastructure
Australia, which is an independent body established under the
Infrastructure Australia Act to advise governments on Australia's future
infrastructure needs and related infrastructure issues. Infrastructure
Australia's functions in relation to the BAF are conferred on it in
accordance with paragraph 5(2)(k) of the Infrastructure Australia Act and
are in addition to the functions conferred on it that Act.
Specific proposals relating to the NBN will not be assessed by
Infrastructure Australia. Rather, these will be assessed through a
separate process.
Clause 116 establishes Infrastructure Australia's function to advise the
Infrastructure Minister in relation to proposals that are referred to it by
that Minister. Consistent with this function, each matter that is referred
to Infrastructure Australia by the Infrastructure Minister must be a matter
concerned with making payments from the BAF in relation to the creation or
development of transport infrastructure.
In line with the Government's intention that proposals are rigorously
assessed, subclause 116(2) requires Infrastructure Australia to apply the
BAF evaluation criteria when advising the Infrastructure Minister in
relation to matters referred to it under this clause.
Subclause 116(3) confirms that the function of Infrastructure Australia
under subclause 116(1) is in addition to its functions under the
Infrastructure Australia Act.
Clause 117 - Infrastructure Australia to advise Communications Minister
about communications infrastructure
As for transport infrastructure above, clause 117 establishes
Infrastructure Australia's function to advise the Communications Minister
in relation to matters that are referred to it by that Minister.
Consistent with this function, each matter referred to Infrastructure
Australia by the Communications Minister must be a matter concerned with
making payments from the BAF in relation to the creation or development of
communications infrastructure.
Note that Infrastructure Australia will not consider spending proposals
relating to eligible national broadband network matters, as these proposals
will be assessed through a separate process.
In line with the Government's intention that proposals are rigorously
assessed, subclause 117(2) requires Infrastructure Australia to apply the
BAF evaluation criteria when advising the Communications Minister in
relation to matters referred to it under this clause.
Subclause 117(3) confirms that the function of Infrastructure Australia
under subclause 117(1) is in addition to its functions under the
Infrastructure Australia Act.
Subclauses 117(4) and (5) require all communications between the
Communications Minister and Infrastructure Australia to be made through the
Infrastructure Minister.
Clause 118 - Infrastructure Australia to advise Energy Minister about
energy infrastructure
As for transport and communications infrastructure above, clause 118
establishes Infrastructure Australia's function to advise the Energy
Minister in relation to matters that are referred to it by that Minister.
Consistent with this function, each matter referred to Infrastructure
Australia by the Energy Minister must be a matter concerned with making
payments from the BAF in relation to the creation or development of energy
infrastructure.
In line with the Government's intention that proposals are rigorously
assessed, subclause 118(2) requires Infrastructure Australia to apply the
BAF evaluation criteria when advising the Energy Minister in relation to
matters referred to it under this clause.
Subclause 118(3) confirms that the function of Infrastructure Australia
under subclause 118(1) is in addition to its functions under the
Infrastructure Australia Act.
Subclauses 118(4) and (5) require all communications between the Energy
Minister and Infrastructure Australia to be made through the Infrastructure
Minister.
Clause 119 - Infrastructure Australia to advise Water Minister about water
infrastructure
As for transport, communications and energy infrastructure above,
clause 119 establishes Infrastructure Australia's function to advise the
Water Minister in relation to matters that are referred to it by that
Minister. Consistent with this function, each matter referred to
Infrastructure Australia by the Water Minister must be a matter concerned
with making payments from the BAF in relation to the creation or
development of water infrastructure.
In line with the Government's intention that proposals are rigorously
assessed, subclause 119(2) requires Infrastructure Australia to apply the
BAF evaluation criteria when advising the Water Minister in relation to
matters referred to it under this clause.
Subclause 119(3) confirms that the function of Infrastructure Australia
under subclause 119(1) is in addition to its functions under the
Infrastructure Australia Act.
Subclauses 119(4) and (5) require all communications between the Water
Minister and Infrastructure Australia to be made through the Infrastructure
Minister.
Clause 120 - BAF evaluation criteria
Clause 120 requires the Infrastructure Minister to formulate BAF evaluation
criteria to be applied by Infrastructure Australia when giving advice under
clauses 116, 117, 118 and 119.
As the BAF evaluation criteria will be made by legislative instrument, the
instrument is required to be registered on the Federal Register of
Legislative Instruments and tabled in the Parliament. It will also be
disallowable by either House of the Parliament.
The purpose of subclause 120(2) is to acknowledge that there may be certain
differences in specific criteria applied by Infrastructure Australia in
giving advice relating to transport infrastructure (under clause 116),
communications infrastructure (under clause 117), energy infrastructure
(under clause 118) or water infrastructure (under clause 119). This
reflects the different nature of the transport, communications, energy, and
water sectors, with the result that specific criteria may be relevant only
in relation to transport, communications, energy or water.
However, in addition to any transport, communications, energy and water
specific criteria, it is expected the BAF evaluation criteria will include
common criteria to be applied by Infrastructure Australia in relation to
advice that is provided under all of clauses 116, 117, 118 and 119.
Subclause 120(3) requires the Infrastructure Minister to consult with the
Communications Minister, the Energy Minister, the Water Minister and the
responsible Ministers before formulating the BAF evaluation criteria. The
intention of the requirement for consultation with the responsible
Ministers is to ensure that there is a common and rigorous approach in the
evaluation criteria framework across the BAF, EIF and HHF that is
consistent with the nation-building objectives of the Funds and in line
with the Government's overarching principles that projects financed from
the Funds should:
. address national infrastructure priorities;
. demonstrate high benefits and effective use of resources;
. efficiently address infrastructure needs; and
. demonstrate they achieve established standards in implementation and
management.
Subclause 120(4) is intended to ensure that the Infrastructure Minister
formulates the BAF evaluation criteria consistent with the operation of the
Government's broader framework for spending proposals to be rigorously
assessed by independent advisory bodies.
Clause 121 - Investment provisions do not apply to certain assets
Clause 121 relates to shares, debentures, trust units and financial assets
held in the name of the Commonwealth. These assets are acquired using
money from the BAF Special Account in line with the purposes of making a
payment in relation to the creation or development of transport
infrastructure, the creation or development of communications
infrastructure, an eligible national broadband network matter, the creation
or development of energy infrastructure and the creation or development of
water infrastructure (including where the payment was channelled through
the Portfolio Special Accounts).
This clause is not concerned with investments of the BAF which are managed
by the Future Fund Board.
Accordingly, subclauses 121(2) and (3) provide that Part 2.3 of the Bill
(which relates to investments of the BAF managed by the Future Fund Board)
and section 39 of the FMA Act do not apply to these assets. Section 39 of
the FMA Act authorises the Finance Minister to invest public money in only
a limited range of investments, such as government bonds and bank deposits.
Therefore, it is appropriate that Commonwealth investment in the creation
or development of transport infrastructure, the creation or development of
communications infrastructure, eligible national broadband network matters,
the creation or development of energy infrastructure and the creation or
development of water infrastructure through the acquisition of shares,
debentures, trust units or other financial assets are exempted from the
application of section 39 of that Act.
Clause 122 - Delegation by the Finance Minister
Under subclause 122(1), the Finance Minister may, in writing, delegate his
or her powers under clauses 27, 28, 29, 51, 63, 70, 77, 84, 89, 94, 99 or
104 to the Secretary of the Finance Department or to an SES employee (or
acting SES employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Finance Minister's powers under clauses 51, 63, 70, 77, 84, 89, 94, 99
and 104 relate to the making of authorisations for payments from the BAF
and directing that specified amounts be transferred from the BAF Special
Account to BAF Portfolio Special Accounts, or from the BAF Special Account,
through a BAF Portfolio Special Account, to the COAG Reform Fund for the
purposes of making a specified grant of financial assistance to a State or
Territory. Delegation of these functions to the Secretary of, or SES
official in, the Finance Department is consistent with the efficient
administration of these matters.
Subclause 122(3) allows the Finance Minister to delegate, in writing, his
or her functions under clauses 27, 28 and 29 of the Act, to the Chair of
the Future Fund Board or to an SES employee (or acting SES employee) in the
Agency. The Finance's Minister's functions under these provisions allow
for amounts to be transferred between the BAF and the Future Fund, EIF and
HHF for the purposes of apportioning shared costs which are initially paid
by one Fund. Accordingly, the Minister delegating this function to
officials in the Department, the Chair of the Future Fund Board or an SES
official in the Agency is considered to be a normal administrative
arrangement for the efficient handling of these matters.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
It is envisaged that the delegate will be accountable to the Finance
Minister for his or her actions under any delegation. Subclauses 122(2)
and (4) reinforce this intention by requiring the delegate to comply with
any direction of the Minister in exercising powers under a delegation.
Clause 123 - Delegation by the Treasurer
Subclauses 92(2), 97(2), 102(2) and 107(2) place an obligation on the
Treasurer to ensure that where money is transferred from a BAF Portfolio
Special Account to the COAG Reform Fund for the purposes of making a
specified grant to a State or Territory, that the COAG Reform Fund is
debited for that purpose as soon as is practicable. This is consistent
with the Government's intention that the COAG Reform Fund is a vehicle
through which transfers and other funds will be disbursed to States and
Territories.
Clause 123 allows the Treasurer to, in writing, delegate his or her
functions under subclauses 92(2), 97(2), 102(2) and 107(2) to the Secretary
of the Treasury Department or to an SES employee (or acting SES employee)
in that Department.
A note at the end of the clause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
Delegation of these functions to the Secretary of, or SES official in, the
Treasury Department is consistent with the efficient administration of this
matter.
Clause 124 - Delegation by the Infrastructure Minister
Under subclause 124(1), the Infrastructure Minister may, in writing,
delegate his or her powers under clauses 53, 57, 65, 66, 67, 91 or 93 to
the Secretary of the Infrastructure Department or to an SES employee (or
acting SES employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Infrastructure Minister's functions under these provisions allow for
the Infrastructure Minister, on behalf of the Commonwealth, to enter into a
written agreement with a recipient of a grant of financial assistance, in
which the terms and conditions of that grant are set out. The functions
under clauses 65 and 91 relate to the obligation on the Infrastructure
Minister to ensure that where money is credited to the BAF Infrastructure
Portfolio Special Account for the purposes of making a payment in relation
to transport infrastructure or to allow for the transfer that amount to the
COAG Reform Fund for that purpose, that the BAF Infrastructure Portfolio
Special Account is debited for that purpose as soon as is practicable.
Delegation of these functions to the Secretary of, or SES official in, the
Infrastructure Department is consistent with the efficient administration
of these matters.
It is envisaged that the delegate will be accountable to the Infrastructure
Minister for his or her actions under any delegation. Subclause 124(2)
reinforces this intention by requiring the delegate to comply with any
direction of the Minister in exercising powers under a delegation.
Clause 125 - Delegation by the Communications Minister
Under subclause 125(1), the Communications Minister may, in writing,
delegate his or her powers under clauses 54, 58, 72, 73, 74, 96 or 98 to
the Secretary of the Communications Department or to an SES employee (or
acting SES employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Communications Minister's functions under these provisions allow for
the Communications Minister, on behalf of the Commonwealth, to enter into a
written agreement with a recipient of a grant of financial assistance, in
which the terms and conditions of that grant are set out. The functions
under clauses 72 and 96 relate to the obligation on the Communications
Minister to ensure that where money is credited to the BAF Communications
Portfolio Special Account for the purposes of making a payment in relation
to communications infrastructure or to allow for the transfer of that
amount to the COAG Reform Fund for that purpose, that the BAF
Communications Portfolio Special Account is debited for that purpose as
soon as is practicable. Delegation of these functions to the Secretary of,
or SES official in, the Communications Department is consistent with the
efficient administration of these matters.
It is envisaged that the delegate will be accountable to the Communications
Minister for his or her actions under any delegation. Subclause 125(2)
reinforces this intention by requiring the delegate to comply with any
direction of the Minister in exercising powers under a delegation.
Clause 126 - Delegation by the Energy Minister
Under subclause 126(1), the Energy Minister may, in writing, delegate his
or her powers under clauses 55, 59, 79, 80, 81, 101 or 103 to the Secretary
of the Energy Department or to an SES employee (or acting SES employee) in
that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Energy Minister's functions under these provisions allow for the Energy
Minister, on behalf of the Commonwealth, to enter into a written agreement
with a recipient of a grant of financial assistance, in which the terms and
conditions of that grant are set out. The functions under clauses 79
and 101 relate to the obligation on the Energy Minister to ensure that
where money is credited to the BAF Energy Portfolio Special Account for the
purposes of making a payment in relation to energy infrastructure or to
allow for the transfer of that amount to the COAG Reform Fund for that
purpose, that the BAF Energy Portfolio Special Account is debited for that
purpose as soon as is practicable. Delegation of these functions to the
Secretary of, or SES official in, the Energy Department is consistent with
the efficient administration of these matters.
It is envisaged that the delegate will be accountable to the Energy
Minister for his or her actions under any delegation. Subclause 126(2)
reinforces this intention by requiring the delegate to comply with any
direction of the Minister in exercising powers under a delegation.
Clause 127 - Delegation by the Water Minister
Under subclause 127(1), the Water Minister may, in writing, delegate his or
her powers under clauses 56, 60, 86, 87, 88, 106 or 108 to the Secretary of
the Water Department or to an SES employee (or acting SES employee) in that
Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Water Minister's functions under these provisions allow for the Water
Minister, on behalf of the Commonwealth, to enter into a written agreement
with a recipient of a grant of financial assistance, in which the terms and
conditions of that grant are set out. The functions under clauses 86
and 106 relate to the obligation on the Water Minister to ensure that where
money is credited to the BAF Water Portfolio Special Account for the
purposes of making a payment in relation to water infrastructure or to
allow for the transfer of that amount to the COAG Reform Fund for that
purpose, that the BAF Water Portfolio Special Account is debited for that
purpose as soon as is practicable. Delegation of these functions to the
Secretary of, or SES official in, the Water Department is consistent with
the efficient administration of these matters.
It is envisaged that the delegate will be accountable to the Water Minister
for his or her actions under any delegation. Subclause 127(2) reinforces
this intention by requiring the delegate to comply with any direction of
the Minister in exercising powers under a delegation.
CHAPTER 3 - EDUCATION INVESTMENT FUND
Part 3.1-Introduction
Clause 128-Object
Clause 128 sets out the objects of Chapter 3, namely to enhance the
Commonwealth's ability to make payments in relation to the creation or
development of higher education infrastructure, the creation or development
of research infrastructure, the creation or development of vocational
education and training infrastructure, the creation or development of
eligible education infrastructure and transitional HEEF payments.
Clause 129-Simplified outline
Clause 129 is an information provision which provides an overview of
Chapter 3 to assist with readability.
Part 3.2-Education Investment Fund
Division 1-Introduction
Clause 130-Simplified outline
Clause 130 is an information provision which provides an overview of
Part 3.2 to assist with readability.
Division 2-Establishment of the Education Investment Fund etc.
Clause 131-Establishment of the Education Investment Fund
Clause 131 establishes a financial asset fund - the Education Investment
Fund (EIF) - consisting of amounts credited to an Education Investment Fund
Special Account (see clause 132 below) and investments of the EIF. The
distinction between the cash and asset components relates to the need for
cash to be duly appropriated, rather than a desire to distinguish between
cash and other types of investments held in the EIF.
An investment of the Education Investment Fund is defined in Part 3.3 to
include money invested in financial assets (including returns on those
investments), derivatives acquired under clause 161 and other financial
assets that the Future Fund Board becomes a holder of through a securities
lending arrangement or otherwise.
Clause 132-Establishment of the Education Investment Fund Special Account
Clause 132 establishes the Education Investment Fund Special Account - a
Special Account for the purposes of section 21 of the FMA Act. A Special
Account is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Any
amounts credited to the EIF Special Account are quarantined from the rest
of the Consolidated Revenue Fund and can only be debited from the EIF for
the purposes set out in clauses 136, 137 and 138, or for the purposes of
channelling funds to an EIF Portfolio Special Account and to the
COAG Reform Fund, in order to make EIF related payments.
The note immediately following clause 132 is included to assist the reader
by clarifying that, in addition to the processes set out in clauses 133,
134 and 135, amounts can be credited to the EIF Special Account by an
Appropriation Act.
Division 3-Credits of amounts to the Education Investment Fund
Clause 133 - Initial credits of amounts to the Education Investment Fund
Special Account
The EIF will receive initial credits through instalments comprising the
assets of the HEEF and $2.5 billion from the 2007-08 budget surplus.
Clause 133 provides the mechanism for amounts to be credited to the EIF
Special Account on a particular date or by set instalments on particular
dates. This mechanism will allow for the $2.5 billion from the 2007-08
budget surplus to be credited to the EIF.
Subclause 133(1) provides that initial contributions to the EIF will be
credited to the EIF Special Account through a written determination or
determinations by the responsible Ministers. These contributions can be
credited either in one lump sum or by instalments.
Subclause 133(2) provides that the responsible Ministers must ensure that,
by 30 June 2009, the EIF is credited with $2.5 billion. This amount
comprises of funds to be credited to the EIF from the 2007-08 budget
surplus.
The notes at the end of subclause 133(2) assist the reader. Note 1 refers
to clause 135, which provides for the balance of the HEEF Special Account
to be credited to the EIF. Note 2 refers to clause 152, which provides for
the EIF to inherit the investments of the HEEF.
Subclause 133(3) provides that the responsible Ministers must not make a
determination under subclause 133(1) after 30 June 2009 - the date by which
the total initial credit of $2.5 billion must be made to the EIF.
Additional contributions to the EIF will be a subsequent credit under
subclause 134(1). For example, any amounts credited to the EIF from future
budget surpluses would be credited under subclause 134(1) below.
Subclause 133(4) provides that determinations for crediting the initial
contributions to the EIF Special Account cannot be revoked.
Subclause 133(5) deems that a determination to credit the initial
contribution to the EIF is a legislative instrument for the purposes of
section 5 of the Legislative Instruments Act. As such the instrument is
required to be tabled in Parliament and published on the Federal Register
of Legislative Instruments.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds required to establish the EIF are about to be
transferred. This same approach was taken in equivalent provisions in the
Future Fund Act.
Clause 134 - Subsequent credits of amounts to the Education Investment Fund
Special Account-determinations by the responsible Ministers
Clause 134 allows for future Government contributions to be made to the
EIF, which could be made out of future realised surpluses subject to other
policy priorities.
Subclause 134(1) provides that Government contributions to the EIF,
subsequent to the initial credits, are made through determinations by the
responsible Ministers. Such further contributions can be made either in
one lump sum or by instalments.
The note at the end of subclause 134(1) assists the reader by referring to
subsection 33(3) of the Acts Interpretation Act. This subsection deals
with variations and revocations of instruments and provides that a power to
make an instrument also includes a power to vary or revoke an instrument
unless the contrary intention appears.
Subclause 134(2) requires the responsible Ministers to have regard to the
object of the Chapter in making determinations to credit further amounts to
the EIF. Therefore, subsequent credits from the EIF will be made with
reference to the need for future investment in education infrastructure,
vocational education and training infrastructure and research
infrastructure.
Subclause 134(3) provides that a determination to credit subsequent amounts
to the EIF is a legislative instrument for the purpose of section 5 of the
Legislative Instruments Act. As such the instrument is required to be
tabled in Parliament and published on the Federal Register of Legislative
Instruments.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds are about to be transferred. This same approach was
taken in equivalent provisions in the Future Fund Act.
Clause 135 - Credit of amount to the Education Investment Fund Special
Account-balance of the Higher Education Endowment Fund Special Account
The HEEF was established by section 11 of the proposed to be repealed HEEF
Act. The HEEF consists of the HEEF Special Account and the investments of
the HEEF. The HEEF will be closed and its balance transferred to the EIF.
Clause 135 provides for the balance of the HEEF Special Account (created
under the proposed to be repealed HEEF Act) as at immediately before the
commencement of this section to be credited to the EIF. This credit will
be made once the section commences.
The EIF inherits the investments of the HEEF under clause 152.
Division 4-Debits of amounts from the Education Investment Fund
Clauses 136 to 138 set out the purposes for which the EIF Special Account
may be debited. These purposes are split across three categories: purposes
relating exclusively to the EIF, purposes relating to transitional
arrangements for the transfer of investments from the HEEF, and purposes
not related exclusively to the EIF, but which could be attributed to the
EIF, Future Fund, BAF and HHF (for example, paying the remuneration and
allowances of Future Fund Board members).
Clause 136 - Purposes of the Education Investment Fund Special Account-
payments purposes and purposes related exclusively to the Education
Investment Fund
Clause 136 sets out the purposes for which the EIF Special Account may be
debited that relate exclusively to the EIF.
These purposes are:
. making payments in relation to the creation or development of higher
education infrastructure, the creation or development of research
infrastructure, the creation or development of vocational education and
training infrastructure, the creation or development of eligible
education infrastructure and making transitional HEEF payments; and
. the payment of various expenses (associated with the investment and
administration of the EIF) that can be exclusively attributed to the EIF.
While the range of such costs are as set out in clause 136, examples
include paying the expenses of an investment of the EIF and paying
expenses incurred by the Future Fund Board under a contract with
investment managers.
The terms 'creation or development of higher education infrastructure',
'the creation or development of research infrastructure', and 'the creation
or development of vocational education and training infrastructure' provide
flexibility and a broad scope in relation to higher education, research and
vocational education and training infrastructure projects that may be
considered for funding from the EIF.
To provide future flexibility (such as to allow the EIF to be extended to
school infrastructure), clause 143 allows the designated Ministers to
determine that a specified matter relating to education infrastructure is a
designated education infrastructure-related matter (see below).
While allowing for flexibility for infrastructure projects eligible to be
considered for funding, the Government has indicated a clear focus for the
EIF, BAF and HHF to assist with financing investment in the creation or
development of infrastructure, consistent with a broader nation-building
objective. Accordingly, it is intended that funding would be directed
towards capital expenditure, which could include associated labour costs
related to the creation or development of infrastructure (where required).
However, consistent with the Government's intention that the EIF provide
financing for the creation or development of relevant infrastructure, it is
not intended that expenditure of a recurrent nature relating to running
costs (such as staff wages and maintenance) would be financed from the EIF.
Accordingly, where specific projects have an ongoing cost component, it is
intended that such funding would be sourced through other means. This
could include direct funding from the budget (outside the EIF), or funding
by the States or Territories in relation to proposals that are brought
forward as part of the COAG reform agenda.
The terms 'creation or development of eligible education infrastructure'
and 'transitional HEEF payment' define particular matters for which
payments may be made from the EIF, in addition to payments that are made in
relation to the creation or development of higher education infrastructure,
the creation or development of research infrastructure and the creation or
development of vocational education and training education infrastructure.
Again, the focus is on the creation and development of relevant
infrastructure, consistent with the Government's objectives for the EIF.
The purpose of paragraph 136(1)(i) is to allow the EIF to be used to
discharge any other expenses or liabilities incurred by the Future Fund
Board that are exclusively incurred in connection with the EIF. It is also
intended to capture miscellaneous costs that may arise and are not covered
by the other existing purposes.
A note at the end of subclause 136(1) assists the reader by referring to
section 21 of the FMA Act, which deals with debits from Special Accounts.
Subclause 136(2) provides that paragraphs 136(1)(a), (b), (c), (d) and (e),
relating to payments in relation to higher education infrastructure,
research infrastructure, vocational education and training infrastructure,
eligible education infrastructure and transitional HEEF payments, do not
limit each other in their application.
Subclause 136(3) provides that a payment under paragraphs 136(1)(a), (b),
(c) or (d) may be made by way of a grant of financial assistance or by a
payment that is not a grant of financial assistance. This provides
flexibility in relation to payments from the EIF made in relation to the
creation or development of higher education infrastructure, the creation or
development of research infrastructure, the creation or development of
vocational education and training infrastructure and the creation or
development of eligible education infrastructure.
Other payments (i.e. payments that are not grants) include payments for the
acquisition, in the name of the Commonwealth, of financial assets (such as
shares, debentures and trust units) in a company involved in the creation
or development of relevant infrastructure. Other payments could also
include public-private partnership payments.
In addition, the Commonwealth would also have the flexibility to make a
payment (other than by a grant of financial assistance) to a State or
Territory under an ordinary contractual obligation.
Note that under clauses 183 and 190, the Finance Minister may direct that a
specified amount is debited from the EIF Special Account and credited to
the EIF Education Portfolio Special Account or the EIF Research Portfolio
Special Account respectively. Such a direction is to allow that amount to
be debited from the EIF Education Portfolio Special Account or the EIF
Research Portfolio Special Account for the purposes of making a specified
payment in relation to the creation or development of higher education
infrastructure, the creation or development of research infrastructure, the
creation or development of vocational education and training
infrastructure, the creation or development of eligible education
infrastructure and HEEF transitional payments (see clauses 183 and 190
below).
Further note that, under clause 194, the Finance Minister may direct that a
specified amount is debited from the EIF Special Account and transferred,
through the EIF Education Portfolio Special Account, to the COAG Reform
Fund Account (which will be established as a Special Account under the FMA
Act on commencement of the COAG Reform Fund Act 2008). Such a direction is
to allow that amount to be subsequently debited from the COAG Reform Fund
for the purposes of making a specified grant of financial assistance to a
State or Territory in relation to the creation or development of relevant
education infrastructure (see clause 194 below and also see section 6 the
COAG Reform Fund Act 2008, which sets out the purposes of the COAG Reform
Fund).
Clause 137 - Purposes of the Education Investment Fund Special Account-
transitional
The EIF inherits the investments of the HEEF under clause 152. Clause 137
provides transitional arrangements to allow the EIF to be debited to pay
any costs, expenses, obligations or liabilities incurred by the
Commonwealth in connection with the HEEF, where those costs, expenses,
obligations or liabilities were incurred (but not discharged) before the
commencement of the EIF.
This includes costs relating to the acquisition of financial assets under
Part 3 of the proposed to be repealed HEEF Act, expenses of an investment
of the HEEF, the costs relating to the acquisition of derivatives under the
proposed to be repealed HEEF Act. It also includes costs relating to a
contract with an investment manager, a bank account and a contract of
insurance where the costs were incurred before commencement of the EIF,
together with any other miscellaneous costs, expenses, obligations or
liabilities that were incurred before commencement of the EIF.
Note 1 at the end of clause 137 assists the reader by referring to
section 21 of the FMA Act, which relates to debits from Special Accounts.
Note 2 informs the reader that the HEEF was established by the repealed
HEEF Act.
Clause 138 - Purposes of the Education Investment Fund Special Account-
purposes not related exclusively to the Education Investment Fund
Clause 138 relates to payment of various expenses for purposes that are not
exclusively attributable to the EIF, but could be attributed to the EIF,
Future Fund, BAF or HHF. The intention of subclauses 138(a) to (g) is to
allow common costs of the EIF, Future Fund, BAF and HHF to be paid
initially by one Fund (with subsequent apportionment between the Funds).
A note at the end of clause 138 assists the reader by referring to
section 21 of the FMA Act, which relates to debits from Special Accounts.
Clause 139 - Payments in relation to the creation or development of higher
education infrastructure
Clause 139 defines the phrase payment in relation to the creation or
development of higher education infrastructure as it relates to the
purposes of the EIF Special Account. Paragraph (a) encompasses payments to
higher education institutions in relation to the creation or development of
education infrastructure. The purpose of paragraph (b) is to allow
payments from the EIF for the acquisition, in the name of the Commonwealth,
of financial assets in entities involved in the creation or development of
education infrastructure (including incidental or ancillary matters), as it
relates to the higher education sector. Flexibility is provided for the
acquisition of shares, debentures and trust units in companies, as well as
for the acquisition of other types of financial assets in other business
entities. This is intended to provide flexibility in how the Government
invests in the creation or development higher education infrastructure.
Shares, debentures or units acquired under subparagraphs 139(b)(i), (ii)
or (iii) allow for investment at the time a relevant company is formed, as
well as investment in relevant existing companies. Subparagraph 139(b)(iv)
similarly applies in relation to business entities.
Subparagraph 139(b)(ii), relating to debentures, covers the provision of
financial assistance to a company by way of loan. This is consistent with
the definition of 'debenture' in the Act, which provides that the term has
the same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
paragraph 139(b) will be in the name of the Commonwealth and will be
managed by the Commonwealth. It is intended that the Education Minister
will manage the Commonwealth's ownership obligations as well as exposures
and risks associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the EIF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 206 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 140 - Payments in relation to the creation or development of
research infrastructure
Clause 140 defines the phrase payment in relation to the creation or
development research infrastructure as it relates to the purposes of the
EIF Special Account. Paragraph (a) encompasses payments to research
institutions in relation to the creation or development of research
infrastructure. The purpose of paragraph (b) is to allow payments from the
EIF for the acquisition, in the name of the Commonwealth, of financial
assets in entities involved in the creation or development of research
infrastructure (including incidental or ancillary matters). Flexibility is
provided for the acquisition of shares, debentures and trust units in
companies, as well as for the acquisition of other types of financial
assets in other business entities. This is intended to provide flexibility
in how the Government invests in research infrastructure.
Shares, debentures or units acquired under subparagraphs 140(b)(i), (ii)
or (iii) allow for investment at the time a relevant company is formed, as
well as investment in relevant existing companies. Subparagraph 140(b)(iv)
similarly applies in relation to business entities.
Subparagraph 140(b)(ii), relating to debentures, covers the provision of
financial assistance to a company by way of loan. This is consistent with
the definition of 'debenture' in the Act, which provides that the term has
the same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
paragraph 140(b) will be in the name of the Commonwealth and will be
managed by the Commonwealth. It is intended that the Research Minister
will manage the Commonwealth's ownership obligations as well as exposures
and risks associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the EIF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 206 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 141 - Payments in relation to the creation or development of
vocational education and training infrastructure
Clause 141 defines the phrase payment in relation to the creation or
development of vocational education and training infrastructure as it
relates to the purposes of the EIF Special Account. Paragraph (a)
encompasses payments to vocational education and training providers in
relation to the creation or development of education infrastructure. The
purpose of paragraph (b) is to allow payments from the EIF for the
acquisition, in the name of the Commonwealth, of financial assets in
entities involved in the creation or development of education
infrastructure (including incidental or ancillary matters), as it relates
to the vocational education and training sector. Flexibility is provided
for the acquisition of shares, debentures and trust units in companies, as
well as the acquisition of other types of financial assets in other
business entities. This is intended to provide flexibility in how the
Government invests in education infrastructure as it relates to the
creation or development vocational education and training sector.
Shares, debentures or units acquired under subparagraphs 141(b)(i), (ii)
or (iii) allow for investment at the time a relevant company is formed, as
well as investment in relevant existing companies. Subparagraph 141(b)(iv)
similarly applies in relation to business entities.
Subparagraph 141(b)(ii), relating to debentures, covers the provision of
financial assistance to a company by way of loan. This is consistent with
the definition of 'debenture' in the Act, which provides that the term has
the same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
paragraph 141(b) will be in the name of the Commonwealth and will be
managed by the Commonwealth. It is intended that the Education Minister
will manage the Commonwealth's ownership obligations as well as exposures
and risks associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the EIF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 206 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 142 - Payments in relation to the creation or development of
eligible education infrastructure
Clause 142 defines the phrase payment in relation to the creation or
development of eligible education infrastructure as it relates to the
purposes of the EIF Special Account. Paragraph (a) encompasses payments in
relation to one or more designated education infrastructure-related
matters. The purpose of paragraph (b) is to allow payments from the EIF
for the acquisition, in the name of the Commonwealth, of financial assets
in entities involved in the creation or development of education
infrastructure (including incidental or ancillary matters), as it relates
to education infrastructure specified in a legislative instrument made by
the EIF designated Ministers for the purpose of this paragraph (see also
clause 143). This is intended to provide flexibility in how the Government
invests in education infrastructure as it relates to education
infrastructure that is specified in a legislative instrument under
clause 143.
Shares, debentures or units acquired under subparagraphs 142(b)(i), (ii)
or (iii) allow for investment at the time a relevant company is formed, as
well as investment in relevant existing companies. Subparagraph 142(b)(iv)
similarly applies in relation to business entities.
Subparagraph 142(b)(ii), relating to debentures, covers the provision of
financial assistance to a company by way of loan. This is consistent with
the definition of 'debenture' in the Act, which provides that the term has
the same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
paragraph 142(b) will be in the name of the Commonwealth and will be
managed by the Commonwealth. It is intended that the Education Minister
will manage the Commonwealth's ownership obligations as well as exposures
and risks associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the EIF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 206 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 143 - Designated education infrastructure-related matters
Clause 143 allows for the EIF designated Ministers to determine that a
specified matter relating to education infrastructure is a designated
education infrastructure related matter. The aim of this provision is to
allow flexibility for the EIF to be extended in future consistent with
government policy, for example in relation to schools infrastructure, as
further contributions are made to the EIF.
A determination under this clause is a legislative instrument for the
purposes of the Legislative Instruments Act. As such the instrument is
required to be tabled in Parliament and registered on the Federal Register
of Legislative Instruments. The instrument is disallowable by either House
of the Parliament.
Clause 144 - Transitional HEEF payments
Clause 144 defines the phrase transitional HEEF payment as it relates to
the purposes of the EIF Special Account. The purpose of this clause is to
allow for grants to be made to eligible higher education institutions in
relation to capital expenditure and in relation to research facilities,
under a 2009 HEEF Funding Round which commenced on 6 June 2008 (i.e. prior
to the proposed repeal of the HEEF Act and closure of the HEEF). It is
intended that proposals arising from the 2009 HEEF Funding Round will be
eligible for funding from the EIF under these arrangements. However, a
transitional HEEF payment requires a pre-1 July 2009 recommendation of the
EIF designated Ministers consistent with this purpose being to allow an
existing HEEF funding process to be completed.
Subclause 144(2) provides that expressions used in this clause have the
same meaning as they had in the HEEF Act.
Clause 145 - Future Fund Board must ensure that there is sufficient money
in the Education Investment Fund Special Account to cover authorised
payments etc.
Clause 145 requires the Future Fund Board to take all reasonable steps to
ensure that the amount of money standing to the credit of the EIF Special
Account is sufficient to cover amounts to be debited from the EIF to
support expenditure in relevant infrastructure - namely, grants of
financial assistance and other payments in relation to the creation or
development of higher education infrastructure, the creation or development
of research infrastructure, the creation or development of vocational
education and training infrastructure, the creation or development of
eligible education infrastructure and transitional HEEF payments. It also
includes payments to be channelled through the EIF Portfolio Special
Accounts, and the COAG Reform Fund for grants of financial assistance to
States and Territories, in relation to relevant infrastructure.
A note at the end of clause 145 is inserted to assist the reader by
clarifying that the Future Fund Board may need to liquidate non-cash assets
in accordance with clause 153 in order to comply with this clause.
Division 5-Inter-fund transfers
Clauses 146 to 148 - Transfers from the Education Investment Fund to the
Future Fund, Building Australia Fund, and Health and Hospitals Fund
Clauses 146 to 148 allow for amounts to be transferred between the EIF and
the Future Fund, BAF and HHF. The purpose of this is to cover the
situation where one Fund pays entirely for an expense that should properly
be apportioned between two or more Funds. The clauses allow the Finance
Minister to direct that one Fund be debited and the other Fund or Funds
credited by a specified amount.
Corresponding transfers from the Future Fund, BAF and HHF into the EIF are
provided for in this Bill.
Subclauses 146(3), 147(3) and 148(3) make it clear that directions of the
Finance Minister are not legislative instruments. These provisions are
merely declaratory in nature. Directions of this type are administrative
in character because they are merely the application of a legal power in a
particular case; they do not determine or alter the content of the law
itself.
Part 3.3-Investment of the Education Investment Fund
Clause 149 - Simplified outline
Clause 149 is an information provision which provides an overview of
Part 3.3 to assist with readability.
Clause 150 - Objects of investment of the Education Investment Fund
Subclause 150(1) is intended to reinforce that amounts are invested by the
Future Fund Board for the main objects of enhancing the Commonwealth's
ability to make payments in relation to the creation or development of
higher education infrastructure, the creation or development of research
infrastructure, the creation or development of vocational education and
training infrastructure, the creation or development of eligible education
infrastructure and transitional HEEF payments.
Subclause 150(2) sets out that the ancillary objects of the investment of
the EIF are for enhancing the ability of the Commonwealth and the Future
Fund Board to discharge costs, expenses, obligations and liabilities and
make payments for the ancillary purposes as set out in paragraphs 136(1)(f)
to (l), 137(a) to (g) and 138(a) to (g).
Clause 151 - Investment of the Education Investment Fund
Clause 151 is modelled on the investment powers under section 39 of the FMA
Act. However, subclause 151(1) expands those powers to specifically provide
for the investment of the EIF in a broad range of financial assets, which
could include cash, interest bearing securities and global property
securities, with the use of derivatives for risk management. Specific
conditions on the acquisition of derivatives are separately covered in
clause 161. This approach to investment of the EIF is consistent with
similar arrangements for the Future Fund.
Investments of the EIF will be made in the name of the Future Fund Board
(rather than the Commonwealth) to reinforce the position that the Future
Fund Board manages the EIF at arm's length from the Government. However,
beneficial ownership of the EIF remains with the Commonwealth at all times.
Subclause 151(3) provides that money invested in financial assets are
'investments of the EIF' and may be realised, disposed of or redeemed by
the Future Fund Board.
Clause 152 - Education Investment Fund to inherit investments of the Higher
Education Endowment Fund
The HEEF will be closed and its balance transferred to the EIF.
Clause 152 is a transitional provision relating to transfer of assets of
the HEEF to the EIF. It provides for the financial assets of the HEEF,
which are held by the Commonwealth (and have continuously been held by the
Commonwealth since commencement of the section), to become investments of
the EIF.
The Commonwealth's rights and powers associated with the assets may be
exercised by the Future Fund Board and are taken to be an EIF investment
function of the Future Fund Board.
The EIF inherits the balance of the HEEF Special Account under clause 135.
Clause 153 -Management of investments of the Education Investment Fund
Clause 153 sets out various matters relating to the management of
investments of the EIF.
Subclauses 153(1) and (2) provide that income derived from an investment of
the EIF, including a return of capital or another form of financial
distribution, must be credited to the EIF Special Account. This is
consistent with the requirements under sections 81 and 83 of the
Constitution (which, in effect, provide that public money forms part of the
Consolidated Revenue Fund and can only be spent if authorised by an
appropriation made by law). In practice, any money that has not been
invested must be held in an official bank account. The requirement to hold
the money in an official bank account is covered in the FMA Act.
Subclauses 153(3) to (5) relate to the arrangements that will apply in
relation to the realisation of assets. While subclauses 153(3) to (4) are
self explanatory, subclause 153(5) allows the Future Fund Board to
authorise, prior to an investment maturing, that the proceeds of this
investment be automatically reinvested with the same entity. This avoids
the need for the proceeds of realisation of the investment to be treated as
public money and credited to the Consolidated Revenue Fund only to be then
reappropriated and reinvested. Any reinvestment is an investment of the
EIF.
Subclause 153(6) provides that section 39 of the FMA Act does not apply to
an investment of the EIF. Section 39 of the FMA Act authorises the Finance
Minister to invest public money in only a limited range of investments,
such as government bonds and bank deposits. However, clause 151(1)
provides for the investment of the EIF in a broader range of financial
assets, which could include cash, interest bearing securities and global
property securities, with the use of derivatives for risk management.
Clause 154 - Education Investment Fund Investment Mandate
It is appropriate that the Government, as manager of the economy and owner
of the EIF, has a mechanism for articulating its overall expectations for
how the EIF will be invested and managed by the Future Fund Board.
Clause 154 establishes a framework that enables the Government to give
strategic guidance to the Future Fund Board while preserving the Board's
role in managing the investment of the EIF at arm's length from the
Government. This approach is consistent with that existing in relation to
the Future Fund.
Subclause 154(1) provides that the responsible Ministers have the power to
give the Future Fund Board written directions in relation to the
performance of its investment functions and the exercise of its powers.
The responsible Ministers must issue at least one direction to ensure that
an Investment Mandate is in force at all times and to provide clarity and
certainty to the Future Fund Board. Note that the Education Investment
Fund investment function is defined in clause 4.
Subclause 154(2) provides that any direction issued under subclause 154(1)
has effect subject to the limitations set out in clause 155 - Limitation on
Education Investment Fund Investment Mandate.
The fact that a direction has already been issued does not prohibit the
responsible Ministers from issuing additional directions. All of these
directions together comprise the Investment Mandate (see subclauses 154(1)
and 154(4)).
While the responsible Minister can issue new directions at any time, the
intention is that the Investment Mandate will reflect the nature of the
Government's policy. Any new directions will therefore only be issued in
light of significant policy changes or material changes in the investment
environment faced by the EIF.
Subclause 154(3) provides that in setting an Investment Mandate, the
responsible Ministers must have regard to maximising the return on the EIF
consistent with international best practice for institutional investment,
enhancing the Commonwealth's ability to make payments in relation to the
objects of the EIF (set out in clause 128), and any other matters the
Ministers consider to be relevant. This requirement will give the Future
Fund Board and the Parliament assurance that the responsible Ministers must
consider the scope of their directions from an investment perspective,
while ensuring that there is flexibility to take account of broader policy
issues and national interest considerations.
Subclauses 154(5) and 154(6) provide that the Investment Mandate may
include, but is not limited to, statements about policies the Future Fund
Board must pursue in relation to risk and return and the allocation of the
EIF to particular asset classes. This may include restrictions or
thresholds for investing the EIF in certain jurisdictions or asset classes
and statements of the Government's tolerance for losses.
Subclause 154(7) provides that any policies are subject to the limitations
set out in clause 155.
Subclause 154(8) ensures that the Future Fund Board is not given
conflicting directions regarding the Government's tolerance for risk, its
expectations for returns and any associated allocation of the EIF across
asset classes.
To avoid doubt, subclause 154(9) makes it clear that the scope of the
responsible Ministers' power to issue directions to the Future Fund Board
in relation to the investment of the EIF is bound by the Act. For example,
the responsible Ministers could not direct the Future Fund Board to use
derivatives in a manner that contradicts clause 161 (which deals with the
acquisition of derivatives by the Future Fund Board).
Subclause 154(10) provides that the Investment Mandate will not formally
commence until at least 15 calendar days after it is issued. This is to
allow the Future Fund Board time to adjust to any revised directions issued
by the responsible Ministers. Importantly, the Future Fund Board will be
able to know with certainty when the new direction will come into force.
Subclause 154(11) provides that directions under subclause 154(1), that set
out certain rules that the Future Fund Board must comply with, are
legislative in character and are therefore legislative instruments for the
purposes of section 5 of the Legislative Instruments Act. However, any
directions issued by the responsible Ministers as part of the Investment
Mandate are exempt from parliamentary disallowance (provided for by
section 44 of the Legislative Instruments Act) and exempt from sunsetting
(provided for by section 54 of the Legislative Instruments Act).
As legislative instruments, any directions given to the Future Fund Board
under this clause are required to be registered on the Federal Register of
Legislative Instruments and tabled in Parliament.
This approach enables the public and the Parliament to hold the Government
accountable for the directions it issues to the Future Fund Board without
impeding the Government's ability to manage its finances.
Subclauses 154(12) and 154(13) provide that, subject to the restrictions
set out in the Act and the expectations of the Government as articulated in
the Investment Mandate, the Future Fund Board has a statutory obligation to
seek to maximise returns, consistent with international best practice for
institutional investment and enhancing the Commonwealth's ability to make
payments in relation to the objects of the EIF (set out in clause 128).
This provision (together with subclause 154(8)) establishes a clear
hierarchy of priorities for the Future Fund Board - the responsibility to
maximise returns is subordinate to the investment parameters set out by the
Parliament and the Government. This framework provides appropriate
flexibility while still ensuring suitable accountability for any directions
the Government gives the Future Fund Board regarding the investment of the
EIF.
It also provides the Future Fund Board with clarity as to the extent of its
accountability - the Future Fund Board must be able to demonstrate that it
is pursuing policies and strategies that are clearly directed at maximising
investment returns in a manner that is consistent with best practice.
It is expected that the Future Fund Board will adopt a best practice
approach to a range of issues by learning from the experiences of other
investors and funds of national significance.
The purpose of subclause 154(13) is to clarify that the subclause is the
default position in the event that a direction under subclause 154(1) is
not issued or is revoked. However, a direction issued by the Ministers
under subclause 154(1) will override subclause 154(12).
Clause 155 - Limitation on Education Investment Fund Investment Mandate
Clause 155 aims to ensure that the EIF is not invested in a way that is
inconsistent with its objectives. A similar clause exists in the Future
Fund Act.
Subclause 155(1) specifies that the responsible Ministers cannot direct the
Future Fund Board to use the assets of the EIF to invest in a particular
financial asset, for example, shares in a particular infrastructure
company. It also prevents the responsible Ministers from issuing a
Ministerial direction that has the effect of requiring the Future Fund
Board to use the assets of the EIF to support a particular business entity,
a particular activity or a particular business.
This clause does not limit the ability of the Investment Mandate to set out
the policies as intended under the Bill, such as those to be pursued by the
Future Fund Board in relation to matters of risk and return.
This clause does not limit the Commonwealth's ability to acquire shares in
a company, debentures in a company, units in a unit trust, or other
vehicles that are allowed for the creation or development of relevant
infrastructure under clauses 139, 140, 141 and 142. Such investments are
external to the EIF and are not made by the Future Fund Board.
Clause 156 - Future Fund Board to be consulted on Education Investment Fund
Investment Mandate
Consistent with the Future Fund arrangements, the responsible Ministers are
required to consult the Future Fund Board on any changes or additions to
the Investment Mandate. Subclauses 156(1) and 156(3) achieve this by
requiring the responsible Ministers to send a draft of the new direction to
the Future Fund Board and inviting the Board to make a submission within a
specified time limit.
The specified time limit will be determined on a case by case basis with
regard to relevant circumstances and priorities at the time. It may be the
case that urgent changes are required in the national interest. In this
situation, it would be reasonable for the Future Fund Board to be asked to
consider a draft direction quickly. However, where there is less urgency,
or the change in the Investment Mandate is quite substantial, it would be
reasonable to provide the Future Fund Board with more time to consider a
draft direction.
Subclause 156(2) provides that any submission received by the responsible
Ministers from the Future Fund Board must be tabled in Parliament with the
new direction. In this way, the Future Fund Board will be able to ensure
that their views on the expected impact on their ability to maximise
returns are publicly known.
Clause 157 - Compliance with Education Investment Fund Investment Mandate
Subclause 157(1) provides that it is the responsibility of the Future Fund
Board to take all reasonable steps to ensure that all policies and
decisions regarding the operation and investment of the EIF are in
accordance with any directions (Investment Mandate) issued by the
responsible Ministers. Since the Investment Mandate is intended to provide
broad guidance to the Future Fund Board, it may contain directions that
require the Board to apply its judgement on whether or not the EIF is
complying with the Mandate.
Subclause 157(2) provides that if the Future Fund Board becomes aware of a
breach of the Investment Mandate or judges that a policy does not comply
with the Investment Mandate, it must inform the responsible Ministers in
writing as soon as is practicable, including a proposed strategy to bring
the operations of the EIF into accordance with the Investment Mandate.
Similarly, subclauses 157(3) and 157(4) provide that if the Government
identifies areas where the Future Fund Board is not complying with the
Investment Mandate, the responsible Ministers can issue written directions
to the Board to take action to remedy the situation. The Future Fund Board
is required to comply with any such directions, noting that the responsible
Ministers are the final arbiters on what is intended by the Investment
Mandate.
Subclause 157(5) provides that any transactions undertaken by the Future
Fund Board that are deemed later not to have complied with the Investment
Mandate, are still valid and the Board is required to honour any commitment
made. This protects third parties who enter into transactions with the
Future Fund Board or its agents in good faith.
Subclause 157(6) makes it clear that a direction under subclause 157(3) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Clause 158 - Future Fund Board must not trigger the takeover provisions of
the Corporations Act 2001
To minimise market distortion and eliminate the potential for conflicts of
interest for the Government as a market regulator, the Future Fund Board is
prohibited from triggering the takeover provisions under section 606 of the
Corporations Act.
Section 606 of the Corporations Act essentially prohibits acquisitions in
relevant interests in the voting shares of a listed company, or unlisted
company with more than 50 share holders, if a person's voting power
increases from a figure at or below 20% to a figure above 20% (or from a
figure above 20% to a higher figure above 20% but below 90%) - unless the
shares are acquired in one of the circumstances set out at section 611 of
that Act.
However, it is the Government's intention that the takeover threshold be
adhered to quite strictly in relation to listed companies and unlisted
companies with more than 50 shareholders. Therefore, subclause 158(1)
provides that the exceptions provided under section 611 of the Corporations
Act (that is, exceptions to the prohibition in section 606) do not apply in
relation to acquisitions by the Future Fund Board.
The prohibition on the Future Fund Board is not expected to have a material
impact on the investment efficiency of the EIF as such limits are quite
similar to those often used by other fund managers. However, the Future
Fund Board will need to have regard to the entirety of its interest (i.e.
through investment of the EIF, Future Fund, BAF and HHF) in a particular
company when the Board is proposing a particular acquisition in the context
of the EIF.
Subclause 158(2) provides that if for some reason the Future Fund Board has
not complied with section 606 of the Corporations Act (as it is applied to
the Future Fund Board under clause 158), the relevant transactions will
still be valid. The aim of this provision is to ensure third parties are
not adversely affected by any non compliance of the Future Fund Board.
A note at the end of the clause assists the reader by referring to section
39 of the Future Fund Act, which sets out the application of the
Corporations Act to the Future Fund Board.
Note that the Future Fund Board is also prohibited from acquiring more than
a 20% stake (as defined in the Financial Sector (Shareholdings) Act with a
few minor adjustments) in a foreign publicly listed company. This
prohibition is found in section 84C of the Future Fund Act, but applies to
the Future Fund Board's activities in relation to the EIF, Future Fund, BAF
and HHF. Therefore, the Future Fund Board must take account of the overall
level of its investment in a foreign listed company in complying with this
provision.
Clause 159 - Borrowing
Clause 159 prohibits the Future Fund Board from borrowing money, except for
short term borrowing associated with the settlement of transactions or in
other circumstances prescribed in regulations (see subclause 159(3) below).
Consistent with the Future Fund Board's broader role in relation to
managing the assets of a number of funds (including the Future Fund), the
eligibility of short term borrowing for transaction settlement is in line
with the treatment of superannuation funds under the Superannuation
Industry (Supervision) Act 1993.
The overall aim of this clause is to ensure that the Future Fund Board is
able to operate efficiently without exposing the budget to undue risk.
Subclause 159(3) provides that regulations may be made to specify
circumstances in which it is considered appropriate for the Future Fund
Board to be able to borrow. Regulations may also be used to clarify any
uncertainty on whether a particular activity constitutes borrowing. While
it is not anticipated that the Future Fund Board will have a need to
borrow, this provision allows for unforseen events or changes in the
investment environment without the need to amend the primary legislation.
The regulations would be disallowable by either House of the Parliament.
Clause 160 - Education Investment Fund investment policies
Subclauses 160(1), 160(3) and 160(7) provide that the Future Fund Board is
required to formulate, publish and comply with a number of policies on its
investment activities.
The aim of this provision is to ensure rigour and transparency around how
the Future Fund Board performs its investment function in relation to the
EIF, including risk management and performance assessment and benchmarks.
In addition to the specific matters set out in paragraphs 160(1)(a) to (d),
the Future Fund Board is required to formulate, publish and comply with
policies and any additional matters specified in regulations (see
paragraph 160(1)(e) and subclause 160(7)).
A note at the end of subclause 160(1) reminds the reader that under
subsection 33(3) of the Acts Interpretation Act, the Future Fund Board is
able to repeal, rescind, revoke, amend, or vary any such policies.
Subclause 160(2) provides that the policies that the Future Fund Board
develops must not be incompatible with the Investment Mandate.
Subclause 160(4) provides that the Future Fund Board must publish the first
set of policies on the internet as soon as is practicable following the
commencement of this clause.
Subclauses 160(5) and 160(6) provide that the Future Fund Board must
conduct reviews of these policies periodically and where the responsible
Ministers change the Investment Mandate. It is not expected that these
reviews would be a formal process or that the results of the reviews would
be required to be published. However, if the review resulted in any
changes to the policies, it is intended that the updated policies would be
published on the internet.
Subclause 160(8) provides that if the Future Fund Board enters into a
transaction which is not consistent with a policy that it has published
under this clause, the transaction will still be valid. This will ensure
that third parties are not affected by any inconsistency with the Future
Fund Board's policies. However, subclause 160(7) provides that the Future
Fund Board is required to take all reasonable steps to comply with the
policies it develops under subsection 160(1).
Subclause 160(9) makes it clear that the policies of the Future Fund Board
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 161 - Derivatives
Derivatives are widely used by financial market participants as a tool for
risk management. As the sophistication, size and mobility of capital
markets around the world increases, investment managers are looking for
more ways to maximise the returns on investments while minimising the
volatility of results. The types and volumes of derivatives being traded
has grown exponentially as the underlying markets have created demand for
these types of instruments.
Clause 161 provides for the Future Fund Board to make use of derivatives
for certain purposes. This includes as a risk management tool and to
achieve indirect exposure to assets that it could not otherwise achieve.
The Future Fund Board may also use derivatives to reduce the transaction
cost of achieving required exposures. However, subclause 161(1) provides
that it may not use derivatives for speculative purposes or for leverage.
Subclause 161(2) provides that the acquisition of derivatives under this
clause cannot be inconsistent with the requirement under clause 160 for the
Future Fund Board to formulate a policy on its investment strategy and take
all reasonable steps to comply with that policy.
Subclauses 161(3) and 161(4) provide that derivatives must be held in the
name of the Future Fund Board and are taken to be an investment of the EIF.
Similar to other investments, derivatives may be realised by the Future
Fund Board under subclause 153(3).
Clause 162 - Additional financial assets
Clause 162 provides that if the Future Fund Board becomes a holder of
another financial asset, for example through a capital distribution, that
asset becomes an investment of the EIF and is therefore subject to all the
restrictions and requirements for investments of the EIF.
Clause 163 - Securities lending arrangements
Clause 163 provides that the Future Fund Board is able to enter into
securities lending arrangements. Lending of securities is commonplace
among institutional investors. It may also take collateral as part of a
securities lending arrangement. Any collateral it takes is either credited
to the EIF Special Account or becomes an investment of the EIF.
Clause 164 - Investment managers
Subclause 164(1) provides that the Future Fund Board is able to hire one or
more investment managers. Investment manager is defined broadly to include
custodians, transition managers and other investment managers. However,
the Agency is excluded from this definition as it is generally expected
that investment activities, such as acquiring derivatives or investing
money, will be outsourced.
Unless approved by the responsible Ministers, the Future Fund Board must
use investment managers to invest money in financial assets, acquire
derivatives, enter into securities lending arrangements or realise
financial assets.
Subclause 164(2) provides that the responsible Ministers may provide
approval in writing for certain methods of investment, other than through
investment managers, should it be prudent and cost effective to do so.
Subclauses 164(3) and 164(4) provide that the Future Fund Board is required
to ensure that investment managers operate within the Act and must report
on the state of investments of the EIF to the Board and the Agency. It
would be expected that such obligations are set out in the contractual
arrangements between the Future Fund Board and the investment manager.
Clause 165 - Custody of securities
Clause 165 provides that section 40 of the FMA Act does not apply to
investment of the EIF.
Section 40 of the FMA Act requires officials who receive any bonds,
debentures or other securities in the course of their duties to deal with
them in accordance with the Finance Minister's Orders. This provision is
designed for departments of state who carry out a more limited range of
investment activities than is envisaged for the Future Fund Board (and
Agency) in relation to the EIF. Further, making custodians and other
investment managers comply with the Finance Minister's Orders for
investment purposes could impose an undue administrative burden.
While section 40 of the FMA Act is excluded, a framework for how the Future
Fund Board must deal with securities that it receives in relation to the
EIF is covered by clauses 153 and 163.
Clause 166 - Refund of franking credits
Under subsection 84B(1) of the Future Fund Act, the Future Fund Board is
deemed to be an exempt institution that is eligible for a refund of
franking credits under the ITAA. As the Future Fund Board is exempt from
income tax, it may have an investment bias towards assets whose return had
not previously been subject to income tax (such as debt instruments or
unfranked dividends). Refunding franking credits removes any potential
bias against franked dividends.
Clause 166 deals with refund of franking credits and provides that if the
Future Fund Board receives a refund of a tax offset under the ITAA and the
tax offset is attributable to the investment of the EIF, any refund
received is credited to the EIF Special Account.
Clause 167 - Realisation of non-financial assets
Clause 167 requires the Future Fund Board to realise an asset that ceases
to be a financial asset or any asset acquired by the Board (as an
investment of the EIF) that is not a financial asset. This could include
circumstances where the Future Fund Board holds an asset which was
mistakenly acquired by the Board, or given to the Board, or which ceases to
be a financial asset due to a revision of the ABS government finance
statistics manual, for example.
The clause provides that a non-financial asset is treated as a financial
asset up to the time it is realised. Paragraphs 167(1)(b) and 167(2)(b)
ensure that the asset is considered an investment of the EIF and that
relevant provisions relating to investments of the EIF apply to that asset
for the time it is held by the Future Fund Board.
Clause 168 - Additional function of the Future Fund Board
Clause 168 provides that the functions of the Future Fund Board include the
function of investing amounts in accordance with the Act.
Part 3.4-Payments
Division 1-Introduction
Clause 169-Simplified outline
Clause 169 is an information provision which provides an overview of
Part 3.4 to assist with readability.
The following diagram illustrates how payments may be made from the EIF.
[pic]
It is the Government's policy intention that payments from the EIF will be
channelled through EIF Portfolio Special Accounts in line with EIF
portfolio Ministers' responsibilities for managing the delivery of
infrastructure projects. Grant payments will be disbursed to States and
Territories, via the relevant EIF Portfolio Special Account, through the
COAG Reform Fund.
Division 2-Education Investment Fund Advisory Board
It is the Government's intention that spending proposals for the creation
or development of higher education infrastructure, the creation or
development of research infrastructure, the creation or development of
vocational education and training infrastructure and the creation or
development of eligible education infrastructure will be rigorously
evaluated by an independent advisory body.
The EIF advisory body function will be undertaken by the EIF Advisory
Board, which is to be an independent body established under this Chapter to
advise the Education Minister about matters referred to it by the Education
Minister and the Research Minister about matters referred to it by the
Research Minister.
The Education Minister and Research Minister, as EIF designated Ministers,
will be responsible for appointment of members to the EIF Advisory Board
and also for terminating appointments.
The EIF Advisory Board will also advise the EIF designated Ministers about
the making of transitional HEEF payments.
Division 2 establishes the EIF Advisory Board and sets out provisions
relating to its function, operation and membership.
Clause 170 - Education Investment Fund Advisory Board
The EIF Advisory Board is established by subclause 170(1). Note that a
reference to the EIF Advisory Board means the Education Investment Fund
Advisory Board as defined in section 4.
Subclauses 170(2) to (4) relate to appointments to the EIF Advisory Board.
The EIF designated Ministers may appoint members to the EIF Advisory Board
in writing. The maximum term of an appointment is three years. However,
the EIF designated Ministers may also appoint a member for a shorter term
as set out in the instrument of appointment.
Members may also be appointed for a subsequent term. The note at the end
of subclause 170(3) refers to subsection 33(4A) of the Acts Interpretation
Act, which provides for 'appoint' to include re-appoint.
The purpose of subclause 170(4) is to ensure that members appointed to the
EIF Advisory Board have a high level of knowledge and experience in an area
that is relevant to the EIF Advisory Board's function. While a potential
appointee's level of skill and experience will be at the EIF designated
Ministers' discretion, examples may include expertise in higher education,
vocational education and training, finance and economics, or experience as
a scientist or research scientist.
Subclause 170(5) provides for the EIF designated Ministers to terminate
appointments to the EIF Advisory Board.
Under subclause 170(6), the EIF designated Ministers may issue written
directions to the EIF Advisory Board regarding the way in which it carries
out its functions and the procedures to be followed at meetings. This
could include, for example, the timeframe for providing advice to the
Education Minister and Research Minister, frequency and quorum requirements
for meetings and the recording of meeting minutes.
Subclause 170(7) makes it clear that directions to the EIF Advisory Board
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 171 - Functions of the EIF Advisory Board
Clause 171 sets out the function of the EIF Advisory Board to provide
advice to the Education Minister about matters which are referred to it by
the Education Minister and to the Research Minister about matters referred
to it by the Research Minister. The EIF Advisory Board may also advise the
EIF designated Ministers (i.e. the Education Minister and the Research
Minister) about matters referred to it by the EIF designated Ministers.
Consistent with the Government's intention to establish the EIF Advisory
Board to consider relevant proposals, subclause 171(2) requires that each
matter that is referred to the EIF Advisory Board by the Education Minister
must be a matter that relates to making payments in relation to the
creation or development of higher education infrastructure, the creation or
development of vocational education and training infrastructure and the
creation or development of eligible education infrastructure.
Similarly, subclause 171(3) requires that each matter that is referred to
the EIF Advisory Board by the Research Minister must be a matter that
relates to making payments in relation to the creation or development of
research infrastructure.
Subclause 171(4) requires the EIF Advisory board to apply the EIF
evaluation criteria when providing advice to the Education Minister or the
Research Minister. This is consistent with the Government's intention that
spending proposals will be rigorously assessed (see below).
Under subclause 171(5), the EIF Advisory Board may also advise about other
matters relating to the object or operation of Chapter 3 (see clause 128)
that do not relate to the making of a particular payment.
Subclauses 171(6) and (7) relate to HEEF transitional payments and set out
an additional function of the EIF Advisory Board to advise the EIF
designated Ministers about matters that are referred to it prior to
1 July 2009. The 1 July 2009 date will allow sufficient time for matters
in the 2009 HEEF Funding Round to be referred to the EIF Advisory Board by
the EIF designated Ministers. In giving advice to the EIF designated
Ministers about such matters, the EIF Advisory Board must apply the
provisions of the 'Higher Education Endowment Fund (HEEF) Application and
Assessment Procedures for the 2009 Funding Round' which was attached to the
Higher Education Endowment Fund Advisory Board Directions No. 1 of 2008
(Directions), as in force prior to commencement of this section. A
regulation-making power may modify these documents as appropriate
reflecting that the 2009 HEEF Funding Round will be completed under the
EIF.
Clause 172 - EIF evaluation criteria
Clause 172 requires the EIF designated Ministers (being the Education
Minister and the Research Minister) to formulate EIF evaluation criteria to
be applied by the EIF Advisory Board when giving advice under
subclause 171(1).
The purpose of subclause 172(2) is to acknowledge that the criteria applied
by the EIF Advisory Board in giving advice in relation to matters referred
by the Education Minister (under paragraph 171(1)(a)) may be different to
the criteria to be applied when it provides advice in relation to matters
referred by the Research Minister (under paragraph 171(1)(b)). This
reflects that there may be different factors affecting higher education
versus research, with the result that specific criteria may be relevant
only in relation to higher education infrastructure and other criteria may
only be relevant in relation to research infrastructure.
However, in addition to any education or research specific criteria, the
EIF evaluation criteria may include common criteria to be applied by the
EIF Advisory Board in relation to advice that is provided both under
paragraph 171(1)(a) and paragraph 171(1)(b).
As the EIF evaluation criteria will be made by legislative instrument, the
instrument is required to be registered on the Federal Register of
Legislative Instruments and tabled in Parliament. It will also be
disallowable by either House of the Parliament.
Subclause 172(3) requires the EIF designated Ministers to consult with the
responsible Ministers before formulating the EIF evaluation criteria. The
intention of this requirement is to ensure that there is a common and
rigorous approach in the evaluation criteria framework across the EIF, BAF
and HHF that is consistent with the nation-building objectives of the Funds
and in line with the Government's overarching principles that projects
financed from the Funds should:
. address national infrastructure priorities;
. demonstrate high benefits and effective use of resources;
. efficiently address infrastructure needs; and
. demonstrate they achieve established standards in implementation and
management.
Subclause 172(4) is intended to ensure that the EIF designated Ministers
formulate the EIF evaluation criteria consistent with the operation of the
Government's broader framework for spending proposals to be rigorously
assessed by independent advisory bodies.
Clause 173 - Remuneration and allowances
Clause 173 provides for the Remuneration Tribunal to determine the
remuneration of members of the EIF Advisory Board. However, the clause
allows the EIF designated Ministers to determine such remuneration if no
determination is made by the Remuneration Tribunal.
The Regulations may prescribe allowances, in addition to remuneration, to
be paid to EIF Advisory Board members.
Clause 174 - Disclosure of interests
Clause 174 sets out a procedure to cover a situation where an EIF Advisory
Board member has a material personal interest in a matter that will be
considered by the EIF Advisory Board. Note that a 'material personal
interest' is intended to be a broader test than simply a monetary gain.
For example, a material personal interest may involve a direct or indirect
advantage or benefit to the extent that it has the capacity to influence
how the member would assess a particular proposal.
Subclause 174(2) requires the member to disclose such an interest to the
EIF Advisory Board and to the EIF designated Ministers. The disclosure
must also be recorded in the meeting minutes.
Subclause 174(4) requires the EIF designated Ministers to terminate the
appointment of an EIF Advisory Board member who does not, without
reasonable excuse, disclose a material personal interest.
Subclause 174(5) confirms that termination under this clause does not limit
the EIF designated Ministers' broader power to terminate a member under
subclause 170(5).
Clause 175 - Resignation
Clause 175 provides for a member to resign from the EIF Advisory Board by
providing a written notice to either the Education Minister or the Research
Minister. The resignation will take effect once received by the EIF
portfolio Minister concerned, or the notice of resignation may contain an
alternative date.
Division 3-Direct payments
Clause 176 - Authorisation of payments
The Finance Minister has a central role in authorising payments (and
directing payments to be channelled through Portfolio Special Accounts and
through the COAG Reform Fund - see below) from the EIF for projects agreed
to by the Government through the annual budget process. However, it is the
Government's intention that for any payments that have been authorised (or
directed), relevant portfolio Ministers - in the case of the EIF, the
Education Minister in relation to education related matters, and the
Research Minister in relation to research related matters - will manage the
delivery of projects (including obligations and any risks) associated with
disbursements from the EIF.
Clause 176 allows the Finance Minister to authorise payments in relation to
the creation or development of higher education infrastructure, the
creation or development of research infrastructure, the creation or
development of vocational education and training infrastructure, the
creation or development of eligible education infrastructure and
transitional HEEF payments.
It is not intended that the payments listed above will limit each other,
which is confirmed by subclause 176(6). Accordingly, for example, the
Finance Minister may authorise payments in relation to both higher
education infrastructure and research infrastructure (i.e. where more than
one aspect might exist in a particular case).
While the Finance Minister could authorise payments under each of
subclauses 176(1), (2), (3), (4) and (5) through separate authorisation
instruments, the clause has been drafted with flexibility to also allow a
single instrument covering the authorisation of one or more payment(s)
under any of subclauses 176(1), (2), (3), (4) or (5). The aim of this is
to provide for greater administrative efficiency in the authorisation of
disbursements, where appropriate.
Payments authorised under clause 176 are made directly to a State,
Territory, or a person other than a State or Territory, noting that a
person includes a partnership.
Payments that are channelled through the EIF Education Portfolio Special
Account and the EIF Research Portfolio Special Account are dealt with
separately in clauses 183 and 190. It is intended that payments relating
to the creation or development of higher education infrastructure, the
creation or development of vocational education and training
infrastructure, the creation or development of eligible education
infrastructure and transitional HEEF payments will be channelled through
the EIF Education Portfolio Special Account and that payments relating to
the creation or development of research infrastructure will be channelled
through the EIF Research Portfolio Special Account. This is consistent
with the establishment of these Portfolio Special Accounts to ensure that
clear accountability and reporting obligations rest with the relevant
portfolio departments. It is also consistent with portfolio Ministers'
responsibilities for managing the delivery of agreed projects. However,
the ability for the Finance Minster to authorise payments directly from the
EIF Special Account provides maximum flexibility as to how funding may be
provided in future.
Payments by way of a grant of financial assistance made to a State or
Territory that are channelled through the COAG Reform Fund are dealt with
separately in clause 194 (see below). It is intended that grants of
financial assistance that are made to States and Territories will be
initially transferred from the EIF to the EIF Education Portfolio Special
Account and then channelled through the COAG Reform Fund. This is
consistent with the COAG Reform Fund being the vehicle through which
capital transfers from the Funds, as well as other funding from the budget,
will be distributed to States and Territories.
Subclause 176(8) makes it clear that authorisations of the Finance Minister
are not legislative instruments. These provisions are merely declaratory
in nature. Authorisations of this type are administrative in character
because they are merely the application of a legal power in a particular
case; they do not determine or alter the law itself.
Clause 177 - Recommendations about payments
It is intended that portfolio Ministers will be responsible for preparing
proposals to be brought forward for Government consideration as part of the
annual budget process. As part of this process, portfolio Ministers will
make recommendations to the Finance Minister that payments be authorised
from the EIF. In this context, the Government has also made a commitment
that all projects financed from the EIF, BAF and HHF will need to satisfy
rigorous evaluation criteria assessed by independent bodies.
To ensure that all proposals ultimately funded from the EIF have met the
Government's broader commitment, EIF portfolio Ministers must ensure that
relevant advice has been sought from the EIF Advisory Board which supports
their recommendation for a payment to be authorised from the EIF.
Consistent with the framework, subclauses 177(1) and (4) provide that the
Finance Minister must not authorise a payment from the EIF unless the
relevant EIF portfolio Minister has recommended the authorisation of the
payment.
Subclauses 177(2) and (5) confirm the obligation on the EIF portfolio
Minister to receive relevant advice from the EIF Advisory Board and ensure
that a proposal for a payment from the EIF satisfies the relevant EIF
evaluation criteria.
In deciding to make a recommendation that a payment be authorised from the
EIF, subclauses 177(3) and (6) require the relevant EIF portfolio Minister
to have regard to the advice from the EIF Advisory Board, together with any
other matter he or she considers relevant.
Subclauses 177(7) to (9) relate to transitional HEEF payments. The EIF
designated Ministers must make a recommendation to the Finance Minister
regarding transitional HEEF payments before 1 July 2009. However, the EIF
designated Ministers must not make such a recommendation unless the EIF
Advisory Board has given advice about the payment.
In deciding to make a recommendation that a payment be authorised from the
EIF, subclause 177(9) requires the EIF designated Ministers to have regard
to the advice from the EIF Advisory Board, together with any other matter
they consider relevant.
Clause 178 - Grant to a State or Territory-education infrastructure etc.
Clause 178 is concerned with grants of financial assistance that are paid
to a State or Territory for the purposes set out in paragraphs 136(1)(c)
or (d) - i.e. grants payments in relation to the creation or development of
vocational education and training infrastructure and the creation or
development of eligible education infrastructure. Note that, in this case,
the payment is not channelled through the EIF Education Portfolio Special
Account or through the COAG Reform Fund.
Also note that grants payments to States and Territories does not include
higher education infrastructure, research infrastructure or transitional
HEEF payments as these involve payments to eligible higher education
institutions which are not in State or Territory jurisdictions.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 178(3) provides for the Education Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Clause 179 - Grant to a person other than a State or Territory-education
infrastructure etc.
Clause 179 is concerned with grants of financial assistance that are paid
to a person other than a State or Territory for the purposes set out in
paragraph 136(1)(a), (c), (d) or (e) - i.e. grants payments in relation to
the creation or development of higher education infrastructure, the
creation or development of vocational education and training
infrastructure, the creation or development of eligible education
infrastructure and transitional HEEF payments. Note that, in this case,
the payment is not channelled through the EIF Education Portfolio Special
Account. Also, these payments are only paid directly to a recipient (and
not through the COAG Reform Fund which is a mechanism to disburse funds to
States and Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 179(3) provides for the Education Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Clause 180 - Grant to a person other than a State or Territory-research
infrastructure
Clause 180 is concerned with grants of financial assistance that are paid
to a person other than a State or Territory for the purposes set out in
paragraph 136(1)(b) - i.e. grants payments in relation to the creation or
development of research infrastructure. Note that the payment is not
channelled through the EIF Research Portfolio Special Account. Also, these
payments are only paid directly to a recipient (and not through the COAG
Reform Fund which is a mechanism to disburse funds to States and
Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 180(3) provides for the Research Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Division 4-Channelling of payments through the EIF Education Portfolio
Special Account
Clause 181 - Establishment of the EIF Education Portfolio Special Account
In line with the role of portfolio Ministers in managing agreed projects,
clear accountability and reporting of disbursements from the EIF will rest
within relevant portfolio departments. For example, it is intended that
the relevant portfolio department will be responsible for arranging for a
specific payment to be made from the EIF based on the EIF portfolio
Minister's agreement that project milestones (or other conditions) have
been satisfactorily achieved. It will also include ensuring that the FMA
Act obligations, in relation to the efficient and effective use of public
money, are being met in relation to such payments.
Clause 181 establishes the EIF Education Portfolio Special Account - a
Special Account for the purposes of section 21 of the FMA Act. A Special
Account is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the EIF Special Account and credited to the EIF
Education Portfolio Special Account can only be subsequently debited from
the EIF Education Special Account for the purposes in clause 182.
Clause 182 - Purposes of the EIF Education Portfolio Special Account
Subclause 182(1) describes the purposes of the EIF Education Portfolio
Special Account, which are for making payments in relation to the creation
or development of higher education infrastructure, the creation or
development of vocational education and training infrastructure, the
creation or development of eligible education infrastructure and
transitional HEEF payments. The note immediately following
subclause 182(1) assists the reader by referring to section 21 of the FMA
Act, which deals with debits from Special Accounts.
Subclause 182(2) confirms that the purposes listed above do not limit each
other.
Subclause 182(3) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the EIF Special Account.
Clause 183 - Channelling of payments through the EIF Education Portfolio
Special Account
Clause 183 provides the mechanism for specific amounts to be debited from
the EIF Special Account and credited to the EIF Education Portfolio Special
Account for the purposes of making payments in relation to the creation or
development of higher education infrastructure, the creation or development
of vocational education and training infrastructure, the creation or
development of eligible education infrastructure and transitional HEEF
payments.
Subclause 183(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the EIF Special Account to the
EIF Education Portfolio Special Account.
Subclauses 183(2) confirms that such a direction must be given so as to
allow that amount to be debited from the EIF Education Portfolio Special
Account for making a specified payment in relation to the creation or
development of higher education infrastructure, the creation or development
of vocational education and training infrastructure, the creation or
development of eligible education infrastructure or making a transitional
HEEF payment. This will ensure that the agreed purpose is retained when
that amount is channelled through the EIF Education Portfolio Special
Account.
Subclause 183(3) confirms that the above payments do not limit each other.
Subclause 183(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 183(5) makes it clear that a direction under subclause 183(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 183(6) requires the Finance Minister to give a copy of any
direction to the Education Minister, on the basis that management of and
responsibility for the EIF Education Portfolio Special Account sits within
the Education portfolio.
Clause 184 - Recommendations about payments-education infrastructure
The Government's commitment to ensuring rigour in the payment process for
the EIF also applies to payments that are channelled through the EIF
Education Portfolio Special Account, in the same way as other payments.
Therefore, the Education Minister must ensure that relevant advice has been
sought from the EIF Advisory Board which supports a recommendation that a
specified amount be transferred from the EIF Special Account to the EIF
Education Portfolio Special Account, for the purposes of making a payment
in relation to the creation or development of higher education
infrastructure, the creation or development of vocational education and
training infrastructure, the creation or development of eligible education
infrastructure and transitional HEEF payments.
Consistent with this framework, subclause 184(1) provides that a direction
to transfer an amount from the EIF Special Account to the EIF Education
Portfolio Special Account must not be specified unless the Education
Minister has recommended the specification of the payment.
Subclause 184(2) confirms the obligation on the Education Minister to
receive relevant advice from the EIF Advisory Board and to ensure that a
proposal relating to a payment from the EIF satisfies the relevant EIF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
EIF to the EIF Education Portfolio Special Account for the purposes of a
payment being made, subclause 184(3) requires the Education Minister to
have regard to the advice from the EIF Advisory Board, together with any
other matter he or she considers relevant.
Subclauses 184(4) to (6) relate specifically to transitional HEEF payments.
Subclause 184(4) requires the EIF designated Ministers to make a
recommendation about the specification of a transitional HEEF payment
before 1 July 2009. However, the EIF designated Ministers must not make
such a recommendation unless the EIF Advisory Board has given advice about
the payment.
In deciding to make a recommendation that an amount be directed from the
EIF to the EIF Education Portfolio Special Account, subclause 184(6)
requires the EIF designated Ministers to have regard to the advice,
together with any other matter they consider relevant.
Clause 185 - Payments-debit from the EIF Education Portfolio Special
Account
Clause 185 reflects the Government's intention that the EIF Education
Portfolio Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the EIF rest with the
relevant EIF portfolio Minster and his or her department. Accordingly, the
EIF Education Portfolio Special Account is a vehicle by which payments from
the EIF are authorised in order to support higher education infrastructure,
vocational education and training infrastructure, eligible education
infrastructure and HEEF transitional expenditure.
The Education Minister is required to ensure that, as soon as practicable
after an amount is credited to the EIF Education Portfolio Special Account,
that amount is debited for the purposes of making the payment. However, if
the payment cannot be made, subclause 185(3) provides for the amount to be
re-credited to the EIF Special Account.
Clause 186 - Grant to a State or Territory-education infrastructure etc.
Clause 186 is concerned with grants of financial assistance that are paid
to a State or Territory through the EIF Education Portfolio Special
Account. Note that grants payments that are paid to States and Territories
through the COAG Reform Fund are dealt with separately in Division 6 of
Part 3.4 (see below).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 186(3) provides for the Education Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Clause 187 - Grant to a person other than a State or Territory-education
infrastructure etc.
Clause 187 is concerned with grants of financial assistance that are paid
to a person other than a State or Territory which are channelled through
the EIF Education Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 187(3) provides for the Education Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Division 5-Channelling of payments through the EIF Research Portfolio
Special Account
Clause 188 - Establishment of the EIF Research Portfolio Special Account
As indicated above, clear accountability and reporting of disbursements
from the EIF will rest within relevant portfolio departments.
Clause 188 establishes the EIF Research Portfolio Special Account - a
Special Account for the purposes of section 21 of the FMA Act. A Special
Account is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the EIF Special Account and credited to the EIF
Research Portfolio Special Account can only be subsequently debited from
the EIF Research Portfolio Special Account for the purposes in clause 189.
Clause 189 - Purposes of the EIF Research Portfolio Special Account
Subclause 189(1) describes the purposes of the EIF Research Portfolio
Special Account, which are for making payments in relation to the creation
or development of research infrastructure and making transitional HEEF
payments. The note immediately following subclause 189(1) assists the
reader by referring to section 21 of the FMA Act, which deals with debits
from Special Accounts.
Subclause 189(2) confirms that the purposes listed above do not limit each
other.
Subclause 189(3) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the Special Account.
Clause 190 - Channelling of payments through the EIF Research Portfolio
Special Account
Clause 190 provides the mechanism for specific amounts to be debited from
the EIF Special Account and credited to the EIF Research Portfolio Special
Account for the purposes of making payments in relation to the creation or
development of research infrastructure.
Subclause 190(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the EIF Special Account to the
EIF Research Portfolio Special Account.
Subclause 190(2) confirms that such a direction must be given so as to
allow that amount to be debited from the EIF Research Portfolio Special
Account for making a specified payment in relation to the creation or
development of research infrastructure or making a specified transitional
HEEF payment. This will ensure that the agreed purpose is retained when
that amount is channelled through the EIF Research Portfolio Special
Account.
Subclause 190(3) confirms that the above payments do not limit each other.
Subclause 190(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 190(5) makes it clear that a direction under subclause 190(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 190(6) requires the Finance Minister to give a copy of any
direction to the Research Minister, on the basis that management of and
responsibility for the EIF Research Portfolio Special Account sits within
the Research portfolio.
Clause 191 - Recommendations about payments-research infrastructure and
transitional HEEF payments
The Government's commitment to ensuring rigour in the payment process for
the EIF also applies to payments that are channelled through the EIF
Research Portfolio Special Account, in the same way as other payments.
Therefore, the Research Minister must ensure that relevant advice has been
sought from the EIF Advisory Board which supports his or her recommendation
that a specified amount be transferred from the EIF Special Account to the
EIF Research Portfolio Special Account, for the purposes of making a
payment in relation to research infrastructure.
Consistent with this framework, subclause 191(1) provides that a direction
to transfer an amount from the EIF Special Account to the EIF Research
Portfolio Special Account must not be specified unless the Research
Minister has recommended the specification of the grant.
Subclause 191(2) confirms the obligation on the Research Minister to
receive relevant advice from the EIF Advisory Board and to ensure that a
proposal relating to a payment from the EIF satisfies the relevant EIF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
EIF to the EIF Research Portfolio Special Account for the purposes of a
payment being made, subclause 191(3) requires the Research Minister to have
regard to the advice from the EIF Advisory Board, together with any other
matter he or she considers relevant.
Subclauses 191(4) to (6) relate specifically to transitional HEEF payments.
Subclause 191(4) requires the EIF designated Ministers to make a
recommendation about the specification of a transitional HEEF payment
before 1 July 2009. However, the EIF designated Ministers must not make
such a recommendation unless the EIF Advisory Board has given advice about
the payment.
In deciding to make a recommendation that an amount be directed from the
EIF to the EIF Research Portfolio Special Account, subclause 191(6)
requires the EIF designated Ministers to have regard to the advice,
together with any other matter they consider relevant.
Clause 192 - Payments-debit from the EIF Research Portfolio Special Account
Clause 192 reflects the Government's intention that the EIF Research
Portfolio Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the EIF rest with the
relevant EIF portfolio Minster and his or her department. Accordingly, the
EIF Research Portfolio Special Account is a vehicle by which payments from
the EIF are authorise in order to support expenditure on research
infrastructure.
The Research Minister is required to ensure that, as soon as practicable
after an amount is credited to the EIF Research Portfolio Special Account,
that amount is debited for the purposes of making the payment. However, if
the payment cannot be made, subclause 192(3) provides for the amount to be
re-credited to the EIF Special Account.
Clause 193 - Grant to a person other than a State or Territory-research
infrastructure
Clause 193 is concerned with grants of financial assistance that are paid
to a person other than a State or Territory which are channelled through
the EIF Research Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 193(3) provides for the Research Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Division 6-Channelling of State/Territory grants payments through the COAG
Reform Fund
Clause 194 - Channelling of State/Territory grants payments through the
COAG Reform Fund
The Government has indicated its intention that the COAG Reform Fund - a
Special Account for the purposes of section 21 of the FMA Act - will be the
vehicle by which grants of financial assistance to States and Territories
will be disbursed. A Special Account is an appropriation mechanism that
sets aside an amount within the Consolidated Revenue Fund to be expended
for specific purposes.
Consistent with portfolio Ministers responsibilities in relation to
managing payments, the authority to disburse amounts to States and
Territories will be transferred from the EIF, through the relevant EIF
Portfolio Special Account, to the COAG Reform Fund.
For this purpose, clause 194 provides the mechanism for specific amounts to
be debited from the EIF and credited to the EIF Education Portfolio
Account. Such amounts will then be transferred to the COAG Reform Fund in
order to enable specified grants of financial assistance to be paid to
States and Territories.
Subclause 194(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the EIF to the EIF Education
Portfolio Special Account.
Subclauses 194(2) and (3) confirm that such a direction must be given so as
to allow that amount to be transferred from the from the EIF Education
Portfolio Special Account to the COAG Reform Fund for making a specified
grant of financial assistance to a vocational education and training
provider or a grant to a State or Territory in relation to a designated
education infrastructure-related matter. This will ensure that the agreed
purpose is retained when that amount is channelled through the COAG Reform
Fund.
Subclause 194(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 194(5) makes it clear that a direction under subclause 194(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 194(6) requires the Finance Minister to give a copy of any
direction to the Treasurer (on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio)
and also the Education Minister.
Clause 195 - Recommendations about grants payments
The Government's commitment to ensuring rigour in the payment process for
the EIF also applies to payments that are channelled through the COAG
Reform Fund, in the same way as other payments.
Therefore, the Education Minister must ensure that relevant advice has been
sought from the EIF Advisory Board which supports his or her recommendation
that a specified amount be paid from the EIF to the EIF Education Portfolio
Special Account and then transferred to the COAG Reform Fund, for the
purposes of making a grant of financial assistance to a State or Territory.
Note that only certain payments from the EIF would be made to States and
Territories and channelled through the COAG Reform Fund - for example,
payments in relation to research infrastructure are not made to States and
Territories and, accordingly, are not channelled through the COAG Reform
Fund.
Consistent with this framework, subclause 195(1) provides that a direction
to transfer an amount from the EIF, through the EIF Education Portfolio
Special Account to the COAG Reform Fund must not be specified unless the
Education Minister has recommended the specification of the grant.
Subclause 195(2) confirms the obligation on the Education Minister to
receive relevant advice from the EIF Advisory Board and to ensure that a
proposal relating to a payment from the EIF satisfies the relevant EIF
evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
EIF, through the EIF Education Portfolio Special Account, to the COAG
Reform Fund for the purposes of a grant payment being made,
subclause 195(3) requires the Education Minister to have regard to the
advice from the EIF Advisory Board, together with any other matter he or
she considers relevant.
Clause 196 - Transfers from the EIF Education Portfolio Special Account to
the COAG Reform Fund
Clause 196 applies to amounts that are transferred from the EIF into the
EIF Education Portfolio Special Account, which will be subsequently
transferred to the COAG Reform Fund to be disbursed to States and
Territories.
Accordingly, for such amounts, subclause 196(2) requires the Education
Minister to ensure that as soon as practicable after an amount is credited
to the EIF Education Portfolio Special Account, he or she directs, in
writing, that the amount is debited from that Account and credited to the
COAG Reform Fund on a specified day.
Under subclause 196(3), such a direction must be given to allow the amount
to be debited from the COAG Reform Fund for the purposes of making a grant
payment to a State or Territory.
Subclause 196(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 196(5) makes it clear that a direction under subclause 196(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 196(6) requires the Education Minister to give a copy of any
direction to the Treasurer on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio.
Clause 197 - Grants payments-debit from the COAG Reform Fund
Clause 197 reflects the Government's intention that the COAG Reform Fund is
not an asset fund like the BAF, EIF and HHF, but rather will act as a
vehicle by which payments from the Funds, and direct funding from the
budget, will be distributed to States and Territories.
The Treasurer is required to ensure that, as soon as practicable after an
amount is credited to the COAG Reform Fund, that amount is debited for the
purposes of making the grant.
Clause 198 - Grant to a State or Territory-education infrastructure
Clause 198 is concerned with grants of financial assistance to vocational
education and training providers in relation to education infrastructure
and grants in relation to designated education infrastructure-related
matters that are paid to a State or Territory through the COAG Reform Fund.
The note immediately following subclause 198(1) assists the reader by
referring to subclause 197(2) which deals with payments channelled through
the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 198(3) provides for the Education Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the EIF.
Division 7-Total payments for a financial year
Clause 199 - General drawing rights limit in relation to a financial year
Clause 199 provides for the annual Appropriation Acts to declare that a
specified amount is a general drawing rights limit in relation to a
particular financial year.
The establishment of the EIF as a Special Account under section 21 of FMA
Act, means that the balance of the EIF Special Account, as it exists from
time to time, is appropriated for the purposes set out in clauses 136, 137,
and 138. This reflects the clear intention to spend all the amounts
credited to the EIF for the purposes identified in the Bill.
However, the Government also intends that payments against the EIF
appropriation will be transparent and subject to parliamentary scrutiny
with the aim of ensuring a managed and orderly rate of expenditure.
Accordingly, while the annual Appropriation Acts will not appropriate
amounts to be paid from the EIF, the intention is that these Acts would
specify a maximum limit on the amount that can be paid out from the EIF in
a particular financial year (including payments that are channelled through
the COAG Reform Fund). The purpose is to provide the Parliament with a
mechanism by which it may supervise the rate at which the committed funds
are to be expended.
The general drawing rights limit for the 2009-10 financial year and beyond
would be included in an Appropriation Act.
In order to give effect to the Government's announcement to fast track its
nation-building agenda in response the global financial crisis, in relation
to the financial year ending 30 June 2009, the general drawing rights limit
will be that declared by the Finance Minister in writing. This is because
the Government will not be in a position to finally decide upon proposals
to be funded in this initial period until after the Parliament rises for
2008.
The general drawing rights limit referred to in clause 199 will operate by
restricting the total amount that may be covered by drawing rights under
the FMA Act, and hence, the amount that can be paid out for the main
purposes of the EIF - namely making payments in relation to the creation or
development of higher education infrastructure, the creation or development
of research infrastructure, the creation or development of vocational
education and training infrastructure, the creation or development of
eligible education infrastructure and transitional HEEF payments. (This
includes payments channelled through EIF Portfolio Special Accounts or
through the COAG Reform Fund.)
Limiting the ability to issue drawing rights is an effective mechanism
because the FMA Act does not permit expenditure without the person making
the payment having been issued with a valid drawing right.
Subclause 199(2) ensures that drawing rights under the FMA Act are not
issued covering debits from the EIF to support relevant infrastructure
expenditure which are in excess of the general drawing rights limit for
that financial year.
Subclause 199(3) provides that the declaration of the Finance Minister, in
relation to the financial year ending on 30 June 2009, is to be a
legislative instrument. As such, it is required to be tabled in the
Parliament and published on the Federal Register of Legislative
Instruments. However, the declaration will not be disallowable. The
Government considers that this would not be appropriate in the
circumstances of this one-off instrument that will be required to enable
payments to be made from the Funds as early as possible in 2009 to give
effect to the Government's announcement to fast track its nation-building
agenda in response to the global financial crisis.
Clause 200 - Drawing rights in relation to other financial years
As the general drawing rights limit for a financial year is particular to
that year and will depend upon the level of spending that is agreed to by
the Government, clause 200 confirms that a general drawing rights limit for
one financial year will not limit the drawing rights that may be issued in
relation to any other year.
Clause 201 - No drawing rights to be issued if there is no general drawing
rights limit in relation to a financial year
Clause 201 has the effect that if annual Appropriation Acts, or a Finance
Minister declaration for the year ending 30 June 2009, do not declare that
an amount is a general drawing rights limit for a financial year, drawing
rights must not be issued covering payments from the EIF to support
relevant infrastructure expenditure. This approach is consistent with the
Government's intention that disbursements from the EIF will be transparent
and allow for appropriate parliamentary scrutiny with the aim of ensuring a
managed and orderly rate of expenditure.
Clause 202 - Total payments to depend primarily on the macroeconomic
circumstances
In establishing the EIF, BAF and HHF, the Government has made a commitment
that spending proposals from the Funds would be delivered in line with the
prevailing macroeconomic conditions.
To meet its commitment, the Government's intention is that spending from
the Funds should depend primarily on the macroeconomic circumstances. In
line with this principle, the Government has indicated an expectation that
the Australian Loan Council will advise governments on the macroeconomic
impacts of funding infrastructure spending and whether a given funding
envelope can be delivered within the prevailing macroeconomic conditions,
consistent with the Government's inflation target.
Clause 202 applies to payments from the EIF which support relevant
infrastructure expenditure. It confirms the Government's policy principle
that payments from the EIF in relation to higher education infrastructure,
research infrastructure, vocational education and training infrastructure,
eligible education infrastructure and transition HEEF payments should
depend primarily on the macroeconomic circumstances.
This is achieved specifically by subclause 202(2), which requires the
Finance Minister, in debiting amounts to be paid from the EIF Special
Account, to have regard to the principle that payments from the EIF should
depend primarily on the macroeconomic circumstances.
Subclause 202(2) allows flexibility for the Government to update the
methodology for determining the macroeconomic circumstances. For example,
while the Government has indicated that the Australian Loan Council will
provide relevant advice, it may also wish to take account of other
budgetary factors in setting the spending envelope for the Funds in a
financial year.
Part 3.5-Reporting obligations etc.
Clause 203 - Finance Minister may require Future Fund Board to prepare
reports or give information
Clause 203 provides that the Finance Minister may write to the Future Fund
Board requiring the Board to prepare a report or specified information on
certain matters relating to the performance of the Board. This report or
information must be provided within the timeframe outlined in the Finance
Minister's request.
Subclause 203(4) provides that the Finance Minister may choose to publish
this report or information.
Subclauses 203(5) and 203(6) make it clear that such reports and documents
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 204 - Keeping the responsible Ministers informed etc.
Clause 204 requires the Future Fund Board to notify the responsible
Ministers of any information the responsible Ministers should know,
including by providing any written information to the Finance Minister.
This could include significant investment results, concerns regarding fraud
and any non compliance with the Board's policy on conflicts of interest.
Clause 205 - Finance Minister may give reports to other Ministers etc.
Clause 205 allows flexibility for the Finance Minister to give reports,
documents and other information to the Treasurer and the EIF portfolio
Ministers. This includes reports and documents under clauses 203 and 204
and any other information obtained by the Finance Minister under the Act.
Part 3.6-Miscellaneous
Clause 206 - Investment provisions do not apply to certain assets
Clause 206 relates to shares, debentures, trust units and other financial
assets held in the name of the Commonwealth. These assets are acquired
using money from the EIF Special Account in line with the purposes of
making a payment in relation to the creation and development of higher
education infrastructure, the creation or development of research
infrastructure, the creation or development of vocational education and
training infrastructure, the creation or development of eligible education
infrastructure and transitional HEEF payments (including where the payment
was channelled through the Portfolio Special Accounts).
This clause is not concerned with investments of the EIF which are managed
by the Future Fund Board.
Accordingly, subclauses 206(2) and (3) provide that Part 3.3 of the Bill
(which relates to investments of the EIF managed by the Future Fund Board)
and section 39 of the FMA Act do not apply to these assets. Section 39 of
the FMA Act authorises the Finance Minister to invest public money in only
a limited range of investments, such as government bonds and bank deposits.
Therefore, it is appropriate that Commonwealth investment in transport
infrastructure, communications infrastructure and eligible national
broadband network matters through the acquisition of shares, debentures,
trust units or other financial assets are exempted from the application of
section 39 of that Act.
Clause 207 - Delegation by the Finance Minister
Under subclause 207(1), the Finance Minister may, in writing, delegate his
or her powers under clauses 146, 147, 148, 176, 183, 190 or 194 to the
Secretary of the Finance Department or to an SES employee (or acting SES
employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Finance Minister's powers under clauses 176, 183, 190 and 194 relate to
the making of authorisations for payments from the EIF and directing that
specified amounts be transferred from the EIF Special Account to EIF
Portfolio Special Accounts, or from the EIF Special Account, through the
EIF Education Portfolio Special Account, to the COAG Reform Fund for the
purposes of making a specified grant of financial assistance to a State or
Territory. Delegation of these functions to the Secretary of, or SES
official in, the Finance Department is consistent with the efficient
administration of these matters.
It is envisaged that the delegate will be accountable to the Finance
Minister for his or her actions under any delegation. Subclauses 207(2)
and (4) reinforce this intention by requiring the delegate to comply with
any direction of the Minister in exercising powers under a delegation.
Clause 208 - Delegation by the Treasurer
Subclause 197(2) places an obligation on the Treasurer to ensure that where
money is transferred from a EIF Portfolio Special Account to the COAG
Reform Fund for the purposes of making a specified grant to a State or
Territory, that the COAG Reform Fund is debited for that purpose as soon as
is practicable. This is consistent with the Government's intention that
the COAG Reform Fund is a vehicle through which transfers and other funds
will be disbursed to States and Territories.
Clause 208 allows the Treasurer to, in writing, delegate his or her
functions under subclause 197(2) to the Secretary of the Treasury
Department or to an SES employee (or acting SES employee) in that
Department.
A note at the end of the clause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
Delegation of this function to the Secretary of, or SES official in, the
Treasury Department is consistent with the efficient administration of this
matter.
Clause 209 - Delegation by the Education Minister
Under subclause 209(1), the Education Minister may, in writing, delegate
his or her powers under clauses 178, 179, 185, 186, 187, 196 or 198 to the
Secretary of the Education Department or to an SES employee (or acting SES
employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Education Minister's functions under these provisions allow for the
Education Minister, on behalf of the Commonwealth, to enter into a written
agreement with a recipient of a grant of financial assistance, in which the
terms and conditions of that grant are set out.
The functions under clauses 185 and 196 relate to the obligation on the
Education Minister to ensure that where money is credited to the EIF
Education Portfolio Special Account for the purposes of making particular
payments, that the EIF Education Portfolio Special Account is debited for
that purpose as soon as is practicable. This includes making payments in
relation to higher education infrastructure, vocational education and
training infrastructure, eligible education infrastructure or transitional
HEEF payments or for the purposes of transferring that amount to the COAG
Reform Fund for the purpose of making a grant of financial assistance to a
vocational education and training provider in relation to education
infrastructure or a grant in relation to a designated education
infrastructure-related matter. Delegation of these functions to the
Secretary of, or SES official in, the Education Department is consistent
with the efficient administration of these matters.
It is envisaged that the delegate will be accountable to the Education
Minister for his or her actions under any delegation. Subclause 209(2)
reinforces this intention by requiring the delegate to comply with any
direction of the Minister in exercising powers under a delegation.
Clause 210 - Delegation by the Research Minister
Under subclause 210(1), the Research Minister may, in writing, delegate his
or her powers under clauses 180, 192 or 193 to the Secretary of the
Research Department or to an SES employee (or acting SES employee) in that
Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Research Minister's functions under these provisions allow for the
Research Minister, on behalf of the Commonwealth, to enter into a written
agreement with a recipient of a grant of financial assistance, in which the
terms and conditions of that grant are set out. Delegation of these
functions to the Secretary of, or SES official in, the Research Department
is consistent with the efficient administration of these matters.
It is envisaged that the delegate will be accountable to the Research
Minister for his or her actions under any delegation. Subclause 210(2)
reinforces this intention by requiring the delegate to comply with any
direction of the Minister in exercising powers under a delegation.
CHAPTER 4 - HEALTH AND HOSPITALS FUND
Part 4.1-Introduction
Clause 211-Object
Clause 211 sets out the objects of Chapter 4, namely to enhance the
Commonwealth's ability to make payments in relation to the creation or
development of health infrastructure.
Clause 212-Simplified outline
Clause 212 is an information provision which provides an overview of
Chapter 4 to assist with readability.
Part 4.2-Health and Hospitals Fund
Division 1-Introduction
Clause 213-Simplified outline
Clause 213 is an information provision which provides an overview of Part
4.2 to assist with readability.
Division 2-Establishment of the Health and Hospitals Fund etc.
Clause 214 - Establishment of the Health and Hospitals Fund
Clause 214 establishes a financial asset fund - the Health and Hospitals
Fund (HHF) - consisting of amounts credited to a Health and Hospitals Fund
Special Account (see clause 215 below) and investments of the HHF. The
distinction between the cash and asset components relates to the need for
cash to be duly appropriated, rather than a desire to distinguish between
cash and other types of investments held in the HHF.
An investment of the Health and Hospitals Fund is defined in Part 4.3 to
include money invested in financial assets (including returns on those
investments), derivatives acquired under clause 236 and other financial
assets that the Future Fund Board becomes a holder of through a securities
lending arrangement or otherwise.
Clause 215 - Establishment of the Health and Hospitals Fund Special Account
Clause 215 establishes the Health and Hospitals Fund Special Account - a
Special Account for the purposes of section 21 of the FMA Act. A Special
Account is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Any
amounts credited to the HHF Special Account are quarantined from the rest
of the Consolidated Revenue Fund and can only be debited from the HHF for
the purposes set out in clauses 218 and 219, or for the purposes of
channelling funds to the HHF Health Portfolio Special Account and to the
COAG Reform Fund in order to make HHF related payments.
The note immediately following clause 215 is included to assist the reader
by clarifying that, in addition to the processes set out in clauses 216
and 217, amounts can be credited to the HHF Special Account by an
Appropriation Act.
Division 3-Credits of amounts to the Health and Hospitals Fund
Clause 216 - Initial credits of amounts to the Health and Hospitals Fund
Special Account
The HHF will receive initial credits totalling $5 billion, by 30 June 2009,
comprising funds from the 2007-08 budget surplus.
Clause 216 provides the mechanism for amounts to be credited to the HHF
Special Account on a particular date or by set instalments on particular
dates. This mechanism will allow for the $5 billion from the 2007-08
budget surplus to be credited to the HHF.
Subclause 216(1) provides that the initial contribution to the HHF will be
credited to the HHF Special Account through a written determination or
determinations by the responsible Ministers. The contribution can be
credited either in one lump sum or by instalments.
Subclause 216(2) provides that the responsible Ministers must ensure that,
by 30 June 2009, the HHF is credited with $5 billion.
Subclause 216(3) provides that the responsible Ministers must not make a
determination under subclause 216(1) after 30 June 2009 - the date by which
the total initial credit of $5 billion must be made to the HHF.
Additional contributions to the HHF will be a subsequent credit under
subclause 217(1). For example, any amounts credited to the HHF from future
budget surpluses would be credited under subclause 217(1) below.
Subclause 216(4) provides that determinations for crediting the initial
contributions to the HHF Special Account cannot be revoked.
Subclause 216(5) deems that a determination to credit the initial
contribution to the HHF is a legislative instrument for the purposes of
section 5 of the Legislative Instruments Act. As such the instrument is
required to be tabled in Parliament and published on the Federal Register
of Legislative Instruments.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds required to establish the HHF are about to be
transferred. The same approach was taken in equivalent provisions in the
Future Fund Act.
Clause 217 - Subsequent credits of amounts to the Health and Hospitals Fund
Special Account-determinations by the responsible Ministers
Clause 217 allows for future Government contributions to be made to the
HHF, which could be made out of future realised surpluses subject to other
policy priorities.
Subclause 217(1) provides that Government contributions to the HHF,
subsequent to the initial contribution, are made through determinations by
the responsible Ministers. Such further credits can be made either in one
lump sum or by instalments.
The note at the end of subclause 217(1) assists the reader by referring to
subsection 33(3) of the Acts Interpretation Act. This subsection deals
with variations and revocations of instruments and provides that a power to
make an instrument also includes a power to vary or revoke an instrument
unless the contrary intention appears.
Subclause 217(2) requires the responsible Ministers to have regard to the
object of the Chapter in making determinations to credit further amounts to
the HHF. Therefore, subsequent credits from the HHF will be made with
reference to the need for future investment in health infrastructure.
Subclause 217(3) provides that a determination to credit subsequent amounts
to the HHF is a legislative instrument for the purpose of section 5 of the
Legislative Instruments Act. As such the instrument is required to be
tabled in Parliament and published on the Federal Register of Legislative
Instruments.
However, the determination, as a ministerial direction, is not
disallowable. Such determinations would usually be regarded as
administrative, rather than legislative, in character. It is not
appropriate that they be disallowable as they are a one-off instrument that
is made when the funds are about to be transferred. The same approach was
taken in equivalent provisions in the Future Fund Act.
Division 4-Debits of amounts from the Health and Hospitals Fund
Clauses 218 and 219 set out the purposes for which the HHF Special Account
may be debited. These purposes are split across two categories: purposes
relating exclusively to the Fund and purposes not related exclusively to
the HHF, but which could be attributed to the HHF, Future Fund, BAF and EIF
(for example, paying the remuneration and allowances of Future Fund Board
members).
Clause 218 - Purposes of the Health and Hospitals Fund Special Account-
payments purposes and purposes related exclusively to the Health and
Hospitals Fund
Clause 218 sets out the purposes for which the HHF Special Account may be
debited that relate exclusively to the HHF.
These purposes are:
. making payments in relation to the creation or development of health
infrastructure; and
. payment of various expenses (associated with the investment and
administration of the HHF) that can be exclusively attributed to the HHF.
While the range of such costs are as set out in clause 218, examples
include paying the expenses of an investment of the HHF and paying
expenses incurred by the Future Fund Board under a contract with
investment managers.
The term 'creation or development of health infrastructure' is intended to
provide flexibility and a broad scope in relation to health infrastructure
projects that may be considered for funding from the HHF. A payment in
relation to the creation or development of health infrastructure can have
the extended meaning provided under clause 220 (see below).
While allowing for flexibility for infrastructure projects eligible to be
considered for funding, the Government has indicated a clear focus for the
HHF, BAF and EIF to assist with financing investment in the creation or
development of infrastructure, consistent with a broader nation-building
objective. Accordingly, it is intended that funding would be directed
towards capital expenditure, which could include associated labour costs
related to the creation or development of infrastructure (where required).
However, consistent with the Government's intention that the HHF provide
financing for the creation or development of relevant infrastructure, it is
not intended that expenditure of a recurrent nature relating to running
costs (such as staff wages and maintenance) would be financed from the HHF.
Accordingly, where specific projects have an ongoing cost component, it is
intended that such funding would be sourced through other means. This
could include direct funding from the budget (outside the HHF), or funding
by the States or Territories in relation to proposals that are brought
forward as part of the COAG reform agenda.
The purpose of paragraph 218(1)(h) is to allow the HHF to be used to
discharge any other expenses or liabilities incurred by the Future Fund
Board that are exclusively incurred in connection with the HHF. It is also
intended to capture miscellaneous costs that may arise and are not covered
by the other existing purposes.
A note at the end of subclause 218(1) assists the reader by referring to
section 21 of the FMA Act, which deals with debits from Special Accounts.
Subclause 218(2) provides that a payment under paragraph 218(1)(a) may be
made by way of a grant of financial assistance or by a payment that is not
a grant of financial assistance. This provides flexibility in relation to
payments from the HHF.
Other payments (i.e. payments that are not grants) include payments for the
acquisition, in the name of the Commonwealth, of financial assets (such as
shares, debentures and trust units) in a company involved in the creation
or development of relevant infrastructure. Other payments could also
include public-private partnership payments.
In addition, the Commonwealth would also have the flexibility to make a
payment (other than by a grant of financial assistance) to a State or
Territory under an ordinary contractual obligation.
Note that under clause 257, the Finance Minister may direct that a
specified amount is debited from the HHF Special Account and credited to
the HHF Health Portfolio Special Account. Such a direction is to allow
that amount to be debited from the HHF Health Portfolio Special Account for
the purposes of making a specified payment in relation to the creation or
development of health infrastructure.
Further note that, under clause 262, the Finance Minister may direct that a
specified amount is debited from the HHF Special Account and transferred,
through the HHF Health Portfolio Special Account, to the COAG Reform Fund
Account (which will be established as a Special Account under the FMA Act
on commencement of the COAG Reform Fund Act 2008). Such a direction is to
allow that amount to be subsequently debited from the COAG Reform Fund for
the purposes of making a specified grant of financial assistance to a State
or Territory in relation to the creation or development of health
infrastructure (see clause 262 below and also see section 6 the COAG Reform
Fund Act 2008, which sets out the purposes of the COAG Reform Fund).
Clause 219 - Purposes of the Health and Hospitals Fund Special Account-
purposes not related exclusively to the Health and Hospitals Fund
Clause 219 relates to payment of various expenses for purposes that are not
exclusively attributable to the HHF, but could be attributed to the HHF,
Future Fund, BAF or EIF. The intention of subclauses 219(a) to (g) is to
allow common costs of the HHF, Future Fund, BAF and EIF to be paid
initially by one Fund (with subsequent apportionment between the Funds).
A note at the end of clause 219 assists the reader by referring to
section 21 of the FMA Act, which relates to debits from Special Accounts.
Clause 220 - Extended meaning of payment in relation to the creation or
development of health infrastructure
Clause 220 extends the meaning of the phrase payment in relation to the
creation or development of health infrastructure as it relates to the
purposes of the HHF Special Account. The purpose of this clause is to
allow payments from the HHF for the acquisition, in the name of the
Commonwealth, of financial assets in entities involved in the creation or
development of health infrastructure (including incidental or ancillary
matters). Flexibility is provided for the acquisition of shares,
debentures and trust units in companies, as well as for the acquisition of
other types of financial assets in other business entities. The extended
definition is intended to provide flexibility in how the Government invests
in the creation or development of health infrastructure.
Shares, debentures or units acquired under paragraphs 220(a), (b) or (c)
allow for investment at the time a relevant company is formed, as well as
investment in relevant existing companies. Paragraph 220(d) similarly
applies in relation to business entities.
Paragraph 220(b), relating to debentures, covers the provision of financial
assistance to a company by way of loan. This is consistent with the
definition of 'debenture' in the Act, which provides that the term has the
same meaning as in the Corporations Act.
An acquisition of shares, debentures, units or other financial assets under
this clause will be in the name of the Commonwealth and will be managed by
the Commonwealth. It is intended that the Health Minister will manage the
Commonwealth's ownership obligations as well as exposures and risks
associated with the assets, on behalf of the Commonwealth.
As these financial assets will not be part of the HHF, the Future Fund
Board will not be involved in the acquisition or management of these
assets. See also clause 274 of the Bill which provides that investment
provisions do not apply to these assets.
Clause 221 - Future Fund Board must ensure that there is sufficient money
in the Health and Hospitals Fund Special Account to cover authorised
payments etc.
Clause 221 requires the Future Fund Board to take all reasonable steps to
ensure that the amount of money standing to the credit of the HHF Special
Account is sufficient to cover amounts to be debited from the HHF to
support expenditure in relevant infrastructure - namely, grants of
financial assistance and other payments in relation to the creation or
development of health infrastructure. It also includes payments to be
channelled through the HHF Health Portfolio Special Account, and the COAG
Reform Fund for grants of financial assistance to States and Territories,
in relation to health infrastructure.
A note at the end of clause 221 is inserted to assist the reader by
clarifying that the Future Fund Board may need to liquidate non-cash assets
in accordance with clause 228 in order to comply with this clause.
Division 5-Inter-fund transfers
Clauses 222 to 224 - Transfers from the Health and Hospitals Fund to the
Future Fund, Building Australia Fund and Education Investment Fund
Clauses 222 to 224 allow for amounts to be transferred between the HHF and
the Future Fund, BAF and EIF. The purpose of this is to cover the
situation where one Fund pays entirely for an expense that should properly
be apportioned between two or more Funds. The clauses allow the Finance
Minister to direct one Fund be debited and the other Fund or Funds credited
by a specified amount.
Corresponding transfers from the Future Fund, BAF and EIF into the HHF are
provided for in this Bill.
Subclauses 222(3), 223(3) and 224(3) make it clear that directions of the
Finance Minister are not legislative instruments. These provisions are
merely declaratory in nature. Directions of this type are administrative
in character because they are merely the application of a legal power in a
particular case; they do not determine or alter the content of the law
itself.
Part 4.3-Investment of the Health and Hospitals Fund
Clause 225 - Simplified outline
Clause 225 is an information provision which provides an overview of
Part 4.3 to assist with readability.
Clause 226 - Objects of investment of the Health and Hospitals Fund
Subclause 226(1) is intended to reinforce that amounts are invested by the
Future Fund Board for the main purposes of enhancing the Commonwealth's
ability to make payments in relation to the creation or development of
health infrastructure.
Subclause 226(2) sets out that the ancillary objects of the investment of
the HHF are for enhancing the Commonwealth's and the Future Fund Board's
ability to discharge costs, expenses, obligations and liabilities and make
payments as mentioned in paragraphs 218(1)(b) to (h) and 219(a) to (g).
Clause 227 - Investment of the Health and Hospitals Fund
Clause 227 is modelled on the investment powers under section 39 of the FMA
Act. However, subclause 227(1) expands those powers to specifically provide
for the investment of the HHF in a broad range of financial assets, which
could include cash, interest bearing securities and global property
securities, with the use of derivatives for risk management. Specific
conditions on the acquisition of derivatives are separately covered in
clause 236. This approach to investment of the HHF is consistent with
similar arrangements for the Future Fund.
Investments of the HHF will be made in the name of the Future Fund Board
(rather than the Commonwealth) to reinforce the position that the Future
Fund Board manages the HHF at arm's length from the Government. However,
beneficial ownership of the HHF remains with the Commonwealth at all times.
Subclause 227(3) provides that money invested in financial assets are
'investments of the HHF' and may be realised, disposed of or redeemed by
the Future Fund Board.
Clause 228 -Management of investments of the Health and Hospitals Fund
Clause 228 sets out various matters relating to the management of
investments of the HHF.
Subclauses 228(1) and (2) provide that income derived from an investment of
the HHF, including a return of capital or another form of financial
distribution, must be credited to the HHF Special Account. This is
consistent with the requirements under sections 81 and 83 of the
Constitution (which, in effect, provide that public money forms part of the
Consolidated Revenue Fund and can only be spent if authorised by an
appropriation made by law). In practice, any money that has not been
invested must be held in an official bank account. The requirement to hold
the money in an official bank account is covered in the FMA Act.
Subclauses 228(3) to (5) relate to the arrangements that will apply in
relation to the realisation of assets. While subclauses 228(3) to (4) are
self explanatory, subclause 228(5) allows the Future Fund Board to
authorise, prior to an investment maturing, that the proceeds of this
investment be automatically reinvested with the same entity. This avoids
the need for the proceeds of realisation of the investment to be treated as
public money and credited to the Consolidated Revenue Fund only to be then
reappropriated and reinvested. Any reinvestment is an investment of the
HHF.
Subclause 228(6) provides that section 39 of the FMA Act does not apply to
an investment of the HHF. Section 39 of the FMA Act authorises the Finance
Minister to invest public money in only a limited range of investments,
such as government bonds and bank deposits. However, clause 227(1)
provides for the investment of the HHF in a broader range of financial
assets, which could include cash, interest bearing securities and global
property securities, with the use of derivatives for risk management.
Clause 229 - Health and Hospitals Fund Investment Mandate
It is appropriate that the Government, as manager of the economy and owner
of the HHF, has a mechanism for articulating its overall expectations for
how the HHF will be invested and managed by the Future Fund Board.
Clause 229 establishes a framework that enables the Government to give
strategic guidance to the Future Fund Board while preserving the Board's
role in managing the investment of the HHF at arm's length from the
Government. This approach is consistent with that existing in relation to
the Future Fund.
Subclause 229(1) provides that the responsible Ministers have the power to
give the Future Fund Board written directions in relation to the
performance of its investment functions and the exercise of its powers.
The responsible Ministers must issue at least one direction, to ensure that
an Investment Mandate is in force at all times and to provide clarity and
certainty to the Future Fund Board. Note that Health and Hospitals Fund
investment function is defined in section 4.
Subclause 229(2) provides that any direction issued under subclause 229(1)
has effect subject to the limitations set out in clause 230 - Limitation on
Health and Hospitals Fund Investment Mandate.
The fact that a direction has already been issued does not prohibit the
responsible Ministers from issuing additional directions. All of these
directions together comprise the Investment Mandate (see subclauses 229(1)
and 229(4)).
While the responsible Minister can issue new directions at any time, the
intention is that the Investment Mandate will reflect the nature of the
Government's policy. Any new directions will therefore only be issued in
light of significant policy changes or material changes in the investment
environment faced by the HHF.
Subclause 229(3) provides that in setting an Investment Mandate, the
responsible Ministers must have regard to maximising the return on the HHF
consistent with international best practice for institutional investment,
enhancing the Commonwealth's ability to make payments in relation to the
objects of the HHF (set out in clause 211), and any other matters the
Ministers consider to be relevant. This requirement will give the Future
Fund Board and the Parliament assurance that the responsible Ministers must
consider the scope of their directions from an investment perspective,
while ensuring that there is flexibility to take account of broader policy
issues and national interest considerations.
Subclauses 229(5) and 229(6) provide that the Investment Mandate may
include, but is not limited to, statements about policies the Future Fund
Board must pursue in relation to risk and return and the allocation of the
HHF to particular asset classes. This may include restrictions or
thresholds for investing the HHF in certain jurisdictions or asset classes
and statements of the Government's tolerance for losses.
Subclause 229(7) provides that any policies are subject to the limitations
set out in clause 230.
Subclause 229(8) ensures that the Future Fund Board is not given
conflicting directions regarding the Government's tolerance for risk, its
expectations for returns and any associated allocation of the HHF across
asset classes.
To avoid doubt, subclause 229(9) makes it clear that the scope of the
responsible Ministers' power to issue directions to the Future Fund Board
in relation to the investment of the HHF is bound by the Act. For example,
the responsible Ministers could not direct the Future Fund Board to use
derivatives in a manner that contradicts clause 236 (which deals with the
acquisition of derivatives by the Future Fund Board).
Subclause 229(10) provides that the Investment Mandate will not formally
commence until at least 15 calendar days after it is issued. This is to
allow the Future Fund Board time to adjust to any revised directions issued
by the responsible Ministers. Importantly, the Future Fund Board will be
able to know with certainty when the new direction will come into force.
Subclause 229(11) provides that directions under subclause 229(1), that set
out certain rules that the Future Fund Board must comply with, are
legislative in character and are therefore legislative instruments for the
purposes of section 5 of the Legislative Instruments Act. However, any
directions issued by the responsible Ministers as part of the Investment
Mandate are exempt from parliamentary disallowance (as provided for by
section 44 of the Legislative Instruments Act) and exempt from sunsetting
(as provided for by section 54 of the Legislative Instruments Act).
As legislative instruments, any directions given to the Future Fund Board
under this clause are required to be registered on the Federal Register of
Legislative Instruments and tabled in Parliament.
This approach enables the public and the Parliament to hold the Government
accountable for the directions it issues to the Future Fund Board without
impeding the Government's ability to manage its finances.
Subclauses 229(12) and 229(13) provide that, subject to the restrictions
set out in the Act and the expectations of the Government as articulated in
the Investment Mandate, the Future Fund Board has a statutory obligation to
seek to maximise returns, consistent with international best practice for
institutional investment and enhancing the Commonwealth's ability to make
payments in relation to the objects of the HHF (set out in clause 211).
This provision (together with subclause 229(8)) establishes a clear
hierarchy of priorities for the Future Fund Board - the responsibility to
maximise returns is subordinate to the investment parameters set out by the
Parliament and the Government. This framework provides appropriate
flexibility while still ensuring suitable accountability for any directions
the Government gives the Future Fund Board regarding the investment of the
HHF.
It also provides the Future Fund Board with clarity as to the extent of its
accountability - the Future Fund Board must be able to demonstrate that it
is pursuing policies and strategies that are clearly directed at maximising
investment returns in a manner that is consistent with best practice.
It is expected that the Future Fund Board will adopt a best practice
approach to a range of issues by learning from the experiences of other
investors and funds of national significance.
The purpose of subclause 229(13) is to clarify that the subclause is the
default position in the event that a direction under subclause 229(1) is
not issued or is revoked. However, a direction issued by the responsible
Ministers under subclause 229(1) will override subclause 229(12).
Clause 230 - Limitation on Health and Hospitals Fund Investment Mandate
Clause 230 aims to ensure that the HHF is not invested in a way that is
inconsistent with its objectives. A similar clause exists in the Future
Fund Act.
Subclause 230(1) specifies that the responsible Ministers cannot direct the
Future Fund Board to use the assets of the HHF to invest in a particular
financial asset, for example, shares in a particular infrastructure
company. It also prevents the responsible Ministers from issuing a
Ministerial direction that has the effect of requiring the Future Fund
Board to use the assets of the HHF to support a particular business entity,
a particular activity or a particular business.
This clause does not limit the ability of the Investment Mandate to set out
the policies as intended under the Bill, such as those to be pursued by the
Future Fund Board in relation to matters of risk and return.
This clause does not limit the Commonwealth's ability to acquire shares in
a company, debentures in a company, units in a unit trust, or other
vehicles that are allowed for the creation or development of relevant
infrastructure under clause 220. Such investments are external to the HHF
and are not made by the Future Fund Board.
Clause 231 - Future Fund Board to be consulted on Health and Hospitals Fund
Investment Mandate
Consistent with the Future Fund arrangements, the responsible Ministers are
required to consult the Future Fund Board on any changes or additions to
the Investment Mandate. Subclauses 231(1) and 231(3) achieve this by
requiring the responsible Ministers to send a draft of the new direction to
the Future Fund Board and inviting the Board to make a submission within a
specified time limit.
The specified time limit will be determined on a case by case basis with
regard to relevant circumstances and priorities at the time. It may be the
case that urgent changes are required in the national interest. In this
situation, it would be reasonable for the Future Fund Board to be asked to
consider a draft direction quickly. However, where there is less urgency,
or the change in the Investment Mandate is quite substantial, it would be
reasonable to provide the Future Fund Board with more time to consider a
draft direction.
Subclause 231(2) provides that any submission received by the responsible
Ministers from the Future Fund Board must be tabled in Parliament with the
new direction. In this way, the Future Fund Board will be able to ensure
that their views on the expected impact on their ability to maximise
returns are publicly known.
Clause 232 - Compliance with Health and Hospitals Fund Investment Mandate
Subclause 232(1) provides that it is the responsibility of the Future Fund
Board to take all reasonable steps to ensure that all policies and
decisions regarding the operation and investment of the HHF are in
accordance with any directions (Investment Mandate) issued by the
responsible Ministers. Since the Investment Mandate is intended to provide
broad guidance to the Future Fund Board, it may contain directions that
require the Board to apply its judgement on whether or not the HHF is
complying with the Mandate.
Subclause 232(2) provides that if the Future Fund Board becomes aware of a
breach of the Investment Mandate or judges that a policy does not comply
with the Investment Mandate, it must inform the responsible Ministers in
writing as soon as is practicable, including a proposed strategy to bring
the operations of the HHF into accordance with the Investment Mandate.
Similarly, subclauses 232(3) and 232(4) provide that if the Government
identifies areas where the Future Fund Board is not complying with the
Investment Mandate, the responsible Ministers can issue written directions
to the Board to take action to remedy the situation. The Future Fund Board
is required to comply with any such directions, noting that the responsible
Ministers are the final arbiters on what is intended by the Investment
Mandate.
Subclause 232(5) provides that any transactions undertaken by the Future
Fund Board that are deemed later not to have complied with the Investment
Mandate, are still valid and the Board is required to honour any commitment
made. This protects third parties who enter into transactions with the
Future Fund Board or its agents in good faith.
Subclause 232(6) makes it clear that a direction under subclause 232(3) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Clause 233 - Future Fund Board must not trigger the takeover provisions of
the Corporations Act 2001
To minimise market distortion and eliminate the potential for conflicts of
interest for the Government as a market regulator, the Future Fund Board is
prohibited from triggering the takeover provisions under section 606 of the
Corporations Act.
Section 606 of the Corporations Act essentially prohibits acquisitions in
relevant interests in the voting shares of a listed company, or unlisted
company with more than 50 share holders, if a person's voting power
increases from a figure at or below 20% to a figure above 20% (or from a
figure above 20% to a higher figure above 20% but below 90%) - unless the
shares are acquired in one of the circumstances set out at section 611 of
that Act.
However, it is the Government's intention that the takeover threshold be
adhered to quite strictly in relation to listed companies and unlisted
companies with more than 50 shareholders. Therefore, subclause 233(1)
provides that the exceptions provided under section 611 of the Corporations
Act (that is, exceptions to the prohibition in section 606) do not apply in
relation to acquisitions by the Future Fund Board.
The prohibition on the Future Fund Board is not expected to have a material
impact on the investment efficiency of the HHF as such limits are quite
similar to those often used by other fund managers. However, the Future
Fund Board will need to have regard to the entirety of its interest (i.e.
through investment of the HHF, Future Fund, BAF and EIF) in a particular
company when the Board is proposing a particular acquisition in the context
of the HHF.
Subclause 233(2) provides that if for some reason the Future Fund Board has
not complied with section 606 of the Corporations Act (as it is applied to
the Future Fund Board under clause 233), the relevant transactions will
still be valid. The aim of this provision is to ensure third parties are
not adversely affected by any non compliance of the Future Fund Board.
A note at the end of the clause assists the reader by referring to section
39 of the Future Fund Act, which sets out the application of the
Corporations Act to the Future Fund Board.
Note that the Future Fund Board is also prohibited from acquiring more than
a 20% stake (as defined in the Financial Sector (Shareholdings) Act with a
few minor adjustments) in a foreign publicly listed company. This
prohibition is found in section 84C of the Future Fund Act, but applies to
the Future Fund Board's activities in relation to the HHF, Future Fund, BAF
and EIF. Therefore, the Future Fund Board must take account of the overall
level of its investment in a foreign listed company in complying with this
provision.
Clause 234 - Borrowing
Clause 234 prohibits the Future Fund Board from borrowing money, except for
short term borrowing associated with the settlement of transactions or in
other circumstances prescribed in regulations (see subclause 234(3) below).
Consistent with the Future Fund Board's broader role in relation to
managing the assets of a number of funds (including the Future Fund), the
eligibility of short term borrowing for transaction settlement is in line
with the treatment of superannuation funds under the Superannuation
Industry (Supervision) Act 1993.
The overall aim of this clause is to ensure that the Future Fund Board is
able to operate efficiently without exposing the budget to undue risk.
Subclause 234(3) provides that regulations may be made to specify
circumstances in which it is considered appropriate for the Future Fund
Board to be able to borrow. Regulations may also be used to clarify any
uncertainty on whether a particular activity constitutes borrowing. While
it is not anticipated that the Future Fund Board will have a need to
borrow, this provision allows for unforseen events or changes in the
investment environment without the need to amend the primary legislation.
The regulations would be disallowable by the Parliament.
Clause 235 - Health and Hospitals Fund investment policies
Subclauses 235(1), 235(3) and 235(7) provide that the Future Fund Board is
required to formulate, publish and comply with a number of policies on its
investment activities.
The aim of this provision is to ensure rigour and transparency around how
the Future Fund Board performs its investment function in relation to the
HHF, including risk management and performance assessment and benchmarks.
In addition to the specific matters set out in paragraphs 235(1)(a) to (d),
the Future Fund Board is required to formulate, publish and comply with
policies and any additional matters specified in regulations (see
paragraph 235(1)(e) and subclause 235(7)).
A note at the end of subclause 235(1) reminds the reader that under
subsection 33(3) of the Acts Interpretation Act, the Future Fund Board is
able to repeal, rescind, revoke, amend, or vary any such policies.
Subclause 235(2) provides that the policies that the Future Fund Board
develops must not be incompatible with the Investment Mandate.
Subclause 235(4) provides that the Future Fund Board must publish the first
set of policies on the internet as soon as is practicable following the
commencement of this clause.
Subclauses 235(5) and 235(6) provide that the Future Fund Board must
conduct reviews of these policies periodically and where the responsible
Ministers change the Investment Mandate. It is not expected that these
reviews would be a formal process or that the results of the reviews would
be required to be published. However, if the review resulted in any
changes to the policies, it is intended that the updated policies would be
published on the internet.
Subclause 235(8) provides that if the Future Fund Board enters into a
transaction which is not consistent with a policy that it has published
under this clause, the transaction will still be valid. This will ensure
that third parties are not affected by any inconsistency with the Future
Fund Board's policies. However, subclause 235(7) provides that the Future
Fund Board is required to take all reasonable steps to comply with the
policies it develops under subsection 235(1).
Subclause 235(9) makes it clear that the policies of the Future Fund Board
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 236 - Derivatives
Derivatives are widely used by financial market participants as a tool for
risk management. As the sophistication, size and mobility of capital
markets around the world increases, investment managers are looking for
more ways to maximise the returns on investments while minimising the
volatility of results. The types and volumes of derivatives being traded
has grown exponentially as the underlying markets have created demand for
these types of instruments.
Clause 236 provides for the Future Fund Board to make use of derivatives
for certain purposes. This includes as a risk management tool and to
achieve indirect exposure to assets that it could not otherwise achieve.
The Future Fund Board may also use derivatives to reduce the transaction
cost of achieving required exposures. However, subclause 236(1) provides
that it may not use derivatives for speculative purposes or for leverage.
Subclause 236(2) provides that the acquisition of derivatives under this
clause cannot be inconsistent with the requirement under clause 235 for the
Future Fund Board to formulate a policy on its investment strategy and take
all reasonable steps to comply with that policy.
Subclauses 236(3) and 236(4) provide that derivatives must be held in the
name of the Future Fund Board and are taken to be an investment of the HHF.
Similar to other investments, derivatives may be realised by the Future
Fund Board under subclause 228(3).
Clause 237 - Additional financial assets
Clause 237 provides that if the Future Fund Board becomes a holder of
another financial asset, for example through a capital distribution, that
asset becomes an investment of the HHF and is therefore subject to all the
restrictions and requirements for investments of the HHF.
Clause 238 - Securities lending arrangements
Clause 238 provides that the Future Fund Board is able to enter into
securities lending arrangements. Lending of securities is commonplace
among institutional investors. It may also take collateral as part of a
securities lending arrangement. Any collateral it takes is either credited
to the HHF Special Account or becomes an investment of the HHF.
Clause 239 - Investment managers
Subclause 239(1) provides that the Future Fund Board is able to hire one or
more investment managers. Investment manager is defined broadly to include
custodians, transition managers and other investment managers. However,
the Agency is excluded from this definition as it is generally expected
that investment activities, such as acquiring derivatives or investing
money, will be outsourced.
Unless approved by the responsible Ministers, the Future Fund Board must
use investment managers to invest money in financial assets, acquire
derivatives, enter into securities lending arrangements or realise
financial assets.
Subclause 239(2) provides that the responsible Ministers may provide
approval in writing for certain methods of investment, other than through
investment managers, should it be prudent and cost effective to do so.
Subclauses 239(3) and 239(4) provide that the Future Fund Board is required
to ensure that investment managers operate within the Act and must report
on the state of investments of the HHF to the Board and the Agency. It
would be expected that such obligations are set out in the contractual
arrangements between the Future Fund Board and the investment manager.
Clause 240 - Custody of securities
Clause 240 provides that section 40 of the FMA Act does not apply to
investment of the HHF.
Section 40 of the FMA Act requires officials who receive any bonds,
debentures or other securities in the course of their duties to deal with
them in accordance with the Finance Minister's Orders. This provision is
designed for departments of state who carry out a more limited range of
investment activities than is envisaged for the Future Fund Board (and
Agency) in relation to the HHF. Further, making custodians and other
investment managers comply with the Finance Minister's Orders for
investment purposes could impose an undue administrative burden.
While section 40 of the FMA Act is excluded, a framework for how the Future
Fund Board must deal with securities that it receives in relation to the
HHF is covered by clauses 228 and 238.
Clause 241 - Refund of franking credits
Under subsection 84B(1) of the Future Fund Act, the Future Fund Board is
deemed to be an exempt institution that is eligible for a refund of
franking credits under the ITAA. As the Future Fund Board is exempt from
income tax, it may have an investment bias towards assets whose return had
not previously been subject to income tax (such as debt instruments or
unfranked dividends). Refunding franking credits removes any potential
bias against franked dividends.
Clause 241 deals with refund of franking credits and provides that if the
Future Fund Board receives a refund of a tax offset under the ITAA and the
tax offset is attributable to the investment of the HHF, any refund
received is credited to the HHF Special Account.
Clause 242 - Realisation of non-financial assets
Clause 242 requires the Future Fund Board to realise an asset that ceases
to be a financial asset or any asset acquired by the Board (as an
investment of the HHF) that is not a financial asset. This could include
circumstances where the Future Fund Board holds an asset which was
mistakenly acquired by the Board, or given to the Board, or which ceases to
be a financial asset due to a revision of the ABS government finance
statistics manual, for example.
The clause provides that a non-financial asset is treated as a financial
asset up to the time it is realised. Paragraphs 242(1)(b) and 242(2)(b)
ensure that the asset is considered an investment of the HHF and that
relevant provisions relating to investments of the HHF apply to that asset
for the time it is held by the Future Fund Board.
Clause 243 - Additional function of the Future Fund Board
Clause 243 provides that the functions of the Future Fund Board include the
function of investing amounts in accordance with the Act.
Part 4.4-Payments
Division 1-Introduction
Clause 244-Simplified outline
Clause 244 is an information provision which provides an overview of
Part 4.4 to assist with readability.
The following diagram illustrates how payments may be made from the HHF.
[pic]
It is the Government's policy intention that payments from the HHF will be
channelled through the HHF Health Portfolio Special Account in line with
the Heath Minister's responsibility for managing the delivery of
infrastructure projects. Grant payments will be disbursed to States and
Territories, via the HHF Health Portfolio Special Account, through the COAG
Reform Fund.
Division 2-Health and Hospitals Fund Advisory Board
It is the Government's intention that all health infrastructure spending
proposals will be rigorously assessed by an independent advisory body.
The HHF advisory body function will be undertaken by the HHF Advisory
Board, which is to be an independent body established under this Chapter to
advise the Health Minister about matters referred to it by the Health
Minister.
The Health Minister will be responsible for appointment of members to the
HHF Advisory Board and also for terminating appointments.
Division 2 establishes the HHF Advisory Board and sets out provisions
relating to its function, operation and membership.
Clause 245 - Health and Hospitals Fund Advisory Board
The HHF Advisory Board is established by subclause 245(1). Note that a
reference to the HHF Advisory Board means the Health and Hospitals Fund
Advisory Board as is defined in section 4.
Subclauses 245(2) to (4) relate to appointments to the HHF Advisory Board.
The Health Minister may appoint members to the HHF Advisory Board in
writing. The maximum term of an appointment is three years. However, the
Health Minister may also appoint a member for a shorter term as set out in
the instrument of appointment.
Members may also be appointed for a subsequent term. The note at the end
of subclause 245(3) refers to subsection 33(4A) of the Acts Interpretation
Act, which provides for 'appoint' to include re-appoint.
The purpose of subclause 245(4) is to ensure that members appointed to the
HHF Advisory Board have a high level of knowledge and experience in an area
that is relevant to the HHF Advisory Board's function. While a potential
appointee's level of skill and experience will be at the Health Minister's
discretion, examples may include expertise in health and medical research
or finance and economics, or experience as a health practitioner or
clinician.
Subclause 245(5) provides for the Health Minister to terminate appointments
to the HHF Advisory Board.
Under subclause 245(6), the Health Minister may issue written directions to
the HHF Advisory Board regarding the way in which it carries out its
functions and the procedures to be followed at meetings. This could
include, for example, the timeframe for providing advice to the Health
Minister, frequency and quorum requirements for meetings and the recording
of meeting minutes.
Subclause 245(7) makes it clear that directions to the HHF Advisory Board
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 246 - Function of the HHF Advisory Board
Clause 246 sets out the function of the HHF Advisory Board to provide
advice to the Health Minister about matters which are referred to it by the
Health Minister.
Consistent with the Government's intention to establish the HHF Advisory
Board to consider relevant proposals, subclause 246(2) requires that each
matter that is referred to the HHF Advisory Board by the Health Minister
must be a matter that relates to the main purpose of the HHF - namely, the
making of payments in relation to the creation or development of health
infrastructure. The HHF Advisory Board may also advise about other matters
referred to it relating to the object or operation of Chapter 4 (see
clause 211), that do not relate to the making of a particular payment.
Subclause 246(3) requires the HHF Advisory board to apply the HHF
evaluation criteria when providing advice to the Health Minister. This is
consistent with the Government's intention that health infrastructure
spending proposals will be rigorously assessed (see below).
Clause 247 - HHF evaluation criteria
Clause 247 requires the Health Minister to formulate HHF evaluation
criteria to be applied by the HHF Advisory Board when giving advice under
subclause 246(1).
As the HHF evaluation criteria will be made by legislative instrument, the
instrument is required to be registered on the Federal Register of
Legislative Instruments and tabled in Parliament. It will also be
disallowable by either House of the Parliament.
Subclause 247(2) requires the Health Minister to consult with the
responsible Ministers before formulating the HHF evaluation criteria. The
intention of this requirement is to ensure that there is a common and
rigorous approach in the evaluation criteria framework across the HHF, BAF
and EIF that is consistent with the nation-building objectives of the Funds
and in line with the Government's overarching principles that projects
financed from the Funds should:
. address national infrastructure priorities;
. demonstrate high benefits and effective use of resources;
. efficiently address infrastructure needs; and
. demonstrate they achieve established standards in implementation and
management.
Subclause 247(3) is intended to ensure that the Health Minister formulates
the HHF evaluation criteria consistent with the operation of the
Government's broader framework for spending proposals to be rigorously
assessed by independent advisory bodies.
Clause 248 - Remuneration and allowances
Clause 248 provides for the Remuneration Tribunal to determine the
remuneration of members of the HHF Advisory Board. However, the clause
allows the Health Minister to determine such remuneration if no
determination is made by the Remuneration Tribunal.
The Regulations may prescribe allowances, in addition to remuneration, to
be paid to HHF Advisory Board members.
Clause 249 - Disclosure of interests
Clause 249 sets out a procedure to cover a situation where an HHF Advisory
Board member has a material personal interest in a matter that will be
considered by the HHF Advisory Board. Note that a 'material personal
interest' is intended to be a broader test than simply a monetary gain.
For example, a material personal interest may involve a direct or indirect
advantage or benefit to the extent that it has the capacity to influence
how the member would assess a particular proposal.
Subclause 249(2) requires the member to disclose such an interest to the
HHF Advisory Board and to the Health Minister. The disclosure must also be
recorded in the meeting minutes.
Subclause 249(4) requires the Health Minister to terminate the appointment
of an HHF Advisory Board member who does not, without reasonable excuse,
disclose a material personal interest.
Subclause 249(5) confirms that termination under this clause does not limit
the Health Minister's broader power to terminate a member under
subclause 245(5).
Clause 250 - Resignation
Clause 250 provides for a member to resign from the HHF Advisory Board by
providing a written notice to the Health Minister. The resignation will
take effect once received by the Health Minister, or the notice of
resignation may contain an alternative date.
Division 3-Direct payments
Clause 251 - Authorisation of payments
The Finance Minister has a central role in authorising payments (and
directing payments to be channelled through the HHF Health Portfolio
Special Account and through the COAG Reform Fund - see below) from the HHF
for projects agreed to by the Government through the annual budget process.
However, it is the Government's intention that for any payments that have
been authorised (or directed), relevant portfolio Ministers - in the case
of the HHF, the Health Minister - will manage the delivery of projects
(including obligations and any risks) associated with disbursements from
the HHF for agreed projects.
Clause 251 allows the Finance Minister to authorise payments in relation to
the creation or development of health infrastructure.
While the Finance Minister could authorise payments under subclauses 251(1)
through separate authorisation instruments, the clause has been drafted
with flexibility to also allow a single instrument covering the
authorisation of one or more payment(s). The aim of this is to provide for
greater administrative efficiency in the authorisation of disbursements,
where appropriate.
Payments authorised under clause 251 are made directly from the HHF Special
Account to a State, Territory, or a person other than a State or Territory,
noting that a person includes a partnership. Payments that are channelled
through the HHF Health Portfolio Special Account are dealt with separately
in clause 257 (see below). It is intended that payments relating to the
creation or development of health infrastructure will be channelled through
the HHF Health Portfolio Special Account, consistent with the establishment
of this Portfolio Special Account, to ensure that clear accountability and
reporting obligations rest with the relevant portfolio departments. It is
also consistent with the Health Minister's responsibilities for managing
the delivery of agreed projects. However, the ability for the Finance
Minister to authorise payments directly from the HHF Special Account
provides maximum flexibility as to how funding may be provided in future.
Payments by way of a grant of financial assistance made to a State or
Territory that are channelled through the COAG Reform Fund are dealt with
separately in clause 262 (see below). It is intended that grants of
financial assistance that are made to States and Territories will be
initially transferred from the HHF to the HHF Health Portfolio Special
Account and then channelled through the COAG Reform Fund. This is
consistent with the COAG Reform Fund being the vehicle through which
capital transfers from the Funds, as well as other funding from the budget,
will be distributed to States and Territories.
Subclause 251(3) makes it clear that authorisations of the Finance Minister
are not legislative instruments. These provisions are merely declaratory
in nature. Authorisations of this type are administrative in character
because they are merely the application of a legal power in a particular
case; they do not determine or alter the law itself.
Clause 252 - Recommendations about payments
It is intended that the Health Minister will be responsible for preparing
proposals to be brought forward for Government consideration as part of the
annual budget process. As part of this process, the Health Minister will
make recommendations to the Finance Minister that payments be authorised
from the HHF. In this context, the Government has also made a commitment
that all projects financed from the HHF, BAF and EIF will need to satisfy
rigorous evaluation criteria assessed by independent bodies.
To ensure that all proposals ultimately funded from the HHF have met the
Government's broader commitment, the Health Minister must ensure that
relevant advice has been sought from the HHF Advisory Board which supports
his or her recommendation for a payment to be authorised from the HHF.
Consistent with the framework, subclauses 252(1) provides that the Finance
Minister must not authorise a payment from the HHF unless the Health
Minister has recommended the authorisation of the payment.
Subclauses 252(2) confirms the obligation on the Health Minister to receive
relevant advice from the HHF Advisory Board and to ensure that a proposal
for a payment from the HHF satisfies the HHF evaluation criteria.
In deciding to make a recommendation that a payment be authorised from the
HHF, subclauses 252(3) requires the Health Minister to have regard to the
advice from the HHF Advisory Board, together with any other matter he or
she considers relevant.
Clause 253 - Grant to a State or Territory
Clause 253 is concerned with grants of financial assistance that are paid
to a State or Territory for the purposes set out in paragraph 218(1)(a) -
i.e. in relation to the creation or development of health infrastructure.
Note that, in this case, the payment is not channelled through the HHF
Health Portfolio Special Account or through the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 253(3) provides for the Health Minister to enter into such
agreements on behalf of the Commonwealth. This is consistent with the
Government's intention that the relevant portfolio Minister will manage the
obligations and risks associated with disbursements from the HHF.
Clause 254 - Grant to a person other than a State or Territory
Clause 254 is concerned with grants of financial assistance that are paid
to a person other than a State or Territory for the purpose set out in
paragraph 218(1)(a) - i.e. in relation to the creation or development of
health infrastructure. Note that, in this case, the payment is not
channelled through the HHF Health Portfolio Special Account. Also, these
payments are only paid directly to a recipient (and not through the
COAG Reform Fund which is a mechanism to disburse funds to States and
Territories).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 254(3) provides for the Health Minister to enter into such
agreements on behalf of the Commonwealth. This is consistent with the
Government's intention that the relevant portfolio Minister manages the
obligations and risks associated with disbursements from the HHF.
Division 4-Channelling of payments through the HHF Health Portfolio Special
Account
Clause 255 - Establishment of the HHF Health Portfolio Special Account
In line with the role of portfolio Ministers in managing agreed projects,
clear accountability and reporting of disbursements from the HHF will rest
within the Health Department. For example, it is intended that the Health
Department will be responsible for arranging for a specific payment to be
made from the HHF based on the Health Minister's agreement that project
milestones (or other conditions) have been satisfactorily achieved. It
will also include ensuring that the FMA Act obligations, in relation to the
efficient and effective use of public money, are being met in relation to
such payments.
Clause 255 establishes the HHF Health Portfolio Special Account - a Special
Account for the purposes of section 21 of the FMA Act. A Special Account
is an appropriation mechanism that sets aside an amount within the
Consolidated Revenue Fund to be expended for specific purposes. Amounts
that are debited from the HHF Special Account and credited to the HHF
Health Portfolio Special Account can only be subsequently debited from the
HHF Health Special Account for the purpose in clause 256.
2 Clause 256 - Purpose of the HHF Health Portfolio Special Account
Subclause 256(1) describes the purpose of the HHF Health Portfolio Special
Account, which is for making payments in relation to the creation or
development of health infrastructure. The note immediately following
subclause 256(1) assists the reader by referring to section 21 of the FMA
Act, which deals with debits from Special Accounts.
Subclause 256(2) confirms that a payment may be made in the form of a grant
of financial assistance or by a payment other than a grant, consistent with
the purposes of the HHF Special Account.
3 Clause 257 - Channelling of payments through the HHF Health Portfolio
Special Account
Clause 257 provides the mechanism for specific amounts to be debited from
the HHF Special Account and credited to the HHF Health Portfolio Special
Account for the purposes of making payments in relation to the creation or
development of health infrastructure.
Subclause 257(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the HHF Special Account to the
HHF Health Portfolio Special Account.
Subclauses 257(2) confirms that such a direction must be given so as to
allow that amount to be debited from the HHF Health Portfolio Special
Account for making a specified payment in relation to the creation or
development of health infrastructure. This will ensure that the agreed
purpose is retained when that amount is channelled through the HHF Health
Portfolio Special Account.
Subclause 257(3) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 257(4) makes it clear that a direction under subclause 257(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 257(5) requires the Finance Minister to give a copy of any
direction to the Health Minister, on the basis that management of and
responsibility for the HHF Health Portfolio Special Account sits within the
Health portfolio.
4 Clause 258 - Recommendations about payments
The Government's commitment to ensuring rigour in the payment process for
the HHF also applies to payments that are channelled through the HHF Health
Portfolio Special Account, in the same way as other payments.
Therefore, the Health Minister must ensure that relevant advice has been
sought from the HHF Advisory Board which supports a recommendation that a
specified amount be transferred from the HHF Special Account to the HHF
Health Portfolio Special Account, for the purposes of making a payment in
relation to the creation or development of health infrastructure.
Consistent with this framework, subclause 258(1) provides that a direction
to transfer an amount from the HHF Special Account to the HHF Health
Portfolio Special Account must not be specified unless the Health Minister
has recommended the specification of the grant.
Subclause 258(2) confirms the obligation on the Health Minister to receive
relevant advice from the HHF Advisory Board and to ensure that a proposal
relating to a payment from the HHF satisfies the HHF evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
HHF to the HHF Health Portfolio Special Account for the purposes of a
payment being made, subclause 258(3) requires the Health Minister to have
regard to the advice from the HHF Advisory Board, together with any other
matter he or she considers relevant.
5 Clause 259 - Payments-debit from the HHF Health Portfolio Special Account
Clause 259 reflects the Government's intention that the HHF Health
Portfolio Special Account is established for the purposes of ensuring clear
accountability and reporting of disbursements from the HHF rest with the
Health Minster and his or her department. Accordingly, the HHF Health
Portfolio Special Account is a vehicle by which payments from the HHF are
authorised in order to support health infrastructure expenditure.
The Health Minister is required to ensure that, as soon as practicable
after an amount is credited to the HHF Health Portfolio Special Account,
that amount is debited for the purposes of making the payment. However, if
the payment cannot be made, subclause 259(3) provides for the amount to be
re-credited to the HHF Special Account.
6 Clause 260 - Grant to a State or Territory
Clause 260 is concerned with grants of financial assistance that are paid
to a State or Territory through the HHF Health Portfolio Special Account.
Note that grants payments that are paid to States and Territories through
the COAG Reform Fund are dealt with separately in Division 5 of Part 4.4
(see below).
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 260(3) provides for the Health Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that the Health Minister will manage the obligations
and risks associated with disbursements from the HHF.
Clause 261 - Grant to a person other than a State or Territory
Clause 261 is concerned with grants of financial assistance that are paid
to a person other than a State or Territory which are channelled through
the HHF Health Portfolio Special Account.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the person are to be set out in a written
agreement between the Commonwealth and the person.
Subclause 261(3) provides for the Health Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that the Health Minister manages the obligations and
risks associated with disbursements from the HHF.
Division 5-Channelling of State/Territory grants payments through the COAG
Reform Fund
Clause 262 - Channelling of State/Territory grants payments through the
COAG Reform Fund
The Government has indicated its intention that the COAG Reform Fund - a
Special Account for the purposes of section 21 of the FMA Act - will be the
vehicle by which grants of financial assistance to States and Territories
will be disbursed. A Special Account is an appropriation mechanism that
sets aside an amount within the Consolidated Revenue Fund to be expended
for specific purposes.
Consistent with portfolio Ministers responsibilities in relation to
managing payments, the authority to disburse amounts to States and
Territories will be transferred from the HHF through the HHF Health
Portfolio Special Account, to the COAG Reform Fund.
For this purpose, clause 262 provides the mechanism for specific amounts to
be debited from the HHF and credited to the HHF Health Portfolio Special
Account. Such amounts will then be transferred to the COAG Reform Fund in
order to enable specified grants of financial assistance to be paid to
States and Territories in relation to the creation or development of health
infrastructure.
Subclause 262(1) allows the Finance Minister to make a direction to
effectively transfer specified amounts from the HHF to the HHF Health
Portfolio Special Account.
Subclauses 262(2) and (3) confirm that such a direction must be given so as
to allow that amount to be transferred from the from the HHF Health
Portfolio Special Account to the COAG Reform Fund for making a specified
grant of financial assistance to a State or Territory in relation to the
creation or development of health infrastructure. This will ensure that
the agreed purpose is retained when that amount is channelled through the
COAG Reform Fund.
Subclause 262(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 262(5) makes it clear that a direction under subclause 262(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 262(6) requires the Finance Minister to give a copy of any
direction to the Treasurer (on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio)
and also the Health Minister.
Clause 263 - Recommendations about grants payments
The Government's commitment to ensuring rigour in the payment process for
the HHF also applies to payments that are channelled through the COAG
Reform Fund, in the same way as other payments.
Therefore, the Health Minister must ensure that relevant advice has been
sought from the HHF Advisory Board which supports a recommendation that a
specified amount be paid from the HHF to the HHF Health Portfolio Special
Account and then transferred to the COAG Reform Fund, for the purposes of
making a grant of financial assistance to a State or Territory.
Consistent with this framework, subclause 263(1) provides that a direction
to transfer an amount from the HHF, through the HHF Health Portfolio
Special Account to the COAG Reform Fund must not be specified unless the
Health Minister has recommended the specification of the grant.
Subclause 263(2) confirms the obligation on the Health Minister to receive
relevant advice from the HHF Advisory Board and to ensure that a proposal
relating to a payment from the HHF satisfies the HHF evaluation criteria.
In deciding to make a recommendation that an amount be directed from the
HHF, through the HHF Health Portfolio Special Account, to the COAG Reform
Fund for the purposes of a grant payment being made, subclause 263(3)
requires the Health Minister to have regard to the advice from the HHF
Advisory Board, together with any other matter he or she considers
relevant.
Clause 264 - Transfers from the HHF Health Portfolio Special Account to the
COAG Reform Fund
Clause 264 applies to amounts that are transferred from the HHF into the
HHF Health Portfolio Special Account, which will be subsequently
transferred to the COAG Reform Fund to be disbursed to States and
Territories.
Accordingly, for such amounts, subclause 264(2) requires the Health
Minister to ensure that as soon as practicable after an amount is credited
to the HHF Health Portfolio Special Account, he or she directs, in writing,
that the amount is debited from that Account and credited to the COAG
Reform Fund on a specified day.
Under subclause 264(3), such a direction must be given to allow the amount
to be debited from the COAG Reform Fund for the purposes of making a grant
payment to a State or Territory.
Subclause 264(4) allows flexibility for 2 or more directions to be set out
in a single document in order to provide for administrative efficiency,
where appropriate.
Subclause 264(5) makes it clear that a direction under subclause 264(1) is
not a legislative instrument. This provision is merely declaratory in
nature. Directions of this type are administrative in character because
they are merely the application of a legal power in a particular case; they
do not determine or alter the content of the law itself.
Subclause 264(6) requires the Health Minister to give a copy of any
direction to the Treasurer on the basis that management of and
responsibility for the COAG Reform Fund sits within the Treasury portfolio.
Clause 265 - Grants payments-debit from the COAG Reform Fund
Clause 265 reflects the Government's intention that the COAG Reform Fund is
not an asset fund like the HHF, BAF and EIF, but rather will act as a
vehicle by which payments from the Funds, and direct funding from the
budget, is distributed to States and Territories.
The Treasurer is required to ensure that, as soon as practicable after an
amount is credited to the COAG Reform Fund, that amount is debited for the
purposes of making the grant.
Clause 266 - Grant to a State or Territory
Clause 266 is concerned with grants of financial assistance in relation to
health infrastructure that are paid to a State or Territory through the
COAG Reform Fund.
The note immediately following subclause 266(1) assists the reader by
referring to subclause 265(2) which deals with payments channelled through
the COAG Reform Fund.
The clause provides that the terms and conditions upon which the financial
assistance is granted to the State or Territory are to be set out in a
written agreement between the Commonwealth and the State or Territory.
Subclause 266(3) provides for the Health Minister to enter into such
agreement on behalf of the Commonwealth. This is consistent with the
Government's intention that relevant portfolio Ministers manage the
obligations and risks associated with disbursements from the HHF.
Division 6-Total payments for a financial year
Clause 267 - General drawing rights limit in relation to a financial year
Clause 267 provides for the annual Appropriation Acts to declare that a
specified amount is a general drawing rights limit in relation to a
particular financial year.
The establishment of the HHF as a Special Account under section 21 of FMA
Act, means that the balance of the HHF Special Account, as it exists from
time to time, is appropriated for the purposes set out in clauses 218 and
219. This reflects the clear intention to spend all the amounts credited
to the HHF for the purposes identified in the Bill.
However, the Government also intends that payments against the HHF
appropriation will be transparent and subject to parliamentary scrutiny
with the aim of ensuring a managed and orderly rate of expenditure.
Accordingly, while the annual Appropriation Acts will not appropriate
amounts to be paid from the HHF, the intention is that these Acts would
specify a maximum limit on the amount that can be paid out from the HHF in
a particular financial year (including payments that are channelled through
the COAG Reform Fund). The purpose is to provide the Parliament with a
mechanism by which it may supervise the rate at which the committed funds
are to be expended.
The general drawing rights limit for the 2009-10 financial year and beyond
would be included in an Appropriation Act.
In order to give effect to the Government's announcement to fast track its
nation-building agenda in response the global financial crisis, in relation
to the financial year ending 30 June 2009, the general drawing rights limit
will be that declared by the Finance Minister in writing. This is because
the Government will not be in a position to finally decide upon proposals
to be funded in this initial period until after the Parliament rises for
2008.
The general drawing rights limit referred to in clause 267 will operate by
restricting the total amount that may be covered by drawing rights under
the FMA Act, and hence, that may be paid from the HHF in a financial year
for its main purposes - namely making payments in relation to health
infrastructure. This includes payments channelled through the HHF Health
Portfolio Special Account and through the COAG Reform Fund.
Limiting the ability to issue drawing rights is an effective mechanism
because the FMA Act does not permit expenditure without the person making
the payment having been issued with a valid drawing right.
Subclause 267(2) ensures that drawing rights under the FMA Act are not
issued covering debits from the HHF to support health infrastructure
expenditure which are in excess of the general drawing rights limit for
that financial year.
Subclause 267(3) provides that the declaration of the Finance Minister, in
relation to the financial year ending on 30 June 2009, is to be a
legislative instrument. As such, it is required to be tabled in the
Parliament and published on the Federal Register of Legislative
Instruments. However, the declaration will not be disallowable. The
Government considers that this would not be appropriate in the
circumstances of this one-off instrument that will be required to enable
payments to be made from the Funds as early as possible in 2009 to give
effect to the Government's announcement to fast track its nation-building
agenda in response to the global financial crisis.
Clause 268 - Drawing rights in relation to other financial years
As the general drawing rights limit for a financial year is particular to
that year and will depend upon the level of spending that is agreed to by
the Government, clause 268 confirms that a general drawing rights limit for
one financial year will not limit the drawing rights that may be issued in
relation to any other year.
Clause 269 - No drawing rights to be issued if there is no general drawing
rights limit in relation to a financial year
Clause 269 has the effect that if annual Appropriation Acts, or a Finance
Minister declaration for the year ending 30 June 2009, do not declare that
an amount is a general drawing rights limit for a financial year, drawing
rights must not be issued covering payments from the HHF to support health
infrastructure expenditure. This approach is consistent with the
Government's intention that disbursements from the HHF will be transparent
and allow for appropriate parliamentary scrutiny with the aim of ensuring a
managed and orderly rate of expenditure.
Clause 270 - Total payments to depend primarily on the macroeconomic
circumstances
In establishing the HHF, BAF and EIF, the Government has made a commitment
that spending proposals from the Funds would be delivered in line with the
prevailing macroeconomic conditions.
To meet its commitment, the Government's intention is that spending from
the Funds should depend primarily on the macroeconomic circumstances. In
line with this principle, the Government has indicated an expectation that
the Australian Loan Council will advise governments on the macroeconomic
impacts of funding infrastructure spending and whether a given funding
envelope can be delivered within the prevailing macroeconomic conditions,
consistent with the Government's inflation target.
Clause 270 applies to payments from the HHF which support health
infrastructure expenditure. It confirms the Government's policy principle
that payments from the HHF in relation to health infrastructure should
depend primarily on the macroeconomic circumstances.
This is achieved specifically by subclause 270(2), which requires the
Finance Minister, in debiting amounts to be paid from the HHF Special
Account, to have regard to the principle that payments from the HHF to
support relevant infrastructure expenditure should depend primarily on the
macroeconomic circumstances.
Subclause 270(2) allows flexibility for the Government to update the
methodology for determining the macroeconomic circumstances. For example,
while the Government has indicated that the Australian Loan Council will
provide relevant advice, it may also wish to take account of other
budgetary factors in setting the spending envelope for the Funds in a
financial year.
Part 4.5-Reporting obligations etc.
Clause 271 - Finance Minister may require Future Fund Board to prepare
reports or give information
Clause 271 provides that the Finance Minister may write to the Future Fund
Board requiring the Board to prepare a report or specified information on
certain matters relating to the performance of the Board. This report or
information must be provided within the timeframe outlined in the Finance
Minister's request.
Subclause 271(4) provides that the Finance Minister may choose to publish
this report or information.
Subclauses 271(5) and 271(6) make it clear that such reports and documents
are not legislative instruments, because they are administrative in
character. They do not determine or alter the content of the law.
Clause 272 - Keeping the responsible Ministers informed etc.
Clause 272 requires the Future Fund Board to notify the responsible
Ministers of any information the responsible Ministers should know,
including by providing any written information to the Finance Minister.
This could include significant investment results, concerns regarding fraud
and any non compliance with the Board's policy on conflicts of interest.
Clause 273 - Finance Minister may give reports to other Ministers etc.
Clause 273 allows flexibility for the Finance Minister to give reports,
documents and other information to the Treasurer and the Health Minister.
This includes reports and documents under clauses 271 and 272 and any other
information obtained by the Finance Minister under the Act.
Part 4.6-Miscellaneous
Clause 274 - Investment provisions do not apply to certain assets
Clause 274 relates to shares, debentures, trust units and other financial
assets held in the name of the Commonwealth and acquired using money from
the HHF Special Account in line with the purposes of making a payment in
relation to the creation or development of health infrastructure (including
where the payment was channelled through the HHF Health Portfolio Special
Account).
This clause is not concerned with investments of the HHF which are managed
by the Future Fund Board.
Accordingly, subclauses 274(2) and (3) provide that Part 4.3 of the Bill
(which relates to investments of the HHF managed by the Future Fund Board)
and section 39 of the FMA Act do not apply to these assets. Section 39 of
the FMA Act authorises the Finance Minister to invest public money in only
a limited range of investments, such as government bonds and bank deposits.
Therefore, it is appropriate that Commonwealth investment in the creation
or development of health infrastructure through the acquisition of shares,
debentures, trust units or other financial assets are exempted from the
application of section 39 of that Act.
Clause 275 - Delegation by the Finance Minister
Under subclause 275(1), the Finance Minister may, in writing, delegate his
or her powers under clauses 222, 223, 224, 251, 257 or 262 to the Secretary
of the Finance Department or to an SES employee (or acting SES employee) in
that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Finance Minister's powers under clauses 251, 257 and 262 relate to the
making of authorisations for payments from the HHF and directing that
specified amounts be transferred from the HHF Special Account to the HHF
Health Portfolio Special Account, or from the HHF Special Account, through
the HHF Health Portfolio Special Account, to the COAG Reform Fund for the
purposes of making a specified grant of financial assistance to a State or
Territory. Delegation of these functions to the Secretary of, or SES
official in, the Finance Department is consistent with the efficient
administration of these matters.
Subclause 275(3) allows the Finance Minister to delegate, in writing, his
or her functions under clauses 222, 223 or 224 of the Act, to the Chair of
the Future Fund Board or to an SES employee (or acting SES employee) in the
Agency. The Finance Minister's functions under these provisions allow for
amounts to be transferred between the HHF and the Future Fund, BAF and EIF
for the purposes of apportioning shared costs which are initially paid by
one fund. Accordingly, the Minister delegating this function to officials
in the Department, the Chair of the Future Fund Board or an SES official in
the Agency is considered to be a normal administrative arrangement for the
efficient handling of these matters.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
It is envisaged that the delegate will be accountable to the Finance
Minister for his or her actions under any delegation. Subclauses 275(2)
and (4) reinforce this intention by requiring the delegate to comply with
any direction of the Minister in exercising powers under a delegation.
Clause 276 - Delegation by the Treasurer
Subclause 265(2) places an obligation on the Treasurer to ensure that where
money is transferred from the HHF Health Portfolio Special Account to the
COAG Reform Fund for the purposes of making a specified grant to a State or
Territory, that the COAG Reform Fund is debited for that purpose as soon as
is practicable. This is consistent with the Government's intention that
the COAG Reform Fund is a vehicle through which transfers and other funds
will be disbursed to States and Territories.
Clause 276 allows the Treasurer to, in writing, delegate his or her
function under subclause 265(2) to the Secretary of the Treasury Department
or to an SES employee (or acting SES employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
Delegation of this function to the Secretary of, or SES official in, the
Treasury Department is consistent with the efficient administration of this
matter.
Clause 277 - Delegation by the Health Minister
Under subclause 277(1), the Health Minister may, in writing, delegate his
or her powers under clauses 253, 254, 259, 260, 261, 264 or 266 to the
Secretary of the Health Department or to an SES employee (or acting SES
employee) in that Department.
A note at the end of the subclause assists the reader by referring to the
relevant section of the Acts Interpretation Act in relation to the
expressions 'SES employee' and 'acting SES employee'.
The Health Minister's functions under these provisions allow for the Health
Minister, on behalf of the Commonwealth, to enter into a written agreement
with a recipient of a grant of financial assistance, in which the terms and
conditions of that grant are set out.
The functions under clauses 259 and 264 relate to the obligation on the
Health Minister to ensure that where money is credited to the HHF Health
Portfolio Special Account for the purposes of making payments in relation
to health infrastructure or to allow for the transfer of that amount to the
COAG Reform Fund for that purpose, that the HHF Health Portfolio Special
Account is debited for that purpose as soon as is practicable. Delegation
of these functions to the Secretary of, or SES official in, the Health
Department is consistent with the efficient administration of these
matters.
It is envisaged that the delegate will be accountable to the Health
Minister for his or her actions under any delegation. Subclause 277(2)
reinforces this intention by requiring the delegate to comply with any
direction of the Minister in exercising powers under a delegation.
CHAPTER 5 - REGULATIONS
Clause 278 - Regulations
Clause 278 provides that the Governor-General may make regulations covering
matters required to be prescribed in this Act, or matters that it would be
convenient to prescribe for the purposes of this Act.
-----------------------
BAF Infrastructure Portfolio Special Account
Building Australia Fund (BAF) Special Account
Infrastructure projects (other than COAG)
BUDGET
COAG reform payments to States/Territories
HHF Health Portfolio Special Account
Council of Australian Governments (COAG) Reform Fund
Health and Hospitals (HHF) Special Account
Council of Australian Governments (COAG) Reform Fund
BAF Energy Portfolio Special Account
BAF Communications Portfolio Special Account
BAF Water Portfolio Special Account
COAG reform payments to States/Territories
BUDGET
Payments to recipients (outside of Consolidated Revenue)
Debits/credits between special accounts
Infrastructure projects (other than COAG)
Infrastructure projects (other than COAG)
Payments to recipients (outside of Consolidated Revenue)
Debits/credits between special accounts
Infrastructure projects (other than COAG)
Infrastructure projects (other than COAG)
BUDGET
COAG reform payments to States/Territories
Debits/credits between special accounts
EIF Education Portfolio Special Account
EIF Research Portfolio Special Account
Payments to recipients (outside of Consolidated Revenue)
Council of Australian Governments (COAG) Reform Fund
Education Investment Fund (EIF) Special Account