Explanatory Memorandum
(Circulated with the authority of the Minister for Finance and Deregulation, Senator the Hon Penny Wong)III. OVERVIEW OF AMENDMENTS IN SCHEDULES
11. The following overview of amendments proposed in Schedules 1 to 2 of the Bill is provided in general terms, rather than by item number.
12. Parts IV and V of this Explanatory Memorandum contain a description of the Schedules of the Bill, organised by item number.
Schedule 1: Amendments
13. Schedule 1 would amend 21 Acts across 6 portfolios to establish a framework for dealing with overpayments, and to address risks of payments breaching section 83 of the Constitution.
14. Schedule 1 seeks to address circumstances where payments are made from special appropriations (including Special Accounts) where administrative processes for making the payments do not align with legislative requirements.
15. Due to the complexity involved in identifying and then resolving these issues, this is expected to be the first tranche of amendments required to address section 83 issues identified by Financial Management and Accountability Act 1997 (FMA Act) agencies.
16. Schedule 1would amend 9 Acts: the Defence Force Retirement and Death Benefits Act 1973 ; the Governor-General Act 1974 ; the Local Government (Financial Assistance) Act 1995 ; the Military Superannuation and Benefits Act 1991 ; the Parliamentary Contributory Superannuation Act 1948 ; the Same-Sex Relationships (Equal Treatment in Commonwealth Laws-Superannuation) Act 2008 ; the Superannuation Act 1976 ; the Superannuation Act 1990 ; and the Taxation Administration Act 1953 to provide a mechanism, called a 'recoverable payment', to address a theme of administrative issues common to four of the portfolios included, with subtle differences in its application to the relevant laws.
17. The recoverable payment provisions would authorise the Commonwealth to pay an amount to a recipient, purportedly as a benefit, entitlement, or amount where the Commonwealth does not otherwise have power under the relevant Act to make a payment. This amendment would have the effect that payments made, purportedly as benefits, entitlements, or amounts under a recoverable payment provision, would attract the coverage of the relevant standing appropriation.
18. The recoverable payment amendments seek to address circumstances where, for example:
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- benefit or entitlement type payments are assessed and made on the basis of information that is available at the time, but are later found to be incorrect; and
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- bona fide processing errors occur, in good faith, due to human error.
19. The provisions would only apply to payments made in good faith in the course of administering the program or Act, but which are inadvertently made outside the authority of the relevant legislation. Fraudulent payments, or payments made otherwise in bad faith, are not supported by the new provisions.
20. Schedule 1 would amend the Taxation Administration Act 1953 (TA Act 1953) within the Treasury portfolio, to enable the Commissioner of Taxation to decide to make a 'discretionary advance'. These advances would be covered by the existing standing appropriation provided in section 16 of the TA Act 1953, and would apply where the Commissioner, or delegate, decides to make a payment on account of an amount that a recipient may become entitled to in future. For the decision to be valid, the Commissioner, or delegate, must be satisfied that the costs that would be incurred by the Commonwealth, the recipient and third parties if the payment(s) were halted, would be greater than if the advance(s) were made. This is designed to require considerations of efficient, effective and economical factors in making a payment, consistent with the requirements of section 44 of FMA Act.
21. Schedule 1 would also amend 7 Acts: the Defence Force Retirement and Death Benefits Act 1973 ; the Governor-General Act 1974 ; the Military Superannuation and Benefits Act 1991 ; the Parliamentary Contributory Superannuation Act 1948; the Same-Sex Relationships (Equal Treatment in Commonwealth Laws-Superannuation) Act 2008 ; the Superannuation Act 1976 ; the Superannuation Act 1990 ; and the TA Act 1953 to authorise the Commonwealth to make 'recoverable death payments'. This provision is designed to address circumstances where:
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- ComSuper or the relevant Secretary (where applicable) is not informed that a member has died; and
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- ComSuper or the relevant Secretary (where applicable) continues to pay a benefit, deposited in an account kept in the name of a deceased person as an individual or a joint account, or paid by way of a cheque made out to a deceased person, until notified of the death.
22. This provision acknowledges that information is imperfect, and that a decision-maker may not know that the recipient has passed away and should be able to rely on the information reasonably available at the time of making a payment. Where a payment of a benefit is made in line with the relevant recoverable death payment provision, the amount is taken to have been paid to the deceased person's estate and is recoverable as a debt due to the Commonwealth by the legal personal representative of the deceased person which may be recovered by the Chief Executive of ComSuper or the Secretary of the Department. As a debt payable to the Commonwealth, the obligations of a Chief Executive under section 47 of the FMA Act apply.
23. This mechanism does not discharge a responsibility to have adequate checking processes in place, rather it seeks to amend the law to reflect the reality where a death may not be known immediately.
24. The recoverable death payments would be supported by the relevant standing appropriation provisions provided in the Acts.
25. Recoverable payments, recoverable advances and recoverable death payments are not designed to excuse poor administration. The FMA Act imposes obligations on Chief Executive to ensure that adequate and accountable processes are in place to ensure that payments are made in accordance with the preconditions in legislation. Further, where payments are made inconsistently with legislation, it is open to the Finance Minister to revoke the relevant drawing rights.
26. Additionally, where the recoverable payment, recoverable death payment or recoverable advance provisions are used, Schedule 1 amends the relevant seven Acts to require the relevant Secretary or Chief Executive to ensure that a report, detailing the total number of instances of use and the total value of those instances, is published, during the applicable publication period for a reporting period, as the Secretary or Chief Executive considers appropriate. For example, the report may be included in the agency's annual report, on its website or in another form that provides appropriate transparency and accountability.
27. For the purposes of the relevant reporting provisions, a reporting period is a financial year or a shorter recurring period specified in a legislative instrument made by the Minister. The applicable publication period for a reporting period is four months or a lesser number of months, as specified in a legislative instrument made by the Minister. The default publication period of four months provides flexibility for the report to be included in an agency's annual report, where preferred by an agency.
28. Schedule 1 would make an operational amendment to the ComSuper Act 2011 to enable the CEO to delegate, in writing, the CEO's function and/or all or any of the CEO's powers under that Act or any other law of the Commonwealth to an SES employee or acting SES employee in ComSuper.
29. Schedule 1 would amend 8 Acts: the Australian Meat and Live-stock Industry Act 1997 ; the Dairy Produce Act 1986 ; the Egg Industry Service Provision Act 2002 ; the Forestry Marketing and Research and Development Services Act 2000 ; the Horticulture Marketing and Research and Development Services Act 2000 ; the Pig Industry Act 2001 ; the Primary Industries and Energy Research and Development Act 1989 ; and the Wool Services Privatisation Act 2000 to better reflect current practices, where the Department of Agriculture, Fisheries and Forestry makes industry payments which are subject to a limit of 0.5% of the industry's gross value of production (GVP) for the year. For the purposes of payments, the GVP is determined by the Secretary or Minister based on data prepared by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). In practice, the ABARES data may not be available until later in the year, and the payments made may have inadvertently exceeded the 0.5% limit of the industry's GVP.
30. The amendments would make payments to the recipient industry body, during a financial year, subject to the condition that:
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- if the Secretary or Minister determines the amount of GVP of the industry by 31 October next following the financial year; and
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- at the end of 31 October next following the financial year, the sum of the amounts that were paid to the recipient industry body exceeds 0.5% of the amount of GVP of the industry as determined by the Secretary,
then the recipient industry body will pay to the Commonwealth an amount equal to the excess.
31. If the Secretary or Minister has not determined the amount of the GVP of the industry by the end of 31 October, next following a financial year, then the Secretary or Minister is deemed to have determined the GVP of the industry for the financial year equal to the amount determined for the previous financial year.
32. Schedule 1 would also amend the Australian Animal Health Council (Live-stock Industries) Funding Act 1996 to align the process for recovering the administrative costs of the agency, in administering payments to the Council, with the processes prescribed in other comparable legislation also administered by the department. The amendment to this Act would enable the full amount of levy to be paid the recipient and would authorise the department to recover administrative costs by separately invoicing the recipient, following the payment of the full amount of levy. This will enable the department to apply a consistent approach when seeking to recover administrative costs, and will mitigate the need to develop new and costly administrative systems to recover administrative costs under the Act. The amendment to this Act, would enable the full amount of levy to be paid the recipient and would authorise the department to recover administrative costs by separately invoicing the recipient, following the payment of the full amount of levy.
33. Schedule 1 would also amend the National Residue Survey Administration Act 1992 to clarify that payments do not need to be made "in accordance with an expenditure program approved by the Minister" to be supported by the appropriation, as in practice the program may be approved by the Minister after payments are required to be made. This will not remove the practice of an expenditure program being in place, but will address a technical breach where approval of the program is delayed by an administrative process.
34. Schedule 1 would amend the Australian Maritime Safety Authority Act 1990 to reflect current practices. This amendment would clarify that the amounts to be paid to the Australian Maritime Safety Authority (AMSA) include all payments received, or purportedly received, by the Commonwealth, as, or in relation to, levies or penalties under the Marine Navigation Levy Act 1989 , the Marine Navigation (Regulatory Functions) Levy Act 1991 , the Protection of the Sea (Shipping Levy) Act 1981 and the related Levy Collection Acts . The amendment also provides that if such a levy or penalty is refunded, the refund is to be reimbursed by AMSA to the Commonwealth.
35. The provisions proposed in Schedule 1 represent an appropriate response to improving the management of administrative processes that run the risk of section 83 breaches. The proposed provisions adopt accountability mechanisms that require agencies to publicly report the use of certain provisions contained in the Bill.
Schedule 2: Validation of certain benefits under the Defence Force Retirement and Death Benefits Act 1973
36. Schedule 2 seeks validate certain benefits under the Defence Force Retirement and Death Benefits Act 1973 (DFRDB Act) to regularise the treatment of certain benefit recipients. The DFRDB Act scheme was closed to new members from 1 October 1991. However, provision was made for certain persons to become members of the DFRDB Act scheme, if those members made certain elections. Some elections made prior to 1 July 2008 were invalid. Despite this, certain persons were treated as if they were DFRDB Act scheme members. The amendments proposed in Schedule 2 of the Bill validate these elections.
37. Schedule 2 provides that if the operation of the Schedule would result in the acquisition of property from a person, otherwise than on just terms, the Commonwealth is liable to pay a reasonable amount of compensation to the person.