House of Representatives

Explanatory Memorandum

(Circulated with the authority of the Minister for Finance and Deregulation, Senator the Hon Penny Wong)

IV. NOTES ON SCHEDULE 1 - Amendments

38. This Schedule seeks to amend 21 Acts across six portfolios to establish a framework for dealing with overpayments, and to address instances at risk of breaching section 83 of the Constitution, where agencies make payments from special appropriations, including Special Accounts, to recipients. This occurs where there is a misalignment between the requirements or preconditions imposed by relevant legislation (including subordinate legislation such as regulations) and the administrative processes implemented to make the payments.

39. Due to the complexity involved in identifying and then resolving these issues, this Bill may only be the first tranche of amendments to address this issue.

40. As background, the Australian National Audit Office (ANAO) raised concerns about circumstances that risk breaching section 83 in the context of finalising agencies' financial statements for the 2010-2011 financial year. For that financial year, many agencies included a note, agreed by the ANAO, in their annual financial statements identifying the potential risk of section 83 breaches, and stating that these were to be reviewed, and if possible, addressed in the 2011-2012 financial year.

41. Section 83 risks are greater where administrative processes do not align with the legislative requirements. For example, in practice, payments may be made based on assumptions and estimates, whereas the statutory provision regulating the entitlement to the payment may require a greater level of specificity in determining whether a payment should be made.

42. The following detailed explanation of the amendments proposed in Schedule 1 is provided by reference to the items in sequential order.

Amending the Australian Animal Health Council(Live-stock Industries) Funding Act 1996

43. Sections 4(2) and 4A(1) of the Australian Animal Health Council (Live-stock Industries) Funding Act 1996 obliges the Commonwealth to make certain payments of levies to the Australian Animal Health Council (the Council). Section 5 provides for an appropriation from the CRF for the purposes of payments under sections 4 and 4A. Currently, payments under these provisions are a net payment of levies less administrative costs.

44. Items 1 to 23 would amend sections 4(2) and 4A(1) to provide for the payment of the full amount of the levy (that is, not an amount equal to the levy amounts less administration costs) by the Commonwealth, and would also provide that the Council is liable to pay amounts back to the Commonwealth equal to the Commonwealth's costs of administering the provisions.

45. Item 1 would amend section 4 of the Act to include a sub-heading for "Commonwealth payments to Australian Animal Health Council".

46. Item 2 would amend the Act to remove a requirement for payments to the Council to be made as a net amount, taking account of the Commonwealth's costs in administering the payments before making a payment to the Council.

47. Item 3 would insert a new provision that would make payments from the Commonwealth to the Council conditional on the Council being liable to pay an amount to the Commonwealth that is equal to the costs incurred in administering the payment. This is designed to allow the Commonwealth to make a payment equal to the full amount of levy collected to the Council, and subsequently invoice the Council for its costs. This is consistent with arrangements provided in other comparable Acts, and would simplify the administrative processes involved in administering these payments.

48. Item 9 makes provision for the Commonwealth to set-off an amount owed by the Council to the Commonwealth against an amount that the Commonwealth is due to make to the Council, to retain flexibility in future payment arrangements.

Application

49. Item 23 provides that the amendments to section 4, 4A, 4(2A) and 4A(1A) of the Act apply to payments made by the Commonwealth to the Council during the month next following the month that the item commences, or a later month.

Amending the Australian Maritime Safety Authority Act 1990

50. Item 24 amends section 48 of the Australian Maritime Safety Authority Act 1990 to substitute a new subsection (1) which makes it clear that the amounts to be transferred to the Australian Maritime Safety Authority include all payments 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. In particular, the provision clarifies that amounts of levy paid in advance, amounts paid in account of levy, mistaken payments and amounts in relation to such levies or penalties which may subsequently be required to be refunded or remitted to the payer are to be paid to the Authority.

51. The new subsection 48(1A) ensures that the Authority does not receive a windfall if the Commonwealth refunds any such amount. Where such circumstances exist, new subsection 48(1B) provides an efficient mechanism for taking account of such circumstances, avoiding the need for an actual transfer of funds between the Authority and the Commonwealth.

52. Item 25 amends section 57 of the AMSA Act to insert "48" after "34" in that section, to allow for the delegation of powers under section 48 by signed instrument.

Application

53. Item 26 is a transitional provision which clarifies that the amendments made by item 24 do not apply to amounts received by the Commonwealth in relation to levies or penalties under the various Acts mentioned above before the repeal and substitution of subsection 48(1), and that the repealed subsection 48(1) continues to apply in respect of such amounts as if that subsection had not been repealed.

Amending the Australian Meat and Live-stock Industry Act 1997

54. The Australian Meat and Live-stock Industry Act 1997 provides for the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Currently, subsection 66(3) provides that the total matching payments paid by the Commonwealth in a financial year must not exceed 0.5% of the gross value of production (GVP) determined by the Secretary. Section 66(4) provides that the regulations may provide for the way in which the Secretary determines the GVP amount. The relevant regulations require the Secretary to determine the GVP amount based on ABARES data.

55. Generally the Secretary is unable to make a determination which applies during a financial year until late in that year or after the end of that year, because the required ABARES data may not be available until that time. Accordingly there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

56. Items 27 to 29 would amend sections 66 and 67 of the Australian Meat & Live-stock Industry Act 1997 to ensure that officials do not inadvertently breach section 83 of the Constitution when making payments before the GVP amount is determined. These items would:

•

permit the Secretary to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Secretary for the previous financial year;

•

state the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Secretary;

•

provide that if a determination has been made, and payments made in the financial year exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under section 66 against the amount that must be repaid to the Commonwealth; and

•

include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

57. Item 27 also states, to avoid doubt, that a determination made by the Secretary under subsection 66(3) of the Australian Meat and Live-stock Industry Act 1997 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on the Federal Register of Legislative Instruments (FRLI), which was established under the Legislative Instruments Act 2003 (Legislative Instruments Act) that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 27 would ensure that the Australian Meat and Live-stock Industry Act 1997 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

58. Item 30 provides that despite the amendments, section 66 of the Act continues to apply in relation to amounts paid to the industry research body during the financial year in which the amendments commence, or an earlier financial year.

59. This item also provides that the amendments to section 66(3) of the Act apply to amounts paid during the financial year next following the financial year in which the amendment commences, or a later financial year.

Transitional

60. Item 31 provides that determinations made under repealed subsection 66(3) of the Australian Meat and Live-stock Industry Act 1997 are to have the effect as if a determination under new subsection 66(3) had been made.

Amending the ComSuper Act 2011

61. The ComSuper Act 2011 (ComSuper Act) establishes the position of the Chief Executive Officer (CEO) of ComSuper. Section 25 of the ComSuper Act allows the CEO to delegate part of all of any of their powers under that Act.

62. Item 32 amends subsection 25(1) of the ComSuper Act to extend the CEO's power of delegation, so that they may delegate their powers under any law of the Commonwealth. This is necessary to ensure that matters that the CEO has responsibility for under other Commonwealth laws can be administered efficiently.

Amending the Dairy Produce Act 1986

63. The Dairy Produce Act 1986 provides for the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Subsection 6(4) creates an annual limit on the appropriation provided under section 6(1) of the Act. The annual limit is the lesser of 0.5% of the GVP, as determined by the Minister, or 50% of the eligible research and development (R & D) spend of the body. Subsection 6(5) provides that the regulations may provide for the way in which the Minister determines the GVP amount. The relevant regulations require the Minister to determine the GVP amount based on ABARES data.

64. Generally the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of that year, because the required ABARES data may not be available until that time. Accordingly, there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

65. Items 33 to 42 would amend sections 5 and 6 of the Dairy Produce Act 1986 to ensure that officials do not inadvertently breach section 83 of the Constitution when making payments before the GVP amount is determined. These items would:

•

permit the Minister to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Minister for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Minister;

•

provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under section 5 against the amount that must be repaid to the Commonwealth; and

•

include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

66. Item 35 also states, to avoid doubt, that a determination made by the Minister under subsection 6(4) of the Dairy Produce Act 1986 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 35 would ensure that the Dairy Produce Act 1986 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

67. Item 41 provides section 6 of the Act continues to apply, despite the amendments, in relation to payments made during the financial year in which the amendments commence or an earlier financial year.

68. Item 41 also provides that section 6(4) of the Act as amended would apply in relation to matching payments during the financial year next following the financial year in which the amendments commence, or a later financial year.

Transitional

69. Item 42 provides that determinations made under repealed subsection 6(4) of the Act are to have the effect as if a determination under the new subsection 6(4) had been made.

Amending the Defence Force Retirement and Death Benefits Act 1973

70. Item 43 would amend the Defence Force Retirement and Death Benefits Act 1973 (DFRDB Act) to insert new provisions to establish a framework for addressing overpayments under the DFRDB Act scheme. The new provisions would ensure that there is authority to make payments at the time payments are made, but provide for the recovery of these payments as a debt to the Commonwealth. Where there is a debt due to the Commonwealth, section 47 of the FMA Act applies in relation to the recovery of that debt. This has been noted in the new provisions proposed in the FFLA Bill (No. 2).

The new section 124B, as amended, deals with recoverable payments of benefits under the scheme

71. The new subsection 124B(1) provides that if, apart from this provision, the Commonwealth does not have power, under this Act or previous legislation, to pay a relevant amount to a person purportedly as a benefit, then the Commonwealth may pay the relevant amount to the person. The new provisions would apply where payments are made by officials bona fide in the course of administering the program or Act, but which are inadvertently made outside the authority of the relevant legislation. In these circumstances, the recoverable payment provisions will ensure that there is an appropriation for the 'mistaken' payment as well as authority to make the payment at the time it is made. An example of when this may happen is in the case of a family law settlement, where the Family Court orders a split of a person's superannuation benefits. The splitting order may be received by ComSuper after the cut-off time for processing the next payday, resulting in an overpayment to the recipient. New section 124B permits such a payment to be made, and provides for the recovery of that payment. The changes do not affect the benefit entitlements of DFRDB members or expand those persons eligible for benefits (or the amount of those benefits) under the scheme. A recoverable payment is only taken to be a benefit for the purpose of the appropriation, and is a recoverable debt due to the Commonwealth. Additionally, fraudulent payments, or payments made otherwise in bad faith, are not supported by the provisions and will remain outside the scope of the relevant appropriation in the Act.

72. By their nature, payments supported by the recoverable payments provisions will generally be made in circumstances where the payer is unaware at the time of making the payment (or taking steps to make the payment) that the payment is not otherwise supported by the Act. That is, an official will generally be unaware that they are relying on the recoverable payment provision until a later time (eg when further information becomes available). The new reporting obligations, discussed below from paragraph 86, will apply once an official is aware that the overpayment occurred.

73. The new subsection 124B(2) provides that a benefit payable under new subsection 124B(1) is a debt to the Commonwealth by the recipient that may be recovered by ComSuper. The new subsection 124B(2) also incorporates a note regarding the legal duty to pursue the recovery of a debt under section 47 of the FMA Act.

74. The new subsection 124B(3) provides for the recovery of the relevant amount or part of the relevant amount. The new subsection 124B(3) also incorporates a note regarding the legal duty to pursue the recovery of a debt under section 47 of the FMA Act.

75. The new subsection 124B(4) provides that for the purposes of subsections 126(4) and (5), in determining whether an amount is payable subsection 124B(1) is to be disregarded. That is, for the purposes of determining whether an amount is recoverable under the existing recovery provisions, the fact that the new provisions provide authority to make the overpayment does not prevent its recovery.

76. The new subsection 124B(5) provides that if a relevant amount has been recovered under subsection 126(4) or (5), it cannot be recovered under new subsection 124B(3) and (4). This prevents double recovery of a debt.

77. Similarly, the new subsection 124B(6) provides that if a relevant amount recovered under new subsection 124B(3) and (4), it cannot be recovered under subsection 126(4) and (5). This prevents double recovery of a debt.

78. The new subsection 124B(7) defines 'benefit' for the purposes of new section 124B as including pension or other money payable.

The new section 124C deals with recoverable payments of death benefits under the scheme.

79. The new subsection 124C(1) provides that if, apart from this provision, the Commonwealth does not have power, under this Act or previous legislation, to pay a relevant amount to a deceased person purportedly as a benefit, then the Commonwealth may pay the relevant amount to the person. This covers situations where a benefit payment may inadvertently be made to a person who has died prior to payment, resulting in the appropriation not supporting payment to that person. An example of when this may happen is where a person in receipt of pension payments dies and ComSuper is not notified of their death for days or weeks later. Another situation where this provision may apply is where ComSuper is notified immediately, but the instructions for the deposit have already been provided to the financial institution and thus are not reversible. New section 124C permits such a payment to be made, and allows for the recovery of that payment, and incorporates a note regarding the legal duty to pursue the recovery of a debt under section 47 of the FMA Act.

80. The new subsection 124C(2) provides that if a payment is made under subsection (1), the relevant amount is taken to have been paid into the deceased person's estate.

81. The new subsection 124C(3) provides that a recoverable death benefit that is paid under new subsection 124C(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper in a court of competent jurisdiction. New section 124C does not prevent the Chief Executive from pursuing recovery methods outside those specified in new section 124C or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act.

82. The new subsection 124C(4) provides that for the purposes of subsections 126(4) and (5), in determining whether an amount is payable subsection 124C(1) is to be disregarded. That is, for the purposes of determining whether an amount is recoverable under the existing recovery provisions, the fact that the new provisions provide authority to make the overpayment does not prevent its recovery.

83. The new subsection 124C(5) provides that if a relevant amount has been recovered under subsection 126(4) or (5), it cannot be recovered under new subsection 124C(3) and (4).

84. The new subsection 124C(6) provides that if a relevant amount recovered under new subsection 124B(3), it cannot be recovered under subsection 126(4 and (5).

85. The new subsection 124C(7) defines 'benefit' for the purposes of new section 124C as including pension or other money payable under previous legislation. This ensures that benefits paid under the Act can be the subject of recoverable death benefits.

New section 124D provides for the reporting of the above payments.

86. The new section 124D deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments in a way that promotes transparency and accountability.

87. The new section 124D(1) provides the reporting requirements for payments made under subsections 124B(1) and 124C(1). New subsection 124D(1) provides that, during the applicable publication period, the Secretary of the Department is to publish a report on the known instances of the recoverable payment and recoverable death payment provisions being used, and the total amount of those payments, in respect of a reporting period. The report is to be published in a manner that the Secretary considers appropriate; for example, the report may be published in the annual report, on the department's website or in another accessible format to ensure an appropriate level of transparency and accountability.

88. However, a report is not required when there have not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 124D(2)).

89. The new subsections 124D(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death payment unless before the report is prepared a Departmental Official is aware of such a payment being made under subsection 124B(1) or subsection 124C(1).

90. The new subsection 124D(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in new subsections 124D(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 124D(6) and (7).

91. The new subsections 124D(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

92. The new subsection 124D(8) defines 'reporting period' for the purposes of new section 7 as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

93. The new subsection 124D(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 124D, as meaning four months, or a shorter period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period. Four months is provided as the starting point, to allow the report to be included in the annual report, if the Secretary considers that to be an appropriate method of publication.

94. The new subsection 124D(10) defines 'Departmental official' for the purposes of new section 124D.

Amending the Egg Industry Service Provision Act 2002

95. The Egg Industry Service Provision Act 2002 provides for the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Subsection 8(3) creates an annual limit on the appropriation in subsection 8(1) of the lesser of 0.5% of the GVP determined by the Minister, and 50% of the eligible R & D spend of the body. Section 8(4) provides that the regulations may provide for the way in which the Minister determines the GVP amount. The relevant regulations require the Minister to determine the GVP amount based on ABARES data.

96. Generally the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of the year, because the ABARES data may not be available until that time. Accordingly there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

97. Items 44 to 51 would amend sections 7 and 8 to ensure that officials do not inadvertently breach section 83 of the Constitution when making payments before the GVP amount is determined. These items would:

•

permit the Minister to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Minister for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Minister;

•

provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under section 7 against the amount that must be repaid to the Commonwealth; and

•

include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

98. Item 46 also states, to avoid doubt, that a determination made by the Minister under subsection 8(3) of the Egg Industry Service Provision Act 2002 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 46 would ensure that the Egg Industry Service Provision Act 2002 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

99. Item 52 provides that despite the amendments to the Act, section 8 continues to apply after the commencement of the amendments, in relation to matching payments made during the financial year in which the amendments commence, or an earlier financial year.

100. Item 52 also provides that subsection 8(3) as amended applies in relation to matching payments made during the financial year next following the financial year in which the amendments commence, or a later financial year.

Transitional

101. Item 53 provides that determinations made under repealed subsection 8(3A) are to have effect as if a determination had been made under new subsection 8(3) of the Act.

Amending the Forestry Marketing and Research and Development Services Act 2007

102. The Forestry Marketing and Research and Development Services Act 2007 provides for the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Subsection 9(4) creates an annual limit on the appropriation in subsection 9(1) of the lesser of 0.5% of the GVP determined by the Minister, and 50% of the eligible R & D spend of the body. Subsection 9(5) provides that the regulations may provide for the way in which the Minister determines the GVP amount. The relevant regulations require the Minister to determine the GVP amount based on ABARES data.

103. Generally the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of the year, because the required ABARES data may not be available until that time. Accordingly there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

104. Items 54 to 63 would amend sections 7, 8 and 9 to ensure that officials do not inadvertently breach section 83 of the Constitution when making payments before the GVP amount is determined. These items would:

•

permit the Minister to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Minister for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Minister;

•

provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under section 8 against the amount that must be repaid to the Commonwealth; and

•

include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

105. Item 58 also states, to avoid doubt, that a determination made by the Minister under subsection 9(4) of the Forestry Marketing and Research and Development Services Act 2007 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 58 would ensure that the Forestry Marketing and Research and Development Services Act 2007 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

106. Item 64 provides despite the amendments to the Act, section 9 continues to apply after the commencement of the amendments, in relation to matching payments made during the financial year in which the amendments commence, or an earlier financial year.

107. Item 64 also provides that subsection 9(4) as amended applies in relation to matching payments made during the financial year next following the financial year in which the amendments commence, or a later financial year.

Transitional

108. Item 65 provides that determinations made under repealed subsection 9(4A), have effect as if the determinations were made under new subsection 9(4) of the Act.

Amending the Governor-General Act 1974

109. Section 4 of the Governor-General Act 1974 (G-G Act) provides for the payment of an allowance (pension benefits) to a former Governor-General. These benefits are paid out of the CRF, which is appropriated accordingly.

110. The changes proposed by item 66 are intended to deal with issues in relation to drawing on these appropriations. The changes do not affect the benefit entitlements of former Governor-Generals or expand those persons eligible for benefits (or the amount of those benefits) under the G-G Act. A recoverable payment or recoverable death payment is only taken to be a benefit for the purpose of the appropriation provisions contained in subsection 4AA(5) and section 5 of the G-G Act and are debts due to the Commonwealth and recoverable.

111. Item 66 of Schedule 1 inserts new sections 4C, 4D and 4E into the G-G Act to establish recoverable payments and recoverable death payments. These provisions are to confirm that amounts paid out of the CRF in certain circumstances are validly paid under an appropriation.

Recoverable Payments

112. The new subsection 4C(1) provides that an amount that is purportedly paid as a benefit under the G-G Act, but is not payable under the Act, may be paid by the Commonwealth (as a recoverable payment).

113. A recoverable payment is intended to cover situations where a payment is made to a person where the legislation does not allow for the payment to that person. An example of when this may occur is where a former Governor-General is also in receipt of a state pension which has increased. The increase will have the effect of reducing the allowance payable under section 4 of the G-G Act. However, the information about the increase may be received after the cut-off time for processing the next payday, resulting in an overpayment to the recipient. New subsection 4C permits such a payment to be made, and deems the payment a recoverable payment, validly appropriated under subsection 4AA(5) and section 5 of the G-G Act.

114. As indicated by the note under the new subsections 4C(2) and 4C(3), these subsections do not preclude the designated Secretary, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under section 47 of the FMA Act. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. Currently, in certain situations, the designated Secretary, on behalf of the Commonwealth, may allow an "overpaid" amount to be recovered by permitting the overpaid recipient to voluntarily arrange for a repayment of that amount. Continuing reliance on this practice would not be prevented by new subsections 4C(2) and 4C(3).

115. The new subsection 4C(2) provides that a recoverable payment that is paid under new subsection 4C(1) is a debt due to the Commonwealth and may be recovered by the designated Secretary on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 4C(2) also incorporates a note regarding the duty to pursue the recovery of a debt under section 47 of the FMA Act.

116. The new subsection 4C(3) provides that a recoverable payment made under new subsection 4C(1) may be used to reduce part or all of any benefits that are payable by the Commonwealth to the recipient under the G-G Act This may be done at the direction of the designated Secretary. New subsection 4C(3) would not apply where the amount has previously been recovered under section 47 of the FMA Act.

117. The new subsection 4C(4) provides that a recoverable payment made under new subsection 4C(1) that relates to a benefit under subsection 4AA(2) of the G-G Act is taken to be a benefit under subsection 4AA(2) of the G-G Act. This allows a recoverable payment to be appropriated as a benefit under subsection 4AA(5) of the G-G Act.

118. The new subsection 4C(5) provides that a recoverable payment made under new subsection 4C(1) that relates to an allowance under section 4 of the G-G Act is taken to be an allowance under section 4 of the G-G Act. This allows a recoverable payment to be appropriated as an allowance under section 5 of the G-G Act.

119. The new subsection 4C(6) defines 'benefit' for the purposes of new section 4C as including an allowance under section 4 or a benefit under subsection 4AA(2). This ensures that benefits paid under the G-G Act can be the subject of recoverable payments.

120. The new subsection 4C(7) defines designated Secretary for the purpose of new section 4C as the Secretary of the Department administered by the Minister who administers section 4 and 4AA of the G-G Act.

Recoverable Death Payments

121. The new subsections 4D(1) and (2) deem an amount that is deposited into an account or paid by way of cheque as a benefit payment under the G-G Act, but is paid after the death of the recipient, as a payment to the estate of the recipient (a recoverable death payment). This deeming occurs when, on the last day on which changes could reasonably be made to the payment, the designated Secretary does not know that the recipient has died, and when the payment would have been payable if the recipient had not died. New subsection 4D(1) also provides that the Commonwealth may pay the amount.

122. A recoverable death payment is intended to cover situations where a payment is made to a person who has died prior to payment being made. An example of when this may happen is where a person in receipt of pension payments dies and the scheme administrator is not notified of their death until sometime later. Another example is where the administrator is notified of the death immediately, but the instructions for the deposit have already been provided to the financial institution and the payment is not reversible. New subsection 4D(1) permits such a payment to be made, and deems the payment a recoverable death payment, validly appropriated under subsection 4AA(5) and section 5 of the G-G Act.

123. As indicated by the note under the new subsection 4D(3), the subsection does not preclude the designated Secretary, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under Section 47 of the FMA Act. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. Currently, in certain situations, the designated Secretary, on behalf of the Commonwealth, may allow an "overpaid" amount to be recovered from the estate by permitting the estate to voluntarily arrange for a repayment of that amount. Continuing reliance on this practice would not be prevented by new subsection 4D(3).

124. The new subsection 4D(3) provides that a recoverable death benefit that is paid under new subsection 4D(1) is a debt due to the Commonwealth and may be recovered by the designated Secretary on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 3D(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

125. The new subsection 4D(4) provides that a recoverable death payment made under new subsection 4D(1) that relates to a benefit under subsection 4AA(2) of the G-G Act is taken to be a benefit under subsection 4AA(2). This allows a recoverable death payment to be appropriated as a benefit under subsection 4AA(5) of the G-G Act.

126. The new subsection 4D(5) provides that a recoverable death payment made under new subsection 4D(1) that relates to an allowance under section 4 of the G-G Act, is taken to be an allowance payable under section 4. This allows a recoverable death payment to be appropriated as an allowance under section 5 of the G-G Act.

127. The new subsection 4D(6) defines 'benefit' for the purposes of new section 4D as including an allowance under section 4 or a benefit under subsection 4AA(2) of the G-G Act.

128. The new subsection 4C(7) defines designated Secretary for the purpose of new section 4D as the Secretary of the Department administered by the Minister who administers sections 4 and 4AA of the G-G Act.

Reports about Recoverable Payments and Recoverable Death Payments

129. The new section 4E deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

130. The new section 4E provides the reporting requirements for payments made under subsections 4C(1) and 4D(1). New subsection 4E(1) provides that, during the applicable publication period, the designated Secretary is to publish a report on the number of recoverable payments and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period. The report is to be published in a manner that the designated Secretary considers appropriate. However, a report is not required when there has not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 4E(2)).

131. The new subsections 4E(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death payments unless before the report is prepared a designated Departmental official is aware of such a payment being made under subsection 4C(1) or subsection 4D(1).

132. The new subsection 4E(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in new subsections 4E(3) and (4), that it is to be reported in a later reporting period, as provided under new subsections 4E(6) or (7).

133. The new subsections 4E(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

134. The new subsection 4E(8) defines 'reporting period' for the purposes of new section 4E as meaning a financial year, or a shorter period if specified in a legislative instrument by the designated Minister.

135. The new subsection 4E(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 4E, as meaning four months, or a shorter period of months if specified in a legislative instrument by the designated Minister, beginning immediately after the end of the reporting period. Four months is to allow for the Secretary to include the report in the annual report, if that is preferred. The report may also be published on the Department's website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. This seeks to ensure that overpayments will be addressed, and minimised.

136. The new subsection 4E(10) defines 'designated Department' for the purposes of new section 4E as meaning the Department administered by the designated Minister.

137. The new subsection 4E(11) defines 'designated Department official' for the purposes of new section 4 as meaning an official who is in or part of the designated Department.

138. The new subsection 4E(12) defines 'designated Minister' for the purposes of new section 4E as meaning the Minister who administers sections 4 and 4AA of the G-G Act.

139. The new subsection 4E(13) defines 'designated Secretary' for the purposes of new section 4E as meaning the Secretary of the designated Department.

Amending the Horticulture Marketing and Research and Development Services Act 2000

140. The Horticulture Marketing and Research and Development Services Act 2000 provides for the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Subsection 16(3) of the provides that the total matching payments paid in a financial year must not exceed 0.5% of the GVP determined by the Secretary. Subsection 16(4) provides that the regulations may provide for the way in which the Secretary determines the GVP amount. The relevant regulations require the Secretary to determine the GVP amount based on ABARES data.

141. Generally the Secretary is unable to make a determination which applies during a financial year until late in that year or after the end of the year, because the required ABARES data may not be available until that time. Accordingly there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

142. Items 67 to 69 would amend section 16 to ensure that officials do not inadvertently breach section 83 of the Constitution when making payments before the GVP amount is determined. These items would:

•

permit the Secretary to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Secretary for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Secretary;

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provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

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allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under subsection 16(2) against the amount that must be repaid to the Commonwealth; and

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include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

143. Item 68 also states, to avoid doubt, that a determination made by the Department's Secretary under subsection 16(7A) of the Horticulture Marketing and Research and Development Services Act 2000 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 68 would ensure that the Horticulture Marketing and Research and Development Services Act 2000 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

144. Item 70 provides that despite the amendments, section 16 of the Act continues to apply in relation to matching payments during the financial year in which the amendments commence, or an earlier financial year.

145. Item 70 also provides that subsection 16(7A) of the Act, as amended, would apply to matching payments in the financial year next following the financial year in which the amendments commence, or a later financial year.

Transitional

146. Item 71 provides that determinations made under repealed subsection 16(3) would have effect as if the determination had been made under new subsection 16(7A).

Amending the Local Government(Financial Assistance) Act 1995

147. The Local Government (Financial Assistance) Act 1995 (LGFA Act) enables the Commonwealth to provide financial assistance to local governing bodies by making grants to States for local government purposes. This financial assistance ensures local governments are able to function effectively and provide necessary services to their residents.

148. The purpose of these amendments is to authorise Commonwealth payments to States which are not otherwise covered by the standing appropriation in the LGFA Act.

149. Item 72 would insert a new section 18A, which would authorise recoverable payments where amounts are paid to a State, purportedly as amounts under the Act. Where an overpayment is made, purportedly as an amount under the LGFA Act, and the State is entitled to receive an amount under the Act, then the relevant amount or such part of the relevant amount as the Minister determines, may, if the Minister so directs, be recovered by deduction from future amounts that the State is entitled to under the LGFA Act. It is not proposed that there would be any obligation to pursue the States for repayment of any amount, in line with policy considerations. This amendment would be supported by the relevant standing appropriation in the LGFA Act.

150. It is immaterial to the new section 18A whether the decision-maker is aware at the time of making a payment, that it could be a recoverable payment. A conscious decision to rely on this provision is not required, however Item 72 provides for reporting when an official becomes aware of instances where the recoverable payment provision has been used.

151. Item 72 would also insert a new section 18B into the LGFA Act. The new section 18B provides reporting requirements for any payments made under the new subsection 18A(1). Subsection 18B(1) provides that during the applicable publication period, the Secretary must publish, in a manner he or she considers appropriate, the number of payments made under subsection 18A(1), and the total amount of those payments, for the relevant reporting period.

152. This provision provides the flexibility for the Secretary to determine the means of publication. It is intended that the scope of publication could include the department's website and/or the annual report.

153. The new subsection 18B(2) defines 'reporting period' for the purposes of new section 18B as meaning a financial year, or a shorter period if specified in a legislative instrument.

154. The new subsection 18B(3) defines the 'applicable publication period' for a reporting period, for the purposes of new section 18B, as meaning four months, or a shorter period of months if specified in a legislative instrument, beginning immediately after the end of the reporting period. Four months is provided to enable the Secretary sufficient time to include the report in the department's annual report, sould the Secretary consider it appropriate. Four months is based on the requirement that agencies annual reports are to be tabled in Parliament by 31 October next following the end of a financial year.

155. The report may also be published on the Department's website or in another accessible format. Reporting on recoverable payments in the new section 18B is intended to ensure transparency and accountability in making any overpayments under the LGFA Act.

Amending the Military Superannuation and Benefits Act 1991

156. The Military Superannuation and Benefits Scheme (MSBS) was established, following the Cole review of the Defence Force Retirements and Death Benefits Scheme (DFRDBS), in 1991. At that time contributing DFRDBS members were given the opportunity to transfer to the new scheme. The MSBS is a combined defined benefit and accumulation scheme with members required to make a fortnightly contribution of between 5% and 10% of salary. The employer benefit, generally preserved until age 60, is a lump sum which may be converted to a pension. MSBS pensions are indexed twice yearly to upward movements in the CPI. The MSBS also provides death, invalidity and reversionary pension benefits.

157. An overpayment of a benefit may inadvertently occur where ComSuper (the administrator) acts on current information which later proves to be inaccurate.

158. Examples of such changes in circumstances include:

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The death of a member;

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A family law adjustment arising from a Court Order;

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Change to an invalidity classification;

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Where an election is cancelled; and

•

Human or system errors.

159. Item 73 would insert, after section 16A of the Military Superannuation and Benefits Act 1991 (MSB Act), new provisions which deal with overpayments under the scheme which have taken place after the commencement of these provisions. The new provisions ensure that there is authority to make payments at the time payments are made under these provisions but allow for the recovery of these payments.

New section 16B deals with these payments in relation to benefits under the MSBS other than death benefits

160. The new subsection 16B(1) provides that if, apart from this provision, the Commonwealth does not have power, under this Act or previous legislation, to pay a relevant amount to a person purportedly as a benefit, then the Commonwealth may pay the relevant amount to the person.

161. The new provision is intended to cover situations where a benefit payment may inadvertently be made to a person when the existing appropriation does not allow for payment to that person. An example of when this may happen is in the case of a Family Law settlement, where the Family Court of Australia orders a split of a person's superannuation benefits. The splitting order may be received by ComSuper after the cut-off time for processing the next payday, resulting in an overpayment to the recipient. New section 16B permits such a payment to be made, and allows for the recovery of that payment.

162. The new subsection 16B(2) provides that a benefit payable under new subsection 16B(1) is a debt to the Commonwealth by the recipient that may be recovered by ComSuper.

163. The new subsection 16B(3) provides for the recovery of the relevant amount or part of the relevant amount.

164. The new section 16C deals with these payments of death benefits under the scheme.

165. The new subsection 16C(1) provides that if, apart from this provision, the Commonwealth does not have power, under this Act or previous legislation, to pay a relevant amount to a deceased person purportedly as a benefit, then the Commonwealth may pay the relevant amount to the person. This covers situations where a benefit payment may inadvertently be made to a person who has died prior to payment, resulting in the appropriation not allowing payment to that person. An example of when this may happen is where a person in receipt of pension payments dies and ComSuper is not notified of their death for days or weeks later. Another situation where this provision may apply is where ComSuper is notified immediately, but the instructions for the deposit have already been provided to the financial institution and thus are not reversible. New section 16C permits such a payment to be made, and allows for the recovery of that payment.

166. The new subsection 16C(2) provides that if a payment is made under subsection (1), the relevant amount is taken to have been paid into the deceased person's estate.

167. The new subsection 16C(3) provides that a recoverable death benefit that is paid under new subsection 16C(1) is a debt due to the Commonwealth and may be recovered by the Chief Executive Officer of ComSuper in a court of competent jurisdiction. New section 16C does not prevent the Chief Executive from pursuing recovery methods outside those specified in new section 16C or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act.

New section 16D provides for the reporting of the above payments.

168. The new section 16D deals with the reporting of recoverable payments and recoverable death benefits and ensures that reporting of these payments is done in a way that provides a transparency and accountability.

169. The new section 16D(1) provides the reporting requirements for payments made under subsections 16B(1) and 16C(1). New subsection 16D(1) provides that, during the applicable publication period, the Secretary of the Department is to publish the number of recoverable payments and recoverable death benefits made, and the total amount of those payments, in respect of a reporting period. However, a report is not required when there have not been any recoverable payments or recoverable death benefits made in respect of a reporting period (new subsection 16D(2).34

170. The new subsections 16D(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death benefit unless before the report is prepared a Departmental Official is aware of such a payment being made under subsection 16B(1) or subsection 16C(1).

171. The new subsection 16D(5) provides that if a recoverable payment or recoverable death benefit was made during a reporting period, but not reported because of the reasons set out in new subsections 16D(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 16D(6) and (7).

172. The new subsections 16D(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death benefit has to be reported in a later reporting period to the period in which it was made.

173. The new subsection 16D(8) defines 'reporting period' for the purposes of new section 16D as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

174. The new subsection 16D(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 16D, as meaning four months, or a shorter period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period.

175. The new subsection 16D(10) defines 'Departmental official' for the purposes of new section 16D.

Transitional

Recovery of payments relating to retention benefit.

176. Part 8 of the MSB Act was repealed under Schedule 4 of the Defence Legislation Amendment Act (No. 1) 2005 (DLA Act 2005). However due to a transitional provision in item 4 of Schedule 4 of the DLA Act 2005 eligibility for the retention benefit is still applicable for eligible members of the Australian Defence Force who were members of the Scheme before 6 October 2005. The MSBS Retention Benefit is available to certain ADF members who have completed 15 years of service and provide a service obligation for a further 5 years service.

177. An overpayment of a benefit may inadvertently occur where Defence (the administrator) act on current information which later proves to be inaccurate.

178. Examples of such changes in circumstances include:

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Where an election is cancelled;

•

Where a member resigns before completing a return of service obligation

•

Human or system errors.

179. Item 74 inserts, after section 51A, new provisions which deal with overpayments under the scheme which have taken place after the commencement of these provisions. The new provisions ensure that there is authority to make payments at the time payments are made but allow for the recovery of these payments.

New section 51B deals with these payments in relation to benefits under the scheme.

180. New subsection 51B(1) provides that if, apart from this provision, the Commonwealth does not have power, under this Act or previous legislation, to pay a relevant amount to a person purportedly as a benefit, then the Commonwealth may pay the relevant amount to the person.

181. The new provision is intended to cover situations where a benefit payment may inadvertently be made to a person when the existing appropriation does not allow for payment to that person. New section 51B permits such a payment to be made, and allows for the recovery of that payment.

182. New subsection 51B(2) provides that a benefit payable under new subsection 51B(1) is a debt to the Commonwealth by the recipient that may be recovered by Defence.

183. New subsection 51B(3) provides for the recovery of the relevant amount or part of the relevant amount from a determination under Part IIIA of the Defence Act 1903 if the Secretary of the Department so directs.

184. New subsection 51B(4) and (5) are technical provisions dealing with the continued operation of the MSBS Retention Benefit provisions as continued in force by item 4 of Schedule 4 to the Defence Legislation Amendment Act (No. 1) 2005 .

New section 51C provides for the reporting of the above payments.

185. New section 51C deals with the reporting of recoverable payments and recoverable death benefits and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

186. New section 51C(1) provides the reporting requirements for payments made under subsections 51B(1). New subsection 51C(1) provides that, during the applicable publication period, the Secretary of the Department is to publish the number of recoverable payments made, and the total amount of those payments, in respect of a reporting period. However, a report is not required when there have not been any recoverable payments made in respect of a reporting period (new subsection 51C(2).

187. New subsections 51C(3) and (4) provides that a report is not required in relation to a recoverable payment unless before the report is prepared a Departmental official is aware of such a payment being made under subsection 51C(1).

188. New subsection 51C(5) provides that if a recoverable payment was made during a reporting period, but not reported because of the reasons set out in new subsections 51C(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 51C(6) and (7). New subsection 51C(5)set out the reporting requirements where a recoverable payment has to be reported in a later reporting period to the period in which it was made.

189. News subsections 51C(6) defines 'reporting period' for the purposes of new section 51C as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

190. New subsection 51C(7) defines the 'applicable publication period' for a reporting period, for the purposes of new section 51C, as meaning four months, or a shorter period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period. Four months is to allow for the Secretary to include the report in the annual report, if that is preferred. The report may also be published on the Department's website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. This seeks to ensure that overpayments will be addressed, and minimised.

191. New subsection 51C(8) defines 'Departmental official' for the purposes of new section 51C.

Amending the National Residue Survey Administration Act 1992

192. Items 75 and 76 amend the National Residue Survey Administration Act 1992 by removing references to the expenditure plan to ensure that it is clear that a payment that is made for purposes related to the matters listed in subparagraphs 8(1)(a)(i)-(iv) is supported by the appropriation.

Amending the Parliamentary Contributory Superannuation Act 1948

193. The Parliamentary Contributory Superannuation Act 1948 (PCS Act) provides for contributory superannuation for persons who have served as members of the Parliament. These benefits are paid out of the CRF which is appropriated accordingly.

194. The changes proposed by item 78 are intended to deal with issues in relation to drawing on these appropriations. The changes do not affect the benefit entitlements of members under the PCS Act or expand those persons eligible for benefits (or the amount of those benefits) under the PCS Act. A recoverable payment or recoverable death payment is only taken to be a benefit for the purpose of the appropriation provisions contained in the PCS Act and are debts due to the Commonwealth and recoverable.

195. Item 77 of Schedule 1 repeals current subsection 24(2) and substitutes new subsection 24(2), which provides that subsection 24(1), has effect subject to new subsection 24AA(4). Subsection 24(1) provides that benefits under the PCS Act shall be absolutely inalienable, and this item ensures that subsection 24(1) does not prevent the establishment of recoverable payments and recoverable death payments.

196. Item 78 of Schedule 1 inserts new sections 24AA, 24AB and 24AC into the PCS Act to establish recoverable payments and recoverable death payments. These provisions are to confirm that amounts paid out of the CRF that are paid in certain circumstances are made validly under an appropriation.

Recoverable Payments

197. The new subsection 24AA(1) provides that an amount that is purportedly paid as a benefit under the PCS Act, but is not payable under the Act, may be paid by the Commonwealth (as a recoverable payment).

198. A recoverable payment is intended to cover situations where a benefit payment is made to a person in circumstances where the person would not be entitled to some or all of the payment and therefore would not come within the existing appropriation. An example of when this may occur is in the case of a Family Law settlement, where the Family Court orders a split of a person's superannuation benefits under the PCS Act. The splitting order may be received by the scheme administrators after the cut-off time for processing the next payday, resulting in an overpayment to the recipient. New section 24AA permits such a payment to be made, and deems the payment a recoverable payment, validly appropriated under the PCS Act.

199. As indicated by the note under the new subsections 24AA(2) and 24AA(3) do not preclude the Secretary of the Department, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under section 47 of the FMA Act. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. Currently, in certain situations, the Secretary of the Department, on behalf of the Commonwealth, may allow an "overpaid" amount to be recovered by permitting the overpaid recipient to voluntarily arrange for a repayment of that amount. Continuing reliance on this practice would not be prevented by new subsections 24AA(2) and 24AA(3).

200. The new subsection 24AA(2) provides that a recoverable payment that is paid under new subsection 24AA(1) is a debt due to the Commonwealth and may be recovered by the Secretary of the Department, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 24AA(2) also incorporates a note regarding the duty to pursue the recovery of a debt under section 47 of the FMA Act.

201. The new subsection 24AA(3) provides that a recoverable payment made under new subsection 24AA(1) may be used to reduce part or all of any benefits that are payable by the Commonwealth to the recipient under the PCS Act. This may be done at the direction of the Secretary of the Department. New subsection 24AA(3) would not apply where the amount has previously been recovered under section 47 of the FMA Act.

202. New subsection 24AA(4) defines 'benefit' for the purposes of new section 24AA as meaning a retiring allowance, annuity or other benefit under the PCS Act. This ensures that benefits paid under the PCS Act can be the subject of recoverable payments.

Recoverable Death Payments

203. The new subsections 24AB(1) and 24AB(2) deem an amount that is deposited into an account or paid by way of cheque as a benefit payment under the PCS Act, but is paid after the death of the recipient, as a payment to the estate of the recipient (a recoverable death payment). This deeming occurs when, on the last day on which changes could reasonably be made to the payment, the Secretary of the Department does not know that the recipient has died, and when the payment would have been payable if the recipient had not died. The new subsection 24AB(1) also provides that the Commonwealth may pay the amount.

204. A recoverable death payment is intended to cover situations where a benefit payment may inadvertently be made to a person who has died prior to payment. An example of when this may occur is where a person in receipt of pension payments dies and the scheme administrators only becomes aware of the death until sometime later. Another situation where this provision may apply is where the scheme administrators become aware that a person has died but this is after the time that instructions for the deposit have already been provided to the financial institution. New section 24AB permits such a payment to be made, and deems the payment a recoverable death payment, validly appropriated for the purposes of the PCS Act.

205. As indicated by the note under the new subsection 24AB(3) the subsection does not preclude the Secretary of the Department, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under Section 47 of the FMA Act. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. Currently, in certain situations, the Secretary of the Department, on behalf of the Commonwealth, may allow an "overpaid" amount to be recovered from the estate by permitting the estate to voluntarily arrange for a repayment of that amount. Continuing reliance on this practice would not be prevented by new subsection 24AB(3).

206. The new subsection 24AB(3) provides that a recoverable death payment that is paid under new subsection 24AB(1) is a debt due to the Commonwealth and may be recovered by the Secretary of the Department, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 24AB(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

207. The new subsection 24AB(4) defines 'benefit' for the purposes of new section 24AB as meaning a retiring allowance, annuity or other benefit under the PCS Act. This ensures that benefits paid under the PCS Act can be the subject of recoverable death payments.

Reports about Recoverable Payments and Recoverable Death Payments

208. The new section 24AC deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

209. The new section 24AC provides the reporting requirements for payments made under subsections 24AA(1) and 24AB(1). New subsection 24AC(1) provides that, during the applicable publication period, the Secretary of the Department is to publish a report on the number of recoverable advances and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period. The report is to be published in a manner that the Secretary considers appropriate. However, a report is not required when there has not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 24AC(2)).

210. The new subsections 24AC(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death payment unless before the report is prepared a departmental official is aware of such a payment being made under subsection 24AA(1) or subsection 24AB(1).

211. The new subsection 24AC(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in new subsections 24AC(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 24AC(6) and (7).

212. The new subsection 24AC(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

213. The new subsection 24AC(8) defines 'reporting period' for the purposes of new section 24AC as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

214. The new subsection 24AC(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 24AC, as meaning four months, or a shorter period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period. Four months is to allow for the Secretary to include the report in the annual report, if that is preferred. The report may also be published on the Department's website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. This seeks to ensure that overpayments will be addressed, and minimised.

215. The new subsection 24AC(10) defines 'Departmental official' for the purposes of new section 24AC as meaning an official who is in or is part of the Department.

Amending the Pig Industry Act 2001

216. The Pig Industry Act 2001 provides for the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Subsection 10(8) of the provides that the total matching payments paid in a financial year must not exceed 0.5% of the GVP determined by the Secretary. Subsection 10(9) provides that the regulations may provide for the way in which the Secretary determines the GVP amount. The relevant regulations require the Secretary to determine the GVP amount based on ABARES data.

217. Generally the Secretary is unable to make a determination which applies during a financial year until late in that year or after the end of the year, because the required ABARES data may not be available until that time. Accordingly there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

218. Items 79 to 87 would amend section 10 to ensure that officials do not inadvertently breach section 83 of the Constitution when making payments before the GVP amount is determined. These items would:

•

permit the Secretary to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Secretary for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Secretary;

•

provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under subsection 16(2) against the amount that must be repaid to the Commonwealth; and

•

include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

219. Item 81 also states, to avoid doubt, that a determination made by the Secretary under subsection 9(4) of the Pig Industry Act 2001 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 81 would ensure that the Pig Industry Act 2001 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

220. Item 88 provides that despite the amendments, section 10 of the Act continues to apply in relation to matching payments during the financial year in which the amendments commence, or an earlier financial year.

221. Item 88 also provides that subsection 10(8) of the Act, as amended, would apply to matching payments in the financial year next following the financial year in which the amendments commence, or a later financial year.

Transitional

Item 89 provides that determinations made under repealed subsection 10(8A) would have effect as if the determination had been made under new subsection 10(8).

Amending the Primary Industries and Energy Research and Development Act 1989

222. Section 30A of the Primary Industries and Energy Research and Development Act 1989 (PIERD Act) specifies a range of payments to be made to a Research and Development (R & D) corporation in relation to the fishing industry. These payments are supported by an appropriation in subsection 30A(3). Subsection 30A(2) contains a complex set of restrictions on payments by reference to their relationship to the GVP determined for the financial year by the Minister. In this context, the Minister determines 3 different GVP amounts (Commonwealth, State/Territory and total GVP) and all are relevant to determining the amount that may be paid under subsection 30A(1).

223. Generally the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of the year, because of the availability of ABARES data on which that determination relies. Accordingly, there is a risk of breaching section 83 of the Constitution where officials make payments during the year which are later found to exceed the cap after the GVP amount is determined.

224. Items 90 to 105 provide for the department to use a set of interim GVP figures to determine the limit of payments in a financial year. The interim figure is based on the previous year's determination. Where payments are made within the interim limit, they will be supported by the appropriation.

225. Once the final GVP amount is determined, the excess or shortfall will be paid or refunded, as appropriate. That is, if the amount paid to the body in accordance with subsection 30A(2) is greater than the amount that would have been paid if the final, not interim, GVP figures were used, the amount of the excess must be paid to the Commonwealth, and may be set-off against other matching amounts owed to the body by the Commonwealth.

226. If the amount paid to the body in accordance with s 30A(2) is less than the amount that would have been paid if the final, not interim, GVP figures were used, the amount of the shortfall must be paid to the body by the Commonwealth. The appropriation in subsection 30A(3) has been amended to support this additional payment also.

227. Subsection 32(1) of the PIERD Act provides that the total amounts paid to an R & D corporation in a financial year must not exceed 0.5% of the GVP determined by the Minister. Subsection 32(2) provides that the regulations may provide for the way in which the Minister determines the GVP amount.

228. Generally the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of the year. Accordingly, there is a risk of breaching section 83 of the Constitution if payments are made before the GVP amount is determined.

229. Items 106 and 107 would amend section 32 to minimise the risk of breaching section 83 of the Constitution:

•

permit the Minister to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

permit that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Minister for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Minister;

•

provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body; and

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under subsection 30(1)(b) against the amount that must be repaid to the Commonwealth.

230. Item 108 would amend section 33 to reflect amendments to sections 30A and 32.

231. Subsection 110(1) of the PIERD Act provides that the sum of the Commonwealth's matching payments paid to a R & D Council under paragraph 108(1)(b) must not exceed 0.5% of the GVP determined by the Minister. Subsection 110(2) provides that the regulations may provide for the way in which the Minister determines the GVP amount for these purposes.

232. Generally the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of the year. Accordingly, there is a risk of breaching section 83 of the Constitution if payments are made before the GVP amount is determined.

233. Items 109 and 110 would amend paragraph 108(1)(b) to reflect amendments proposed in items 111 to 113 to sections 110 and 112.

234. Items 111 to 113 would amend sections 110 and 112 to minimise the risk of breaching section 83 of the Constitution:

•

permit the Minister to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

•

permit that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Minister for the previous financial year;

•

state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Minister;

•

provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body; and

•

allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under section 108(1)(b) against the amount that must be repaid to the Commonwealth.

235. Items 103, 107 and 112 also clarify that determinations made by the Minister under sections 30, 32 or 110 of the PIERD Act are not legislative instruments. These amendments would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Items 103, 107 and 112 would also ensure that the PIERD Act explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

236. Items 114 to 116 include application provisions for amounts paid prior to and after the amendments taking effect.

Transitional

237. Items 117 to 119 provides transitional arrangements for determinations made prior to these amendments.

Amending the Same-Sex Relationships(Equal Treatment in Commonwealth Laws-Superannuation) Act 2008

238. The Same-Sex Relationships (Equal Treatment in Commonwealth Laws-Superannuation) Act 2008 (Same-Sex Relationships Act) amended a number of Commonwealth civilian and military superannuation schemes to make death benefits available to same-sex partners and children of same-sex relationships. The amendments commenced from 1 January 2009.

239. Section 4 of the Same-Sex Relationships Act provides for the Finance Minister to determine replacement payments for persons who would have been eligible for death payments if the amendments had commenced from 1 July 2008.

240. Item 120 of Schedule 1 inserts new sections 5, 6 and 7 into the Same-Sex Relationships Act to establish recoverable payments and recoverable death benefits. These provisions are to confirm that amounts paid out of the CRF in certain circumstances are validly paid under an appropriation. Payment of replacement payments are made from the CRF, which is appropriated accordingly.

241. ComSuper draws on a Finance special appropriation for this purpose. The changes proposed by item 120 are intended to deal with issues in relation to drawing on that appropriation.

242. The changes do not affect the entitlements of persons covered by section 4 of the Same-Sex Relationships Act or expand those persons eligible for a replacement payment (or the amount of such a payment). A recoverable payment or recoverable death payment is only taken to be a replacement payment for the purpose of the appropriation provision contained in subsection 4(7) and are debts due to the Commonwealth and recoverable.

Recoverable Payments

243. The new subsection 5(1) provides that an amount that is purportedly paid as a benefit under section 4 of the Same-Sex Act, but is not payable under that Act, may be paid by the Commonwealth (as a recoverable payment).

244. A recoverable payment is intended to cover situations where a replacement payment is made to a person in circumstances where the person would not be entitled to some or all of the payment and therefore would not come within the existing appropriation. For example, this may occur where there has been a miscalculation of the payment (which is later corrected), resulting in an overpayment to the recipient. New section 5 permits such a payment to be made, and provides for the payment to be a recoverable payment, validly appropriated under subsection 4(7).

245. The new subsection 5(2) provides that a recoverable payment that is paid under new subsection 5(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 5(2) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

246. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. The new section 5 does not prevent the Chief Executive from pursuing recovery methods outside those specified in new subsections 5(2) and (3) or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act. For example, new subsections 5(3) and (4) do not preclude a relevant recipient voluntarily arranging for, or agreeing to, repayment of the debt, that is the recoverable payment.

247. The new subsection 5(3) provides that a recoverable payment made under new subsection 5(1) may be used to reduce part or all of any benefits that are payable by the Commonwealth to the recipient under section 4. This may be done at the direction of the CEO of ComSuper. The new subsection 5(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

248. The new subsection 5(4) provides that a recoverable payment made under new subsection 5(1) is taken to be a replacement payment under section 4 for the purposes of subsection 4(7). This allows a recoverable payment to be appropriated as a replacement payment.

249. The new subsection 5(5) defines 'benefit' for the purposes of new section 5 as meaning a replacement payment under section 4.

Recoverable Death payments

250. The new subsection 6(1) provides that an amount that is deposited into an account or paid by way of cheque as a replacement payment under section 4 of the Act, but is paid after the death of the recipient, may be paid by the Commonwealth (as a recoverable death payment). This only applies when, on the last day on which changes could reasonably be made to the payment, the CEO of ComSuper does not know that the recipient has died, and where the payment would have been payable if the recipient had not died. New subsection 6(2) provides that the relevant amount is taken to have been paid to the deceased person's estate.

251. A recoverable death payment is intended to cover situations where a replacement payment may inadvertently be made to person who has died prior to payment. An example of when this may occur is where a person in receipt of replacement payments dies and ComSuper only becomes aware of the death sometime later. Another situation where this provision may apply is where ComSuper becomes aware that a person has died but this is after the time that instructions for the deposit have already been provided to the financial institution. New section 6 permits such a payment to be made, and provides for the payment to be a recoverable death payment, validly appropriated under subsection 4(7).

252. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. New section 6 does not prevent the Chief Executive from pursuing recovery methods outside that specified in the new subsection 6(3) or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act. For example, new subsection 6(3) does not preclude a voluntary arrangement or agreement being put in place to repay the debt (that is the recoverable death payment).

253. The new subsection 6(3) provides that a recoverable death payment that is paid under new subsection 6(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 6(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

254. The new subsection 6(4) provides that a recoverable death payment made under new subsection 6(1) is taken to be a replacement payment under section 4 for the purposes of subsection 4(7). This allows a recoverable death benefit to be appropriated as a replacement payment.

255. The new subsection 6(5) defines 'benefit' for the purposes of new section 6 as meaning a replacement payment under section 4.

Reports about Recoverable Payments and Recoverable Death Payments

256. The new section 7 deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

257. The new section 7 provides the reporting requirements for payments made under subsections 5(1) and 6(1). New subsection 7(1) provides that, during the applicable publication period, the CEO of ComSuper is to publish the number of recoverable payments and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period. The report is to published in a manner that the CEO of ComSuper considers appropriate. However, a report is not required when there have not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 7(2)).

258. The new subsections 7(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death payment unless before the report is prepared a ComSuper official is aware of such a payment being made under subsection 5(1) or subsection 6(1).

259. The new subsection 7(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in new subsections 7(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 7(6) and (7).

260. The new subsections 7(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

261. The new subsection 7(8) defines 'reporting period' for the purposes of new section 7 as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

262. The new subsection 7(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 7, as meaning four months, or a shorter period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period. Four months is to allow for the CEO of ComSuper to include the report in the annual report, if that is preferred. The report may also be published on ComSuper's or the Department's website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. This seeks to ensure that overpayments will be addressed, and minimised.

263. The new subsection 7(10) defines 'ComSuper official' for the purposes of new section 7 as meaning an official who is in or is part of ComSuper.

264. The new subsection 7(11) defines 'Finance Minister' for the purposes of new section 7 as meaning the Minister who administers the FMA Act.

Amending the Superannuation Act 1976

265. The Superannuation Act 1922 (1922 Act) provides the rules for the superannuation scheme that applied to Commonwealth civilian employees before 1 July 1976. When the Commonwealth Superannuation Scheme (CSS) was established on 1 July 1976 all contributors under the scheme established under the 1922 Act (1922 scheme) were transferred to the CSS. However, pensions continue to be payable to retired 1922 scheme members and their eligible dependants under the 1922 Act.

266. The Superannuation Act 1976 (1976 Act) provides the rules for the CSS, which took the place of the 1922 scheme in 1976. The CSS was closed to new members in 1990 when the Public Sector Superannuation Scheme (PSS) was introduced. There are contributory members in the CSS as well as persons who have left the scheme and are entitled to a preserved benefit that will become payable in the future. There are also persons in receipt of pensions under the Act, including retired contributory members and eligible spouses and orphans of deceased contributors and retired members.

267. Payment of benefits under the 1922 Scheme and the CSS (other than certain benefits as set out in the 1976 Act) are made from the CRF, which is appropriated accordingly. ComSuper draws on Finance special appropriations for this purpose.

268. The changes proposed by item 122 are intended to deal with issues in relation to drawing on these appropriations. The changes do not affect the benefit entitlements of 1922 Scheme or CSS members or expand those persons eligible for benefits (or the amount of those benefits) under the 1922 Scheme or the CSS. A recoverable payment or recoverable death payment is only taken to be a benefit for the purpose of the appropriation provisions contained in subsection 112(2) of the 1976 Act and section 134 of the 1922 Act and are debts due to the Commonwealth and recoverable.

Recovery of Amounts Paid from the Consolidated Revenue Fund

269. Subsections 156(4) and (5) currently allow the Commonwealth Superannuation Corporation (CSC), the scheme trustee, to recover incorrectly paid benefits or to use these amounts to offset other payments. Item 121 of Schedule 1 amends subsections 156(4) and (5) of the 1976 Act to limit CSC's recovery power to those amounts paid by CSC. The 1976 Act provides for certain benefits to be paid directly from the CSS Fund to a person rather than via the CRF. For example, an early release lump sum payable under section 79C is payable directly from the CSS Fund. This amendment ensures that amounts paid from CRF are not recoverable by CSC. However, the amounts will still be recoverable under section 47 of the FMA Act.

270. Item 122 inserts new sections 156B, 156C and 156D into the 1976 Act to establish recoverable payments and recoverable death payments. These provisions are to confirm that amounts paid out of the CRF in certain circumstances are validly paid under an appropriation.

Recoverable Payments

271. The new subsection 156B(1) provides that an amount that is purportedly paid as a benefit under the 1976 Act or the 1922 Act, but is not payable under those Acts, may be paid by the Commonwealth (as a recoverable payment).

272. A recoverable payment is intended to cover situations where a benefit payment is made to a person in circumstances where the person would not be entitled to some or all of the payment and therefore would not come within the existing appropriation. An example of when this may occur is in the case of a Family Law settlement, where the Family Court orders a split of a person's superannuation benefits under the 1976 Act. The splitting order may be received by ComSuper after the cut-off time for processing the next payday, resulting in an overpayment to the recipient. New section 156B permits such a payment to be made, and provides for the payment to be a recoverable payment, validly appropriated under subsection 112(2) of the 1976 Act or section 134 of the 1922 Act.

273. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. New subsections 156B(2) and (3) do not prevent the Chief Executive from pursuing recovery methods outside those specified in new subsections 156B(2) and (3) or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act. For example, new subsections 156B(2) and (3) do not preclude a relevant recipient voluntarily arranging for, or agreeing to, repayment of the debt, that is the recoverable payment.

274. The new subsection 156B(2) provides that a recoverable payment that is paid under new subsection 156B(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 156B(2) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

275. The new subsection 156B(3) provides that a recoverable payment made under new subsection 156B(1) may be used to reduce part or all of any benefits that are payable by the Commonwealth to the recipient under the 1922 Act or 1976 Act. This may be done at the direction of the CEO of ComSuper. The new subsection 156B(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

276. The new subsection 156B(4) provides that a recoverable payment made under new subsection 156B(1) that relates to a benefit (within the meaning of the 1976 Act) is taken to be a benefit for the purposes of subsection 112(2). This allows a recoverable payment to be appropriated as a benefit under the 1976 Act.

277. The new subsection 156B(5) provides that a recoverable payment made under new subsection 156B(1) that relates to a pension or other payment under the 1922 Act is taken to be a pension or payment under the 1922 Act. This allows a recoverable payment to be appropriated as a pension or other money payable under the 1922 Act.

278. The new subsection 156B(6) defines 'benefit' for the purposes of new section 156B other than subsections (4) as including pension or other money payable under the 1922 Act. This ensures that benefits paid under both the 1976 Act and the 1922 Act can be the subject of recoverable payments.

Recoverable Death Payments

279. The new subsection 156C(1) provides that an amount that is deposited into an account or paid by way of cheque as a benefit payment under the 1976 Act or 1922 Act, but is paid after the death of the recipient, may be paid by the Commonwealth (as a recoverable death payment). This only applies when, on the last day on which changes could reasonably be made to the payment, the CEO of ComSuper does not know that the recipient has died, and where the payment would have been payable if the recipient had not died. The new subsection 156C(2) provides that the relevant amount is taken to have been paid to the deceased person's estate.

280. A recoverable death payment is intended to cover situations where a benefit payment may inadvertently be made to a person who has died prior to payment. An example of when this may occur is where a person in receipt of pension payments dies and ComSuper only becomes aware of the death sometime later. Another situation where this provision may apply is where ComSuper becomes aware that a person has died but this is after the time that instructions for the deposit have already been provided to the financial institution. New section 156C of the 1976 Act permits such a payment to be made, and provides that the payment is a recoverable death payment, validly appropriated under subsection 112(2) of the 1976 Act or section 134 of the 1922 Act for the purposes of those Acts.

281. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. New subsection 156C(3) does not prevent the Chief Executive from pursuing recovery methods outside those specified in new subsections 156(3) or (4) or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act. For example, new subsection 156C(3) does not preclude a voluntary arrangement or agreement being put in place to repay the debt, that is recoverable death payment.

282. The new subsection 156C(3) provides that a recoverable death payment that is paid under new subsection 156C(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 156C(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

283. The new subsection 156C(4) provides that subsection 112(2) of the 1976 Act does not apply to a benefit under new subsection 156C(1) if it relates to a pension or other money payable under the 1922 Act. In conjunction with new subsection 156C(5), this ensures that a recoverable death payment made in respect of the 1922 Act is appropriated under the 1922 Act.

284. The new subsection 156C(5) provides that a recoverable death payment made under new subsection 156C(1) that relates to a pension or other payment under the 1922 Act is taken to be a pension or payment under the 1922 Act. This allows a recoverable death payment to be appropriated as a pension or other money payable under the 1922 Act.

285. The new subsection 156C(6) defines 'benefit' for the purposes of paragraph 156C (1)(e) as including pension or other money payable under the 1922 Act. This ensures that benefits paid under both the 1976 Act and the 1922 Act can be the subject of recoverable death payments.

Reports about Recoverable Payments and Recoverable Death Payments

286. The new section 156D deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

287. The new section 156D provides the reporting requirements for payments made under subsections 156B(1) and 156C(1). New subsection 156D(1) provides that, during the applicable publication period, the CEO of ComSuper is to publish a report on the number of recoverable payments and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period. The report is to be published in a manner that the CEO of ComSuper considers appropriate. However, a report is not required when there have not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 156D(2)).

288. The new subsections 156D(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death payment unless before the report is prepared a ComSuper official is aware of such a payment being made under subsection 156B(1) or subsection 156C(1).

289. The new subsection 156D(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in new subsections 156D(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 156D(6) and (7).

290. The New subsections 156D(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

291. The new subsection 156D(8) defines 'reporting period' for the purposes of new section 156D as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

292. The new subsection 156D(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 156D, as meaning four months, or a lesser period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period. Four months is to allow for the CEO of ComSuper to include the report in the annual report, if that is preferred. The report may also be published on ComSuper's or the Department's website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. This seeks to ensure that overpayments will be addressed, and minimised.

293. New subsection 156D(10) defines 'ComSuper official' for the purposes of new section 156D as meaning an official who is in or is part of ComSuper.

294. The new subsection 156D(11) defines 'Finance Minister' for the purposes of new section 7 as meaning the Minister who administers the FMA Act.

Amending the Superannuation Act 1990 (1990 Act)

295. The 1990 Act provides the rules for the PSS that became the scheme for new Commonwealth employees from 1 July 1990. The PSS was closed from 1 July 2005. There are contributory members of the PSS as well as persons who have left the scheme who have a preserved benefit that will become payable in the future. There are also persons in receipt of pension, including retired contributory members and eligible spouses and orphans of deceased contributors and retired members. Payments of benefits (other than certain benefits as set out in the PSS legislation) are made from the CRF which is appropriated accordingly. ComSuper draws on Finance special appropriations for this purpose.

296. The changes proposed by item 123 of Schedule 1 are intended to deal with issues in relation to drawing on these appropriations. The changes do not affect the benefit entitlements of PSS members or expand those persons eligible for benefits (or the amount of those benefits) under the PSS. A recoverable payment or recoverable death payment is only taken to be a benefit for the purpose of the appropriation provision contained in section 18 of the 1990 Act and are debts due to the Commonwealth and recoverable.

297. Item 123 of Schedule 1 inserts new sections 39A, 39B and 39C into the 1990 Act to establish recoverable payments and recoverable death payments. These provisions are to confirm that amounts paid out of the CRF that are paid in certain circumstances are validly made under an appropriation.

Recoverable Payments

298. The new subsection 39A(1) provides that an amount that is purportedly paid as a benefit under the PSS Rules, but is not payable under those Rules, may be paid by the Commonwealth (as a recoverable payment).

299. A recoverable payment is intended to cover situations where a benefit payment is made to a person in circumstances where the person would not be entitled to some or all of the payment and therefore would not come within the existing appropriation. An example of when this may happen is in the case of a Family Law settlement, where the Family Court orders a split of a person's superannuation benefits under the 1990 Act. The splitting order may be received by ComSuper after the cut-off time for processing the next payday, resulting in an overpayment to the recipient. New section 39A of the 1990 Act permits such a payment to be made, and provides for the payment to be a recoverable payment, validly appropriated under section 18.

300. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. The new section 39A does not prevent the Chief Executive from pursuing recovery methods outside those specified in new subsections 39A(2) and (3) or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act. For example, new subsections 39A(2) and (3) do not preclude a relevant recipient voluntarily arranging for, or agreeing, to repay the debt, that is a recoverable payment.

301. The new subsection 39A(2) provides that a recoverable payment that is paid under new subsection 39A(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 39A(2) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

302. The new subsection 39A(3) provides that a recoverable payment made under new subsection 39A(1) may be used to reduce part or all of any benefits that are payable by the Commonwealth to the recipient under the PSS Rules (provided the amount has not previously been recovered under section 47 of the FMA Act). This may be done at the direction of the CEO of ComSuper. The new subsection 39A(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

303. The new subsection 39A(4) provides that a recoverable payment made under new subsection 39A(1) is taken to be a payment by the Commonwealth under sections 16 or 16A for the purposes of section 18. This allows a recoverable payment to be appropriated under the 1990 Act.

Recoverable Death Payments

304. The new subsections 39B(1) provides that an amount that is deposited into an account or paid by way of cheque as a benefit payment under Act, but is paid after the death of the recipient, may be paid by the Commonwealth (as a recoverable death payment). This only occurs when, on the last day on which changes could reasonably be made to the payment, the CEO of ComSuper does not know that the recipient has died, and where the payment would have been payable if the recipient had not died. The new subsection 39B(2) provides that a relevant amount is taken to have been paid to the deceased person's estate.

305. A recoverable death payment is intended to cover situations where a benefit payment may inadvertently be made to a person who has died prior to payment. An example of when this may occur is where a person in receipt of pension payments dies and ComSuper only becomes aware of the death some time later. Another situation where this provision may apply is where ComSuper becomes aware that a person has died but this is after the time that instructions for the deposit have already been provided to the financial institution. The new section 39B permits such a payment to be made, and provides for the payment to be a recoverable death payment, validly appropriated under section 18.

306. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible. New section 39B(3) does not prevent the Chief Executive from pursuing recovery methods outside that specified in new subsection 39B(3) or choosing to not recover the debt under the circumstances allowable under section 47 of the FMA Act. For example, new subsection 39B(3) does not preclude a voluntary arrangement or agreement being put in place to repay the debt, that is the recoverable death payment.

307. The new subsection 39B(3) provides that a recoverable death benefit that is paid under new subsection 39B(1) is a debt due to the Commonwealth and may be recovered by the CEO of ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new subsection 39B(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

308. The new subsection 39B(4) provides that a recoverable death payment made under new subsection 39B(1) is taken to be a payment by the Commonwealth under sections 16 or 16A for the purposes of section 18. This allows a recoverable death payment to be appropriated as a benefit under the 1990 Act.

Reports about Recoverable Payments and Recoverable Death Payment

309. The new section 39C deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

310. The new section 39C provides the reporting requirements for payments made under subsections 39A(1) and 39B(1). The new subsection 39C(1) provides that, during the applicable publication period, the CEO of ComSuper is to publish a report on the number of recoverable payments and recoverable death payments made, when they know that they are made and the total amount of those payments, in respect of a reporting period. The report is to be published in a manner that the CEO of ComSuper considers appropriate. However, a report is not required when there have not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 39C(2)).

311. The new subsections 39C(3) and (4) provides that a report is not required in relation to a recoverable payment or recoverable death payment unless before the report is prepared a ComSuper official is aware of such a payment being made under subsection 39A(1) or subsection 39B(1).

312. The new subsection 39C(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in new subsections 39C(3) or (4), that it is to be reported in a later reporting period, as provided under subsections 39C(6) and (7).

313. The new subsections 39C(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

314. The new subsection 39C(8) defines 'reporting period' for the purposes of new section 39C as meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.

315. The new subsection 39C(9) defines the 'applicable publication period' for a reporting period, for the purposes of new section 39C, as meaning four months, or a shorter period of months if specified in a legislative instrument by the Minister, beginning immediately after the end of the reporting period. Four months is to allow for the CEO of ComSuper to include the report in the annual report, if that is preferred. The report may also be published on ComSuper's or the Department's website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. This seeks to ensure that overpayments will be addressed, and minimised.

316. The new subsection 39C(10) defines 'ComSuper official' for the purposes of new section 39C as meaning an official who is in or is part of ComSuper.

317. The new subsection 39C(11) defines 'Finance Minister' for the purposes of new section 39C as meaning the Minister who administers the FMA Act.

Amending the Taxation Administration Act 1953

318. Item 124 of Schedule 1 seeks to amend the Taxation Administration Act 1953 (TA Act 1953) to ensure that certain erroneous payments that the Commissioner makes in the course of administering the taxation laws are supported by the standing appropriation.

319. A fundamental principle reflected in the Australian Constitution is that payments from the Consolidated Revenue Fund are controlled by the Federal Parliament. Accordingly, section 83 of the Constitution provides that no money shall be drawn from the Treasury except under an appropriation made by law.

320. Payments made by the Commissioner of Taxation under taxation laws are therefore required to be supported by such an appropriation. The general standing appropriation for payments made under laws that are administered by the Commissioner is contained in section 16 of the TA Act 1953. The Australian Taxation Office (ATO) currently makes in excess of 14 million such payments under taxation laws administered by the Commissioner in each financial year.

321. These payments are typically made based on information provided to the ATO by the entities that are claiming an entitlement to them. Having regard to the volume of payments that are required to be managed, ATO computer systems are designed to process many of the payments required or permitted under taxation laws without human intervention. ATO officers may also intervene in appropriate circumstances, and make decisions under the law. It is inevitable, given the number of payments that are made under the law, the complexity of the law that the Commissioner of Taxation administers, and the arrangements (system and human) required to administer those payments, that some erroneous payments will be made from time to time.

322. The standing appropriations in taxation laws generally are limited to circumstances "[w]here the Commissioner is required or permitted to pay an amount to a person" by or under a taxation law. However, there can be doubt as to whether some erroneous payments made by the Commissioner of Taxation are supported by an appropriation. There are two particular concerns.

323. The first is where an ATO officer knows, or has reasonable grounds to know that the payment being made is more than what is required or permitted by law. In these cases, it is generally accepted that the erroneous amount is not supported by the standing appropriations in the taxation laws. This is so even in cases where the overall costs to the community of correcting the erroneous payment before it is paid would be more than the amount of the error.

324. The second is where the making of an erroneous payment is a genuine mistake made by the Commissioner in the course of his administration of the taxation laws. By their nature, it is not known at the time of making these payments that they are erroneous. In many of these cases, the erroneous amount is likely to be supported by the standing appropriations in the taxation laws. However, if the cause of the erroneous payment occurs outside the process of assessing or determining entitlement to the payment (for example, in the course of processing the payment after a view is reached under the law about how much an entity should be paid), it is again generally accepted that the erroneous amount is not supported by the standing appropriations in the taxation laws.

325. In both of these types of cases, the Commissioner currently has the power under the taxation law to recover any amount paid to an entity that is more than what is required or permitted by the law.

326. The requirement that payments are supported by an appropriation made by law is a fundamental Constitutional principle. As payments must be required or permitted by law, the Commissioner has a number of checks and arrangements in place to manage the appropriation risks associated with erroneous payments. The ATO also has a well-established control environment designed to minimise and monitor errors caused by genuine mistakes. The ATO currently will not make payments that are known to be erroneous, even if the overall costs associated with correcting the error are more than the quantum of the error. Nevertheless, there have remained a small number of payments that are made by the Commissioner on an annual basis that would not be supported by an appropriation. These payments are currently fully disclosed in the ATO's Annual Report.

327. From a financial reporting view, Government entities are guided by the financial reporting framework which includes the Financial Management and Accountability Act 1997 (FMA Act), the Finance Minister's Orders (FMOs) and relevant accounting standards. The FMOs state that entities should present all information necessary to provide a true and fair disclosure to the users of the financial information and go further to say that any disclosure relating to appropriations must be made regardless of materiality.

328. Typically, since this issue has been first recognised, less than 1,000 payments made by the Commissioner annually have been identified as representing a risk of non-compliance with section 83 of the Constitution. This is less than 0.01% of all cash payments made annually by the ATO. In the majority of cases, any amounts paid in excess of what is required or permitted by law are recovered.

329. The current basis of the standing appropriations in taxation laws - that is, payments required or permitted by law are appropriated - is fundamentally sound. However, there are two difficulties in this context. First, there is inconsistency in the treatment of erroneous payments made by way of genuine ATO mistakes under the standing appropriations in the taxation law. Secondly, the current scope of payments required or permitted by the law does not enable the Commissioner to administer the taxation law in an efficient and effective manner for the community in some cases where he has identified that a payment would be erroneous if it were to be paid.

330. To remedy this, the amendments being made to the taxation laws in this Bill will permit the Commissioner in a limited range of circumstances to make payments to an entity:

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Where the Commissioner knows or has reasonable grounds to know that the payment exceeds the amount that the law requires or would permit, but the costs to the community of taking the necessary steps to make the correct payment is greater than the amount of the excess (a recoverable advance).

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Where the Commissioner does not know at the time of making the payment that it exceeds the amount that the law otherwise requires or would permit (a recoverable payment).

331. The only alternative would be to impose additional controls beyond those that already exist within the ATO to manage payments that risk not being supported by an appropriation. This would have a disproportionally adverse impact on the processing of payments which are currently fully supported or are likely to be supported by an appropriation. In other words, the vast majority of payments that the ATO makes would also be held up even though they are likely to be supported by an appropriation. This would adversely impact the cash flow of businesses and individuals. It would also not guarantee that all payments would be supported by an appropriation.

332. Introducing a system of recoverable advances and recoverable payments, with a similar approach being adopted across agencies, has the effect that the payments fall within the existing standing appropriation, and can still be recovered using existing mechanisms or by discharging them against any future entitlement that might arise. Accordingly, a key object of these changes is to provide some flexibility for the Commissioner to administer taxation laws more efficiently, so as to achieve the best outcome for the community as a whole.

333. Item 124 inserts section 15B and 15C into the TA Act 1953 to enable the Commissioner to make recoverable advances or recoverable payments and to ensure that these payments are supported by the standing appropriation. For accountability and transparency, proposed section 15D requires that the Commissioner publishes details about the reliance on recoverable advances and recoverable payments.

Recoverable advances

334. Item 124 inserts section 15B into the TA Act 1953 to allow the Commissioner to make recoverable advances. This will ensure that payments to be made in the course of administering the taxation law in an efficient and effective manner will be supported by the standing appropriation in section 16 of the TA Act 1953.

335. New subsection 15B(1) permits the Commissioner to make a recoverable payment to a person (the recipient) on account of an amount to which the recipient may become entitled to under a taxation law.

336. Recoverable advances may in limited circumstances permit the Commissioner to make some payments that exceed the amount otherwise payable at law. That is, where it is likely that it would cost more to the Commonwealth, recipient or third party to ensure that the correct payment is made. It is important to note that it may not be economical or practical to analyse payments on an individual basis such as if an error impacts a batch run of payments. In this case the Commissioner should be able to consider the consequences of making (or not making) the payments on a collective basis.

Example 1.1 - Recoverable advance made in conjunction with other payments

In 2009, prior to the completion of a batch of over 228,000 co-contribution payments (valued at approximately $43 million ), the ATO discovered an error in the calculation of interest relating to 1,165 of the payments. The error was valued at approximately $17,000. Reversing the transactions and recalculating the interest would have adversely impacted on superannuation funds by delaying all of the payments, and would have also resulted in additional interest being payable by the Commonwealth to compensate for the further delays .

Even though it would be more efficient and effective to allow the payments to proceed, without the recoverable advance this would represent a risk of non-compliance with section 83 of the Constitution .

The proposed changes would permit the Commissioner to allow the payments to proceed, with the excess amount being treated as a recoverable advance. The recoverable advances would be supported by the standing appropriation in section 16 and are therefore validly appropriated .

Example 1.2 - Recoverable advance

From time to time, as part of compliance activity, the ATO identifies that a taxpayer has made an error on a Business Activity Statement (BAS) that impacts on a refund that the taxpayer is claiming through the BAS. Where that error is small (for example, less than $250 ), it would be more efficient and effective to request the taxpayer to make an adjustment reflecting that error in their following BAS rather than to process an assessment to reflect the correct amount. The recoverable advance provisions would in these circumstances ensure that the payment made is supported by the standing appropriation in section 16. The advance would be recoverable under the new provisions .

337. An advance may be recoverable from the recipient as tax-related liability or it may discharge a Commonwealth liability.

338. A recoverable advance is a debt due to the Commonwealth by the recipient and is payable to the Commissioner. Whether or not the recipient has become entitled to an amount under a taxation law, subsection 15B(4) provides the Commissioner with a statutory cause of action which allows him to sue and recover recoverable advances from the recipient as tax-related liabilities.

Advance may discharge Commonwealth liability

339. If an advance is made to a person (the recipient) and an amount is payable to the recipient by the Commonwealth under a taxation law, the Commissioner may, by written notice given to the recipient, determine that the making of the advance is taken to have offset whole or part of the Commonwealth liability. The Commissioner may only make a determination to discharge a Commonwealth liability if the advance has not been fully recovered under another recovery provision.

Example 1.3 - discharge of Commonwealth liability

Kath is the recipient of a $100 recoverable advance in the 2012-13 year as a result of an identified error in an interest on overpayment calculation. She lodges her income tax return in July 2013 for the 2012-13 year which results in a refund of $500. The Commissioner makes a determination under subsection 15B(5) that the advance will be taken to have offset part of the Commonwealth liability. Accordingly, Kath receives a refund of $400 which has been reduced by the recoverable advance she received of $100 .

340. An advance or part of an advance must not be specified in a determination if it has already been specified in a previous determination.

341. An amount that is specified in a determination cannot be recovered under another recovery provision. Except for this rule, a determination does not limit the operation of Part IIB of the TA Act 1953 (about running balance accounts, application of payments and credits and related matters).

342. For the avoidance of doubt, for the purposes of section 47 of the FMA Act, a determination to discharge Commonwealth liability is taken to be a method of debt recovery.

Recoverable payments

343. Item 124 inserts section 15C into the TA Act 1953 to permit the Commissioner to pay an amount (the relevant amount) to a person (the recipient) if, at the time of making the payment, the recipient is purportedly entitled to the relevant amount under a taxation law. These payments will have dual character as a recoverable payment and an administrative overpayment under section 8AAZN of the TA Act 1953.

344. The effect of section 15C is that recoverable payments will be supported by the standing appropriation in section 16 of the TA Act 1953. However if at the time of payment an amount is known to exceed the amount otherwise payable at law, the excess will not be supported by the standing appropriation except if it satisfies section 15(B).

345. A recoverable payment is a debt due to the Commonwealth by the recipient and is payable to the Commissioner.

346. A recoverable payment may be recovered by deduction from an amount that is payable to the recipient by the Commonwealth under a taxation law.

347. If the relevant amount is recovered under a designated recovery provision the relevant amount cannot be recovered by deduction from a Commonwealth liability. If the relevant amount is recovered by deduction from a Commonwealth liability it cannot be recovered under a designated recovery provision.

348. The designated recovery provisions include section 8AAZN of the TA Act 1953 (about administrative overpayments); section 70 of the Superannuation Guarantee (Administration) Act 1992 ; section 24 of the Superannuation (Government Co-Contribution for Low Income Earners) Act 2003 ; section 50 of the First Home Savers Account Act 2008 ; and a similar provision of a taxation law.

349. Currently, the Commissioner is duty-bound by law to ensure that money mistakenly paid out of consolidated revenue, without authority, is recovered in the most effective and timely manner. In doing so, the Commissioner will use the appropriate option for recovery. Because of the dual character of a recoverable payment the Commissioner may seek to recover the amount as an administrative overpayment arising under section 8AAZN of the TA Act 1953, or another designated recovery provision, as appropriate. Under the designated recovery provisions, the Commissioner is able to commence proceedings for recovery of administrative overpayments as soon as the mistake is detected.

350. In applying a designated recovery provision, the recoverable payment should be disregarded in determining whether a person is entitled to an amount or whether the amount is payable. That is, the recoverable payment is permitted to be made but there is no entitlement of the recipient to that payment.

Reports about recoverable advances

351. The Commissioner must publish a report that sets out the number of recoverable advances and recoverable payments (if any) and the total amount of those payments. The report must be published within four months after the end of the financial year unless the Minister specifies a shorter period of months. Additional disclosure will be required if there are any instances where the authority is not used appropriately (the action taken was not clearly more effective and efficient). Any such instances will be reported to the Assistant Treasurer and the Finance Minister through the Certificate of Compliance as breaches of section 44 of the FMA Act. The reporting period is a financial year or a shorter recurring period may be specified in a legislative instrument made by the Minister.

Amending the Wool Services Privatisations Act 2000

352. The Wool Services Privatisation Act 2000 provides of the Commonwealth to make certain payments, called 'matching payments', to industry bodies. Subsection 31(7) creates an annual limit on the appropriation in s 31(4) of the lesser of 0.5% of the GVP determined by the Minister, and 50% of the eligible R & D spend of the body. Subsection 31(8) provides that the regulations may provide for the way in which the Minister determines the GVP amount. The relevant regulations require the Minister to determine the GVP amount based on a ABARES data.

353. In most cases, the Minister is unable to make a determination which applies during a financial year until late in that year or after the end of the year, because the required ABARES data may not be available until that time. Accordingly there is a risk of breaching section 83 of the Constitution if payments are made during the year which are later found to exceed the GVP amount once it is determined.

354. Items 125 to 131 would amend section 31 to minimise the risk of breaching section 83 of the Constitution:

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permit the Minister to make a determination of the GVP amount with respect to a financial year (without requiring that determination to be made within the applicable financial year);

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provide that if a determination has not been made within 4 months after the end of the financial year, and a determination was made for the previous financial year, the amount is taken to be the amount determined by the Minister for the previous financial year;

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state that the total matching payments retained by the body in respect of a financial year must not exceed 0.5% of the amount of GVP determined by the Minister;

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provide that if payments are made in a financial year which exceed 0.5% of the amount of GVP determined, the excess is a debt to the Commonwealth and must be repaid by the body;

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allow the Commonwealth to set-off an amount of a matching payment to which a body is entitled under section 31 against the amount that must be repaid to the Commonwealth; and

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include application provisions for amounts paid prior to and after the amendments take effect and transitional arrangements for determinations made prior to these amendments.

355. Item 126 also states, to avoid doubt, that a determination made by the Minister under section 31 of the Wool Services Privatisation Act 2000 is not a legislative instrument. This amendment would not change the way in which determinations are currently treated in practice. No determinations have been registered on FRLI, which was established under the Legislative Instruments Act that commenced on 1 January 2005. The Office of Legislative Drafting and Publishing, which is responsible for FRLI, does not view these determinations as being legislative in character, nor, as a consequence, legislative instruments. Item 126 would ensure that the Wool Services Privatisation Act 2000 explicitly describes determinations as not being legislative instruments, which removes the need for a legislative character test.

Application

356. Item 132 provides that despite the amendments, section 31 of the Act continues to apply in relation to matching payments during the financial year in which the amendments commence, or an earlier financial year.

357. Item 132 also provides that subsection 31(7) of the Act, as amended, would apply to matching payments in the financial year next following the financial year in which the amendments commence, or a later financial year.

Transitional

358. Item 133 provides that new subsection 31(7A) would have effect as if a determination made under the repealed subsection 31(7) of the Act had been made under new subsection 31(7).