Explanatory Memorandum
(Circulated by authority of the Minister for Justice, the Hon Michael Keenan MP)Schedule 1 - Amendments
General outline
The purpose of Schedule 1 is to make amendments to the Crimes Act relating to the Commonwealth penalty unit.
These amendments increase the Commonwealth penalty unit amount from $170 to $180, and provide a mechanism for the amount to be indexed every three years according to the Consumer Price Index (CPI).
Penalty units are used to describe the amount payable for monetary penalties imposed for criminal offences in Commonwealth legislation and Territory ordinances. Commonwealth penalties are generally expressed in terms of penalty units rather than specific values to assist with the adjustment of penalties across the Commonwealth statute book.
The penalty unit mechanism allows the maximum monetary penalty for all offences under Commonwealth law, or Territory ordinances, to be automatically adjusted with a single amendment to section 4AA of the Crimes Act. This removes the need for multiple legislative amendments and ensures that monetary penalties in Commonwealth legislation and Territory ordinances remain comparable.
Maintaining the value of the penalty unit over time is necessary to ensure it reflects changes in real terms. This ensures that financial penalties for Commonwealth offences keep pace with inflation and continue to remain effective in deterring unlawful behaviour.
When the penalty unit was introduced in 1992, its value was set at $100. This value was adjusted to $110 in 1997 and to $170 in 2012. Both increases were made in line with changes in the CPI.
The 2015-16 Budget includes a measure to increase the value of the penalty unit from $170 to $180, with effect from 31 July 2015. This increase is broadly consistent with inflation since the value was last adjusted in December 2012. The Budget measure also provided that the Government will introduce ongoing automatic indexation of the penalty unit value based on the CPI. Indexation will occur on 1 July every three years, with the first indexation occurring on 1 July 2018.
Crimes Act 1914
Item 1 - subsection 3(1) (definition of quarter)
Subsection 3(1) of the Crimes Act provides definitions for key terms in the Act. This subsection currently includes a definition of 'quarter', which no longer serves a purpose under the Act.
To accommodate the indexation of the penalty unit value, this item repeals the current definition of 'quarter' in subsection 3(1) and substitutes a new definition to reflect the quarter periods used for the calculation of the CPI (that is, the 3 month periods ending on 31 March, 30 June, 30 September and 31 December).
Item 2 - Subsection 4AA(1) (definition of penalty unit)
Subsection 4AA(1) of the Crimes Act specifies the monetary value of a penalty unit at any particular time. Currently, subsection 4AA(1) defines 'penalty unit' as the amount of $170. To reflect the increase in the CPI since the penalty unit value was last increased in December 2012, this item provides that the new definition of 'penalty unit' is the amount of $180. The new definition also specifies that this value is subject to indexation, in line with the formula in the following subsections.
Item 3 - Subsection 4AA(1A)
This item repeals existing subsection 4AA(1A) which contains the current review mechanism for the penalty unit value. This was inserted in 2012 when the value was last adjusted. This item currently requires the Attorney-General to cause a review of the value of the penalty unit every three years after the date it was last reviewed. This review mechanism is no longer required with the introduction of automatic indexation of the penalty unit value based on inflation.
The item repeals the existing subsection and substitutes new subsection 4AA(1A) which creates a requirement for the Minister to publish the new penalty unit amount by notifiable instrument after it is indexed. A notifiable instrument is a category of legislative instrument set out in section 11 of the Legislative Instruments Act 2013 (as inserted by the Acts and Instruments (Framework Reform) Act 2015 which commences in March 2016). This instrument will be registered on the Federal Register of Legislation. This requirement will ensure that the adjusted penalty unit amount is clearly specified for members of the public, enforcing agencies and courts.
Item 4 - At the end of section 4AA
This item adds new subsections to section 4AA to provide for the automatic indexation of the penalty unit every three years. New subsections 4AA(3) and (4) provide the technical detail for how indexation will occur.
Subsection 4AA(3) provides that an 'indexation day' will be 1 July 2018 and every third 1 July following that date (that is, 1 July 2021, 1 July 2024, 1 July 2027 etc). These indexation days will be when the penalty unit value is adjusted in line with the change in the CPI.
On every indexation day, the penalty unit value is replaced by the amount calculated by the formula in subsection 4AA(3). This involves multiplying the penalty unit value immediately before the indexation day by the 'indexation factor' as defined in new subsection 4AA(4).
New subsection 4AA(4) provides that the 'indexation factor' is to be calculated by dividing the 'index number' for the reference quarter by the 'index number' for the base quarter. This means that the penalty unit value will be adjusted based on the change in inflation since the last adjustment.
The subsection also specifies that the 'index number' for a quarter is the All Groups Consumer Price Index number, as published by the Australian Statistician. The CPI is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services. The Australian Bureau of Statistics is responsible for calculating and publishing the CPI on a quarterly basis.
New subsection 4AA(5) provides that the indexation factor is to be calculated to three (3) decimal places (rounding up if the fourth decimal place is five (5) or more).
New subsection 4AA(6) provides that the adjusted penalty unit value will be rounded to the nearest whole dollar amount (rounding 50 cents upwards).
New subsection 4AA(7) provides that calculations of adjusted penalty unit amounts are to be made using index numbers published in terms of the most recently published index reference period for the CPI. It also requires that index numbers published in substitution for previously published index numbers are disregarded (except where the substituted numbers are published to take account of changes in the reference base).
New subsection 4AA(8) provides that if the penalty unit value is increased following indexation, the increased amount only applies to offences committed on or after the indexation day.
Item 5 - Application of item 2
This item sets out the application of amendments made by Item 2 of Schedule 1. As noted above, this item amends the existing definition of the 'penalty unit' to the amount of $180.
This item makes it clear that this amendment applies only in relation to an offence committed on or after the commencement of the item. This will ensure that the increased value of the penalty unit will apply only to offences committed after the Schedule commences on 31 July 2015.