Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon. Josh Frydenberg MP)
Chapter 22 Appropriation (Coronavirus Economic Response Package) Bill (No. 2) 2019-2020
Outline of chapter
22.1 The main purpose of the Appropriation Bill No. 2 is to propose appropriations from the Consolidated Revenue Fund for services that are not the ordinary annual services of the Government in addition to amounts appropriated through the Appropriation Act (No. 2) 2019-2020 and the Supply Act (No. 2) 2019-2020.
Context of amendments
22.2 Appropriations for the ordinary annual services of the Government must be contained in a separate Bill from other appropriations in accordance with sections 53 and 54 of the Australian Constitution.
22.3 Consequently, the Appropriation Bill No. 2 appropriates amounts that are not for the ordinary annual services of the Government. Annual appropriations that are for the ordinary annual services of the Government are proposed in the Appropriation Bill No. 1.
Summary of new law
22.4 The Appropriation Bill No. 2 provides for the appropriation of specified amounts for expenditure by Australian Government entities, primarily being non-corporate Commonwealth entities (non-corporate entities) under the PGPA Act.
Detailed explanation of new law
22.5 Portfolio statements are defined in the Appropriation Bill No. 2 to mean the Portfolio Budget Statements 2019-20 and the Portfolio Additional Estimates Statements tabled in relation to the Bill for the Appropriation Act (No. 3) 2019-2020 and the Bill for the Appropriation Act (No. 4) 2019-2020. [Clause 3 of the Appropriation Bill No. 2]
22.6 Portfolio statements are relevant documents under paragraph 15AB(2)(g) of the Acts Interpretation Act which provides for material to be considered in the interpretation of an Act if the material is declared by the Act to be relevant material for the purposes of section 15AB of the Acts Interpretation Act. [Clause 4 of the Appropriation Bill No. 2]
22.7 The purpose of the portfolio statements is to provide information on the proposed allocation of resources to Government outcomes by Commonwealth entities within each portfolio.
Notional transactions between entities that are part of the Commonwealth
22.8 Notional transactions between non-corporate entities are to be treated as if they are real transactions. [Clause 5 of the Appropriation Bill No. 2]
22.9 Notional transactions, therefore, require the debiting of an appropriation made by Parliament. The payments of the amounts in Schedule 1 from one non-corporate entity to another do not require, in a constitutional sense, an appropriation, because both non-corporate entities operate within the Consolidated Revenue Fund. For reasons of financial discipline and transparency, the practice has arisen for these payments between non-corporate entities to be treated as though they required an appropriation, and to debit an appropriation when such notional payments are made. This is consistent with section 76 of the PGPA Act.
22.10 When a non-corporate entity makes a payment, whether to another non-corporate entity or another part of the same non-corporate entity (such as a different 'business unit' within the entity), it is to be treated as a 'real' payment. This means that the appropriation made by Parliament is extinguished by the amount of the notional payment, even though no payment is actually made from the Consolidated Revenue Fund. Similarly, a notional receipt in such a situation is to be treated by the receiving non-corporate entity (where relevant) as if it were a real receipt. This does not mean every internal transfer of public money involves a notional payment and receipt.
22.11 The total of the appropriations in Schedule 1 of the Appropriations Bill No. 2 is $744,197,000. The amounts in Schedule 1 may be increased by a determination under clause 12 (Advance to the Finance Minister). [Clause 6 of the Appropriation Bill No. 2]
22.12 The amounts in Schedule 1 of the Appropriations Bill No. 2 may be adjusted further in accordance with sections 74 to 75 of the PGPA Act. Specifically:
- Section 74 of the PGPA Act, when read with Rule 27 of the Public Governance, Performance and Accountability Rule 2014 , permits non-corporate entities to retain certain types of receipts by adding them to their most recent departmental item or other type of appropriation in an Appropriation Act when prescribed.
- Appropriations may be adjusted by amounts recoverable by a non-corporate entity from the ATO for GST, in accordance with section 74A of the PGPA Act. The amounts specified in Schedule 1 exclude recoverable GST. The appropriations shown represent the net amount that Parliament is asked to allocate to particular purposes.
- Section 74A of the PGPA Act has the effect of increasing an appropriation by the amount of the GST qualifying amount arising from payments in respect of the appropriation. As a result, there is sufficient appropriation for payments under an appropriation item, provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial amount shown against the item in Schedule 1. Section 74A of the PGPA Act also applies to notional transactions between and within non-corporate entities.
- Items may be adjusted to take into account the transfer of functions between non-corporate entities, in accordance with section 75 of the PGPA Act. It is possible that adjustments under section 75 may result in new items and/or outcomes being created in an Appropriation Act.
22.13 Additionally, the Finance Minister manages the payment from items in the Appropriation Bill No. 2 by non-corporate entities using a discretionary power under section 51 of the PGPA Act. Section 51 allows the Finance Minister to manage the timing and the amount of appropriated money to be made available to a Commonwealth entity (an entity as defined in section 10 of the PGPA Act, except as required by law.
State, Australian Capital Territory, Northern Territory and local government items
22.14 Schedule 1 of the Appropriation Bill No. 2 administered appropriations for financial assistance to the States, Australian Capital Territory, Northern Territory and local governments. State, Australian Capital Territory, Northern Territory and local government items are appropriated separately for each outcome, making it clear what the funding is intended to achieve. The amount specified in Schedule 1 of the Appropriation Bill No. 2 for an outcome may be applied by a non-corporate entity for the purpose of making payments to any of the States, Australian Capital Territory, Northern Territory or local government authorities for the purpose of achieving that outcome. [Clause 7 of the Appropriation Bill No. 2]
22.15 Additional information on payments to the States, Territories and local government can be found in the portfolio statements of the relevant entities. These documents can be found at www.budget.gov.au .
22.16 The appropriation of new administered outcome amounts are to be applied by a non-corporate entity for the purpose of contributing to the outcome for a non-corporate entity. An administered item is defined in to be an amount set out in Schedule 1 of the Appropriation Bill No. 2 opposite an outcome for a non-corporate entity under the heading 'New Administered Outcomes'. As with administered items in the Appropriation Bill No. 1, New Administered Outcomes are appropriated separately for outcomes, making it clear what the funding is intended to achieve. [Clause 3 and Subclause 8(1) of the Appropriation Bill No. 2]
22.17 Where the portfolio statements indicate a particular activity is in respect of a particular outcome, then expenditure on that activity is taken to be expenditure for the purpose of contributing to achieving that outcome. [Subclause 8(1) of the Appropriation Bill No. 2]
22.18 New Administered Outcomes are those administered by a non-corporate entity on behalf of the Government (e.g. certain grants, benefits and transfer payments). These payments are usually made pursuant to eligibility rules and conditions established by the Government or the Parliament. Specifically, administered items are tied to outcomes (departmental items are not).
22.19 New Administered Outcomes are typically proposed when:
- a non-corporate entity's outcomes are changed to reflect new program objectives, strategies and/or activities;
- a non-corporate entity seeks administered operating appropriations for the first time (including existing non-corporate entities that have received departmental operating appropriations in the past); and/or
- annual administered operating appropriations are proposed for the first time for programs previously funded by special appropriations.
Administered assets and liabilities items
22.20 Schedule 1 of the Appropriation Bill No. 2 sets out the amounts to acquire administered assets, enhance existing administered assets and/or discharge administered liabilities relating to activities administered by non-corporate entities on behalf of the Government. Administered assets and liabilities appropriations are provided for functions managed by a non-corporate entity on behalf of the Government. Administered assets and liabilities items can be applied for any outcomes of the non-corporate entity in:
- Schedule 1 of the Appropriation Bill No. 2;
- Schedule 1 of the Appropriation Bill No. 1;
- Schedule 1 of the Appropriation Act (No. 1) 2019-2020;
- Schedule 1 of the Supply Act (No. 1) 2019-2020;
- Schedule 1 of the Appropriation Act (No. 2) 2019-2020;
- Schedule 2 of the Supply Act (No. 2) 2019-2020;
- Schedule 1 of the Appropriation Act (No. 3) 2019-2020; or
- Schedule 2 of the Appropriation Act (No. 4) 2019-2020.
[Clause 9 of the Appropriation Bill No. 2]
Other departmental items
22.21 The new law appropriates departmental non-operating appropriations in the form of equity injections, over which the non-corporate entity also exercises control. This ensures that the amount specified in other departmental items for a non-corporate entity may be applied for the departmental expenditure of the entity. For example, 'equity injections' can be provided to non-corporate entities to enable investment in assets to facilitate departmental activities and for Designated Collecting Institutions to purchase heritage and cultural assets. [Clause 10 of the Appropriation Bill No. 2]
22.22 Other departmental items are not expressed in terms of a particular financial year. This is because, for example, equity injection appropriations provide funding to meet the cost expected to be incurred in the Budget year to acquire a new asset but, for a number of reasons, some part of the appropriation may not be required until a later financial year.
22.23 Other departmental items are available until they are spent, or the Act through which they were appropriated is repealed.
22.24 Annual Appropriation Acts have a lifespan of up to three years after which they automatically repeal.
Corporate entity items
22.25 The new law provides for appropriations of money for corporate entities to be paid from the Consolidated Revenue Fund by the relevant Department. Payments for corporate entities must be used for the purposes of those entities. [Clause 11 of the Appropriations Bill No. 2]
22.26 A corporate entity is defined to be a corporate Commonwealth entity or a Commonwealth company within the meaning of the PGPA Act. Many corporate entities receive funding from appropriations. However, these entities are legally separate from the Commonwealth, and as a result, do not debit appropriations or make payments from the Consolidated Revenue Fund. [Clause 3 of the Appropriations Bill No. 2]
22.27 Corporate entity payments are initiated by requests to the relevant portfolio Departments from the corporate entity. The Finance Minister manages appropriations for corporate entities through a discretionary power to control the timing and amount made available under section 51 of the PGPA Act, except as required by law. Corporate entities hold the amounts paid to them on their own account.
22.28 If a corporate entity is subject to another Act that requires amounts appropriated by Parliament for the purposes of that entity to be paid to the entity, then the full amount of the corporate entity payment must be paid to the entity. [Subclause 11(2) of the Appropriations Bill No. 2]
22.29 This is not intended to qualify any obligations in other legislation regulating a corporate entity, where that other legislation requires the Commonwealth to pay the full amount appropriated for the purposes of the entity.
22.30 In addition to the annual appropriations, some corporate entities may also receive public money from related entities such as a portfolio Department and from special appropriations managed by those Departments. Many corporate entities also receive funds from external sources.
Advance to the Finance Minister
22.31 The Finance Minister may allocate additional amounts for items when satisfied that there is an urgent need for expenditure and the existing appropriation in the current year is not provided for or is insufficiently provided for. The allocated amount is referred to as the Advance to the Finance Minister. The total amount that can be determined under the Advance to the Finance Minister provision is $1,200 million. [Clause 12 of the Appropriation Bill No. 2]
22.32 The maximum total of amounts that can be determined under the Advance to the Finance Minister provision is $1,200 million [Subclause 12(3) of the Appropriation Bill No. 2]
22.33 This provides the Finance Minister with capacity to allocate additional amounts for Coronavirus expenditures that were not contemplated when preparing the Appropriation Bill No. 2.
22.34 The quantum of the Advance to the Finance Minister provision has been determined by extrapolating the Coronavirus related Advances to the Finance Minister approved since the beginning of March 2020 through until the end of the 2019-20 financial year. The quantum of the Advance to the Finance Minister also takes into consideration the evolving nature of the Coronavirus outbreak, the associated uncertainty around what may be required as part of the Government's response and the likely need for the Government to act quickly. While this new Advance to the Finance Minister provision is significant, it will be limited to Coronavirus response requirements only (including responses to health and economic impacts).
22.35 The proposed Advance to the Finance Minister is in addition to the ordinary Advance to the Finance Minister provided through the Annual Appropriations Acts of $295 million for Appropriation Bill No. 1 and $380 million for Appropriation Bill No. 2. These ordinary Advance to Finance Minister provisions are intended to meet urgent expenditure associated with the ongoing operations of Government which will continue throughout the Coronavirus response.
22.36 The Finance Minister will only consider issuing an amount if satisfied there is an urgent need for expenditure that is not provided for, or is insufficiently provided for, in Schedule 1 of the Appropriation Bill No. 2, because of an omission or understatement, or because of unforeseen circumstances. Generally, options under sections 71 to 75 of the PGPA Act must be considered, where applicable, before the Finance Minister will make a determination. [Subclause 12(1) of the Appropriation Bill No. 2]
22.37 The Finance Minister may make a determination to allocate an amount from the Advance to Finance Minister to an item in Schedule 1, to a new item not already in Schedule 1, or to a new outcome. [Subclause 12(2) of the Appropriation Bill No. 2]
22.38 Such a determination is a legislative instrument, which must be tabled in Parliament. [Subclause 12(4) of the Appropriation Bill No. 2]
22.39 The determinations are not subject disallowance under section 42 of the Legislation Act 2003 as this would frustrate the purpose of the provision, which is to provide additional appropriation for urgent expenditure. Further, an Advance to the Finance Minister does not sunset. Legislative instruments enabled by the Appropriations Bill No. 2, once enacted, automatically repeal when the Act itself repeals.
Crediting amounts to special accounts
22.40 Special accounts may be established under the PGPA Act by a determination of the Finance Minister (section 78) that is disallowable by Parliament or by another Act (sections 79 and 80). The determination or Act that establishes the special account will specify the purposes of the special account.
22.41 If the purpose of an item in Schedule 1 of the Appropriation Bill No. 2 is also the purpose of a special account (regardless of whether the item expressly refers to the special account), then amounts may be debited against the appropriation for that item and credited to the special account. [Clause 13 of the Appropriation Bill No. 2]
Appropriation of the Consolidated Revenue Fund
22.42 The Consolidated Revenue Fund is appropriated as necessary for the purposes of the Appropriations Bill No. 2. [Clause 14 of the Appropriation Bill No. 2]
22.43 Significantly, this means that there is an appropriation in law when the Act commences. That is, the appropriations are not made or brought into existence just before they are paid, but when the Act commences. This indicates that the amounts appropriated may be affected by the PGPA Act, in particular sections 74 to 75, after the Act commences.
Schedule 1 - Services for which money is appropriated
22.44 Schedule 1 of the Appropriation Bill No. 2 specifies the appropriations proposed for the other than ordinary annual services of the Government. It contains a summary table which lists the total amounts for each portfolio. A separate summary table is included for each portfolio, with other tables detailing the appropriations for each Commonwealth entity. [Schedule 1 of the Appropriation Bill No. 2]
22.45 Schedule 1 of the Appropriation Bill No. 2 includes, for information purposes, the amount appropriated in the Appropriation Act (No. 2) 2019-2020 and the Supply Act (No. 2) 2019-2020 , which is printed in italics and labelled as 'Budget Appropriation (italic figures) - 2019-2020', and a figure for the previous financial year labelled 'Actual Available Appropriation (light figures) - 2018-2019'. The Budget Appropriation and Actual Available Appropriation are estimates that do not affect the amount available at law. These figures provide a comparison with the proposed appropriations
22.46 The Budget Appropriation and Actual Available Appropriation are calculated for each item by adding the amounts appropriated in the relevant financial year's annual Appropriation Acts, plus any Advances to the Finance Minister, and any adjustments under sections 51 and 75 of the PGPA Act. In some instances, the figures may also be affected by limits applied administratively by the Department of Finance. In addition, where an entity's outcome structure has changed since the last Appropriation Act, only ongoing outcomes may be shown in the Appropriation Bill No. 2. For these reasons, the Actual Available Appropriation figures may be different from the sum of amounts provided in earlier Appropriation Acts.
Decisions included in the Appropriation Bill No. 2
22.47 The Appropriation Bill No. 2 proposes appropriations totalling $744.2 million for the following entities:
- the Department of Health ($740.0 million) with $700.0 million for purchasing personal protective equipment for the National Medical Stockpile, including surgical and P2 masks, surgical gowns, gloves, and goggles. A further $40.0 million will be provided to purchase antibiotics and antivirals for the National Medical Stockpile;
- the Department of Education, Skills and Employment ($3.8 million) to facilitate support for small businesses to retain their apprentices and trainees by providing a wage subsidy of 50 per cent of the apprentices' or trainees' wage, capped at $7,000 per quarter per eligible apprentice, for up to nine months from 1 January to 30 September 2020. This measure will support up to 70,000 businesses, employing around 117,000 apprentices and trainees; and
- the Department of Veterans' Affairs ($0.4 million) to facilitate stimulus payments to eligible Department of Veterans' Affairs clients.
Application and transitional rules
22.48 The Appropriation Bill No. 2 commences as an Act on the day the Bill receives Royal Assent. [Clause 2 of the Appropriation Bill No. 2]
22.49 The Appropriation Bill No. 2, once enacted, will repeal at the start of 1 July 2022. [Clause 15 of the Appropriation Bill No. 2]