Bills Digest no. 36 2008–09
Dairy Adjustment Levy Termination Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Date introduced:
24 September 2008
House:
House of Representatives
Portfolio:
Agriculture, Fisheries and Forestry
Commencement:
Sections 1-3, Schedule 1, items 1, 2 and 4 of Schedule
3 and Schedule 4 on the day after the Royal Assent; Schedule 2 on the
day after the day declared for the purposes of subclause 94(1) of Schedule
2 to the Dairy Produce Act 1986; and Item 3 of Schedule 3 immediately
after the day specified for the purposes of subclause 55(2) of Schedule
2 of the Dairy Produce Act 1986.
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
The purpose of this Bill is to amend
Schedule 2 of the Dairy Produce Act 1986 to terminate both the
Dairy Adjustment Authority and the Dairy Adjustment Levy, and to wind
up the Dairy Structural Adjustment Fund.
The
issue of deregulation of the dairy industry was the subject of debate and
inquiry over several years, culminating in the inquiry of the Senate Rural
and Regional Affairs and Transport References Committee in 1999 (the Senate
Committee).
The Senate Committee concluded, in its report entitled
Deregulation
of the Australian Dairy Industry (the Senate Committee report), that ‘sooner rather than later the market will force
deregulation and that a managed outcome with a soft landing is preferable
to a commercially driven crash’.[1]
Dairy Industry
Adjustment Package
On 28 September 1999 the then Minister for Agriculture,
Fisheries and Forestry, the Hon. Warren Truss, MP announced a $1.8 billion
adjustment package for the dairy
industry, subject to all States agreeing to deregulate their market milk
schemes.
The adjustment package comprised four programs:
- the Dairy Structural Adjustment Program – allocated $1.63 billion
in payments for eligible dairy producers, administered by the Dairy
Adjustment Authority
- Supplementary Dairy Assistance - allocated an additional $139 million
in payments, administered by the Dairy Adjustment Authority
- the Dairy Exit Program - provided an optional tax-free exit payment
of up to $45,000 for eligible dairy producers wishing to leave the industry,
administered by Centrelink, and
- the Dairy Regional Assistance Program – provided $65 million to assist
regional communities to adjust to dairy deregulation, administered by
the Department of Transport and Regional Services.[2]
The Dairy Industry Adjustment Act 2000 was part
of a raft of legislation that provided the adjustment program for the
deregulation of the Australian dairy industry. The relevant bills
digest contains useful background information.
In announcing the package the Minister stated:
In order to smooth the move to a deregulated industry,
the Australian Dairy Industry Council has developed a major package
to facilitate adjustment. The package will be funded through a levy
of 11 cents a litre on all retail milk sales. This levy is unlikely
to have any impact on retail prices as farm gate prices are expected
to fall after deregulation by at least this amount.[3]
The Dairy Adjustment Levy (General) Act 2000,
Dairy Adjustment Levy (Excise) Act 2000, and Dairy Adjustment
Levy (Customs) Act 2000 provide for the imposition of the Dairy Adjustment
Levy. The Regulation Impact Statement for the Dairy Industry Adjustment
Bill 2000 provides the following explanation for the funding of the adjustment
package:
The adjustment package is to be financed through a
levy of 11 cents per litre on sales of liquid milk products. In terms
of the levy imposition, consideration has been given to an appropriate
point of imposition to ensure that the burden is not passed back to
the producer, whilst ensuring efficient levy collection. The levy is
to be on cow’s milk and will broadly cover whole milk, modified milk,
Ultra Heat Treated (UHT) and flavoured milk. The levy will be applied
on a ‘cents per litre’ basis at the retail level. However, collection
would be at the processor level for convenience, efficiency and security.
As there are far fewer processors than retailers, collecting the levy
from processors minimises the number of collection points. As a result,
the administrative burden and costs of levy imposition are reduced and
there is greater scope for ensuring compliance…
A levy, set at 11 cents per litre, is calculated to
cover the total cost of payments to producers plus interest and administration
costs (estimated to be $1.74 billion) over a target period of 8 years…[4]
The current Bill is directed to the termination of the
Dairy Adjustment Authority and Dairy Adjustment Levy as well as the winding
up of the Dairy Structural Adjustment Fund.
No exact date has been set for the Dairy Adjustment Levy
to end as this depends on when the amount that the government outlaid
in assistance to dairy farmers has been fully repaid to the Commonwealth.
While the final payment was made to farmers in April 2008, the Dairy Adjustment
Levy has continued to pay off the interest on loans the former government
used to fund initial payments under the adjustment package.[5]
At its meeting of 25 September
2008, the Selection of Bills Committee resolved to defer consideration
of the Bill until its next meeting.[6]
The move to terminate the Dairy
Adjustment Levy has been welcomed on the grounds that it should lead to
a reduction in milk prices by 11 cents a litre.[7]
Queensland Dairyfarmers’ Organisation president Wes Judd
was reported as stating that ‘the move [to terminate the Dairy Adjustment
Levy] was expected. This is just part of the process of winding up the
package.’[8]
According to the Explanatory Memorandum, the Dairy Industry
Adjustment Program was designed to be cost neutral to the Commonwealth;
a consumer levy funded all administrative costs, payments to farmers and
grants to dairy dependent communities under the program. Any surplus
levy collected will be credited to the Commonwealth.[9]
However it should be noted that the Bill provides that
if, as a result of the amendments in the Bill, there is an acquisition
of property from a person otherwise than on just terms, the Commonwealth
is liable to pay a reasonable amount of compensation.
The Explanatory Memorandum states that the Dairy Structural
Adjustment Fund had a deficit of approximately $205 million in July 2008,
but is expected to be in balance in the first quarter of 2009.[10] The amendments in the Bill are intended to
allow the Commonwealth to stop the appropriation of levy funds into the
Dairy Structural Adjustment Fund as soon as possible after the deficit
in the fund has been eliminated.
Whilst the Dairy Industry Adjustment Program was cost
neutral to the Commonwealth, the key issues from the perspective of those
consumers who have been paying the levy are:
- Does the Bill effectively minimise the amount of surplus funds collected
under the Dairy Adjustment Levy?
- Steps have been taken (in item 6 of the Bill) to minimise the
amount of surplus funds collected under the Dairy Adjustment Levy
by reducing the levy termination notification period from 28 days
to seven days.[11]
- Does the Bill make provision for any surplus funds collected under
the Dairy Adjustment Levy?
- Any surplus funds collected under the Dairy Adjustment Levy are
to be paid (under item 5 of the Bill) to the Commonwealth.
- Who has responsibility for any claims made on the Dairy Structural
Adjustment Fund after it is wound up?
- The Secretary of the Department of Agriculture, Fisheries and
Forestry will have that responsibility.[12]
Part 1 of Schedule 1
of the Bill winds up the Dairy Adjustment Authority.
Item 2 amends the Dairy Produce Act 1986
(the Dairy Produce Act) by inserting proposed subclauses 55(2)
and (3) into existing Schedule 2. The amendment will empower the
Minister[13] to declare
that the Dairy Adjustment Authority ceases to exist immediately after
a specified day. That declaration will be by legislative instrument which
will, in accordance with the Legislative Instruments Act 2003,
be registered on the Federal Register of Legislative Instruments and will
be subject to the disallowance regime.
Item 3 is an applications provision.[14]
It allows the Secretary of the Department of Agriculture, Fisheries and
Forestry to assume the powers of the Dairy Adjustment Authority immediately
after it ceases to exist under proposed subclause 55(3).
Part 2 of Schedule 1 of
the Bill terminates the Dairy Adjustment Levy.
Existing clause 79 of Schedule 2 of the Dairy Produce
Act lists the manner in which money standing to the credit of the Dairy
Structural Adjustment Fund is to be expended. Item 4 inserts proposed
paragraph 79(ia) so that monies can also be expended in meeting the
expenses incurred by the Commonwealth in terminating the Dairy Industry
Adjustment Program.
Existing subclauses 83(1) and (2) of Schedule 2 of the
Dairy Produce Act provide for the payment of dairy adjustment levy to
the industry services body, namely Dairy Australia Limited. Item 5
inserts proposed subclause 83(3A) which will allow the Minister
to declare that subclauses 83(1) and (2) do not apply. The effect of
the amendment is that no further payments of Dairy Adjustment Levy will
be made to Dairy Australia Limited after the declaration is made. The
declaration must be by legislative instrument and the date specified in
the legislative instrument must not be before the levy termination
day.
Existing subclause 94(1) of the Dairy Produce Act provides
for the Dairy Adjustment Levy to be terminated by the Minister publishing
a notice in the Gazette once the Minister is satisfied that all
costs associated with the Dairy Industry Adjustment Package have been
met. According to the existing provision, the 28th day after the publication
of notice is the levy termination day.
Item 6 repeals that provision and substitutes
proposed subclause 94(1) which empowers the Minister to declare
by legislative instrument that the seventh day after the day that the
instrument is registered on the Federal Register of Legislative Instruments
is the levy termination day. The effect of this amendment
is to reduce the levy termination notification period from 28 days to
seven days to minimise collection of levy funds which are surplus to requirements.
Amendments to existing subclause 94(2) under item
7 will prevent the Minister from making a declaration about levy
termination day unless there is sufficient money in the Dairy
Structural Adjustment Fund for the purposes prescribed in the subclause.
Part 3 of Schedule 1 of the Bill winds up the Dairy
Structural Adjustment Fund.
Item 8 inserts proposed clause 77AA into
Schedule 2 of the Dairy Produce Act which will allow the Minister to give
written notice (or notices) that monies which are credits in the Dairy
Structural Adjustment Fund are to be paid to the Commonwealth. When the
Dairy Structural Adjustment Fund is no longer in credit it will be wound
up: proposed subclause 77AA(3). According to the Explanatory Memorandum,
the rationale for this provision is that sufficient funds be retained
in the Dairy Structural Adjustment Fund to ensure its solvency until it
is formally wound up.[15]
There is, entrenched in section 51(xxxi) of the Constitution
of Australia, a guarantee which stipulates that property acquired
by the Commonwealth Government must be acquired ‘on just terms’.
Item 9 refers to an acquisition otherwise than
on just terms in the context of section 51(xxxi) of the Constitution
but then provides that the Commonwealth is liable to pay a 'reasonable
amount of compensation'. It should be noted that proposed clause 132:
- does not specifically apply paragraph 51(xxxi) of the Constitution
of Australia to the acquisition
- provides that the Commonwealth is liable to pay a ‘reasonable amount
of compensation’, as distinct from ‘just terms’, and
- allows for a person to initiate court proceedings to determine the
amount of compensation, if an agreement on an amount cannot be reached
between parties.
However, use of such a provision is now commonplace, for
example, section 152AQC of the Trade Practices Act 1974 and in
section 60 of the Northern Territory Emergency Response Act 2007.
Schedule 2 of the Bill contains items which repeal
the whole of the following Acts:
None of these Acts will be required after the Minister
has declared the levy termination day under proposed
subclause 94(1) of this Bill. Subsequently, commencement of these
provisions will occur on the day after the levy termination day.
Schedule 3 of the Bill contains consequential
amendments.
Item 1 of Schedule 4 of the Bill provides
for the making of any regulations which may be required.
[13]. In accordance with section
19A of the Acts Interpretation Act 1901 the reference to ‘the Minister’
in this Bill is a reference to the Minister for Agriculture, Fisheries
and Forestry.
Paula Pyburne
9 October 2008
Bills Digest Service
Parliamentary Library
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