DAIRY INDUSTRY ADJUSTMENT BILL 2000 Explanatory Memorandum

1998 – 1999 - 2000

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

SENATE

DAIRY INDUSTRY ADJUSTMENT BILL 2000

REVISED EXPLANATORY MEMORANDUM

(Circulated by Authority of the Minister for Agriculture, Fisheries and Forestry,
the Hon Warren Truss MP)

THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED

ISBN: 0642 429995

DAIRY INDUSTRY ADJUSTMENT BILL 2000

GENERAL OUTLINE

1. The Dairy Industry Adjustment Bill 2000 provides the framework for implementation of the Dairy Industry Adjustment Program. The main object of the Dairy Industry Adjustment Program is to assist the dairy industry to adjust to deregulation by providing for dairy structural adjustment payments (made under this Schedule) and dairy exit payments (made under Part 9C of the Farm Household Support Act 1992).

FINANCIAL IMPACT STATEMENT

2. The proposed Dairy Adjustment Levy (General) Bill 2000, Dairy Adjustment Levy (Excise) Bill 2000, and Dairy Adjustment Levy (Customs) Bill 2000 provide for the imposition of the Dairy Adjustment Levy. This levy will generate sufficient Commonwealth revenue to pay for the Dairy Industry Adjustment Program, raising $1.74 billion over a target period of eight years. All money raised will be used to fund the Dairy Industry Adjustment Package, including the cost of collecting the levy.

3. Commonwealth revenue may decrease by up to $1 million per year for each of the eight years of the program as a result of providing some of the assistance through non-taxable exit grants rather than structural adjustment assistance. This aside, the package has no budgetary impact as it is fully funded by levy revenue.

REGULATION IMPACT STATEMENT

Background

4. The dairy industry is Australia’s fourth largest agricultural exporter, selling up to one half of its milk output in world markets, at a value of $2.2 billion. The industry has an annual Gross Value of Production (GVP), ex factory, of around $7 billion and provides employment for over 50,000 people, principally in rural and regional Australia.

5. The industry regulatory environment can be divided into two broad categories based on whether milk is used as liquid milk for human consumption (market milk) or in the manufacture of dairy products (manufacturing milk). Manufacturing milk arrangements are currently underpinned by Commonwealth legislation. It provides for the operation of the Domestic Market Support (DMS) scheme, which assists producers of manufacturing milk through monthly payments (currently 0.95 cents per litre in 1999-2000) and is funded by a transfer from Australian consumers of dairy products. The DMS scheme is legislated under the Dairy Produce Act 1986 to end on 1 July 2000.

6. Market milk arrangements are underpinned by state legislation and provide a guaranteed producer price for milk used as market milk that is about double the producer price for manufacturing milk. The mechanisms for guaranteeing this premium vary between each State and Territory. Separate quota arrangements operate in New South Wales, Queensland and Western Australia while Victoria, South Australia and Tasmania operate different schemes which provide for equitable sourcing and payment for market milk.

7. Victoria is the largest milk producing state in Australia, accounting for over 60 per cent of Australian milk output. Given this dominance, deregulation in Victoria will have significant flow-on effects in other states. The expectation is that all markets will eventually move into parity with Victoria, with some premiums remaining to reflect transport costs and other local supply advantages.

Nature and Extent of the Problem

8. Dairy industry deregulation is expected to precipitate a significant change in the operating environment for most Australian dairy farmers. Given the levels of assistance which are currently generated through Commonwealth and State regulatory arrangements, full deregulation is expected to initially result in substantial losses in farm income and a significant level of industry dislocation. There is a risk that if industry deregulation was to take place in a disorderly manner, the resulting economic shock will cause significant economic losses due to the unnecessary exit of dairy farmers out of the industry. The exit and subsequent re-entry of dairy farmers is not costless due to the associated transactions costs and impediments to the mobility of capital and labour throughout the economy. In cases where existing farmers are efficient over the medium to long term, these costs would translate to an overall loss to society.

9. More widely, deregulation is likely to have a negative effect on some regional businesses and ancillary industries. Dairy farming involves the daily use of many and varied business inputs. This activity has significant multiplier effects throughout local regional economies. The loss of farm income may translate into a reduction in economic activity in that region. The impact on rural economies would be exacerbated if manufacturing and processing plants located in regional centres cease their operations because they are no longer viable. Further, the cost efficiencies associated with such large-scale operations may be lost if adequate milk supplies are not available due to farmer dislocation.

10. In essence, there is the possibility that significant proportions of long-term benefits of deregulation may be lost if short-term adjustment costs are unduly high.

Objectives

11. The broad regulatory objective is to facilitate coordinated and orderly structural adjustment in the dairy industry so as to maximise the long-term benefits of deregulation while minimising the short-term costs of moving to a less regulated environment. This includes minimising the exit of farmers from the industry who would otherwise be efficient producers in the long term.

12. Any regulatory solution should be consistent with Australia’s international trade obligations. A regulatory solution should also be consistent with the principles of the National Competition Policy.

Options

13. There are many types of measures that could be considered to assist industries through the process of structural adjustment. Some key parameters considered in addressing the issues facing the dairy industry are that any option should:

- be targeted and transparent;
- be consistent with Australia’s international trade obligations;
- be well developed and generally acceptable to most stakeholders;
- consider the timeframe and magnitude of the option; and
- consider how the option would be funded.

14. After an intensive consultation process, dairy industry leaders through the Australian Dairy Industry Council (ADIC) considered the following options:

- retaining the current Commonwealth and State regulatory framework;
- creating a national market milk pool;
- creating an eastern states market milk pool;
- creating a system of notional swaps between State dairy industry authorities;
- implementing a phased removal in state market milk arrangements (phased implementation of reforms);
- implementing a modified DMS scheme with the scheme funded by a market milk levy only; and
- full deregulation.

15. Coming out of this process, only full deregulation was considered by the ADIC as feasible in the light of competitive commercial pressures in the global and domestic dairy industry and the need to take account of Australia’s international trade obligations.

16. Within the option of full deregulation, two possible courses of action were identified:

a) allowing deregulation to occur in an unmanaged, piecemeal fashion; or
b) provision of an adjustment package which will assist the dairy industry through the process of deregulation.

17. Allowing deregulation to occur in an unmanaged piecemeal fashion was not considered viable, as it would bring about severe dislocation of the dairy industry and adverse impacts at the regional level.

18. As a consequence, the ADIC put forward for Government consideration an industry agreed proposal aimed at assisting farmers deal with the impacts of deregulation in a positive and orderly way. In response to this proposal, on 28 September 1999 the Federal Government announced its willingness to provide a major structural adjustment package for dairy farmers in the event that all States and Territories decided to remove their market milk farmgate pricing arrangements. The total package, estimated to cost up to $1.74 billion, provides eligible dairy farmers with quarterly adjustment payments over 8 years, or the option of up to a $45,000 tax free exit payment in the first two years of the program, where a farmer wishes to leaving farming.

19. It is envisaged that payments to producers under the package would be used in whatever investment considered most appropriate to enhance viability and competitiveness of the enterprise. This may take the form of investments to achieve scale economies, relocation or debt restructuring. As a result of the package, it is anticipated that a greater number of farmers will be able to negotiate the transition to a deregulated environment and to re-establish themselves as viable enterprises. Alternatively, where farmers believe exit to be the best option, the payments will provide the farmer with the means to assist to clear debts and exit the industry to undertake more viable economic activities. A pre-requisite for receiving any payments is that farmers must prepare a farm business assessment.

20. Payments to farmers are to be administered by an independent statutory body known as the Dairy Adjustment Authority (DAA). The DAA will receive administrative support from the Australian Dairy Corporation (ADC), but retain full independence in its decision making and accountability.

21. A key feature of the adjustment package is that it is to be funded from a Commonwealth levy on sales of liquid milk products over a target period of up to 8 years. The levy is to be imposed at retail with collection by milk processors.

Impact Analysis

22. Over the longer term, the benefits from deregulation are likely to be significant as those operators remaining in the industry gain through increased economies of scale and increased demand for dairy products (generated through lower prices). The consequent improved production efficiencies (at both the producer and processor levels) are also expected to improve the competitiveness of the industry in both domestic and international markets. However, as mentioned previously, full deregulation is expected to initially result in significant reductions in farm incomes with some consequential level of industry dislocation.

23. The key stakeholders likely to be affected by deregulation are:

(a) Farmers
24. There are over 13,000 dairy farmers in Australia. The vast majority of farmers are expected to experience a fall in income upon deregulation as they will no longer receive either the premium on market milk generated through state arrangements, or a market support payment on manufacturing milk under the DMS scheme.

25. In terms of manufacturing milk, producers will lose the market support payment (0.95 cents per litre in 1999-2000). Given the period in which the Australian dairy industry has operated under the certainty of regulation, the extent to which the producer price for market milk will fall upon deregulation is a matter of conjecture. Projections of the price falls vary from 10 cents per litre (around 19 per cent of the current producer price for market milk) up to 25 cents per litre (48 per cent). Taking the mid range between these projections (at 15 cents per litre), ABARE estimates that the impact of deregulation would be an average annual per farm fall in income of $28,350.

26. The package is designed to assist farmers adjust to this fall in income and, in so doing, secure the long-term benefits of deregulation. This will be achieved by providing payments that will allow farmers to either undertake structural improvements or, alternatively, leave the industry.

27. To encourage effective use of the assistance, each farmer will be required to undertake a farm business assessment prior to receiving any payments. It is intended that, through an assessment of the farm enterprise, the information available to farmers for making appropriate investment decisions is maximised. Furthermore, an exit component is being incorporated into the package to better target those farmers who arrive at the conclusion they will be non-viable in a deregulated market and should leave the industry. The broad thrust of the exit component is to provide these farmers with sufficient funds to facilitate their exit from the industry.

(b) Manufacturers, Processors and Exporters
28. There are between 15 and 20 firms involved in the manufacturing of dairy products and processing of fresh milk in Australia. A number of these firms are farmer owned co-operatives although there are also a number of publicly owned companies. Australia also has many small manufacturing operations, mainly producing specialty cheeses.

29. Deregulation offers significant benefits for manufacturers and processors. Milk represents an input cost for processors and manufacturers. Consequently, this sector of the dairy industry is expected to benefit directly from lower input prices. Processors will no longer be subject to a complex set of regulations governing the purchase of fresh milk for human consumption from State dairy industry authorities. Manufacturers will also not be required to pay the manufacturing milk levy imposed under the Commonwealth’s DMS scheme nor will they be involved in the dispersal of market support payments to manufacturing milk producers.

30. It is also anticipated that deregulation will encourage acquisitions, mergers and strategic alliances within the manufacturing and processing sectors. This would be due to firms seeking to secure sufficient equity capital to improve the efficiency of their operations through the establishment and operation of large scale, cost-efficient dairy factories with good distribution networks and successful marketing strategies.

31. At the same time, deregulation may create problems if the short-term dislocation of the dairy industry causes disruptions in milk supply. This may precipitate further restructuring and rationalisation within the processing and manufacturing sector as firms relocate from marginal milk producing areas to more suitable regions or merge with other firms in the search for increased scale and production efficiencies.

32. While there are specialist exporters, Australia’s larger manufacturers are the main exporters of dairy produce. Dairy exports have grown considerably over the past decade with up to half of Australia’s milk output sold in international markets, at a value of over $2 billion. Having expended significant resources to establish these markets, it is crucial that Australian exporters maintain and expand these markets by ensuring a reliable supply of Australian dairy produce at internationally competitive prices.

(c) Wholesalers and Retailers
33. It is anticipated that wholesalers and retailers will benefit from the flow on effects of lower input prices for liquid milk products and, with the abolition of the manufacturing milk levy, lower prices for dairy products. These benefits will be partially offset by the imposition of the levy required to fund the adjustment package.

(d) Consumers
34. Commonwealth and State regulatory arrangements currently generate monetary transfers of over $500 million annually from Australian consumers. Accordingly, it is believed deregulation will eventually provide substantive benefits to consumers.

35. However, the extent to which lower prices are realised will depend on the power of processors and retailers to increase margins, and the level of competition for milk sales.

(e) Commonwealth and State Governments
36. The Commonwealth and State governments have regulatory arrangements that influence the farm gate pricing of milk. These arrangements vary between States, are complex to administer and require significant resources. Deregulation will enable administrative resources to be reduced, particularly in the long term.

A. Impact on farms, manufacturers and processors and exports

37. Under the proposed package, it is estimated that the national average payment will be $118,192 per farm (table 1). Levels of payments to individuals will vary between States (table 1). For example, the average in Victoria is expected to be $95,000 while in Western Australia it is expected to average $240,000.

38. Again, it must be understood that each State will experience diversity within these averages reflecting the varying level of impact deregulation will have on individual entities. These estimates represent the sum of payments to farmers over the eight years and do not take account of payments through the dairy exit component of the package.

39. It is envisaged that, through these payments, any sharp downturn in milk output will be avoided in the short term and production will progressively shift to a more efficient, lower cost regime across Australia. Avoiding a short-term downturn in production will allow manufacturers and processors to maintain their competitiveness through continuing to operate large scale, cost efficient plant. It also ensures sufficient dairy produce to service growing export markets. Deregulation should assist growth of exports in the longer term as it will lead to better use of resources through a more efficient scale of operation with a lower cost of production.

Table 1: Indicative estimates of adjustment payments

	Current Farm Income	Annual fall in income (a)	Adjustment payment (b)

	$ per farm	$ per farm	$ per farm
New South Wales	83,510	-46,210	169,408
North Coast	49,450	-32,760	-
Central/South Coast	107,840	-55,290	-
Riverina	100,070	-54,740	-
Victoria	44,690	-21,590	95,061
Western Districts	39,840	-16,270	-
Goulburn Murray	45,000	-23,370	-
Gippsland	43,270	-17,890	-
Other Victoria	61,010	-24,020	-
Queensland	56,470	-32,940	123,914
South Australia	55,520	-31,550	160,159
Western Australia	89,510	-53,500	237,254
Perth Metropolitan	103,480	-66,890	-
South-West	77,160	-41,650	-
Tasmania	58,300	-22,230	100,315
AUSTRALIA	53,740	-28,350	118,192

B. Funding the Adjustment Package

40. 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 wholemilk, 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 processor 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. The imposition of one flat levy on liquid milk sales is expected to be significantly less complex than the five levies which exist under the current DMS scheme.

41. A levy, set at of 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. At the same time, a levy of 11 cents per litre should be sufficiently low enough in order to minimise any potential impact on the market place, in terms of market milk sales and retail prices.

(i) Impacts on Consumers
42. Given the comparative unresponsiveness of market milk demand to changing prices, it is likely that the levy used to fund the adjustment package will be passed onto consumers. The size of the consumer transfer, based on a 11 cents per litre levy, will be $1.74 billion, or, on average, around $218 million annually. However, consumers are still expected to be better off under the package than under the current situation where Commonwealth and State regulatory arrangements provide for monetary transfers of over $500 million annually from consumers.

(ii) Impacts on Government
43. The proposed adjustment package is intended to largely obviate the need for direct budgetary support for the dairy industry. It is also consistent with the Government’s microeconomic reform agenda in that it allows the dairy industry to take greater control of its own affairs, and significantly reduces the role of government in the industry. The proposed package also provides a path for ensuring that the dairy policies of all governments remain consistent with the principles of National Competition Policy. The full deregulation of the dairy industry is also consistent with Australia’s trade position in the World Trade Organisation.

44. However, the Government will still have a role in managing the statutory levy arrangements required for the proposed adjustment package.

C. Impact of Option on Existing Regulation

45. As mentioned previously, deregulation will involve State government decisions to remove regulation that currently impacts on the Australian dairy industry.

46. It involves the repeal of all or substantial parts of the:

Dairy Industry Act 1979 (New South Wales)
Dairy Industry Act 1992 (Victoria)
Dairy Industry Act 1993 (Queensland)
Dairy Industry Act 1992 (South Australia)
Dairy Industry Act 1983 (Western Australia)
Dairy Industry Act 1994 (Tasmania)

47. Deregulation will also significantly curtail or eliminate the need for state dairy industry authorities, thereby providing direct savings for the dairy industry, who fund these organisations through a margin on the price for market milk. As an indication of the potential savings, in 1997-98, the New South Wales Dairy Corporation and Victorian Dairy Industry Authority had total annual operating expenses of $12.1 million and $6.45 million respectively, however the actual savings to be realised from deregulation within these overall expenses cannot be estimated.

48. At a Commonwealth level, Part VII, Division 5 of the Dairy Produce Act 1986 and relevant parts of Schedule 6 of the Primary Industry (Excise) Levies Act 1998 and Schedule 4 of the Primary Industry (Customs) Levies Act 1998 would cease to operate with the end of the DMS scheme. There will also no longer be a need to collect the market milk levy, manufacturing milk, import offset, acquisition offset levy and the levy on the re-importation of exported dairy produce. This has required a complex web of legislation, statutory rules and Gazette notices to cover the collection of the levies and operation of the DMS scheme. There has been a significant commitment of resources in dealing with legislative and policy issues relating to levy imposition, compliance and the payment of market support payments.

49. Furthermore, the Australian Dairy Corporation undertakes the day to day administration of the DMS scheme, on behalf of the Commonwealth. The costs of activities of the Corporation are met from the levy receipts. In 1997-98, the Corporation’s operating expenses in administering the DMS scheme were around $1.2 million.

Conclusions

50. Allowing deregulation to occur without adjustment assistance would result in greater dislocation of the dairy industry and more severe impacts at a regional level. Economic losses would otherwise arise due to the unnecessary exit of some dairy farmers out of the industry. The exit and subsequent re-entry of dairy farmers is not costless due to the associated transaction costs and impediments to the mobility of capital and labour throughout the economy. In cases where existing farmers would probably be viable in the medium term, these costs translate to overall loss to the community.

51. The implementation of an adjustment package based on the ADIC proposal is, in the Government’s view, necessary to ensure the benefits of deregulation are realised.

Consultation

52. The Australian Dairy Industry Council (ADIC), the proponent of the adjustment package, is responsible for general policy development and co-ordination of dairy industry matters at a national level. ADIC represents all sectors of the dairy industry with representatives drawn from the Australian Dairy Farmers’ Federation (milk producers) and the Australian Dairy Products Federation (manufacturers and processors). It represents over 80 per cent of Australia’s dairy farmers and the vast majority of manufacturers, and is recognised as the peak industry body. In addition, the Victorian Government held a plebiscite of the State's dairy farmers which resulted in resounding support for deregulation, and early returns on a poll being undertaken of New South Wales farmers indicates support for deregulation.

53. The coordinated deregulation of the dairy industry and the associated adjustment package was discussed by Commonwealth and State Agricultural Ministers in March and August 1999 meetings and more recently at a special meeting on 22 December 1999.

Implementation and Review

54. For the package to be fully implemented, State governments are required to repeal those parts of their legislation that embodies the current market milk arrangements. The agreement of State Minsters for Agriculture to the package is being sought, including their commitment to amend or repeal relevant state legislation.

55. The Government wishes to see amending Commonwealth legislation receive the earliest passage through Parliament to enable the scheme to be in place to pay eligible producers as soon as possible after 1 July 2000.

56. The collection and dispersal of the levy on fresh milk sales will be managed by the Levy Revenue Services (LRS) within AFFA. They have the procedures in place for determining levy liability, ensuring compliance, collecting and dispersing levies. They also have mechanism for reviewing all aspects of levy collection.

57. The ADC’s role in providing administrative support will be reviewed by the DAA in 2001/2002. The overall arrangements will be reviewed by the DAA in 2002/2003.

NOTES ON CLAUSES

Clause 1 Short title

58. The Act will be called the Dairy Industry Adjustment Act 2000.

Clause 2 Commencement

59. The Act will commence on Royal Assent. Payments under the Dairy Structural Adjustment Program (DSAP) scheme will commence on a day to be fixed by Proclamation.

Clause 3 Schedule(s)

60. Clause 3 provides that the amendments or the repeal of Acts specified in the Schedule to the Bill and any other Item in the Schedule will have effect according to the terms of that Item. Schedule 1 provides for the amendment of the Dairy Produce Act 1986, including the establishment of the Dairy Industry Adjustment Program. Schedule 2 provides for consequential amendment of a number of other Acts to enable effective implementation of the Dairy Industry Adjustment Program.

61. Item 1 is a technical provision to amend the long title of the Dairy Produce Act 1986 to allow for provision of the Dairy Industry Adjustment Program in the Dairy Produce Act 1986.

62. Item 2 provides for Schedule 2 to be excluded from the definition of an authorised person as it has its own definition (see clause 86), which differs from that applied to the rest of the Dairy Produce Act 1986.

63. Item 3 provides for a definition of the Dairy Structural Adjustment Fund to be added to the definitions applicable to this Act.

64. Item 4 makes clear that the Dairy Structural Adjustment Fund is not part of the money of the Corporation.

65. Item 5 renames the current Schedule in the Dairy Produce Act 1986 as Schedule 1 to reflect the new schedule (Schedule 2) to be added to the Act.

66. Item 6 provides that the money of the Corporation will not be used to pay the expenses of the Dairy Industry Adjustment Program.

67. Item 7 is related to the amendment proposed under Item 2. Specifically, it provides that an authorised person under the Dairy Produce Act 1986 (but not Schedule 2) does not have the power to call for returns in relation to the Dairy Industry Adjustment Program (which has its own definition of an authorised person).

68. Item 8 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own offence provisions in relation to claims for payments (refer Part 5 of Schedule 2).

69. Item 9 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own offence provisions in relation to returns (refer Division 8 of Part 4).

70. Item 10 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own provisions for refund of levy payments (see clauses 122 and 123 of Schedule 2).

71. Item 11 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own provisions in respect to overpayments (refer Part 2, Divisions 4 and 5 of Schedule 2).

72. Item 12 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own provisions in respect to access to premises for the purposes of the Dairy Adjustment Levy (see Part 4 Division 9 of Schedule 2).

73. Item 13 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own provisions in respect to secrecy and protection of confidentiality of information (refer Part 2 Division 3 and clause 126 of Schedule 2).

74. Item 14 provides for Schedule 2 to be excluded from this section as the Dairy Industry Adjustment Program has its own provisions for the appointment of authorised persons (see clause 125 of Schedule 2).

75. Item 15 inserts a proposed new section 125A to the Dairy Produce Act 1986 to give effect to proposed Schedule 2 to the Dairy Produce Act 1986 which provides for the Dairy Industry Adjustment Program.

76. Item 16 provides for the existing Schedule to be renamed Schedule 1, as the Dairy Industry Adjustment Program is to be added to the Dairy Produce Act 1986 as Schedule 2.

77. Item 17 adds Schedule 2 to the Dairy Produce Act 1986. Schedule 2 contains the Dairy Industry Adjustment Program.

Schedule 2- Dairy Industry Adjustment Program

Part 1-Introduction

78. Clause 1 provides an executive summary of Schedule 2 and Part 9C of the Farm Household Support Act 1992 which provide the framework for the implementation of the Dairy Industry Adjustment Program.

Clause 2 Definitions

79. Clause 2 defines the terms used in the Bill. Important terms in the overall scheme of the legislation are the terms ‘deliver’, ‘manufacturing milk’ and ‘market milk’. The interaction of these definitions means that only milk delivered in the 1998-99 financial year on which the market milk levy was imposed or which a domestic market support payment was paid will be used as the basis on which to calculate payments under DSAP.

Clause 3 DSAP payment start day

80. DSAP payments will only commence on Proclamation. This will occur once the Government is satisfied that the states and territories have effectively deregulated their farmgate pricing arrangements through repeal of relevant legislation or other appropriate measures. If the DSAP payment start day does not commence within 6 months of the Bill receiving Royal Assent, Part 2 of this schedule (which deals with DSAP payments) will be repealed. The net effect being the DSAP scheme will not commence, and there would be no payments.

Clause 4 DSAP claim period

81. Dairy farmers will have a period of 3 months to apply for DSAP. This 3-month period will be formally specified by way of a notice in the Gazette. To facilitate the claim period and hence the DSAP scheme commencing as soon as possible, this notice will not be disallowable.

Clause 5 Entity

82. This clause defines who will be eligible to apply for the DSAP scheme.

Clause 6 Dairy farm enterprise

83. The definition of dairy farm enterprise is necessary to enable calculation of the overall enterprise amount (refer Clause 2) or maximum DSAP payment available to a particular business. This maximum overall enterprise amount is based on milk delivered in the 1998-99 financial year on which the market milk levy was imposed or on which a domestic market support payment was paid. Where a particular dairy farm enterprise supports a sharefarming or leasing arrangement (as defined under the DSAP scheme), these arrangements are to be included with the owner operator as a single business for the purpose of calculating the overall enterprise amount.

Clause 7 Eligible interest in a dairy farm enterprise

84. Subject to the DSAP scheme, owner operators, sharefarmers, lessors and lessees will be eligible to claim the overall enterprise amount attributable to a particular dairy farm enterprise.

Clause 8 Application to things happening before commencement

85. This is a technical provision to clarify that although Part 1 refers to the present tense, it does not mean that the provisions contained in Part 1 cannot be applied in the past.

Part 2- DSAP payments

Clause 9 Simplified outline

86. Clause 9 provides a simplified outline of Division 1.

Clause 10 DSAP Scheme

87. The Minister must formulate the DSAP scheme within 14 days of the Bill receiving Royal Assent. Clause 10 outlines key elements to be included in the DSAP scheme.

Clause 11 General policy objectives for the DSAP scheme

88. In formulating the DSAP scheme, the Minister must seek to ensure the policy objectives or guidelines set out in clauses 11 to 23 are achieved.

Clause 12 Types of payment rights

89. Clause 12 outlines the 3 types of payment rights that will be available under the DSAP scheme – standard payment rights, exceptional events supplementary payment rights and anomalous circumstances payment rights.

Clause 13 Standard payment right

90. A standard payment right will only be available to an entity which held an eligible interest in a dairy farm enterprise at 6.30pm on 28 September 1999 and delivered market and or manufacturing milk during 1998/99. The Commonwealth Government announced on 28 September 1999 that it would provide an adjustment package should all states decide to remove their farm gate arrangements. It is considered that it would be unreasonable for farmers to be aware of the Government’s decision and have accounted for it in any contractual arrangements prior to 6.30pm on 28 September 1999.

91. Subclause 13(3) outlines the calculation of the face value of a standard payment right depending on the number and type of eligible interests. For example, subclause 13(3)(a) deals with the payment right of an owner operator where there are no eligible sharefarming or leasing arrangements (as defined under the DSAP scheme). Generally, subclause 13(3) deals with common types of arrangements that involve 2 or more parties. The DSAP scheme will outline the calculation of the face value of the standard payment right for more complicated arrangements.

92. In order to achieve current market milk prices for milk deliveries, a particular essential capital contribution is required. This may be provided through ownership of quota. Where no quota arrangement exists but access to market milk pricing is available, the essential capital contribution is provided through ownership of land and/or a significant proportion of the livestock. Subclause 13(5) provides that only those entities who can demonstrate they provide the essential capital contribution will have access to the premium component (as defined in clause 2). Subclause 13(5A) allows for an entity or entities who may form part of a partnership to be taken to own the entire proportion of the livestock for the purposes of determining a significant proportion of the livestock. This will ensure partnerships are not disadvantaged by having to own significantly more of the livestock than the intended 25% or more.

Clause 14 Exceptional events supplementary payment right

93. An exceptional events supplementary payment right will only be available to an entity which has been granted a standard payment right. In addition, the entity must be able to demonstrate that, as a result of an exceptional and natural event (including flood, fire, drought or disease) milk deliveries during the 1998-99 financial year were reduced by 30% or more of the average delivered in the 1997/98, 1996/97 and 1995/96 financial years.

94. Subclause 14(3) provides that the exceptional events supplementary payment right cannot exceed the amount that would have been the total face value of the standard payment right if the exceptional event had not occurred. Subclause 14(4) provides the DAA with the discretion to determine the value of the payment right and when it is conferred on the entity. More than one payment right can be issued to an entity, if, in the first instance, the DAA is not able to provide the full amount the entity may be eligible for.

Clause 15 Anomalous Circumstances Payment Right

95. This provision provides that an entity which does not pass the standard DSAP test (as defined) but held an eligible interest in a dairy farm enterprise during the whole, or part, of 1998/1999 and is taken to have been affected by anomalous circumstances (as defined under the DSAP scheme), is eligible for the grant of an anomalous circumstances payment right.

96. The grant of an anomalous circumstances payment right will be at the discretion of the DAA.

Clause 16 $350,000 cap

97. The purpose of the $350 000 limit is to ensure that payments in excess of this amount flow only to those farmers who rely primarily on dairying as their main source of income. When an entity applies for a payment right, a qualified financial adviser (as defined under the DSAP scheme) will be required to certify that the entity passes the 70% dairy income test (as defined under subclause 16(3)). It should be noted that a statement made in a certificate is subject to the provisions of clause 49 (cancellation of units because of the making of a false statement) and clause 132 (false or misleading statements in claims).

Clause 17 Farm business assessment

98. To be eligible for a payment right, an entity must have undertaken a farm business assessment (as defined under the DSAP scheme). It is intended the farm business assessment will assist farmers to understand the likely impact of the changing market situation on their business after deregulation. The assessment will guide producers on the options available to them in meeting these new circumstances and how best to use the structural adjustment payments. It should be noted that a statement made in a certificate under subclause 17(2)(b) is subject to the provisions of clause 49 (cancellation of units because of the making of a false statement) and clause 132 (false or misleading statements in claims).

Clause 18 Units in payment rights

99. Clause 18 provides for the calculation of the number of units in a payment right. For example, a payment right of $100,000 would equate to 3125 units.

Clause 19 Cancellation of units

100. This clause clarifies that the DAA has the power, under clauses 49, 50, 51 and 52, to cancel payment rights where they have been granted on the basis of false statements, error, failure to dispose of units as directed or when an exit payment is granted. However, the DSAP scheme may provide that the DAA is not to cancel a unit where there has been an error by the DAA (clause 50) if the DAA is satisfied that the entity (or each of the entities) who received a DSAP payment in respect of the unit acted in good faith.

Clause 20 Duration of scheme

101. To be granted a payment right, an entity, or a person acting on behalf of the entity, must make a claim during the DSAP claim period. This is to allow the DAA, in assessing the applications (after the close of the DSAP claim period) to determine the exact number of entities claiming an overall enterprise amount in relation to a specific dairy farm enterprise. However, clause 20(2)(b) provides that where units are cancelled due to a false statement or error by the DAA, the DAA may allow claims relating to that enterprise after the end of the DSAP claim period.

102. Subclause 20(3) provides that DSAP payments cannot be made before the DSAP payment start day which is defined under clause 2. Payments are not to be made in respect of a quarter that is later than the quarter ending on 30 June 2008.

Clause 21 Register of units, etc

103. Clause 21 provides that the DAA is to keep a register, in electronic form or otherwise, in which the DAA records particulars of units, including ownership. The DSAP scheme will specifically define the class of entities who can own a unit. It is intended ownership will be limited to primary producers or the beneficiaries of deceased estates of dairy producers.

104. Subclause 21(4)(a) provides that the transfer of ownership of a unit is not to be registered unless the transferee is an eligible entity. However, subclause 21(4)(b) provides that where a transfer is not to an eligible entity, the transfer can be registered provided that the transferee gives the DAA a written undertaking to assign the unit to an eligible entity within 60 days after the transfer is registered. For example, in the case of bankruptcy, the liquidator has 60 days to sell the units to an eligible entity.

105. Subclauses 21(8) and 21(9) prevent the undermining of subclause 21(4) by the use of trusts and equitable assignments.
Clause 22 Invitations to make claims for payment rights etc

106. To enable farmers to become aware of the requirements for applications under the DSAP scheme during the DSAP claim period, the DAA will be required to conduct a public information program about the scheme, including advertisements in local and national newspapers. In addition, the DAA is to obtain and record information to assist entities in making claims for payment rights and to assist the DAA in assessing those claims. This will include the DAA making reasonable efforts to identify and contact those entities it believes could be eligible to claim a payment right. However, any entity which does not receive a formal invitation from the DAA is also allowed to make a claim for a payment right.

Clause 23 Making of DSAP payments

107. At the end of the DSAP claim period, the DAA will have 30 days to assess claims. At the end of the assessment period, the DAA will notify an entity of their payment right and their rights of appeal (refer clause 25 and 26). If the entity does not appeal the decision, the initial payment, subject to the DSAP payment start day, will be made on the first day after the end of the 28-day period. If the first day is earlier than the DSAP payment start day, the initial payment day is the DSAP payment start day. Subclause 23(3)(b) provides that subsequent payment days will be ascertained in accordance with the scheme, subject to the DSAP payment start day.

108. Subclause 23(3) provides for the initial payment day for each payment right. Where there are no requests for appeal and the DSAP payment start day has been declared, the first payment will be made on the first day after the end of the appeal period. Where there are appeals, the first payment will be determined in accordance with the DSAP scheme, subject to the DSAP payment start day.

109. Subclause 23(4) provides for the making of DSAP payments in the initial payment quarter and earlier quarters, while subclause 23(5) provides for the making of DSAP payments in subsequent quarters. For example, if the initial payment day is 1 November 2000, the registered owner of a unit in a payment right would receive $1 for the September quarter (the earlier quarter) and $1 for the December quarter (the initial payment quarter) ie a total of $2. For all subsequent quarters, up until 30 June 2008, the registered owner would receive $1.

110. Subclause 23(6) provides that the DAA has, subject to the DSAP scheme, up to 10 working days from the initial payment day (in the case of the first payment) and the first day of the quarter (in subsequent payments) to make the payment. To allow flexibility, the due date will be defined in the DSAP scheme but it is not intended to be an unreasonably long period given the limit in clause 23(6)(b).

Clause 24 Scheme may confer administrative powers on the DAA

111. Clause 24 provides that the DSAP scheme can confer discretionary powers on the DAA.

Clause 25 Reconsideration and review of decisions

112. The DSAP scheme must provide for the reconsideration and review of decisions. An entity has 28 days after the decision comes to their attention to request the DAA to reconsider the decision. In practice, it would be taken to be when they receive notification of the decision by registered mail. If an entity requests such a reconsideration or review, the DAA is required to reconsider the decision and confirm, revoke or vary the decision as the DAA considers appropriate. If the DAA does not confirm, revoke or vary a decision within 60 days of receiving the request, the DAA is taken, at the end of that period, to have confirmed the decision.

113. Subclause 25(1)(c) provides that an entity can only apply to the Administrative Appeals Tribunal (AAT) once the DAA has confirmed or varied its original decision. Once the DAA has confirmed its decision, subclause 25(7) provides that an entity has 28 days to apply to the AAT. If an entity requests the reconsideration of a decision under subclause 25(1)(a), the original decision will continue to operate. However, an entity may apply to the AAT for the decision to be stayed or suspended pending the outcome of the review.

Clause 26 Statement to accompany notification of decisions

114. Clause 26 provides that the DAA, when making an administrative decision under the DSAP scheme, must, when advising the entity of the decision, include details regarding the entity’s right to seek a reconsideration of the decision, and if dissatisfied with the reconsideration, to apply to the AAT.

115. Subclause 26(2) provides that when the DAA gives to the entity written notice of the confirmation or variation of a decision under subclause 25(1)(b), the notice must include details regarding the entity’s right to apply to the AAT for review of the decision.

Clause 27 Fees

116. Clause 27 provides that the DSAP scheme may provide for fees. For example, updating the register to reflect changes in ownership may be subject to a fee.

Clause 28 Statutory declarations

117. Under the DSAP scheme, statements made in claims may need to be verified by statutory declaration. For example, in order for the DAA to determine entities’ shares of the overall enterprise amount, it may be necessary for the entities to certify to the DAA their share of income from milk deliveries to allow the DAA to determine each entity’s share of the face value of the payment right. Such certification would be provided to the DAA at the time of an entity’s application for a payment right.

Clause 29 Methods by which DSAP payments may be made

118. This clause outlines the methods by which DSAP payments may be made, including by electronic funds transfer.
Clause 30 Adjustment of eligibility for payment rights – transfer of milk delivery rights

119. Clause 30 provides for the adjustment of eligibility for payment rights to recognise change in ownership of quota since 1 July 1998. The amount of milk produced by the transferor will not change, however, that which attracted a premium payment, that is market milk payment in the year 1998/99, will be recognised for entitlement purposes as attracting the manufacturing milk price, or non premium payment, only.

120. The amount of milk produced by the transferee will not change, however, the premium payment that was received by the transferor prior to transfer will be recognised for entitlement purposes as being received by the transferee. In practice, the transferee will receive 37.27 cents per litre for the amount of the quota transferred and the transferor will receive 8.96 cents per litre for the amount transferred.

Clause 30A Adjustment of eligibility for payment rights – abnormal market milk pool distributions

121. Clause 30A provides for the adjustment of eligibility for payment rights to recognise abnormal distribution of market milk pool distributions in 1998/99 to producers delivering milk through pooling systems. Pooling is intended to ensure all producers receive an equal proportionate share of market milk payments. Where this did not happen in 1998/99, the DSAP Scheme may make provision to adjust payment rights as if an equal proportionate share of market milk payments were made during that year.

Clause 31 Adjustment of eligibility for payment rights – death

122. Clause 31 allows the DSAP scheme to modify eligibility requirements for a payment right to cover the death of an individual who held an eligible interest in a dairy farm enterprise at 6.30pm on 28 September 1999.

Clause 32 Ancillary or incidental provisions

123. If the Minister considers appropriate, the DSAP scheme may contain other ancillary or incidental provisions.

Clause 33 Scheme making power not limited

124. In formulating the DSAP scheme, while the Minister must have regard to the policy objectives outlined in clauses 11 to 32 inclusive, the Minister is not limited by these objectives.

Clause 34 Variation of scheme

125. This clause provides for variation of the DSAP scheme. Any variation must be consistent with the relevant policy objectives and requirements set out in Part 2.

Clause 35 Scheme to be a disallowable instrument

126. The DSAP scheme, to be formulated by the Minister, will be a disallowable instrument.

Clause 36 Application to things happening before commencement

127. This is a technical provision to clarify that although Division 1 refers to the present tense, it does not mean the provisions contained in Division 1 cannot be applied in the past.

Clause 37 DAA may obtain information and documents

128. Clause 37 enables the DAA to obtain information and documents from a person which the DAA has reason to believe is relevant to the operation of the DSAP scheme. Similarly, the DAA may also require a person to give evidence. Failure by a person to comply with a request for information, documents or evidence is guilty of an offence under subclause 37(5). In addition, a person complying with a request from the DAA for information, documents and evidence is subject to the offences set out in Part 5 of this Schedule.

Clause 38 Copying documents-reasonable compensation

129. A person complying with the DAA’s request to make copies of (and supply) any such documents to the DAA which the DAA has reason to believe is relevant to the operation of the DSAP scheme, is entitled to be paid reasonable compensation.

Clause 39 Self-incrimination

130. An individual, who is subject to a notice given by the DAA under clause 37, can not refuse to comply with the notice on the grounds that the giving of information or evidence or producing a document (or a copy of a document) under this Division on the grounds that the information or evidence or the production of the document (or copy) might tend to incriminate the individual or expose the individual to a penalty.

131. However, giving the information or evidence or producing the document (or copy) and any information, document or thing obtained as a direct or indirect consequence of giving the information or evidence or producing the document (or copy), is not admissible in evidence against the individual in criminal proceedings other than proceedings for an offence against subclause 37(5), clause 131, clause 132, clause 133 or clause 134.

Clause 40 Copies of documents

132. If, in accordance with the DAA’s information gathering powers, a person is required to produce a document (or copy), the DAA may inspect and make and retain copies of the document.

Clause 41 DAA may retain documents

133. Clause 41 provides that while the DAA may take and retain documents for as long as is necessary, the person who owns the document is entitled to be supplied with a certified true copy as soon as practicable. This certified true copy must be received in all courts and tribunals as evidence as if it were the original. Until a certified copy is supplied, the DAA must provide the owner with reasonable access to the document.

Clause 42 Protection of confidentiality of information

134. Clause 42 protects confidentiality of information. Specifically, it restricts what the entrusted person may do with protected information, or protected documents, that the person has obtained in the course of official employment (as defined). Subclause 42(3) outlines what information an entrusted person may record or disclose. If the entrusted person breeches these restrictions, they are liable to imprisonment for 2 years.

Clause 43 Scheme debt

135. Clause 43 defines a scheme debt to allow recovery by the DAA of DSAP overpayments.

Clause 44 Scheme debts are debts due to the Corporation

136. A DSAP overpayment is a debt due to the Corporation.

Clause 45 Recovery by legal proceedings

137. The DAA, as the agent of the Corporation, may seek to recover a DSAP overpayment by action in a court of competent jurisdiction.

Clause 46 Recovery by set-off

138. A DSAP overpayment may be recovered from an entity by deducting the overpayment from one or more future DSAP payments payable to the entity.

Clause 47 Corporation may collect money from a person who owes money to an entity

139. Clause 47 allows the Corporation to collect money from a person who owes money to an entity that has a DSAP overpayment. For example, it allows the DAA to recover a DSAP overpayment from an entity’s bank account. The third party must comply with the DAA’s direction or be subject to a penalty.

Clause 48 Penalty for unpaid scheme debts

140. The entity is liable to a penalty of 16% per year on the unpaid amount of a scheme debt. The penalty is to encourage repayment of the debt. However, if a scheme debt is the result of an error made by the DAA or the Corporation and the payment concerned was received in good faith, the penalty does not apply. Subclause 48(4) is a standard provision which allows the penalty payable to be reduced in the case where a judgement debt bears interest.

141. If the making of a false statement results in a payment right being granted or the face value of the payment right exceeding what it should have been if the statement was not false, the DSAP scheme must give the DAA the power to cancel the payment right entirely or cancel the excess units. Units cancelled under this clause may result in an overpayment which can be recovered by the DAA under Division 4. The net effect of this clause and Division 4 is that the Commonwealth can recover payments made on the basis of fraudulent claims.

142. If a DAA error in relation to the grant of a payment right (and not the result of a false statement) results in a payment right being granted or the face value of the payment right exceeding what it should have been if the statement was not false, the DSAP scheme must give the DAA the power to cancel the payment right entirely or cancel the excess units. A unit cancelled under this clause may result in an overpayment which can be recovered by the DAA under Division 4. The net effect of this clause and Division 4 is that the Commonwealth can recover payments made on the basis of an error made by the DAA. However, the DSAP scheme may allow the DAA discretion as to the cancelling of units where an entity who received a DSAP payment in respect of a unit acted in good faith.

Clause 51 Cancellation of unit because of a breach of an undertaking to assign the unit

143. If an entity breaches their undertaking to assign a unit to an eligible entity in accordance with clause 21(4)(b) (ie within 60 days after the transfer is registered), the DAA must write to the entity directing them to comply with the undertaking within 60 days. If the entity does not comply with the written direction, the DSAP scheme must authorise the DAA to cancel the unit at the end of that 60-day period.

144. To apply for the DEP scheme, an entity must first be granted a DSAP payment right and still be the registered owner of one or more unencumbered units in the payment right. The units in the DSAP payment right are only cancelled if an entity qualifies for the DEP scheme.

145. A DSAP payment right or a unit can only be cancelled in accordance with clauses 49, 50, 51 and 52.

Clause 54 Dairy Adjustment Authority

146. Clause 54 provides for the establishment of the DAA.

Clause 55 Functions

148. The DAA has power to do all things necessary or convenient to be done for or in connection with the performance of its functions. In particular, the DAA has the power to enter into contracts and agreements on behalf of the Commonwealth.

Clause 57 Phasing-down of the DAA

149. Clause 57 allows the Minister to phase-down the DAA by reducing the number of DAA members. For example, the Minister may phase down the DAA to ensure that its size is commensurate with its workload.

Clause 58 Membership of the DAA

150. Clause 58 provides for membership of the DAA at various intervals. For fraud control purposes, the DAA will not be abolished and if there is no ordinary member, the Secretary will be the ex-officio member of the DAA. This is to ensure that if fraud is discovered at any time in the future, the DAA will be able to cancel the units and recover any overpayments.

Clause 59 Qualifications of DAA members

Clause 60 Appointment of DAA members

152. Ordinary DAA members are to be appointed by the Minister on a part-time basis by written instrument. To allow flexibility, the period of appointment is to be specified in the instrument.

Clause 61 Procedures

153. Subclause 61(1) outlines the various procedures, such as the convening of meetings, to be prescribed in regulations. Subclause 61(2) specifically provides for the procedure for the passing of a resolution at a DAA meeting.

Clause 62 Disclosure of interests before the second DAA phase-down time

154. Clause 62 provides for the disclosure of interests by an ordinary DAA member who has a material personal interest in a matter being considered by the DAA. Clause 63 provides for the disclosure of interests after the second DAA phase-down time.

Clause 63 Disclosure of interests after the second DAA phase-down time

155. Clause 63 provides for the disclosure of interests by an ordinary member or the Secretary as the ex-officio member of the DAA after the second DAA phase-down time. If the Minister considers the DAA has a material interest in a matter which could conflict with the proper performance of its functions in relation to that matter, the Minister must direct the DAA to delegate its powers and functions in relation to that matter to an SES or acting SES employee.

Clause 64 Remuneration and allowances

156. The remuneration of an ordinary DAA member is to be determined by the Remuneration Tribunal or as is prescribed. An ordinary DAA member is to be paid such allowances as are prescribed.

Clause 65 Leave of absence

157. An ordinary DAA member can be absent from a meeting or meetings of the DAA with the approval of the Minister or the DAA Chairman.

Clause 66 Resignation

158. An ordinary DAA member may resign by writing (signed by the member) and sent to the Minister.

Clause 67 Termination of appointment

159. Clause 67 provides that the Minister may terminate an ordinary DAA member’s appointment, or the appointment of all of the ordinary DAA members, if the Minister considers the member’s or the DAA’s performance has been unsatisfactory. For example, subclause 67(3) provides for termination of appointment because of misbehaviour or physical or mental incapacity. The Minister may also terminate the appointment of the government member.

Clause 68 Other terms and conditions

160. The Minister can determine that an ordinary DAA member holds office on such terms and conditions in respect of matters not covered by this Act.

Clause 69 Corporation must provide assistance to DAA

161. This clause provides that if the DAA requests the Corporation to provide it with resources and facilities, the Corporation must provide the requested assistance. However, this does not prevent the DAA from obtaining resources elsewhere. It should be noted that staff of the Corporation working for the DAA are not subject to the direction of the Corporation, or the Managing Director. This is to clearly delineate the separate roles and responsibilities of the two bodies.

Clause 70 Consultants etc

162. The DAA, by acting on behalf of the Commonwealth, may engage consultants.

Clause 71 Delegation by DAA- before second DAA phase-down time

163. To enable the efficient and effective operation of the DAA, the DAA may delegate its functions or powers to a DAA member or a person who holds or performs the duties of a position of General Manager for the Corporation, in so far as the Corporation officer is responsible for support of DAA activities.

Clause 72 Delegation by DAA-after second DAA phase-down time

164. Clause 72 provides for the delegation of powers and functions by an ordinary DAA member or the Secretary as the ex-officio member of the DAA. These powers and functions can only be delegated to an SES employee or acting SES employee.

Clause 73 Annual report

165. Clause 73 provides for the annual reporting requirements of the DAA.

Clause 74 DSAP Payments taken to be subsidies for the purposes of section 15-10 of the Income Tax Assessment Act 1997

166. This clause provides that DSAP payments will be subject to income tax.

Clause 75 Review in 2002-2003

167. The review in 2002-2003 will allow the Minister to assess the adequacy of levy collections to fund DSAP payments and dairy exit payments, following the end of the Dairy Exit Program.

Part 3-Dairy Structural Adjustment Fund

Clause 76 Establishment of the Dairy Structural Adjustment Fund

168. Clause 76 provides for the establishment of the Dairy Structural Adjustment Fund (DSAF) to house the funds collected under the dairy adjustment levy. This fund will be vested in and managed by the Corporation in accordance with the requirements of the Commonwealth and Authorities and Companies Act 1997.

Clause 77 Money to be paid into the Dairy Structural Adjustment Fund

169. Clause 77 clearly specifies the money to be credited to the DSAF, including the dairy adjustment levy, fees and civil penalties relating to the DSAP scheme and the recovery of overpayments.

Clause 78 Application of the Dairy Structural Adjustment Fund

170. Clause 78 lists the specific purposes for which the Corporation is to spend the money in the DSAF. It should be noted that subclause 78(m) includes interest repayments on money borrowed by the Corporation for the purpose of making payments in accordance with this clause.

Clause 79 Solvency of the Dairy Structural Adjustment Fund

171. Clause 79 provides that the Corporation and the Minister must take all reasonable steps to ensure that there is sufficient money in the Fund to make DSAP and DEP payments and meet any other calls on the Fund as those calls fall due.

Clause 80 Borrowing for the purposes of the Dairy Structural Adjustment Fund

172. Clause 80 allows the Corporation to borrow money for the purpose of making payments in accordance with clause 78. To allow the Corporation to make DSAP and dairy exit payments from the DSAP payment start day, such borrowings can occur before the DSAP payment start day.

Clause 81 Investment of money standing to credit of the Dairy Structural Adjustment Fund

173. Clause 81 provides that the Corporation can invest money standing to the credit of the DSAF only in accordance with section 19 of the Commonwealth Authorities and Companies Act 1997.

Clause 82 Payment of dairy adjustment levy to the Corporation

174. Clause 82 provides that although the dairy adjustment levy and associated penalties must be paid into Consolidated Revenue, the Commonwealth must pay this money to the Corporation.

Clause 83 Payment of DSAP scheme fees to the Corporation

175. Clause 83 provides that although fees collected under the DSAP scheme must be paid into Consolidated Revenue, the Commonwealth must pay this money to the Corporation.

Clause 84 Payment of penalties under the DSAP scheme to the Corporation

176. Clause 84 provides that although penalties collected under the DSAP scheme for unpaid scheme debts must be paid into Consolidated Revenue, the Commonwealth must pay this money to the Corporation.

Part 4- Collection of dairy adjustment levy

Clause 85 Simplified outline

177. Clause 85 contains a simplified explanation of the Dairy Adjustment Levy and its collection arrangements.

Clause 86 Definitions

178. This clause lists definitions of terms used in this part. Of particular note:

179. levy means the levy that is payable under Division 2 and imposed as the Dairy Adjustment Levy by any of the following Acts:

(a) the Dairy Adjustment Levy (Excise) Act 2000;
(b) the Dairy Adjustment Levy (Customs) Act 2000;
(c) the Dairy Adjustment Levy (General) Act 2000.

180. process in the context of clause 95 is used to identify the last process before the product is leviable. Process does not include common management practices such as chilling, transport or distribution of the product, where the state of the product is not changed.

181. Relevant application to own use is used to take account of activities which are the equivalent of a retail sale of milk product, but are not a retail sale. The notes on clause 87 provides some examples of relevant application to own use.

Clause 87 When levy is payable

182. Subclause 87(1) provides for where levy is payable. These subclauses ensure that the levy raises sufficient revenue to fund the Dairy Industry Adjustment Program, and simplify the collection process.

183. Subclause 87(1)(a) applies the levy liability at the point of sale of the leviable milk product to a retailer.

184. Subclause 87(1)(b) applies the levy to the retail sale of a leviable milk product where there has not been a sale to a retailer before the sale to the consumer. In most cases this involves a sale of milk direct from the milk factory or a dairy farm to the consumer, or a prison dairy farm that produces milk that may be sold through the prison cafeteria.

185. Subclauses 87(1)( c) and (d) ensure that levy is imposed where the equivalent of a retail sale of milk product has occurred.

186. Subclause 87(1)(c) applies the levy liability at the point of sale of the leviable milk product to a person who purchases it for the purposes of relevantly applying it to their own use. The product may have been purchased for example, for:

(a) giving it away to a person who does not give any consideration for it, such as a promotional give-away by a supermarket, or consumption by patients in a public hospital; or
(b) transferral of the milk product as part of an overall contract, where consideration by the consumer is given, but not specifically for the purpose of buying milk, such as milk sachets in motels, airlines etc; or
(c) where the leviable milk product is an ingredient in a product that is given to the consumer and may or may not involve consideration by the consumer. Examples are:

(i) where a café has purchased leviable milk product from a milk vendor to make custard for use as part of a meal purchased by the consumer.
(ii) where a person has purchased leviable milk product from a milk vendor to make custard that is given away.
(iii) where an airline has purchased leviable milk product to make custard for use as part of a meal provided as part of the airline service.

187. Note that clause 89 provides that once the levy has been imposed, it cannot be imposed a second time. For example, should a community group have purchased some milk from a supermarket the levy will already have been imposed on the supermarket by subclause 87(1)(a). Should the community group use the milk as an ingredient in a product that is either given away or sold to raise money, they would not have to pay levy (under subclause 87(1)(c)) as the levy has already been paid by the supermarket.

188. Subclause 87(1)(d) applies the levy liability where the person uses the leviable milk product for the purposes of relevantly applying it to their own use similar to subclause 87(1)(c). The difference between this subclause and subclause 87(1)(c ) is that the levy payer does not purchase the product in Australia before the relevant application to own use. That is, they are either vertically integrated within Australia, or have brought product into Australia for the relevant application to own use.

189. Subclause 87(2) prevents the application of the levy to a relevant application to a persons own use of a leviable milk product if it is consumed at the site on which it was produced. For example this clause provides an exemption from the levy for domestic farm or housecow milk consumed on farm, or the circumstance where a prison dairy provides milk for the consumption of the inmates free of charge.

190. Subclause 87(3) provides that the levy will not be payable unless it is imposed as the Dairy Adjustment Levy by another Act. The Dairy Adjustment Levy (Excise) Bill 2000, the Dairy Adjustment Levy (Customs) Bill 2000 and the Dairy Adjustment Levy (General) Bill 2000 impose the levy.

Clause 88 Commencement of levy

191. This clause provides for the levy to commence on products leviable under clause 87 on 8 July 2000.

Clause 89 No double levy

192. This clause prevents the double application of the levy by providing that if the leviable milk product has previously been subject to the imposition of levy then further levy under this legislation can not be applied.

Clause 90 Exemptions from levy

193. This clause allows regulations to be made which provide exemptions from levy.

Clause 91 Who pays the levy

194. This clause stipulates who is liable to pay the levy and is aligned with the provisions of subclause 87(1) which provides for when levy is payable.

Clause 92 Termination of levy when core funding obligations are met

195. This clause provides for the Dairy Adjustment Levy to be terminated by the Minister publishing a notice in the Gazette once the Minister is satisfied that certain costs associated with the Dairy Industry Adjustment Program have been met. This includes the cost to the Commonwealth of collecting the Levy.

Clause 93 Termination of levy if DSAP payment start day does not occur within 6 months after the Dairy Industry Adjustment Act 2000 receives Royal Assent

196. This clause provides for the Dairy Adjustment Levy to be terminated after a period of six months after Royal Assent if the Dairy Structural Adjustment Program start day is not fixed by a Proclamation published in the Gazette.

Clause 94 When levy due for payment

197. The intention of this clause is to protect levy revenue by limiting the elapsed time between sale or supply of the product and the payment of the levy.

198. If the levy was payable on the sale of a leviable milk product under clause 87(1)(a) or (c), the levy is due and payable on whichever of the following comes first:

(a) the first day on which any part of the payment for the sale is due; or
(b) 90 days.

199. Where levy is payable under Clause 87(1)(b) the levy is due for payment on the 28^th day after the end of the month after the product was sold. If the levy is payable under Clause 87(1)(d) then the levy is due for payment on the 28^th day after the end of the month in which the relevant application occurred.

200. If the levy payer is declared a designated small levy payer (refer clause 121), levy will be payable on the 28^th day after the end of the financial year.

Division 4 - Collection agents, collection sub-agents and collecting organisations

201. The purpose of this Division is to provide for a process of levy collection that maximises target revenue collection at least cost to the Commonwealth and Industry.

Clause 95 Collection agents

202. This clause requires that levy is payable under Clause 87(1)(a), (b) or (c), unless there is a collection agreement between the Commonwealth and the purchaser. It is intended by this clause for the person who conducted the last process to be agents of the Commonwealth and collect the levy from retailers other purchasers or sub-agents and then remit the levy at a regular interval to the Commonwealth.

203. Subclause 95(2) provides measures to secure collection of the levy. The collection agent is defined as the person who conducted the last process before the sale to a person for resale or applying the product to their own use. In the majority of cases the person conducting the last process, and is thus recognised as the collection agent, will be the milk processor.

204. Subclause 95(3) provides that where a purchaser has paid the levy to a collection agent, then their liability to pay the levy to the Commonwealth is discharged. The intent of this subclause is to prevent the purchaser being exposed to possible double payment of levy upon leviable milk product. This would occur if the collection agent has defaulted in remitting the levy to the Commonwealth.

205. Subclause 95(4) provides a time frame for the collection agent to remit the levy to the Commonwealth. This would usually be 28 days after the end of the month in which the levy was collected, except in the case of designated small remitters (refer clause 120), who would be required to remit the levy on the 28^th day after the end of the financial year.

206. Subclause 95(5) provides offences for contravention of this clause.

Note as at 1 February 2000, one penalty unit is prescribed by subsection 4AA(1) of the Crimes Act 1914 as $110.

207. Subclause 95(6) provides that a collection agent in supplying the product must inform the purchaser that levy is payable on the sale of the product, and the amount of levy payable.

208. Subclause 95(7) provides an offence for failing to adhere to the requirements of subclause 95(6) of 50 penalty units.

Clause 96 Collection sub-agents-simple supply chain

209. This clause establishes a single interposed person between the collection agent (usually the processor) and the purchaser as a collection sub-agent for the levy on behalf of the Commonwealth. It is intended by this clause for the interposed persons to be sub-agents of the Commonwealth and collect the levy from retailers or other purchasers and then remit the levy at a regular interval to the collection agent.

210. For example if the collection agent, being a processor, sells the product to a wholesaler who then on-sells the product to a purchaser the wholesaler is deemed to be the interposed person and therefore a sub-agent

211. This clause allows amounts of levy to be amalgamated along the supply chain to ease levy collection. In addition, it enables any necessary levy recovery action to take place at any point in the supply chain and allows the levy to be paid in tandem with payment for the product between each party, thereby reducing business costs.

212. Sub-agents are excused from collecting and remitting the levy if a relevant third party has an agreement with the Commonwealth to collect levy (under the provisions of Clause 101).

213. Subclause 96(2)(b) provides that the purchaser is required to pay to the collection agent the levy before the time when the levy becomes due to be paid under the provisions of clause 94(1).

214. Subclause 96(3) provides that where a purchaser has paid the levy to a collection sub-agent, then their liability to pay the levy to the Commonwealth is discharged. The intent of this subclause is to prevent the purchaser being exposed to possible double payment of levy upon leviable milk product. This would occur if the collection sub-agent has defaulted in remitting the levy to the collection agent.

215. Subclause 96(4) provides a mechanism to establish regulations to provide a time frame for the collection sub-agent to remit the levy to the collection agent. The determination of the actual time frame will be set in regulations.

216. Subclause 96(5) compliments the requirements and intent of subclause 95(4) upon the collection agent and requires that the collection agent remit the levy received from a sub-agent to the Commonwealth on the 28^th day after the end of the month in which the sub-agent remitted the levy. However, in the case of a designated small remitter, the collection agent will be required to remit the levy on the 28^th day after the end of the financial year.

217. Subclause 96(6) provides offences for contravention of subclause 96(4) or (5) and applies them to sub-agents and collection agents who are required to remit to a collection agent, or the Commonwealth, levy collected under the provisions of this clause.

218. Subclause 96(7) and (8) complements the requirements of subclause 95(6) and (7). This ensures that all parties from the collection agent through the sub-agent to the retailer are fully aware of the levy and their liability applicable to a particular amount of leviable product.

219. Subclause 96(9) provides an offence of failing to adhere to the requirements of subclause 96(7) or (8) with a penalty upon conviction of 50 penalty units.

Clause 97 Collection sub-agents-complex supply chain

220. This clause establishes two or more persons interposed between the processor and the levy payer as collection sub-agents for the levy on behalf of the Commonwealth. It is intended by this clause for the interposed persons to be sub-agents of the Commonwealth and collect the levy from retailers and other purchasers and then remit the levy at a regular interval to the next sub-agent up the supply line to the collection agent.

221. This clause allows amounts of levy to be amalgamated along the supply chain to ease levy collection. In addition, it enables any necessary levy recovery action to take place at any point in the supply chain and allows the levy to be paid in tandem with payment for the product between each party, thereby reducing business costs.

222. Subclause 97(2) identifies the order of sub-agents in relation to the supply chain.

223. Sub-agents are excused from collecting and remitting the levy if a relevant third party has an agreement with the Commonwealth to collect levy (under the provisions of Clause 101).

224. Subclause 97(3)(b) provides that the purchaser is required to pay the levy to the lowest ranking sub-agent (from whom they purchased the milk product) before the time when the levy becomes due to be paid under the provisions of subclause 94(1).

225. Subclause 97(4) provides that where a purchaser has paid the levy to the lowest ranking sub-agent on a supply chain, then their liability to pay the levy to the Commonwealth is discharged. The intent of this subclause is to prevent the purchaser being exposed to possible double payment of levy upon leviable milk product. This would occur if a collection sub-agent in a supply chain has defaulted in remitting the levy to the next ranking sub agent or the collection agent.

226. Subclauses 97(5), (6) and (7) complement the requirements and intent applicable to sub-agents in subclause 96(4) and applies them to sub-agents in a complex supply chain. This requires the lowest sub-agent in the chain to remit the levy to the next sub-agent and the levy then to be remitted by each sub agent in turn up the chain to the highest ranking sub agent who in turn is required to remit the levy to the collection agent.

227. Subclause 97(8) complements the requirements and intent applicable to collection agents in subclause 96(5) and requires that the collection agent remit the levy received from a sub-agent to the Commonwealth on the 28^th day after the end of the month in which the sub-agent remitted the levy. However, in the case of a designated small remitter, the collection agent will be required to remit the levy on the 28^th day after the end of the financial year.

228. Subclause 97(9) provides offences for contravention of subclauses 97(5), (6), (7) or (8) and complements the requirements and intent of subclause 96(9) applying them to sub-agents and collection agents in a complex supply chain who are required to remit to another sub-agent or a collection agent or the Commonwealth levy collected under the provisions of this clause.

229. The intention of subclauses 97(10), (11) and (12) is to complement the requirements of subclauses 96(7) and (8), but in a complex supply chain. This ensures that all parties from the collection agent through all the sub-agents to the party liable to pay the levy are fully informed and aware of the levy and their liability applicable to a particular amount of leviable product.

230. Subclause 97(13) provides an offence of failing to adhere to the requirements of subclause 97(10), (11) or (12) with a penalty upon conviction of 50 penalty units.

Clause 98 Collection agents and collection sub-agents to notify unpaid levy

231. This clause provides the mechanism to readily identify and pursue unpaid levy by requiring agents and sub-agents to inform the Commonwealth of any levy outstanding on the 28^th day after the end of the month in which the levy was payable. This provision enables agents and sub-agents to pass the information to the Commonwealth at the same time as levy is remitted by the agent or sub-agent, thus reducing the administrative burden on industry.

Clause 99 Collection agents and collection sub-agents to notify unremitted levy

232. This clause provides for agents and sub-agents to inform the Commonwealth of any levy that has not been remitted by a sub-agent further down the supply chain which remains outstanding on the 28^th day after the end of the month in which the levy was due to be remitted.

Clause 100 Collection agents and collection sub-agents to issue receipts for levy

233. The intention of this clause is that each collection agent, sub-agent and party liable to pay the levy is provided with proof that their obligation to pay or remit levy has been fulfilled. It also provides the Commonwealth the means for identification and commencement of recovery procedures where a break has occurred in the collection chain. Provision is made to allow exemptions from this clause.

Clause 101 Collecting organisations

234. This clause is intended to allow the Secretary to enter into an agreement with an organisation to collect the levy on behalf of the Commonwealth. This clause closely parallels Section 11 of the Primary Industries Levies and Charges (Collection) Act 1991.

235. Subclause 101(1) provides for the collection agreement under this clause to apply to levy which is payable on leviable milk product sold to a purchaser for retail sale or sold to a person for the purpose of relevantly applying the product to a persons’ own use

236. Subclause 101(3) outlines what may be included in such an agreement but does not limit what may be included.

237. Subclause 101(4) provides that whilst an agreement is in force, payments of amounts of levy by a particular person are to be made to the organisation in accordance with the agreement.

238. Subclause 101(5) stipulates that where a person under the provisions of an agreement pays amounts of levy, that person is discharged from further liability to pay levy to the extent of the amount paid.

239. Subclause 101(6) requires the Secretary to consult with the Council before entering into an agreement

240. Sub-clause 101(7) requires that the Secretary give notice, within 21 days, in the Gazette of agreements entered into.

241. Subclause 101(8) allows that failure to consult with the Council or give timely notice in the Gazette will not invalidate the agreement. The Commonwealth and the Secretary will always have a duty to consult with the Australian Dairy Industry Council. However, this does not undermine the authority of the Commonwealth to make a decision to enter into agreements with a collecting organisation.

Clause 102 Application of the Financial Management and Accountability Act 1997

242. This clause provides that the Financial Management and Accountability Act 1997 does not apply to levy collected by a collection agent, a collection sub agent or a collecting organisation but does apply to moneys remitted by them to the Commonwealth.

243. The intention of this Division is to provide for the retention of specific records to assist in the identification of levy liability of both the payer and collectors of the levy.

Clause 103 Record-keeping requirements for levy payers

244. This clause is intended to provide the requirement for levy payers to keep certain records of transactions and the periods for which the records must be kept.

245. Subclause 103(1), (2) and (3) requires records in respect leviable milk products where levy is payable under the provisions of Clause 87(1) to be kept and to be retained for five (5) years after the relevant transaction or use took place.

246. Subclause 103(4) provides that no matter what medium or method by which records are maintained or stored, they are to be of such a type and standard as to be easily inspected and understood by a person authorised to inspect them. The records must be in English or readily accessible or convertible to English, and provide sufficient information for a person’s liability to pay levy to be ascertained.

247. Subclause 103(5) provides a mechanism to remove the requirement for the retention of records by levy payers either under notification by the Secretary or if the company involved has been finally dissolved.

248. Subclause 103(6) provides penalties of 30 units for failing to comply with the record keeping requirements of this clause.

Clause 104 Record-keeping requirements for collection agents and collection sub-agents

249. This clause is intended to provide the requirement for collection agents and sub-collection agents to keep certain records of transactions and the periods for which the records must be kept.

250. Subclause 104(1) and (2) requires records in respect to amounts of levy received by collection agents and sub-agents to be kept and to be retained for five (5) years after the levy is received.

251. Subclause 104(3) provides that no matter what medium or method by which records are maintained or stored, they are to be of such a type and standard as to be easily inspected and understood by a person authorised to inspect them. The records must be in English or readily accessible or convertible to English, and provide sufficient information for a person’s liability to pay levy to be ascertained.

252. Subclause 104(4) provides a mechanism to remove the requirement of the retention of records by collection agents or sub-agents either under notification by the Secretary or if the company involved has been finally dissolved.

253. Subclause 104(5) provides penalties of 30 units for collection agents and sub-agents for failing to comply with the record keeping requirements of this clause.

Clause 105 Late payment penalty

254. The intention of this clause is to provide and set a rate of penalty for the late payment or late remittance of the levy.

255. Subclause 105(1)(a) and (b) set out the method to calculate the amount of penalty on late levy payments.

256. Subclause 105(2) applies the late payment to remission of levy by a collection agent or a collection sub-agent.

257. Subclauses 105(2)(a) and (b) set out the method to calculate the amount of penalty due. This method is the same as late payment penalties set for other primary industries levies, which may also be collected on behalf of the Commonwealth by persons designated collection agents by this part (see the Primary Industries Levies and Charges Collection Act 1991).

258. If a partial payment is made during a month, the penalty payment is done in two parts for that particular month.

259. Subclause 105(3) allows the Secretary or his delegate to extinguish a whole or part of the penalty imposed under this clause.

260. This division provides for the recovery of levy, penalties, and other amounts as debts due to the Commonwealth.

Clause 106 Levy debts

261. This clause identifies what are levy debts and is intended to assist in the pursuit of outstanding levies by the Commonwealth. Levy debt is intended to include the principal amount and any amount of late payment penalty outstanding. Note that upon recovery of the debt the obligation to remit the levy ceases.

Clause 107 Levy debts are debts due to the Commonwealth

262. This clause makes levy debts as debts due to the Commonwealth and allows the Commonwealth to take action at any point in the levy chain to recover unpaid levy or levy that has not been remitted.

Clause 108 Recovery of levy debts

263. This clause allows the Commonwealth to take action to pursue levy debts in the appropriate arena.

Clause 109 Commonwealth may collect money from a person who owes money to a person

264. Subclause 109(1) states that this clause allows the Commonwealth to collect moneys from a person who owes money to a person who has a levy debt. This is often referred to as ‘garnishing powers’.

265. Subclause 109(2) provides that the Secretary may give a third party a direction to pay some or all of the available moneys to the Commonwealth to satisfy a levy debt.

266. Subclause 109(3) prevents a direction requiring payment to the Commonwealth before it becomes due.

267. Subclause 109(4) creates an offence for a third party that fails to comply with a direction of the Secretary.

268. Subclause 109(5) allows a Court to order a convicted person (above any other penalty imposed) to pay the Commonwealth an amount up to that specified by the Secretary’s direction.

269. Subclause 109(6) provides indemnity to the person making the payment and caries the assumption that the payment is made with the authority of all persons concerned.

270. Subclause 109(7) and (8) provides for the Secretary to immediately give notice to the party concerned where any levy debt or part of a levy debt is discharged before any payment is made by the third party.

271. It is intended that, as far as possible, the Secretary or his delegate will, prior to providing the notice, ensure that the funds received for the purpose of discharge of any part of the debt are fully transferred and not recoverable under any action taken against the Commonwealth.

272. Subclause 109(9) outlines the circumstances where money is owed to a third person for the purposes of this clause and is intended to include any monies owed or retained on account of the liable person irrespective of any conditions of payment.

273. The purpose and intent of this division is to enable authorised persons to audit records and obtain information to assist in the identification of levy liability, outstanding levy debts or incorrect levy payments. The provisions contained in this division are based on provisions in the Primary Industries Levies and Charges Collection Act 1991 to assure consistency and continuity of collection regimes.

Clause 110 Power to call for returns or information

274. This clause is intended to provide powers for authorised officers to obtain information relevant to the collection of the dairy adjustment levy. The clause also provides penalties for failing to comply with notices exercising that power.

275. Subclause 110(1) provides an authorised person, who must be an APS employee authorised by the Secretary under the provisions of clause 125, with the power to call for information by notice and require, under Subclause 110(1)(a) that the notice is, within a reasonable time, answered and the return or information called for is supplied. Subclause 110(1)(b) provides that the return or information is verified by statutory declaration.

276. Subclause 110(2) creates an offence for contravention of a notice issued under this provision.

277. Subclause 110(3) provides that upon conviction of an offence of failing to comply with a notice to supply a return or information the Court may direct that the return or information is supplied within a specified time. Subclause 110(4) provides a further offence in the same terms as subclause 110(2) for failing to comply with the Court direction.

Clause 111 Regulations may require the giving of returns or information

278. This clause provides regulations concerning the contents and requirements of returns or information relating to the levy.

279. Subclause 111(1) outlines those subject to the regulations.

280. Subclause 111(2) allows the regulations to provide penalties for offences against those regulations with penalties up to 50 units. Subclause 111(3) allows for a Court upon conviction to require the person to provide the return or information. Subclause 111(4) makes it an offence to contravene a Court direction.

Clause 112 Self-incrimination

281. This clause provides for a safeguard against self-incrimination for requirements under Division 8. It is not the intention of this clause to extend that safeguard outside of the scope of Division 8.

282. Subclause 112(1) provides that a requirement to submit a return or information is not excused on the grounds of self-incrimination. However, protection is given by subclause 112(2) against self incrimination in criminal proceedings by:

(i) information, document or thing obtained under the provisions of this Division except for proceedings under the provisions of clauses 110 or 111 relating to the submitting of returns, or information; or
(ii) Clause 133 or 134 relating to providing false or misleading information; or
(iii) providing false or misleading documents that relate to the requirements of Division 8.

283. Note that this clause is subject to amendment once the Criminal Code(Theft, Fraud, Bribery and Related Offences) Bill 1999 is passed by Parliament.

284. This division provides access to premises by authorised officers and includes requirements to assist and refrain from hindering or obstructing that access. The overall intent of the Division is to provide powers to enable the audit process to proceed without affording an unreasonable burden on businesses involved in the collection process. The provisions contained in this division are based on provisions in the Primary Industries Levies and Charges Collection Act 1991 to assure consistency and continuity of collection regimes.

Clause 113 Powers of authorised person in relation to premises

285. This clause provides powers to authorised officers in relation to entering premises and their subsequent actions.

286. Subclause 113(1) allows an authorised officer to enter premises either with consent or in accordance with a warrant issued under the provisions of clause 116 for the purpose of audit and/or investigation in relation to compliance of the collection of Dairy Adjustment Levy. It is not the intent of this subclause that entry requires the presence at the entering of the authorised person or thereafter of the person giving the consent.

287. Subclause 113(2) provides authority for an authorised officer who has entered premises to (a) search, examine and take stock of any leviable milk product and (b) search, inspect, examine, take extracts from, and make copies of, any examinable documents which includes any record or document stored or maintained in any medium including electronic or computer records.

Clause 114 Obstruction of authorised person acting under a warrant

288. This clause is intended to prevent hindrance or obstruction of an authorised person exercising the powers conferred under clause 113 with the authority of a warrant issued under clause 116 and provides a penalty of 30 units. It is intended that this provision be extended to any person who hinders or obstructs the authorised person no matter what their relationship is to the premises or even if no such relationship exists.

Clause 115 Persons to assist authorised persons acting under a warrant

289. This clause requires that the occupier or the person in charge of premises entered by an authorised person exercising powers under the provisions of clause 113 and under the authority of a warrant under clause 116 must, upon request, provide reasonable assistance to the authorised person in exercising those powers. The intent is that provision of reasonable assistance includes, amongst other things, access to or extraction of records from all mediums of storage including computer storage. Further, it is the intent of this clause that the person in charge includes the person who has overall legal responsibility for the operations of the establishment (such as an owner or lessee) as well as the person in charge at that time of the whole premises, part of the premises, an operation within those premises or part of an operation in those premises.

Clause 116 Warrant to enter premises

290. This clause enables the issuing of a warrant for an authorised person to enter premises and exercise powers under this part. The intent of the warrant is to enable authorised officers to ensure the requirements of this part are adhered to and protect the interests of the Commonwealth, the industry as a whole and the levy funds.

291. Subclause 116(1) enables a magistrate if satisfied by the application made by an authorised person on oath that (a) there are reasonable grounds for believing that there are on nominated premises (i) any leviable milk products or (ii) examinable documents and that (b) the warrant is reasonably required to ascertain if a person is contravening or has contravened a provision of the collection of dairy adjustment levy, to issue a warrant for the authorised person to enter the premises. Subclauses 116(1)(c) and (d) provide for the authorisation of such assistance and force as is necessary and reasonable to effect the entry and to give the warrant capability to be acted upon within specific times or at any time.

292. Subclause 116(2) requires that the warrant specifies (a) the powers exercisable under subclause 113(2) by the authorised person, namely, search, examine and take stock of any leviable milk product and search, inspect, examine, take extracts from, and make copies of, any examinable documents. And (b) the day at which the warrant expires not being more than 14 days after issue.

Clause 117 Identity cards

293. This clause relates to the provision and use of identity cards by authorised officers.

294. Subclause 117(1) provides that the Secretary may issue an identity card to an authorised officer.

295. Subclause 117(2) requires what must be contained on an identity card and that the card must be in a format approved by the Secretary.

296. Subclause 117(3) provides a penalty of one unit if a person who ceases to be an authorised person retains an identity card.

297. Subclause 117(4) requires an authorised person to produce their identity card to the occupier or person in charge of premises that they propose to enter unless entering under the authority of a warrant issued under clause 116. If the authorised person fails to meet this requirement then the authorised person looses his entitlement to enter the premises.

298. It is not the intent of this clause that the entitlements conferred upon an authorised person under clause 113 are removed where an invitation is given to an authorised person by a person familiar with, or accepting the authorised person or their authority, before the identity card can be shown. For example where an authorised officer repeatedly has cause to enter a premises and is familiar to the person or persons with whom he is dealing or, where consent is given remotely, for example by correspondence, to an authorised officer to enter premises unaccompanied.

299. This division provides a mechanism whereby levy debts can be identified at a particular point and to give that identification of debt some authority. The intent is to aid in the recovery of unpaid or unremitted levy and to, as far as possible, remove those in the supply chain who have complied with their levy liabilities and requirements.

Clause 118 Evidentiary certificates

300. This clause provides that, the Secretary may issue a certificate stating that a person is liable to pay levy, and the particulars of that liability. An evidentiary certificate may also be issued stating that a person has contravened a levy remission provision and the particulars of that contravention.

Clause 119 Evidentiary effect of certificate

301. This clause provides that an evidentiary certificate is prima facie evidence of the matters outlined in the certificate in any civil proceedings.

Clause 120 Designated small remitters

302. The collection and compliance costs that the levy will impose on some levy remitters will be near, if not greater than the amount of levy they will collect. This clause provides for such small remitters to be recognised, enabling them to remit the levy on an annual, rather than a monthly basis. The declaration to recognise a remitter as a designated small remitter applies for the specified financial year only.

Clause 121 Designated small levy-payers

303. The collection and compliance costs that the levy will impose on some levy payers and the collection agent will be near, if not greater than the amount of levy for which the levy payer will be liable. This clause provides for such small levy payers to be recognised, enabling them to pay the levy on an annual, rather than a monthly basis. The declaration to recognise a levy payer as a designated small levy payer applies for the specified financial year only.

Clause 122 Refund of overpayments

304. This clause requires the Commonwealth must refund amounts of levy or late payment penalty that have been overpaid.

Clause 123 Refund of levy

305. This clause allows regulations to be made to provide for procedures for the refund of the levy.

Clause 124 Methods by which levy may be paid or remitted

306. This clause enables regulations to be made for the payment or remitting of levy to the Commonwealth and includes a provision to utilise electronic funds transfer where applicable.

Clause 125 Authorised persons

307. This clause enables the Secretary to authorise persons to be authorised persons for the provisions of this part dealing with the collection of dairy adjustment levy.

308. Subclause 125(1) permits the Secretary to authorise an APS employee to be an authorised person for one or all of the relevant applications of the Act.

309. It is the intended that the compliance powers are not exercised frivolously and are invested in persons who are suitably experienced, accountable and, subject to the conduct and disciplinary provisions of the Australian Public Service. Authorised officers are to be suitably trained and experienced in procedures and protocols and the effective professional application of those powers that have not, and do not, bring the Commonwealth or the relevant industry into disrepute. It is the Commonwealth and the Secretary’s intention to maintain that standard.

310. Subclause 125(3) permits the Secretary to authorise a person employed by or in the service of a collection organisation to be an authorised person only for the purposes of clause 110, that is, to call for returns or information.

Clause 126 Publication of information about levy

311. This clause enables an authorised person to publish the details of a person who has paid or is liable to pay levy or penalty or the name and address of a collection agent, a sub agent or collecting organisation. An authorised person will also be able to provide aggregate information on the amount of levy received or receivable or aggregate details regarding leviable milk products subject to the levy to the Australian Dairy Industry Council and to a person to whom the Secretary has granted access to the information.

312. Subclause 126(2) prevents the publication of information that would allow an amount of levy or late payment penalty paid or payable by a particular person to be identified with that person (or his or her Estate).

313. A fee for providing any information may be charged. This fee will not be subject to taxation.

Clause 127 Delegation by Secretary

314. This clause enables the Secretary to delegate to a senior officer all or any of his powers under this part dealing with the collection of the Dairy Adjustment Levy, except the power to appoint authorised persons. The clause also stipulates that the appointed delegated is subject to directions given by the Secretary.

Clause 128 Reconsideration and review of decisions

315. This clause enables a person affected by a decision to request a review of a decision by the Secretary. This clause only applies to decisions in relation to the extinguishing of late payment penalties.

316. Subclause 128(1) provides that a person dissatisfied with a decision may within 28 days or within a further period allowed by the Secretary, request in writing that the Secretary reconsider the decision. Subclause 128(2) requires that the reasons for making the request must be set out in the request.

317. Subclause 128(3) provides that within 45 days of receiving the request the Secretary must reconsider the decision and make a decision to either uphold the original decision, vary the decision or revoke the decision. The Secretary is then required under subclause 128(4) to advise the requesting person in writing the result of the decision including the reasons for the decision.

318. Subclause 128(5) allows an application to be made to the Administrative Appeals Tribunal for review of the Secretary’s decision under subclause 128(3).

319. Subclause 128(6) requires that a person who makes a relevant decision must give in writing to a person affected by that decision a statement outlining their options for review of the decision under this clause and or the Administrative Appeals Tribunal Act 1975. However, subclause 128(8) provides that a failure to comply with subclause 128(6) does not invalidate the decision

Clause 129 Commonwealth not liable to levy

320. This clause is a standard clause indicating that the Commonwealth is not liable to pay levy on leviable milk products, as the Commonwealth cannot by law be made liable to taxation by the Commonwealth.

321. However, a notional liability will exist for a Department of State, a Department of the Parliament, a Statutory Agency or an Authority of the Commonwealth. The Minister for Finance may give written direction instructions as to how this notional liability may be paid by the transfer of money within an account, or between accounts, operated by the Commonwealth, or an Agency or Authority of the Commonwealth.

Part 5-Offences

322. This clause provides that chapter 2 of the Criminal Code applies to all offences against this schedule. Chapter 2 of the Criminal Code was enacted in 1995 and codifies the general principles of criminal responsibility. Chapter 2 is being progressively applied to all Commonwealth offences.

Clause 131 False or misleading evidence

323. Clause 131 creates an offence where a person (either a natural person or a body corporate) knowingly gives evidence to the DAA (refer clause 37) which is false or misleading in a material particular. The maximum penalty that can be imposed on a natural person for the offence is 12 months imprisonment. Pursuant to subsection 4B(2) Crimes Act 1914 a court may impose a pecuniary penalty on a natural person, in addition to or instead of, a term of imprisonment. The maximum pecuniary penalty that a court may impose on a natural person is $6,600. Where a body corporate is convicted of the offence a court may impose a maximum pecuniary penalty of $33,000; namely an amount not exceeding 5 times the maximum pecuniary penalty that could be imposed on a natural person convicted of the same offence.

324. There are two types of offences created by this clause. The more serious offence (subclause 132(1)) requires proof that the defendant knew the statement made in, or in connection with, a claim for a payment right was false or misleading or knew that the statement omitted any matter or thing without which the statement is misleading. It provides for a maximum penalty of 12 months imprisonment (but see the paragraph on clause 131 concerning pecuniary penalties that may be imposed on natural persons and bodies corporate). The other offence (subclause 132(4)) only requires proof that the defendant was reckless as to whether the statement made in, or in connection with, the claim for a payment right was false or misleading or was reckless as to whether the statement omitted any matter or thing without which the statement is misleading. It provides for the maximum penalty of 6 months imprisonment (but see the paragraph on clause 131 concerning pecuniary penalties that may be imposed on natural persons and bodies corporate). Both offences provide for a defence where the defendant can point to evidence that the false or misleading statement in the claim was not false or misleading in relation to a material particular (subclauses 132(2), (3), (5) and (6)). It would be too onerous to require the prosecution to prove that the defendant knew or was reckless as to materiality. However the proposed defence should ensure that materiality is taken into account.

325. Proposed subclause 132(7) provides for alternative verdicts where it becomes apparent during the hearing that the defendant is guilty of the second offence rather than the first offence.

326. Clause 133 creates an offence where a person knows that the information the person has provided is false or misleading or that the information is misleading if a matter or thing is omitted. The information must be given to a person who is exercising powers or performing functions under, or in connection with, the DSAP scheme or this Schedule, or in compliance or purported compliance with the DSAP scheme or this Schedule. The maximum penalty is 12 months imprisonment (but see the paragraph on clause 131 concerning pecuniary penalties that may be imposed on natural persons and bodies corporate). Again there is a defence where the information is not false or misleading in a material particular (subclauses 133(2) and (3)). The clause does not contain a less serious recklessness offence. Although clause 132 (false or misleading statements in claims) contains a recklessness offence that is appropriate where the person is involved in completing a claim, but it would not be appropriate to extend it to this offence.

Clause 134 False or misleading documents

327. Clause 134 creates an offence where a person produces a document to another person, knowing it to be false or misleading and it is produced in compliance or purported compliance with the DSAP scheme or this Schedule. The maximum penalty matches the other offences – 12 months imprisonment (but see the paragraph on clause 131 concerning pecuniary penalties that may be imposed on natural persons and bodies corporate). Subclause 134(2) contains a defence where the document is not false or misleading in a material particular. Subclause 134(3) contains a defence often found in this type of offence where the document has been identified by the person producing the document as being false or misleading in a material particular.

PART 2 – TRANSITIONAL PROVISIONS

328. Item 18 provides for membership of the DAA prior to the commencement of the Bill. To ensure payments under the DSAP scheme flow to farmers as soon as possible from 1 July 2000, a committee, to be known as the Dairy Adjustment Panel, will be established to commence the work of the DAA (eg the creation of the database referred to in subclause 22(3)). However, to ensure continuity between the two bodies, this item provides that the members appointed to the Panel will be automatically appointed to the DAA. It should be noted that the qualification requirements for members of the Panel are identical to those for the DAA outlined in clause 59.

Bankruptcy Act 1966

329. Item 1 provides for proposed paragraph 116(2)(mcb) to protect the dairy exit payments under the dairy exit payment (DEP) scheme from bankruptcy to ensure they are treated consistently with re-establishment grants under the re-establishment grant scheme.

330. Items 2 and 3 are related amendments flowing from Item 1.

Farm Household Support Act 1992

331. Item 4 inserts the definition of dairy exit payment into subsection 3(2).

332. Item 5 inserts the definition of DEP scheme into subsection 3(2).

333. Item 6 provides that the definition of relevant Secretary under subsection 4(4)(b) includes dairy exit payments.

334. Item 7 provides for a proposed amendment to the Objects of the Act to ensure inclusion of the DEP scheme is not inconsistent with those Objects.

335. Item 8 provides for proposed Section 52C to allow the Minister to formulate the DEP scheme and associated dairy exit payments. Proposed subsection 52(C)(2) specifically provides for qualification requirements, applications, calculation of the payment and method of payment. The DEP scheme will cease on 30 June 2002 with farmers having the additional 12 months available to complete sale of the farm.

336. Item 9 provides for a proposed consequential amendment to ensure that the delegation of powers by the Secretary under section 53 in relation to the Act also includes the DEP scheme.

337. Item 10 provides for a proposed consequential amendment to ensure that the delegation of powers by the Secretary under section 53A in relation to the Act also includes the DEP scheme.

338. Item 11 provides for proposed paragraphs 54(1)(g) and 54(1)(h) to give the Secretary general power to obtain information in relation to a dairy exit payment.

339. Item 12 provides for a proposed amendment to section 55 to provide that dairy exit payments, like the re-establishment grants under the re-establishment grant scheme, are inalienable, whether by way of, or in consequence of, sale, assignment, execution, charge, bankruptcy or otherwise.

340. Item 13 provides for proposed subsection 56(3) to allow recovery of dairy exit overpayments as a debt due to the Australian Dairy Corporation.

341. Item 14 provides for proposed subsection 57(5) to provide that dairy exit payments are to be made out of the DSAF.

Income Tax Assessment Act 1997

342. Item 15 provides for proposed subparagraph 118-37(1)(e) to provide that dairy exit payments, like the re-establishment grants under the re-establishment grant scheme, are exempt from capital gains tax.

Remuneration Tribunal Act 1973

343. Item 16 provides for proposed paragraph 7(9)(ab) to allow for remuneration or allowances payable to members of the DAA to be paid out of the DSAF rather than out of the Consolidated Revenue Fund.

Social Security Act 1991

344. Item 17 inserts the definition Farm Household Support Act 1992 in subsection 23(1) as including the DEP scheme. The key provision affected as a result of this amendment is the definition of ‘officer’ under subsection 23(1) such that a decision of an officer under the Farm Household Support Act 1992 now includes the DEP scheme. The net effect of this amendment is that the review process available to recipients of a dairy exit payment will be the same as the review process for recipients of the re-establishment grants under the re-establishment grant scheme.

Commonwealth of Australia Explanatory Memoranda