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Dairy Produce Levy (No. 1) Amendment Bill 1995 [and] Dairy Produce Levy (No. 2) Amendment Bill 1995 [and] Dairy Produce Amendment Bill 1995
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Parliamentary
Research
Service
BILLS DIGEST
No. 60-62.1995
Dairy Produce Amendment Bill 1995
Dairy Produce Levy (No.1) Amendment Bill 1995
Dairy Produce Levy (No.2) Amendment Bill 1995
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Dairy Produce AInendment Bill 1995
Date Introduced: 8 March 1995 House: House of Representatives Portfolio: Primary Industries and Energy Commencement: 1 July 1995
Purpose
To provide for the replacement of the current dairy market support arrangements.
The key provisions allow for:
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the winding-up of the Market Support Fund; establishment of the Domestic Market Support Fund; the receipt of market milk and manufacturing milk levies; payment of domestic market support payments to producers of manufacturing milk; and
the termination of the Domestic Market Support Fund on 30 June 2000_
This Bill should be read in conjunction with the Dairy Produce Levy (No.1) Amendment Bill 1995 and the Dairy Produce Levy (No.2) Amendment Bill 1995.
Background
Existing Support Arrangements
The current Commonwealth assistance regime for the Australian dairy industry (generally referred to as the 'Crean Plan') commencedin July 1992. The key elements of the regime include:
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Dairy Produce Amendment Bill 1995
reduction in the market support payments for manufactured dairy exports beginning in 1993-94, in equal steps to 10% above export parity prices by the year 2000; retention of the existing quota on cheese imports;
termination on 30 June 1992 of underwriting; an increase in the ceiling for the dairy industry's promotion levy from 5.5 cents to 8.0 cents per kilogram ofbutterfat; and removal of the 'comfort clause'.
Until 1992, the Dairy Produce Levy (No.1) Act 1986 contained a provision (the 'comfort clause') under which the market support levy could be suspended if a State believed it was being disadvantaged by the actions of another State. Where a request to suspend the levy
was made, the Commonwealth Minister was required to suspend it within 60 days unless a majority of members of the Australian Agricultural Council voted against the suspension. Prior to the removal of this provision in 1992, there had been two requests for a
suspension, both from New South Wales in response to the supply of Victorian milk to the Sydney market.
Several levies are imposed, under the provisions o£the Dairy ProduceLevy (No. 1) Act 1986, on the milk fat content of whole milk or whole milk products:
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produced in Australia; produced at a factory in Australia; or re-imported into Australia.
These levies are known as the 'market support levy', the 'corporation levy'. the 'promotion levy'. the 'research levy' and the 'exotic animal disease levy'. These levies are payable by the producer, the factory owner or the importer. The Primary Irulustries Levies arul Charges Collection Act 1991 provides for the
collection o£the levies. Money raised by the levy are apportioned between the Australian Diary Corporation (ADC) (under the provides of the Dairy Produce Act 1986), the Dairy Research and Development Corporation (under the provisions of the PrimaryIndustries and Energy DevelnpmentAct 1989) and the
Exotic Animal Disease Preparedness Consultative Council (under the provisions of the Exotic Animal Disease Control Act 1989).
The key element in the current Commonwealth assistance regime for the dairy industry is the 'market support levy'. The rate of the market support levy in 1992-93 was 45 cents per kilogram of milk fat. Market support levy collections totalled $141.210 million in 1992-93, compared with $138.903 million in 1991
92. Levy receipts are pooled into a 'market support fund' from which funds are paid out on all exports of dairy products at a rate determined by the ADC. During 1992-93, the maximum rate of support allowable was 22% of defined average export prices. The actual rate of support averaged approximately 15%.
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Dairy Produce Amendment Bill 1995
The Dairy Produce AmendmentAct 1992:
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extended market support payments for exports of dairy products until 30 June 2000; provided for a phased reduction in the rate of market support payments for exports of dairy products; and terminated underwriting of dairy export prices from 30 June 1992.
The phased reduction in the maximum percentage rate of market support payments are:
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1992-93 1993-94 1994-95 195-96 1996-97 1997-98 1998-99 1999-2000 -
22.000% 20.286% 18.572% 16.858%;
15.144%; 13.430%; 11.716%;
10.000%.
Proposed Support Arrangements
The amendments proposed by the Dairy Produce Amendment Bill 1995, Dairy Produce (No.1) Amendment Bill 1995 and Dairy Produce Levy (No.2) Amendment Bill 1995 are a consequence of the proposed termination ofmarket support payments. The Dairy Produce (World Trade OrganizationAmendments) Act 1994 provided for the termination of market support payments to the dairy
industry. The termination of market support payments is considered by the Government to be necessary if Australia is to ratify the Final Act embodying the results of the Uruguay Round of multilateral trade negotiations. Market support payments are considered to be an export subsidy which the Final Act seeks to
reduce.
The arrangements proposed by the Dairy Produce Amendment Bill 1995, Dairy Produce (No.1) Amendment Bill 1995 and Dairy Produce Levy (No.2) Amendment Bill 1995 provide the same level of support as would have been afforded under the Crean Plan, but are consistent with the Final Act embodying
the results o£lhe Uruguay Round of multilateral trade negotiations. The Australian Bureau ofAgricultural and Resource Economics describes the proposed support arrangements as involving:
the pre-paymett' of the consumer tr01l$fer in the form ofa leuy imposed OIl. manufocturers ratlu!r than at the farm gate. 'I"h£ leuy applies to milk used in manufacturing products for the domestic market. while manufaduring milk used for exports does not aUract th£ leuy. The funds collected will then be paid to manufacturing milk producers. Manufacturers
will recoup tll⬠levy from domestic consumers using the existing price structure, so that the transfer from consumers to manufacturirlg milk prodw;ers is no greater than. that which UIOuld have existed under the current plan. I
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Dairy Produce Amendment Bill 1995
The four main elements of agricultural reform to emerge from the Uruguay Round are:
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tariffication of non-tariff measures; 36% reduction in tariff barriers, including those resulting from tariffication; 36% reduction in budgetary outlays on export subsidies and a 21%
reduction in terms of quantities of subsidised exports; and 20% reduction in domestic support measures.
On 29 November 1994, the Minister for Primary Industries and Energy announced the market support arrangements which are intended to replace those that will be terminated when the Dairy Produce (World Trade OrganizationAmendments)Act 1994 commences.
The central features of the proposed support arrangements, as stated by the ~ster. were:
Till! mechanismselected is an input levy on milk used in tlw manufO£tureofdairy products. Till! levy will be paid by manufacturersinto ConsolidatedRevenueand then appropriatedto the Australian Dairy Corporation, which will administer the scheme.
The Corporation will rebate exports to manufacturerson. presentationofdocumentary evidence and pay the balance ofthe levy, less administrativecosts, as support to manufcreturingmilk producers. Manufcreturers will therefore be able to either recoup the levy paid through the export rebate or pass it on to consumers. There sMuld be TW increase
in the price ofdairy productsas the consumertransfer will be TW greater than that generated under the currentscheme.
The levy will be adjustedannually to generate receipts equal to the con.sumer tran.sfer, which would have been provided under the 1992Plan, subject to the maximum levels specified in the present legislatwn, which are reducingannually.
As requestedby industry, the all milk levy on market milk will be continuedat the current rate, generating a transfer within the industry ofabout $35 million from market milk to manufacturingmilk producers. The total support{Wwing to the manufacturingmilk sector is estimated at about $135 million in 1995-96.
Due to the prcretice by manufacturersofpre-payingthe expected export supportpayment and consumertransfer under the current scheme to the producerin the price paid for milk received, stocks on hnnd at 30 June 1995 will contain a TWtionalleuy ofabout two cents per litre milk equivalent. These stocks will not be eligible for export rebate under the new
schemeas they were not subject to statutory levy.2
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Dairy Produce Amendment Bill 1995
Australian Dairy Industry - Select Statistical Overview
Table 1: Summary and Projections of Key Dairy Statistics'
1992-93 1993-94 1994-95
(forecast) I (proiection\
Total Milk 7327ML 8076ML 8200ML
Production Returns to Farmers (real) Market Milk 46.6 elL 47.4 elL 47.6 elL
Manufacturing 28.9 elL 25.9 elL 25.6 elL
Milk
Production Butter 127 kt 143 kt 148 kt
Cheese 210 kt 226 kt 228 kt
Exnort Volume Butter 64kt 85 kt 88 kt
Cheese 86 kt 99 kt 101 kt
Export Value $1109 m $1239 m $1407 m
(real)
Table 2: Dairy Farm Cash Incomes (Average per farm)'
New South Victoria Queensland Western South Tasmania
Wales Australia Australia
1992·93 $62630 $52 190 $31580 $79750 $55560 $65 180
1993·94 $70070 $52620 852310 $89430 $52 160 $66320
1994·95 $58600 $56500 844700 $81700 $51300 $72 700
Note. Farm cash mcome IS dermed as the difference between total cash costs and total cash receipts.
Main Provisions
Winding-up of Market Support Fund
Item 14 of the Schedule to the Bill repeals section 102 of the Dairy ProduceAct 1986 (the Principal Act) and substitutes an new section 102 which has the following major effects:
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requires, as soon as practicable after 1 July 1995, that the Market Support Fund be wound up; and for any surplus Market Support Fund money to be credited to the Domestic Support Fund.
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Dairy Produce Amendment Bill 1995
Domestic Market Support Fund (the Domestic Fund)
A new Division 5 (proposed sections 10M-108F>, dealing with the Domestic Fund, is inserted in the Principal Act hy item 15.
Important Definitions
'Dairy produce' is defined hy proposed section 10M to have the same meaning as in the Dairy Produce Levy (No.1) Act 1986. That Act defines a dairy product to mean butter, butter oil, cheese, other than a prescribed variety, or any other product prescrihed as a dairy product, provided it is produced from milk or from
a constituent part of milk.
'Manufacturer'is defined by proposed section I02A to mean a person who carries on a business consisting of, or including, the manufacture of dairy produce.
'Manufacturing milk' is defined hy proposed section 10M to mean relevant dairy produce delivered hy a producer to a manufacturer during a month ending before 1 July 2000, or relevant dairy produce produced by a manufacturer and used by them during a month ending before 1 July 200, in the manufacture of
dairy produce. The term 'relevant dairy produce' is defined by the Dairy Produce Levy (No.1) Act 1986 to mean dairy produce that is whole milk, or whole milk products. 'Manufacturing milk levy' is defined by proposed section 10M to mean the
manufacturing milk levy imposed by the Dairy Produce Levy (No.1) Act 1986 [as amended by the proposed Dairy Produce Levy (No.1) AmendmentAct 1995], including penalties payable under the PrimaryIndustries Levies and Charges Collectwn Act 1991 in relation to the levy.
'Market milk levy' is defined by proposed section 102A to mean the market milk levy imposed by the Dairy Produce Levy (No.1)Act 1986 [as amended by the proposed Dairy Produce Levy (No.1) AmendmentAct 1995], including penalties payable under the PrimaryIndustries Levies and Charges Collectwn Act 1991 in relation to the levy.
Establishment of Domestic Fund
Proposed section 103 provides for the establishment of the Domestic Fund and for its administration by the Australian Dairy Corporation (ADC).
Contents of Domestic Fund
Proposed section 104 provides for certain monies to be credited to the Domestic Fund, principally market milk or manufacturing levy payments received by the Commonwealth.
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Dairy Produce Amendment Bill 1995
Uses to Which Domestic Fund Monies Can be Put
Domestic Fund monies may be used for purposes specified in proposed section 105, including:
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domestic market support payments in respect of manufacturing milk; manufacturing milk levy rebate payments; expenses incurred by the Commonwealth in the collection and
administration oflevy; and ADC expenses in administering the Domestic Fund.
Payment of Levies to ADC
The practical effect of proposed section 106 is to require the Commonwealth to pay the ADe an amount equal to each amount it has received by way of the market milk levy, manufacturing milk levy and penalties.
One possible reading of proposed section 106 is that the Commonwealth will have to pay an amount equal to each individual levy payment received to the ADC. If in fact a payment to the ADC has to be made with respect to each individual levy payment, it is arguable that the administrative costs of the
proposed arrangements may be greater than they are under the current scheme. Section 93(1)(a) of the Principal Act currently requires the Commonwealth to pay the ADC amounts equal to levy received from time to time. The Explanatory Memorandum does not provide an explanation for this change in wording.
Producers to Provide ADC with Monthly Returns
Proposed section 106A requires a manufacturer of dairy produce, within 10 days of the end of each month before 1 July 2000, to give the ADC a return relating to relevant dairy produce (see 'definitions' above) :
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delivered during the month by producers to the manufacturer; and produced by the manufacturer and used by them during the month in the manufacture of dairy produce.
The above reporting requirements will not apply to relevant dairy produce ('see definitions' above) processed by a manufacturer as liquid milk for human consumption and sold or distributed domestically as liquid milk for human consumption.
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Dairy Produce Amendment Bill 1995
What Domestic Market Support is Payable for
Proposed section 107 provides that a domestic market support payment for manufacturing milk is payable by the ADC for all manufacturing milk produced in Australia in a month ending before I July 2000.
Rate of Domestic Market Support Payments
Proposed section 108 deals with the rate of domestic market support payments for manufacturing milk. The amount payable is calculated at a rate determined by the ADC. That rate is to be the rate applying during the month in which the manufacturing milk was produced.
In determining the rate, the ADC is to seek to ensure that the Domestic Fund can meet all obligations under the Principal Act as at 1 July 2000.
Who are Domestic Market Support Payments Payable to
Domestic market support payments are payable to the producers of manufacturing milk (proposed section 108A).
Negative Levy Payments
Under proposed section 108B. where a manufacturer has a negative levy entitlement in respect of a month, that is, the amount of manufacturing milk levy payable is a negative amount (i.e. credit), the ADC must pay the manufacturer that amount.
Manufacturing Milk Levy Rebates and Offsets
Under proposed section 108C, a manufacturing milk levy rebate will be payable, subject to proposed section 1080, in respect of a month where:
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a person has exported dairy produce; and relevant dairy produce (see 'definitions' above) used in the manufacture of the exported produce has been taken into account in the calculation of the manufacturing milk levy; and
the export of the produce has not been taken into aocount under paragraphs 7(2)(c) and (d) of the proposed Dairy Produce Levy (No. 1) Act 1995. Section 7 of the proposed Dairy Produce Levy (No.1) Act 1995 sets out the method of calculatiog the amount of
manufacturing levy imposed on dairy produce delivered to, or used by, a manufacturer during a month. Basically, the amount of manufacturing milk levy is the total of: an amount calculated at the milk fat and protein rate for the month of the milk fat and protein
rate content of the dairy produce [proposed paragraphs 7(2)(a) and (b)], less the total of the manufacturer's export milk fat and 8
Dairy Produce Amendment Bill 1995
protein component for the month [proposed paragraphs 7(2)(c) and (d)].
A manufacturing milk levy rebate may not be paid by the ADC unless an application has been made by the applicant to the ADC:
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within 21 day of the end ofthe month to which the application relates; the application is in accordance with a form approved by the ADC; and the application contains the specified information.
As soon as practicable after receiving an application for a manufacturing milk levy rebate. the ADC must:
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determine whether the applicant is entitled to the rebate; inform the applicant of its decision; tell the applicant how much rebate they are entitled to and the basis for that amount; and
pay the applicant the rebate.
Where the ADC determines that an applicant is not entitled to a rebate, it is to inform the applicant ofits decision and provide reasons. ADC determinations returning rebates are reviewable by the Administrative Appeals Tribunal.
Proposed section I08D allows a reduction in manufacturing milk levy rebate where it is payable during a month to a manufacturer, or a corporation related to the manufacturer, who subsequently imports or acquires imported dairy produce.
Winding-up oCthe Domestic Fund
Proposed section 108F provides for the winding-up of the Domestic Fund. The Domestic Fund is to be wound up. as soon as practicable. after 1 July 2000. Where the ADC is satisfied there is no reasonable prospect that it will incur any more liabilities, or receive any more applications or claims for which Fund
money may be expended. it must determine total ADC liabilities in relation to which Domestic Fund money may be used.
Where the amount of Domestic Fund money on winding-up exceeds liabilities, the ADC must put the balance into a bank account. Money in this account must be used for such purpose!s as the ADC, after consultation with the peak industry body, determines to be appropriate. Where liabilities exceed the amount of Domestic Fund money. the ADC may use money in a relevant fund (eg the promotion fund) to meet liabilities. Where on winding-up. their exists any investments that represent money of the Domestic Fund, those investment are to
be used by for such purpose!s as the ADC, after consultation with the peak industry body. determines.
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Dairy Produce Amendment Bill 1995
Determination of Milk Fat or Protein Content of Dairy Produce
A new section lIlA, dealing with how the milk fat or protein content of dairy produce is to determined for levy calculation purposes, is inserted in the Principal Act by item 16. Basically, where it is not practicable, and it is necessary for levy calculation purposes to determine the milk fat or protein
content of dairy produce, the dairy produce is taken to have the prescribed milk fat or protein content for dairy produce of tbat kind.
The prescribed milk fat or protein content for dairy produce of a particular type is:
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the milk fat or protein content prescribed in relation to that type of dairy produce; or the milk fat or protein content prescribed in relation to a class of dairy produce that includes the particular type of dairy produce.
Endnotes 1. J. Bills, S. Doyle, V. Topp and T. Gleeson, 'Outlook for the Australian Dairy Industry', Proceedings of the National Agricultural and Resources Outlook Conference - Agriculture, 7-9 February 1995, p. 140 2. Minister for Primary Industry and Energy, Media Release, 29 November
1994.
3. J. Bills, S. Doyle, V. Topp and T. Gleeson, 'Outlook for the Australian Dairy Industry', Proceedings of the National Agricultural and Resources Outlook Conference - Agriculture, 7-9 February 1995, p. 136. 4. Ibid., p. 137.
Ian Ireland (06 2772438) Bills Digest Service Parliamentary Research Service
18 April 1995
This Digest does not have any legal status. Other sources should be consulted to determine whether this Bill has been enacted and, ifso whether the subsequent Act reflects further amendments.
Commonwealth of Australia 1995
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members and
Senators in the course of their official duties.
Published by the Department of the Parliamentary Library, 1995. 10
Warning: This Digest was prepared for debate and reflects the legislation as introduced but does not canvass subsequent amendments.
rrhis Digest was available on iPDBS from 18 Anril 1995
Dairy Produce Levy (No.1) Amendment Bill 1995
Date Introduced: 8 March 1995 House: House of Representatives Portfolio: Primary Industries and Energy Commencement: 1 July 1995
Purpose To impose levies on certain dairy produce produced and manufactured in Australia. The levies will be payable by the producers and manufacturers of the produce. The levies will fund new market support arrangements, the Australian
Dairy Corporation, the promotion of the Australian dairy industry and dairy industry research.
Background This Bill should be read in conjunction with the Dairy Produce Amendment Bill 1995 and the Dairy Produce Levy (No.2) Amendment Bill 1995.
The reader is referred to the 'Background' in the Digest for the Dairy Produce Amendment Bill 1995.
Dairy Produce Levy (No.1) Ameudmeut Bil11995
Main Provisions Item 4 of the Schedule to the Bill repeals Part II of the Principal Act and inserts a new Part II.
Imposition of Levies
Levies are imposed by proposed section 5 on:
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relevant dairy produce lie dairy produce that is whale milk, or whale milk produce] processed during a month ending before 1 July 2000, as liquid milk for human consumption and sold or distributed in Australia [this levy is referred to as the market milk levy];
relevant dairy produce delivered to a manufacturer during a month ending before 1 July 2000, or produced by a manufacturer and used by them during a month ending before 1 July 2000, in the manufacture of dairy produce; [this levy is referred to as the manufacturing milk levy]; and
on relevant dairy produce produced from 1 July 1995 [these levies are referred to as the Corporation levy, the promotion levy and the research levy].
Amount of Market Milk Levy Payable
The amount of market milk levy payable will be an amount calculated at the prescribed milk fat and protein rate (see below) for a month on the milk fat and protein content ofthe relevant dairy produce.
Amount of Manufacturing Milk Levy Payable
Proposed section 7 deals with amount of manufacturing milk levy payable.
The amount of manufacturing milk levy payable will be an:
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amount calculated at the milk fat and protein rate for the mouth ou the milk fat and protein content of the relevant dairy produce; less
the total of the manufacturer's export milk fat and protein component for the month.
A manufacturer's export milk fat or protein component for a month is an amount calculated at the milk fat or protein rate for the month on the milk fat content or protein component of dairy produce:
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Dairy Produce Levy (No.1) Amendment Bill 1995
exported by the manufacturer for the month, and manufactured by them and exported by another person.
Proposed section 7 specifies a number of circumstances where the amount of manufacturing milk levy payable may be offset because of the importation of relevant dairy produce. The manufacturing milk levy will not be payable where a manufacturer's export milk fat and protein component for a month is greater than the amount of manufacturing milk levy payable.
Corporation, Promotion and Research Levies - Amount Payable
Proposed section 8 provides that the amount oflevy payable on relevant dairy produce with respect to the Corporation, promotion and research levies is the total of: an amount calculated at the prescribed milk fat and protein rate in relation to that levy on the milk fat and protein content of the produce.
Milk Fat and Protein Rates
Proposed sections 9 and 10 set out the maximum milk fat and protein rates which may be prescribed in relation to the market milk, manufacturing milk, Corporation, promotion and research levies.
Who has to Pay the Levies
The market milk, Corporation, promotion and research levies will be payable by the producer and the manufacturing milk levy by the manufacturer.
Ian Ireland (06 2772438) Bills Digest Service Parliamentary Research Service
18 April 1995
This Digest does not have any legal status. Other sources should be consulted to determine whether this Bill has been enacted and, if so whether the subsequent Act reflects further amendments.
Commonwealth of Australia 1995
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members and Senators of the Australian Parliament in the course of their official duties.
3
Warning: This Digest was prepared for debate and reflects the legislation as introduced but does not canvass subsequent amendments.
Dairy Produce Levy (No.2) Amendment Bill 1995
Date Introduced: 8 March 1995 House: House of Representatives Portfolio: Primary Industries and Energy Commencement: 1 July 1995
Purpose
To impose a levy on re-imports of certain Australian dairy produce.
Background
The objective of the levy proposed by the Bill, as stated in the Explanatory Memorandum, is to '... ensure that exported dairy produce, for which an export rebate has been claimed, is not subsequently re-imported to receive the consumer transfer on the domestic market without penalty.'
This Bill should be read in conjunction with the Dairy Produce Amendment Bill 1995 and the Dairy Produced Levy (No.1) Amendment Bill 1995.
The reader is referred to the 'Background' in the Digest for the Dairy Produce Amendment Bill 1995.
Main Provisions
Part III of the Dairy Produce Levy (No. 2) Act 1986 (the Principal Act) is repealed by item 2 of the Schedule, and a new Part III (proposed sections 8-10), dealing with the imposition of a levy on certain imported dairy produce, the amount of levy payable and by whom the levy is payable, substituted.
Dairy Produce Levy (No.2) Amendment Bill 1995
Imposition of Levy
Under proposed section 8, a levy is imposed on dairy produce which:
⢠has been exported from Australia; and
⢠either an amount has been paid, or is payable. by way of a market support payment, or its export has been taken into account in the calculation of the mauufacturing milk levy; and
⢠is subsequently imported into Australia in the same form, or substantially the same form, as it was exported.
Amount of Levy Payable
The amount of levy payable is an amount equal to the total of an amount calculated at the milk fat and protein rate for the month in which the dairy produce is imported on the milk fat and protein content of the dairy produce when imported (proposed section 9).
The terms 'milk fat rate' and 'protein rate' are defined in proposed section 7 of the proposed Dairy Produce Levy (No.1) AmendmentAct 1995. The reader is referred to the Digest for the Dairy Produce Levy (No. I) Amendment Bill 1995.
Who has to Pay the Levy
The importer of the dairy produce has to pay the levy (proposed section 10).
Ian Ireland (06 2772438) Bills Digest Service Parliamentary Research Service
18 April 1995
This Digest does not have any legal status. Other sources should be consulted to determine whether this Bill has been enacted and, ifso whether the subsequent Act reflects further amendments.
© Commonwealth of Australia 1995
Except to the extent of the uses permitted under the CopyrightAct 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members and Senators of the Australian Parliament in the course of their official duties.
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