Senator WOODLEY (1:38 PM) —I believe that it is a serious issue and I do want to put some of my thoughts on the record. I am prepared to incorporate my speech, if that would further help the Senate, because I am trying to be cooperative. So I am prepared to incorporate my speech as well as my amendments. I seek leave to have my speech on the second reading and amendments incorporated in Hansard .

Leave granted.

The speech read as follows—

Let me begin my contribution today by putting on the record that the Australian Democrats are very pleased to see this legislation introduced into the Federal Parliament.

As Senators will be aware, the Democrats have, over the past seven or eight years, actively pursued the issue of farmers' access to welfare payments.

We have, on many occasions, moved amendments relating to the exemption of the family farm from various assets tests—most particularly the AUSTUDY assets test—and we were instrumental in establishing two Senate inquiries into the impact of the assets test on farming families.

These moves have been based on our belief that a number of social security rules have been, and are still, unfairly discriminating against our farming families.

Because of this concern, we welcome the Bill before us today which seeks to rectify the harsh impact the social security `gifting provisions' have on family farmers.

The intergenerational transfer of family farms, and the effect this has on a person's entitlement to the Age Pension, has been a concern of the Australian Democrats for a long time now.

We have always felt that allowing farmers to hand their farms on through successive generations achieves a number of very desirable outcomes.

Firstly, it means the family's accumulated wealth of farming knowledge and experience can be handed on with the property.

Secondly, it helps to ensure the viability and structure of many of our farming communities.

Thirdly, it allows ageing farmers to retire from the industry with dignity.

And finally, it allows the input of new and innovative techniques of farming to be introduced and incorporated into that accumulated expertise.

It is for these reasons that the intergenerational transfer of farming properties is, and always has been, an essential component of the Australian farming industry.

We have farms in Australia that have been in the same family for five and six generations. Indeed, the attitude of most family farmers is that the property they are working is really only their's to be held on trust for the next generation and the generations after that.

Up until now, however, farmers who have handed their properties on to their sons or daughters have paid a high price in terms of their loss of access to the Age Pension. This has come about as a result of the so-called `gifting provisions' which apply to the Pension.

These provisions mean that a person who gives away an asset valued in excess of $10,000 is deemed by Centrelink to still hold that asset for the following 5 years and to be earning an income on it.

These `gifting provisions' play a valuable role in preventing people deliberately running down their assets in order to qualify for the pension. Retiring farmers, however, are unfairly caught up in the provisions meaning that they are usually precluded from the Age Pension for 5 years after retiring.

The bill before us today provides that, for 3 years from the 1 5th of September last year, low income farmers can gift their farm to the younger generation without losing access to the Age Pension or Veterans' Service Pension.

The scheme will also be open to those farmers who have transferred their farms in the last 5 years.

As I've already said, the Democrats strongly support the overall principle of allowing farmers to retire from farming with dignity by removing the social security penalties that currently apply.

Importantly, the proposed scheme will not only provide a window of opportunity for farmers to transfer their farms but it will also serve to emphasis the importance to farming families of succession planning and the need to undertake business planning generally.

Having said that, the Democrats do have a number of concerns with this scheme as it's currently proposed.

It was originally our intention to seek to address those problems through amendments to the legislation.

A letter we received from the Minister, however, stated that the Government has not been able to allocate sufficient time to this bill to allow a full debate.

I have to put on the record the fact that I feel this is a very unfortunate position for the Senate to be in given the great importance of this scheme to our farming families.

Despite this scheme being announced by the Prime Minister back in September last year, it's taken the Government nine months to bring this legislation before the Senate and we are being asked to pass it within an hour and with no serious debate whatsoever.

One of the very important roles of the Senate is to scrutinise each and every piece of legislation that comes before it. This is a role the Democrats take most seriously and we are disappointed that greater time could not have been allocated to this very important piece of legislation.

I must say that I was very keen to pursue the amendments I foreshadowed in the Community Affairs Committee report but, at the same time, I recognise the importance of getting this scheme up and running as quickly as possible.

Having consulted with the farming bodies who appeared at the Senate inquiry, the Democrats have agreed not to move amendments to allow the Bill to be debated in this lunch time debate. I signal now though that we believe the scheme will need to be amended in the future.

Overall, we believe that what should be a very positive scheme is at great risk of being stymied by the restrictive conditions placed on the scheme in order to minimise the cost to the government.

At the Senate inquiry we heard evidence from Lifeline in Queensland that it had not found anyone able to qualify for the scheme.

We heard similar evidence from a Rural Counsellor in Queensland.

And we heard from the National Farmers Federation that it had only been able to find two people that thought they may qualify.

That having been said, I would now like to briefly outline some of the specific concerns we have with this Bill.

Firstly, the scheme is only to be available for 3 years from the 1 5th of September last year. That was the date that the Prime Minister announced the scheme despite the fact that the Government did not even have draft legislation ready at that stage.

What that has meant is that, in reality, the scheme has been effectively non-operational for the past nine months. No applications have been granted and, not surprisingly, rural counsellors are advising people not to transfer their farms until the legislation is passed.

So, by the time the scheme is up-and-running nearly a year will have been lost out of that three year window of opportunity.

The Democrats support the views of a number of people who appeared before the Senate Committee that the scheme should apply for at least five years. This would allow more people to take advantage of the scheme and also give more notice to other farmers to begin to undertake their succession planning.

Our second concern relates to the income test being applied to the scheme. To qualify, the farmer's average income over the past 3 years must be below the maximum pension rate—that is, around $9,000 for single people and $15,000 for couples.

The scheme is aimed at farms that are supporting two families but it's very difficult to imagine how an income of $15,000 could have sustained two families for the past three years.

The Democrats believe that a more appropriate threshold is that suggested by the National Farmers Federation and the South Australian Farmers Federation—that is, the total amount pensioners can earn before their pension is reduced.

So, we would like to see the income test levels raised to around $19,600 for couples and $11,600 for singles.

In this regard I was very interested to read a letter that the Federal Member for Maranoa has apparently been sending to his constituents. In that letter, Mr Scott, whose electorate covers many farming properties, says that he supports an increase in the income test to the level the Democrats are now suggesting.

Mr Scott is also Minister for Veterans' Affairs and it's expected that around 300 veterans will benefit from this scheme so his views are clearly of great interest.

The Democrats are also concerned at the requirement that farmers must have owned the farm being gifted for 15 years or been in farming for at least 20 years.

We believe this requirement is too stringent and may lead to inequities. For example, a farmer who has owned his current farm for 14 years and his previous farm for 3 years wouldn't be eligible to transfer his current farm.

We believe that an appropriate test would be to simply require that a farmer has been in farming for at least 15 years.

Another major concern we have with the proposed scheme is that the value of the farm, net of farm debt, must be not more than $500,000.

ABARE figures show that the average net value of all farms is around $1.05m. At the same time however, ABARE has also estimated that in 1996-97 the average broadacre farm had a business profit of negative $1,400.

The Democrats believe that the assets limit needs to be significantly increased and that a tapered withdrawal should be put in place rather than the `sudden-death' cut-off that's being proposed.

Under the current scheme, a person whose farm is worth $499,000 can be eligible for a full pension but a person whose farm is worth just $2,000 more will qualify for nothing.

This will not only lead to injustices but also encourages the use of artificial means of minimising asset levels.

The Democrats have incorporated an amendment which will raise the assets limit to $800,000.

The Democrats have a number of other concerns with the proposed scheme but I don't have time to run through those in any detail in the remaining time allocated for this bill. I simply conclude by saying that we are very pleased to see the Government at least begin to address this very important issue for family farmers. We feel the scheme is being strangled by restrictions at the moment and we would hope that the Government would look at reviewing the eligibility criteria sometime in the near future.

The Democrats will certainly be watching the progress of this scheme over the next six months and will consider pursuing the amendments I have already foreshadowed at a later date.

The amendments read as follows—

That the House of Representatives be requested to make the following amendments:

(1) Schedule 1, item 5, page 6 (lines 11 to 34), omit subsections (3) and (4), substitute:

(3) A person is a qualifying farmer if the person has been involved in farming in Australia for a continuous period of 15 years by:

(a) contributing a significant part of his or her labour to farm enterprises; and

(b) deriving a significant part of his or her income from farm enterprises.

(4) A person is also a qualifying farmer if:

(a) the person has been involved in farming in Australia for periods that together add up to 15 years, by:

(i) contributing a significant part of his or her labour to farm enterprises; and

(ii) deriving a significant part of his or her income from farm enterprises; and

(b) the maximum break between periods of farming has not exceeded 6 months; and

(c) in the opinion of the Secretary, any break was caused either by:

(i) the sale or purchase of successive farms; or

(ii) exceptional circumstances.

(2) Schedule 1, item 14, page 10 (line 21), omit "2000", substitute "2002".

(3) Schedule 1, item 14, page 11 (line 2), omit "2000", substitute "2002".

(4) Schedule 1, item 14, page 11 (line 5), omit "$500,000", substitute "$800,000".

(5) Schedule 1, item 14, page 11 (line 29), omit "2000", substitute "2002".

(6) Schedule 1, item 14, page 12 (line 4), omit "2000", substitute "2002".

(7) Schedule 1, item 14, page 12 (line 7), omit "$500,000", substitute "$800,000".

(8) Schedule 1, item 14, page 17 (line 9), omit "2000", substitute "2002".

(9) Schedule 1, item 14, page 18 (line 32), omit "2000", substitute "2002".

(10) Schedule 1, item 14, page 20 (lines 19 and 20), omit " maximum basic entitlement ", substitute " multiplied basic rate ".

(11) Schedule 1, item 14, page 20 (after line 20), after step 4 of the method statement, insert:

Step 4A. Work out under subsection (4A) the person's ordinary income free area for age pension applicable to the person. Multiply that amount by 3 and add it to the person's multiplied basic rate. The result is called the person's maximum basic entitlement .

(12) Schedule 1, item 14, page 22 (after line 30), after subsection (4), insert:

Person's ordinary income free area for age pension

(4A) For the purposes of Step 4A in the Method statement in subsection (1), the income free area for age pension applicable to the person is:

(a) if the person was a member of a couple at any time during the 3 years immediately preceding the operative day—the amount that was, on the operative day, the ordinary income free area for a partnered person under Module E of Pension Rate Calculator A in section 1064; or

(b) if paragraph (a) does not apply—the amount that was, on the operative day, the ordinary income free area for a person who is not a member of a couple under Module E of Pension Rate Calculator A in section 1064.

(13) Schedule 2, item 3, page 27 (lines 1 to 24), omit subsections (3) and (4), substitute:

(3) A person is a qualifying farmer if the person has been involved in farming in Australia for a continuous period of 15 years by:

(a) contributing a significant part of his or her labour to farm enterprises; and

(b) deriving a significant part of his or her income from farm enterprises.

(4) A person is also a qualifying farmer if:

(a) the person has been involved in farming in Australia for periods that together add up to 15 years, by:

(i) contributing a significant part of his or her labour to farm enterprises; and

(ii) deriving a significant part of his or her income from farm enterprises; and

(b) the maximum break between periods of farming has not exceeded 6 months; and

(c) in the opinion of the Secretary, any break was caused either by:

(i) the sale or purchase of successive farms; or

(ii) exceptional circumstances.

(14) Schedule 2, item 11, page 31 (line 12), omit "2000", substitute "2002".

(15) Schedule 2, item 11, page 31 (line 23), omit "2000", substitute "2002".

(16) Schedule 2, item 11, page 31 (line 27), omit "$500,000", substitute "$800,000".

(17) Schedule 2, item 11, page 32 (line 17), omit "2000", substitute "2002".

(18) Schedule 2, item 11, page 32 (line 27), omit "2000", substitute "2002".

(19) Schedule 2, item 11, page 32 (line 30), omit "$500,000", substitute "$800,000".

(20) Schedule 2, item 11, page 37 (line 26), omit "2000", substitute "2002".

(21) Schedule 2, item 11, page 39 (line 19), omit "2000", substitute "2002".

(22) Schedule 2, item 11, page 41 (lines 6 and 7), omit " maximum basic entitlement ", substitute " multiplied basic rate ".

(23) Schedule 2, item 11, page 41 (after line 7), after step 4 of the method statement, insert:

Step 4A. Work out under subsection (4A) the person's ordinary/adjusted income free area for age service pension applicable to the person. Multiply that amount by 3 and add it to the person's multiplied basic rate. The result is called the person's maximum basic entitlement .

(24) Schedule 2, item 11, page 43 (after line 16), after subsection (4), insert:

Person's ordinary/adjusted income free area for age service pension

(4A) For the purposes of Step 4A in the Method statement in subsection (1), the ordinary/adjusted income free area for age service pension applicable to the person is:

(a) if the person was a member of a couple at any time during the 3 years immediately preceding the operative day—the amount that was, on the operative day, the ordinary/adjusted income free area for a partnered person under Module E in Part 2 of Schedule 6; or

(b) if paragraph (a) does not apply—the amount that was, on the operative day, the ordinary/adjusted income free area for a person who is not a member of a couple under Module E in Part 2 of Schedule 6.