2019-2020-2021-2022

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLY Bill (No. 1) 2022-2023

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

(Circulated by the authority of the Minister for Finance,

Senator the Honourable Simon Birmingham)

Table of Acronyms and Defined Terms

 

 

 

Supply Bill (No. 1) 2022-2023

General Outline

1                This Explanatory Memorandum accompanies the Supply Bill (No. 1) 2022-2023(the Bill).

2                The main purpose of the Bill is to propose appropriations from the Consolidated Revenue Fund (CRF) for the ordinary annual services of the Government.

3                The Bill proposes appropriations broadly equivalent to 5/12 ^ths of the estimated 2022-23 annual appropriations for the ordinary annual services of the Government. The Bill proposes greater appropriations for certain entities which may have disproportionately high expenditure early in the financial year or support the continuing COVID-19 response, such as the Department of Health. Further details of the amounts proposed in the Bill are outlined in the Notes on clauses section of this Explanatory Memorandum (under Schedule 1—Services for which money is appropriated).

4                Annual appropriations for the ordinary annual services of the Government for the balance of 2022-23, being an amount broadly equivalent to 7/12 ^ths plus 2022-23 Budget measures, are proposed in the Appropriation Bill (No. 1) 2022-2023.

5                Appropriations for the ordinary annual services of the Government must be contained in a separate Bill from other appropriations in accordance with sections 53 and 54 of the Australian Constitution (the Constitution). Consequently, the Bill proposes appropriations for the ordinary annual services of the Government. Other annual appropriations that are not for the ordinary annual services of the Government are proposed in the Supply Bill (No. 2) 2022-2023, on broadly the same proportional basis as this Bill.

6                The Portfolio Budget Statements (portfolio statements) show amounts included in both the Supply Bills (Nos. 1 and 2) 2022-2023 and Appropriation Bills (Nos. 1 and 2) 2022-2023 . This Explanatory Memorandum should be read in conjunction with the various 2022-23 portfolio statements, which contain details on the appropriations set out in the Schedules of the Bills.

Structure of the Bill

7                The Bill provides for the appropriation of specified amounts for expenditure by Australian Government entities, primarily being non-corporate Commonwealth entities (non-corporate entities) under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) .

8                Part 1 of the Bill deals with definitions, the interpretative role of the portfolio statements and the concept of notional transactions. Part 2 of the Bill proposes appropriations to make payments of the amounts in Schedule 1 for departmental items (clause 7), administered items (clause 8) and corporate entity items (clause 9). Part 3 of the Bill specifies the Advance to the Finance Minister (AFM) provision (clause 10).

9                Part 4 deals with credits to special accounts (clause 11), provides for amounts to be appropriated as necessary (clause 12), and specifies when the Bill is repealed (clause 13). In addition to the AFM provision in Part 3, clause 12 of the Bill recognises that the appropriations in the Bill may also be varied by the PGPA Act .

Financial Impact

10            The Bill, if enacted, would appropriate the amounts specified in Schedule 1 as set out in clause 6.

 

Statement of Compatibility with Human Rights

1                The Bill seeks to appropriate money for the ordinary annual services of the Government.

2                Accordingly , the Bill performs an important constitutional function, by authorising the withdrawal of money from the CRF for the broad purposes identified in the Bill .

3                However, as the High Court has emphasised, beyond this, the Appropriation Acts for the ordinary annual services of the Government do not confer authority to engage in executive action. In particular, they do not confer legal authority to spend .

4                Given that the legal effect of Appropriation Bills is limited in this way, the Bill is not seen as engaging, or otherwise affecting, the rights or freedoms relevant to the Human Rights (Parliamentary Scrutiny) Act 2011 .

5                Detailed information on the relevant appropriations, however, is contained in the portfolio statements.

 

 

Notes on clauses

Part 1—Preliminary

Clause 1—Short title

1                Clause 1 specifies that the short title of the Bill, once enacted, will be the Supply Act (No. 1) 2022-2023 .

Clause 2—Commencement

2                Clause 2 provides for the Bill to commence as an Act on the later of either 1 July 2022 or the day of the Royal Assent.

Clause 3— Definitions

3                Subclause 3(1) defines the key terms used in the Bill, such as “administered item”, “non-corporate entity”, and “special account”.

4                Subclause 3(2) confirms that, for the purposes of other laws, the Bill when enacted is to be regarded as an Appropriation Act.

Clause 4—Portfolio statements

5                Clause 4 declares that the portfolio statements are relevant documents for the purposes of section 15AB of the Acts Interpretation Act 1901 (AI Act). Paragraph 15AB(2)(g) of the AI Act provides for material to be considered in the interpretation of an Act if the material is declared by the Act to be a relevant document for the purposes of section 15AB of the AI Act.

6                The purpose of the portfolio statements is to provide information on the proposed allocation of resources to Government outcomes by Commonwealth entities within each portfolio. The term “portfolio statements” is defined in subclause 3(1) to mean the Portfolio Budget Statements tabled in relation to the Appropriation Bill (No. 1) 2022-2023.

Clause 5—Notional transactions between entities that are part of the Commonwealth

7                Clause 5 provides that notional transactions between non-corporate entities are to be treated as if they are real transactions. Notional transactions, therefore, require the debiting of an appropriation made by Parliament. The payments of the amounts in Schedule 1 from one non-corporate entity to another do not require, in a constitutional sense, an appropriation, because both non-corporate entities operate within the CRF. For reasons of financial discipline and transparency, the practice has arisen for these payments between non-corporate entities to be treated as though they required an appropriation, and to debit an appropriation when such notional payments are made. This is consistent with section 76 of the PGPA Act.

8                When a non-corporate entity makes a payment, whether to another non-corporate entity or another part of the same non-corporate entity (such as a different “business unit” within the entity), it is to be treated as a “real” payment. This means that the appropriation made by Parliament is extinguished by the amount of the notional payment, even though no payment is actually made from the CRF. Similarly, a notional receipt in such a situation is to be treated by the receiving non-corporate entity (where relevant) as if it were a real receipt. This does not mean every internal transfer of public money involves a notional payment and receipt.

Part 2—Appropriation items

Clause 6—Summary of appropriations

9                Clause 6 sets out the total of the appropriations in Schedule 1 of the Bill. The amounts in Schedule 1 may be increased by a determination under clause 10 (Advance to the Finance Minister).

10            The amounts in Schedule 1 of the Bill may be adjusted further in accordance with sections 74 to 75 of the PGPA Act. Specifically:

·                 Section 74 of the PGPA Act, when read with Rule 27 of the Public Governance, Performance and Accountability Rule 2014 , permits non-corporate entities to retain certain types of receipts by adding them to their most recent departmental item or other type of appropriation in an Appropriation Act when prescribed.

·                 Appropriations may be adjusted by amounts recoverable by a non-corporate entity from the Australian Taxation Office for Goods and Services Tax (GST), in accordance with section 74A of the PGPA Act . The amounts specified in Schedule 1 exclude recoverable GST. The appropriations shown represent the net amount that Parliament is asked to allocate to particular purposes.

·                 Section 74A has the effect of increasing an appropriation by the amount of the GST qualifying amount arising from payments in respect of the appropriation. As a result, there is sufficient appropriation for payments under an appropriation item, provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial amount shown against the item in Schedule 1. Section 74A also applies to notional transactions between and within non-corporate entities.

·                 Items may be adjusted to take into account the transfer of functions between non-corporate entities, in accordance with section 75 of the PGPA Act. It is possible that adjustments under section 75 may result in new items and/or outcomes being created in an Appropriation Act.

11            Additionally, the Finance Minister manages the payment from items in the Bill to Commonwealth entities using a discretionary power under section 51 of the PGPA Act. Section 51 allows the Finance Minister to manage the timing and the amount of appropriated money to be made available to a Commonwealth entity (an entity as defined in section 10 of the PGPA Act), except as required by law.

Clause 7—Departmental items

12            Clause 7 provides that the amount specified in a departmental item for a non-corporate entity may be applied for the departmental expenditure of the non-corporate entity. Clause 3 defines:

·                 “departmental item” to be the total amount set out in Schedule 1 in relation to a non-corporate entity under the heading “Departmental”; and

·                 “expenditure” to be payments for expenses, acquiring assets, making loans or paying liabilities.

13            While the departmental items in Schedule 1 may be divided between outcomes, the different amounts against outcomes are notional. The total appropriation for departmental expenses represents the departmental item.

14            Departmental items involve costs over which a non-corporate entity has control. Departmental appropriations can be used to make any payment related to the functions of the non-corporate entity including on purposes covered by other items whether or not they are in the Act for an entity. Expenditure typically covered by departmental items includes:

·                 employee expenses, suppliers and other operational expenses (e.g. interest and finance expenses); and

·                 the acquisition and capitalised maintenance of departmental assets valued at $10 million or less.

15            The cash to meet departmental expenses may be required at times other than when the expenses are incurred. Departmental items are available until they are spent, or until the Act through which they were appropriated is repealed. Annual Appropriation Acts have a lifespan of up to three years after which they automatically repeal.

16            Generally, if non-corporate entities are directed by Government to perform additional activities, they are expected to meet the cost of the additional activities from their existing appropriations, which may then be replenished by a departmental appropriation in the following financial year. This is known as supplementation and applies when the direction was given, or a decision to propose further appropriations is made, in a timeframe within which it is not practicable to include the expected expenses in a further Appropriation Bill for that financial year.

17            There can also be occasions when a non-corporate entity, such as a portfolio Department, is required to assist with matters in relation to other areas of the Government. Examples can include whole-of-Government activities or a portfolio Department assisting with the formation and initial costs of a new portfolio body (for which the Department might later be supplemented). Another example would be where Government has decided to implement shared services arrangements, and one non-corporate entity is providing corporate services assistance to another non-corporate entity.

Clause 8—Administered items

18            Subclause 8(1) provides for the appropriation of administered amounts to be applied by a non-corporate entity for the purpose of contributing to the outcome for a non-corporate entity. An “administered item” is defined in clause 3 to be the amounts set out in Schedule 1 opposite an outcome for a non-corporate entity under the heading “Administered”. Administered amounts are appropriated separately for each outcome, so, unlike departmental items, the split across outcomes is not notional. This makes it clear what the funding is intended to achieve.

19            The purposes for which each administered item can be spent are further set out in subclause 8(2). Subclause 8(2) provides that where the portfolio statements indicate a particular activity is in respect of a particular outcome, then expenditure on that activity is taken to be expenditure for the purpose of contributing to achieving that outcome.

20            Administered items are those administered by a non-corporate entity on behalf of the Government (e.g. certain grants, benefits and transfer payments). These payments are usually made pursuant to eligibility rules and conditions established by the Government or the Parliament. Specifically, administered items are tied to outcomes (departmental items are not).

Clause 9—Corporate entity items

21            Clause 9 provides for appropriations of money for corporate entities to be paid from the CRF by the relevant Department. Clause 9 provides that payments for corporate entities must be used for the purposes of those entities.

22            A “corporate entity” is defined in subclause 3(1) to be a corporate Commonwealth entity or a Commonwealth company within the meaning of the PGPA Act. Many corporate entities receive funding from appropriations. However, these entities are legally separate from the Commonwealth, and as a result, do not debit appropriations or make payments from the CRF.

23            Corporate entity payments are initiated by requests to the relevant portfolio Departments from the corporate entities. The Finance Minister manages appropriations for corporate entities through a discretionary power to control the timing and amount made available under section 51 of the PGPA Act, except as required by law. Corporate entities hold the amounts paid to them on their own account.

24            Subclause 9(2) provides that if a corporate entity is subject to another Act that requires amounts appropriated by Parliament for the purposes of that entity to be paid to the entity, then the full amount of the corporate entity payment must be paid to the entity.

25            The purpose of subclause 9(2) is to clarify that subclause 9(1) is not intended to qualify any obligations in other legislation regulating a corporate entity, where that other legislation requires the Commonwealth to pay the full amount appropriated for the purposes of the entity.

26            In addition to the annual appropriations, some corporate entities may also receive public money from related entities such as a portfolio Department and from special appropriations managed by those Departments. Many corporate entities also receive funds from external sources.

Part 3—Advance to the Finance Minister

Clause 10—Advance to the Finance Minister

27            Clause 10 of the Bill enables the Finance Minister to allocate additional amounts for items when satisfied that there is an urgent need for expenditure, and the existing appropriation in the current year is not provided for, or is insufficiently provided for. The allocated amount is referred to as the Advance to the Finance Minister (AFM).

28            Subclause 10(1) has the effect that a determination can only be made under subclause 10(2) if the Finance Minister is satisfied there is an urgent need for expenditure in the current year that is not provided for, or is insufficiently provided for, in Schedule 1 either because of an omission or understatement, or because of unforeseen circumstances.

29            Subclause 10(2) enables the Finance Minister to make a determination to allocate an amount from the AFM to an existing item in Schedule 1, to a new item not already in Schedule 1, or to a new outcome.

30            Subclause 10(3) provides that the total amount that can be determined under the AFM provisions in the Bill, once enacted, and the Appropriation Act (No. 1) 2022-2023 is $2,400 million.

31            Subclause 10(4) provides that the total amount of the AFM provisions in subclause 10(3) includes $2,000 million for future urgent and unforeseen COVID-19 related expenditure and $400 million for other urgent and unforeseen expenditure.

32            Subclause 10(5) provides that, should both the Bill and the Appropriation Bill (No. 1) 2022-2023 be enacted, the amounts specified in subsections 10(3) and (4) of the Appropriation Act (No. 1) 2022-2023 are to be disregarded. Instead, the amounts specified in subsections 10(3) and (4) of the Supply Act (No. 1) 2022-2023 are the total amounts available to be determined under both AFM provisions. The practical effect is that if both Bills became Acts during the term of this Parliament, then the AFM under those respective Acts cannot be granted beyond a total of $2,400 million.

33            It should be noted that Appropriation Act (No. 1) 2022-2023 and Appropriation Bill (No. 1) 2022-2023 are defined in subclause 3(1) to refer only to the version of that legislation introduced in the present Parliament (known as the 46 ^th Parliament). If that appropriation legislation lapses because of the calling of a Federal Election, subsection 10(5) of the Supply Act (No. 1) 2022-2023 would not apply.

34            If in the next Parliament (the 47 ^th Parliament) another Bill is introduced with the same title, that is Appropriation Bill (No. 1) 2022-2023 , that legislation would not be covered by subsection 10(5) of the Supply Act (No. 1) 2022-2023 , because it would fall outside the definition in the Supply Bill (that is, it would not be associated with the 46 ^th Parliament).

35            Subclause 10(6) provides that a determination under subclause 10(2) is a legislative instrument, which must be tabled in Parliament. It is not subject to section 42 (disallowance) of the Legislation Act 2003 as this would frustrate the purpose of the provision, which is to provide additional appropriation for urgent expenditure. This also reflects the need for entities to have certainty of appropriation when making expenditures. Further, an AFM is not subject to Part 4 of Chapter 3 (sunsetting) of the Legislation Act 2003 ; legislative instruments enabled by the Bill, once enacted, automatically repeal when the Act itself repeals (see clause 13).

36            The AFM is an important mechanism which provides the Government with the capacity to respond to urgent and unforeseen pressures such as those that emerged throughout the COVID-19 pandemic without impinging on the important role of Parliament in its consideration of legislation.

37            The extraordinary AFM provisions for the purposes of COVID-19 related response expenditure take into consideration the unique and evolving nature of the COVID-19 pandemic. These provisions ensure the Government is able to respond to urgent and unforeseen COVID-19 related expenditure requirements should these arise at times during the 2022-23 financial year, where it is not possible or not practical to pass further Appropriation Acts.

38            The AFM is split in the usual proportion across the pair of Bills (40 per cent in Bill 1 and 60 per cent in Bill 2). Accordingly, this Bill provides for $2,000 million and the Supply Bill (No. 2) 2022-2023 provides for $3,000 million, for COVID-19 related response expenditure.

39            The $5,000 million of the contingency in the Supply Bills (Nos. 1 and 2) 2022-2023 is statutorily limited to COVID-19 related matters only. This is consistent with a commitment previously provided for in the Appropriation (Coronavirus Economic Response Package) Acts (Nos. 1 and 2) 2019-20 and the Appropriation (Coronavirus Response) Acts (Nos. 1 and 2) 2021-2022 .

40            The $5,000 million is the maximum total appropriation that can be allocated from the AFM provisions in both the Supply Bills (Nos. 1 and 2) 2022-2023 and the Appropriation Bills (Nos. 1 and 2) 2022-2023, once enacted, for COVID-19 related response expenditure. This total is similar in value to the COVID-19 related items that have received specific program funding in the Appropriation (Coronavirus Response) Acts (Nos. 1 and 2) 2021-2022 .

41            The $1,000 million general-purpose component of the AFM quantum ($400 million in this Bill and $600 million in the Supply Bill (No. 2) 2022-2023) is for the purposes of responding to circumstances other than COVID-19. The $1,000 million setting marks a normalisation in the value of the AFM for general purposes.

42            Allocations from the AFM provisions will be subject to the same scrutiny and accountability provisions as have applied to AFM provisions during the pandemic, including a media release in weeks when AFMs are issued which reports and reconciles the use of the AFM provision, and seeking the concurrence of the Shadow Minister for Finance on behalf of the Opposition for any proposed AFM greater than $1 billion (as detailed at paragraph 47 below).

Effect of an AFM determination 

43            An AFM determination does not authorise expenditure on a particular purpose. It increases an existing multi-purpose line item appropriation (departmental or administered) in the Appropriation Act that covers expenditure on a range of different programs.

Why AFM determinations are exempt from disallowance

44            The disallowance of an AFM determination would not invalidate expenditure that has already been made in reliance upon it. However, it would leave entities short of the funds that they need to carry out their other ordinarily budgeted expenditure in what remains of a financial year.

45            Disallowance of an AFM determination would reduce an entity’s appropriation to its original level. Yet the urgent expenditure it has already undertaken validly prior to disallowance, in reliance upon the determination, would count towards the newly reduced appropriation. The reason why this occurs is because an AFM determination does not authorise expenditure on a particular purpose. It increases an existing multi-purpose line item appropriation (departmental or administered) in the Appropriation Act that covers expenditure on a range of different programs. If a House disallows the determination, it reverses the increase and impairs the funding remaining for other programs that are unrelated to the AFM.

46            Accordingly, disallowance would leave the entity with a shortfall in the appropriation available to fund the ongoing expenditure for which the Government originally budgeted and which the Parliament approved when it passed the Appropriation Act. Because of the unavoidable negative impacts that disallowance of an AFM would cause to the routine operations of the Government, there is a bipartisan consensus that AFM determinations should be exempt from disallowance. 

Accountability and transparency arrangements for AFM determinations

47            Recent extraordinary AFM provisions have been supported by strong accountability and transparency arrangements including:

(a)                registration of each AFM determination with an explanatory statement on the Federal Register of Legislation (legislation.gov.au);

(b)                a media release by the Finance Minister in weeks when AFMs are issued;

(c)                a commitment for the Finance Minister to seek the concurrence of the Shadow Minister for Finance, on behalf of the Opposition, for any proposed AFM allocation over $1 billion;

(d)                an annual assurance review by the Australian National Audit Office (ANAO); and

(e)                an Annual Report on the AFM allocations tabled in Parliament, inclusive of the ANAO’s assurance review report.

48            These measures will continue throughout the 2022-23 financial year, consistent with the arrangements that have applied to other AFMs during the COVID-19 pandemic.

Part 4—Miscellaneous

Clause 11—Crediting amounts to special accounts

49            Clause 11 provides that if the purpose of an item in Schedule 1 is also the purpose of a special account (regardless of whether the item expressly refers to the special account), then amounts may be debited against the appropriation for that item and credited to the special account. Special accounts may be established under the PGPA Act by a determination of the Finance Minister (section 78) that is disallowable by Parliament or by another Act (sections 79 and 80). The determination or Act that establishes the special account will specify the purposes of the special account.

Clause 12—Appropriation of the Consolidated Revenue Fund

50            Clause 12 provides that the CRF is appropriated as necessary for the purposes of the Bill. Significantly, this clause means that there is an appropriation in law when the Act commences. That is, the appropriations are not made or brought into existence just before they are paid, but when the Act commences. This clause indicates that the amounts appropriated may be affected by the PGPA Act, in particular sections 74 to 75 (see clause 6), after the Act commences.

Clause 13—Repeal of this Act

51            Clause 13 provides that the Bill, once enacted, will repeal at the start of 1 July 2025.

 

Schedule 1—Services for which money is appropriated

52            Schedule 1 specifies the appropriations proposed for the ordinary annual services of the Government. Schedule 1 contains a summary table which lists the total amounts for each portfolio. A separate summary table is included for each portfolio, with other tables detailing the appropriations for each Commonwealth entity. More details about the appropriations in Schedule 1 are contained in the portfolio statements and the second reading speech for the Bill.

53            Schedule 1 includes, for information purposes, a figure for the previous financial year labelled “Actual Available Appropriation (italic figures) - 2021-2022”. The Actual Available Appropriation (AAA) is an estimate that does not affect the amount available at law. That figure provides a comparison with the proposed appropriations.

54            The AAA is calculated for each item by adding the amounts appropriated in the relevant financial year’s annual Appropriation Acts, plus any AFMs, and any adjustments under sections 51 and 75 of the PGPA Act. In some instances, the figure may also be affected by limits applied administratively by the Department of Finance. In addition, where an entity’s outcome structure has changed since the last Appropriation Act, only ongoing outcomes may be shown in the Bill. For these reasons, the Actual Available Appropriation figures may be different from the sum of amounts provided in earlier Appropriation Acts.

55            The Supply Bills (Nos. 1 and 2) 2022-2023 propose approximately 5/12 ^ths of the 2022-23 appropriation estimates for most entities and programs, adjusted as explained in this paragraph and in paragraphs 56 to 57 below. The 2022-23 estimates are broadly the 2021-22 base, adjusted f or economic and program specific parameters, and the effect of decisions announced as part of the 2021-22 Mid-Year Economic and Fiscal Outlook or included in the Appropriation Bills (Nos. 3 and 4) 2021-2022 (Additional Estimates Appropriation Bills).  

56            The Supply Bills propose appropriations greater than 5/12 ^ths of the 2022-23 estimates for the following activities:

(a)                full-year appropriation for the Department of Health and the National Recovery and Resilience Agency, to provide flexibility to meet the demands of ongoing responses to COVID-19 and the recent floods in New South Wales and Queensland, as well as responses to any emerging disasters;

(b)                full-year appropriation for entity outcomes and programs with uneven expenditure early in the financial year, including the Families and Children Program and the Integrated Carer Support Service (the Department of Social Services); the National Collaborative Research Infrastructure Strategy (the Department of Education, Skills and Employment); the Tertiary Education Quality and Standards Agency (departmental capital budget); and the Department of Industry, Science, Energy and Resources (Outcome 3 - administered);

(c)                9/12 ^ths appropriation to ensure adequate cash flow for select smaller entities, as well as programs and entities with uneven expenditure early in the financial year including:

·                      the National Indigenous Australians Agency;

·                      the National Disability Insurance Scheme Quality and Safeguards Commission;

·                      the Department of Education, Skills and Employment’s Government Schools National Support Program;

·                      the Department of Veterans’ Affairs’ payment to the Commonwealth War Graves Commission;

·                      the Department of Agriculture, Water and the Environment’s Commonwealth Environmental Water Program; and

(d)                9/12 ^ths appropriation for Services Australia for unforeseen government services that may need to be delivered.

57            Following convention, the Supply Bills generally do not include 2022-23 Budget measures, with the exception of COVID-19 response measures largely related to drugs and health services that have been extended since the 2021-22 Mid-Year Economic and Fiscal Outlook Additional Estimates’ processes. The majority of the extended COVID-19 measures fall within the responsibility of the Department of Health, with smaller amounts for the Australian Digital Health Agency and Services Australia.