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Dairy Produce Amendment (Dairy Service Levy Poll) Bill 2016



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ISSN 1328-8091

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BILLS DIGEST NO. 88, 2015-16 25 FEBRUARY 2016

Dairy Produce Amendment (Dairy Service Levy Poll) Bill 2016 Rob Dossor Economics Section

Contents

Purpose of the Bill ............................................................... 2

Structure of the Bill ............................................................. 2

Background ......................................................................... 2

Committee consideration .................................................... 4

Senate Standing Committee for the Selection of Bills ............. 4

Senate Standing Committee for the Scrutiny of Bills .............. 4

Policy position of non-government parties/independents ..... 4

Position of major interest groups ......................................... 4

Financial implications .......................................................... 4

Statement of Compatibility with Human Rights .................... 5

Parliamentary Joint Committee on Human Rights .................. 5

Key issues and provisions..................................................... 5

Date introduced: 11 February 2016

House: House of Representatives

Portfolio: Agriculture and Water Resources

Commencement: Sections 1 to 3 commence on Royal Assent. Schedule 1 commences on Proclamation or six months after Royal Assent, whichever is earlier.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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Purpose of the Bill The purpose of the Dairy Produce Amendment (Dairy Service Levy Poll) Bill 2016 (the Bill) is to amend the Dairy Produce Act 19861 (Dairy Act) to remove the requirement for Dairy Australia to make recommendations about the dairy service levy rate (levy rate) at least every five years.2 The Bill will introduce a new framework for conducting dairy service levy polls (levy polls).

Structure of the Bill The Bill contains only one Schedule which repeals and replaces Division 3 of Part II of the Dairy Act.

Background Dairy Australia (DA) is a body established by the Commonwealth at the initiative—and for the benefit of—the dairy sector. Under subsection 7(1) of the Dairy Act, it is the declared industry services body.3

The functions of DA are to help dairy farmers adapt to a changing operating environment and achieve a profitable, sustainable dairy industry.4 This is done by way of investment in projects that affect the whole dairy industry, with a focus towards investment on pre- and post-farm gate research, development, extension and industry services. 5 In order to carry out these functions, DA receives funding by way of the dairy service levy (dairy levy) which the Commonwealth collects from dairy producers at a rate of 2.9263 cents per kilogram for milk fat and 7.1229 cents per kilogram for milk protein, on behalf of DA.6

Under the Dairy Act, DA is required to conduct a poll of dairy levy payers before making any recommendations to the Minister with regards to the levy rate.7 The information collected from the poll is then used to develop DA’s recommendations.8 The Dairy Produce (Dairy Service Levy Poll) Regulations 2006 (Dairy Regulations) requires DA to provide recommendations to the Minister at least every five years.9 This means that DA is also required to conduct a poll of all dairy levy payers at least every five years.

There have been concerns raised about ‘the regulatory and financial burden associated with holding a poll every five years’.10 DA received feedback from stakeholders that the process involved with the last poll, which was conducted in 2012, ‘was costly, inefficient, time consuming and could be done better.’11

DA was required to consult with the dairy industry prior to conducting the levy poll. In the lead up to the 2012 levy poll it conducted 52 presentations around the country.12 DA concluded that, due to the varying level of farmer turnout (which was said to have been reasonable in Victoria, but poor in northern NSW), the consultation process was inefficient.13 Approximately 42 per cent of levy payers responded to the poll, (this represented about 51 per cent of eligible voters as votes are based on one vote per dollar towards the dairy service levy).14 The outcome of the 2012 levy poll was that 60.13 per cent of valid votes voted for an increase of the dairy levy, with 54.05 per cent voting for an increase of 10 per cent and 6.08 per cent of votes in favour of a 15 per cent increase.15 39.87 per cent voted for no levy.16

1. Dairy Produce Act 1986, accessed 19 February 2016. 2. The time limits for when recommendations about the dairy service levy rate must be made are prescribed under the regulations: subregulation 5(5) of the Dairy Produce (Dairy Service Levy Poll) Regulations 2006, accessed 16 February 2016. 3. Department of Finance (DoF), ‘List of Australian Government Bodies and government relationships as at 1 October 2009: Agriculture, fisheries

and forestry portfolio’, DoF website, October 2009, p. 71, accessed 15 February 2016. 4. Dairy Australia (DA), ‘Who we are’, DA website, accessed 23 February 2016. 5. DA, Australian dairy industry in focus 2015, DA, Melbourne, 2015, p. 2, accessed 23 February 2016. 6. Department of Agriculture and Water Resources (DAWR), ‘Information Sheet [Dairy Produce Levy]’, DAWR website, accessed 23 February

2016. This levy is distributed to DA minus administration costs. 7. Dairy Produce Act 1986, subsection 9(2). 8. Ibid.

9. Dairy Produce (Dairy Service Levy Poll) Regulations 2006, regulation 5. 10. Explanatory Memorandum, Dairy Produce Amendment (Dairy Service Levy Poll) Bill, p. 2. 11. I Halliday (Managing Director, Dairy Australia), Evidence to Senate Rural and Regional Affairs and Transport References Committee, Inquiry into Industry structures and systems governing the imposition and disbursement of marketing and research and development (R&D) levies in

the agricultural sector, 4 February 2015, p. 26, accessed 16 February 2016. 12. Ibid., p. 30. 13. Ibid.

14. Ibid., p. 31. Regulation 11, Dairy Produce (Dairy Service Levy Poll) Regulations 2006. 15. DA, ‘Dairy service levy’, DA website, accessed 19 February 2016.

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In 2012, the Chair of the DA Board of Directors proposed an independent review into Dairy Australia’s Constitution by a Constitutional Review Panel (the Panel).17 The review was established by Dairy Australia in consultation with the Australian Dairy Farmers (ADF— the dairy farmer representative body) and the Department of Agriculture.18 The review commenced in June 2014 (when the review panel was established).19

The Dairy Levy Poll Process Review Report to the Board of Dairy Australia Limited (the Review report) made a number of recommendations, including that:

• the levy should be reviewed at least every five years with a view to determining whether a change to either the levy rate or the mechanism for the imposition of the levy should be put forward

• the industry should have flexibility as to the timing of the levy poll and

• a levy poll would only be held in the circumstances where a change in either the level of the levy or the mechanism for the imposition of the levy was recommended by the Levy Poll Advisory Committee.20

The Review report also recommended other changes around the levy poll, such that Group A (dairy farmers) members of DA could request a levy poll when a bloc comprising at least 15 per cent of Group A members disagreed with the Levy Poll Advisory Committee decision not to convene a levy poll.21 This would result in a vote by all Group A members on whether to conduct a levy poll. If this vote determined that a levy poll should be conducted, the Levy Poll Advisory Committee would be obliged to conduct the poll and include the option put forward by the bloc.22

The review recommended that the Levy Poll Advisory Committee should appropriately represent the industry while ensuring it remains a workable size.23 It recommended that initial members should comprise:

• an independent chair

• two DA representatives

• two ADF representatives and

• one Australia Dairy Products Federation (the dairy processing and marketing peak body) representative.24

Starting in October 2015 dairy levy payers were electronically polled as to whether they supported the proposed changes to the levy poll process.25 The poll drew 24.7 per cent of eligible voters, with 89.95 per cent voting in support of the changes.26 According to ADF President Simone Jolliffe, all levy payers were consulted during the consultation process (consultation was conducted by ADF with the support of DA and state dairy farming organisations).27

Minister Joyce reaffirmed support for the proposed changes on 3 February 2016 following a meeting with Simone Jolliffe.28

16. Ibid.

17. Dairy Levy Poll Review Panel, Dairy levy poll process review, report to the Board of Dairy Australia Limited, Dairy Levy Poll Review Panel, Melbourne, 23 April 2015, p. 3, accessed 17 February 2015. 18. Dairy Levy Poll Process Review, ‘Home’, Dairy Levy Poll Process Review webpage, accessed 24 February 2016. 19. Dairy Levy Poll Review Panel, Dairy levy poll process review, op. cit., p. 6. 20. Ibid., p. 4. 21. Ibid.

22. Ibid., pp. 4-5. 23. Ibid., p. 5. 24. Ibid.; Australian Dairy Products Federation Inc (ADPF), ‘About’, ADPF website, accessed 25 February 2016. 25. Australian Dairy Farmers (ADF), No change, no levy poll - you decide, media release, 5 October 2015, accessed 18 February 2016. 26. ‘Dairy farmers back levy poll change’, The Land, (online edition), 2 December 2015, accessed 18 February 2016. 27. ADF, ADF update 2015, ADF, November/December 2015, pp. 4-5, accessed 18 February 2016; B Joyce (Minister for Agriculture and Water

Resources), ‘Second reading speech: Dairy Produce Amendment (Dairy Service Levy Poll) Bill 2016’, House of Representatives, Debates, (proof), 11 February 2016, p. 3, accessed 19 February 2016. 28. B Joyce (Minister for Agriculture and Water Resources), Joyce voices support for simplified dairy levy process, media release, 3 February 2016, accessed 18 February 2016.

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While the review was being finalised, the Senate Rural and Regional Affairs and Transport References Committee (the Committee) was conducting an Inquiry into Industry Structures and Systems Governing the Imposition and Disbursement of Marketing and Research and Development (R&D) Levies in the Agricultural Sector.29 In its final report, which was tabled on 30 June 2015, the Committee did not reach a conclusion about whether a poll should be required to determine levy rates across agricultural industries.30 As a result the Committee did not make any express recommendations regarding levy polls. Crossbench Senator David Leyonhjelm, however, while endorsing the Committee’s recommendations, stated

The wool and dairy sectors both allow levy payers to vote on the level of levies to be imposed, including the option of zero. While neither is perfect, they are considerably more representative than other sectors where voting only occurs when there is a proposal to impose a new levy or increase an existing one… 31

Senator Leyonhjelm made additional recommendations including that each sector undertake a regular poll of levy payers to decide the rate of levy and the split of levy funds between marketing and R&D and that polls be conducted at intervals of four years, with the option to defer a particular poll for up to two years in exceptional circumstances.32

Committee consideration Senate Standing Committee for the Selection of Bills At the time of writing the Senate Standing Committee for the Selection of Bills had not considered the Bill.

Senate Standing Committee for the Scrutiny of Bills At the time of writing the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Policy position of non-government parties/independents Senator Leyonhjelm is quoted as stating that he would ‘like to see the dairy industry continue asking its members if they wish to continue paying the levy but go further than that and ask how they’d like the levy money spent’.33

Otherwise the Bill does not appear to have raised concerns or commentary from other non-government parties or independent senators or members, as at the time of writing.

Position of major interest groups The main dairy industry body, the ADF pushed for the changes.34 The ADF as well as DA were responsible for drafting the Terms of Reference of the Dairy Levy Poll Process Review.35

Financial implications The Bill will have no financial implications for the Commonwealth. According to the Government it will, however, provide savings to DA of up to $1 million every five years.36 This is due to DA not being required to hold a levy poll every five years, which last cost around $720,000 (although the bulk of this was spent on industry consultation, including media, about the poll).37

29. Further information about the inquiry is available on the Committee’s homepage: Senate Rural and Regional Affairs and Transport References Committee, ‘Inquiry into industry structures and systems governing the imposition and disbursement of marketing and research and development (R&D) levies in the agricultural sector’, Parliament of Australia website, accessed 23 February 2016.

30. Senate Rural and Regional Affairs and Transport References Committee, Inquiry into industry structures and systems governing the imposition and disbursement of marketing and research and development (R&D) levies in the agricultural sector, The Senate, Canberra, 30 June 2015, p. 72, accessed 23 February 2016.

31. Ibid., p. 79. 32. Ibid., p. 81. 33. C Bettles, ‘Leyonhjelm cautions Joyce on Levy reforms’, Farm Weekly, (online edition), 11 February 2016, accessed 17 February 2016. 34. Dairy Review Levy Process Review, ‘Dairy review levy process: questions and answers’, Dairy Review Levy Process Review website, accessed

19 February 2016. 35. Dairy Levy Poll Review Panel, Dairy levy poll process review, op. cit., p. 3. 36. Explanatory Memorandum, op. cit., p. 3.

37. For example media and a ‘road show’ cost around $540,000. I Halliday, Evidence to Senate Rural and Regional Affairs and Transport References Committee, op. cit., pp. 30-32.

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Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible as it does not raise any human rights issues.38

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise human rights concerns.39

Key issues and provisions The Bill contains only one Schedule, which repeals and replaces Division 3 of Part 2 of the Dairy Act.

Division 3 currently consists of section 9, which covers recommendations about the dairy levy rate and the requirement to carry out levy polls. Specifically, subsection 9(1) requires the relevant services body (currently DA) to make recommendations to the Minister about the dairy levy amount and for the recommendations to be made within the time prescribed under the regulations. Subsection 9(2) provides that before making a recommendation, DA must conduct a poll in accordance with the regulations and the recommendation must reflect the results of the poll. Subsection 9(3) ensures that the regulations contain provisions allocating votes to each dairy service levy payer.

Item 1 repeals and replaces Division 3. Proposed Division 3 inserts new section 9, which sets out the new provisions relating to polls and recommendations about the dairy service levy amount. Proposed subsections 9(1) and 9(2) stipulate that DA must conduct a levy poll about the amount of the dairy levy, in accordance with the legislative instrument made under this section, if a request for a levy poll is made in accordance with the legislative instrument.

Proposed subsection 9(3) provides that if DA conducts a poll, it is to make recommendations to the Minister about the amount of the dairy levy within the period specified in the legislative instrument and in accordance with the results of the levy poll.

Proposed subsection 9(4) allows the Minister, by legislative instrument, to make provision for the making of a request for a levy poll, the conduct of a levy poll and the making of recommendations to the Minister about the dairy levy rate. Proposed subsection 9(5) also allows the legislative instrument to make provision for the persons or bodies who may request a levy poll, the circumstances in which a request for a levy poll may or must be made and the form of a request for a levy poll.

Proposed subsection 9(6) requires that the legislative instrument must include provisions allocating votes to each dairy service levy payer.

Importantly, new section 9 no longer refers to the regulations and instead refers to the legislative instrument. The Explanatory Memorandum notes that it is intended that subordinate legislation in the form of a legislative instrument will be developed to:

• require DA to establish a levy poll advisory committee to consider the levy rate every five years

• require DA to hold a levy poll if a variation to that rate is recommended by the advisory committee and

• include a mechanism for Group A members of DA to request DA conduct a levy poll if they disagree with the levy poll advisory committee’s decision not to convene a levy poll. This proposal must be supported by at least 15 per cent of levies paid by Group A members.40

38. The Statement of Compatibility with Human Rights can be found at page 4 of the Explanatory Memorandum to the Bill. 39. Parliamentary Joint Committee on Human Rights, Thirty-fourth report of the 44th Parliament, The Senate, Canberra, 23 February 2016, p. 1, accessed 24 February 2016. 40. Explanatory Memorandum, op. cit., p. 2.

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