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2019-2020
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SUPPLY BILL (NO. 1) 2020-2021
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Finance,
Senator the Honourable Mathias Cormann)
Table of Acronyms and Defined Terms
AAA Actual Available Appropriation
AFM Advance to the Finance Minister
AI Act Acts Interpretation Act 1901
Commonwealth An entity as defined in section 10 of the PGPA Act
entity
corporate entity A corporate Commonwealth entity or a
Commonwealth company within the meaning of the
PGPA Act
CRF Consolidated Revenue Fund
Finance Minister Minister for Finance and the Public Service
GST Goods and Services Tax
non-corporate Non-corporate Commonwealth entities as defined in
entities the PGPA Act, or the High Court
PGPA Act Public Governance, Performance and Accountability
Act 2013
portfolio Portfolio Budget Statements and Portfolio Additional
statements Estimates Statements
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
House of Representatives 1
Outline
Supply Bill (No. 1) 2020-2021
General Outline
1 This Explanatory Memorandum accompanies the Supply Bill (No. 1)
2020-2021 (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 7/12ths of the
estimated 2020-21 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 to
support the COVID-19 response, such as the Department of Health and Services
Australia. Further details of the amounts proposed in the Bill are outlined in the
Notes on clauses section to this Explanatory Memorandum, under Schedule 1--
Services for which money is appropriated.
4 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) 2020-2021 and
Supply (Parliamentary Departments) Bill (No. 1) 2020-2021, on broadly the same
proportional basis as this Bill. Together these three Bills are termed the Supply
Bills.
5 This Explanatory Memorandum should be read in conjunction with the
various 2019-20 portfolio statements (being the Portfolio Budget Statements
2019-20 and the Portfolio Additional Estimates Statements) which contain details
on the appropriations set out in the Schedule of the Bill.
Structure of the Bill
6 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).
7 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).
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
House of Representatives 2
Outline
8 Part 4 of the Bill 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
9 The Bill, if enacted, would appropriate the amounts specified in Schedule 1
as set out in section 6.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Statement of compatibility with human rights
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, Appropriation
Acts do not create rights and nor do they, importantly, impose any duties.
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.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
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) 2020-2021.
Clause 2--Commencement
2 Clause 2 provides for the Bill to commence as an Act on the later of either
1 July 2020 or the day of the Royal Assent.
Clause 3--Definitions
3 Clause 3 defines the key terms used in the Bill, such as "administered item",
"non-corporate entity", and "special account". Clause 3 also confirms that, for the
purposes of other laws, the Bill when enacted it to be regarded as an
Appropriation Act.
Clause 4--Portfolio statements
4 Clause 4 declares that the portfolio statements are relevant documents under
paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act) which
provides for material to be considered in the interpretation of an Act if the
material is declared by the Act to be relevant material for the purposes of
section 15AB of the AI Act.
5 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 the
Bill, at clause 3, to mean the Portfolio Budget Statements 2019-20, tabled in
relation to the Appropriation Bill (No. 1) 2019-2020 and the Appropriation Bill
(No. 2) 2019-2020, and the Portfolio Additional Estimates Statements 2019-20,
tabled in relation to the Appropriation Bill (No. 3) 2019-2020 and the
Appropriation Bill (No. 4) 2019-2020.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
Clause 5--Notional transactions between entities that are part
of the Commonwealth
6 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.
7 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
8 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).
9 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
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
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.
10 Additionally, the Finance Minister manages the payment from items in the
Bill by non-corporate 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
11 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.
12 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.
13 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.
14 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.
15 Generally, if non-corporate entities are directed by Government to perform
additional activities, they are expected to meet the cost of the additional activities
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
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.
16 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
17 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.
18 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.
19 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
20 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.
21 A "corporate entity" is defined in clause 3 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
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
legally separate from the Commonwealth, and as a result, do not debit
appropriations or make payments from the CRF.
22 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.
23 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.
24 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.
25 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
26 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).
27 Subclause 10(1) establishes the criteria about which the Finance Minister
must be satisfied before determining to add an amount to an item of an entity.
28 The Finance Minister will only consider issuing an amount under
subclause 10(1) if satisfied there is an urgent need for expenditure that is not
provided for, or is insufficiently provided for, in Schedule 1, because of an
omission or understatement, or because of unforeseen circumstances. Generally,
options under sections 74 to 75 of the PGPA Act must be considered, where
applicable, before the Finance Minister will make a determination under
subclause 10(2).
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.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
30 Subclause 10(3) provides that the total amount that can be determined under
the AFM provision is $16 billion, to provide the Government with the capacity to
allocate additional appropriations for COVID-19 related responses that are not
contemplated in the current package.
31 Subclause 10(4) 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. 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).
Part 4--Miscellaneous
Clause 11--Crediting amounts to special accounts
32 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
33 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
34 Clause 13 provides that the Bill, once enacted, will repeal at the start of
1 July 2023.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
Schedule 1--Services for which money is appropriated
35 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.
36 Schedule 1 includes, for information purposes, a figure for the previous
financial year labelled "Actual Available Appropriation (italic figures) -
2019-2020". 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.
37 The AAA is calculated for each item by adding the amounts appropriated in
the previous 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.
38 The Bill proposes 7/12ths of the 2020-21 appropriation estimates, which are
broadly equivalent to those presented at the 2019-20 Budget, indexed for
economic and program specific parameters, the effect of decisions announced as
part of the 2019-20 Mid-Year Economic and Fiscal Outlook or included in the
2019-20 Additional Estimates Appropriation Bills, and the amendments to the
Administrative Arrangements Order which took effect from 1 February 2020.
39 To support the Government's economic response to the COVID-19
pandemic, the Supply Bills propose appropriations greater than 7/12ths of the
2020-21 estimates for the following activities:
(a) Full 2020-21 appropriations for Services Australia, the Australian
Taxation Office and the Department of Health, to provide flexibility to
respond to service delivery requirements.
(b) Full 2020-21 appropriations for programs that act like demand driven
programs however are funded through annual appropriations including the
National Disability Insurance Agency, Operation Sovereign Borders,
Disability Employment Services, Employment Services (including
Jobactive), and Support for the Child Care System.
(c) Full 2020-21 appropriations for the Regional Investment Corporation to
ensure capacity to meet the current high level of demand by farmers and
primary production dependent small businesses for drought loans at
two-years interest free terms.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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Notes on clauses
(d) 10/12ths of the 2020-21 appropriations for the Attorney-General's
Department's Program 1.7: Royal Commissions, to enable the Bushfire
Royal Commission to proceed.
(e) 9/12ths of the 2020-21 appropriations for the Department of Agriculture,
Water and Environment's Program 4.1: Biosecurity and Export Services
and Program 4.2: Plant and Animal Health, to ensure services can be
maintained in the event revenue is impacted.
(f) 7/12ths of the 2019-20 appropriations for the Australian Digital Health
Agency (ADHA), to ensure continued operation of the ADHA, which is
currently funded by a program which terminates on 30 June 2020.
40 The Supply Bills also propose appropriations to provide for expenditure in
2020-21 for measures included in the Appropriation (Coronavirus Economic
Response Package) Bill (No. 1) 2019-2020, where these items continue in
2020-21.
Explanatory Memorandum to Supply Bill (No. 1) 2020-2021
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