Wednesday, 22 August 2018
Farm Household Support Amendment (Temporary Measures) Bill 2018; Second Reading
The original question was that this bill be now read a second time. To this the honourable member for Hunter has moved as an amendment that all words after 'that' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.
First of all, the most important thing here is that our farmers be aware that they should be ringing the Rural Financial Counselling Service on 1800686175 or the family assistance hotline on 132316, and under no circumstances should they self-assess. There are many conditions that may allow them to get help when they absolutely need it, and they may not realise that the hand of the government is there for them. It's important that they don't rely on trying to assess their own assets and property. There's help available, and we have the resources to help them.
The Farm Household Support Amendment (Temporary Measures) Bill 2018 is a bill to help and to amend the Farm Household Support Act 2014. Under this bill, two temporary changes to the Farm Household Allowance program will happen. Firstly, it will increase the farm assets threshold to a net $5 million until 30 June 2019. Increasing the net farm asset threshold to this amount will give more farmers access to the allowance during times of hardship, which is what we're facing right now. It will help those farmers who have little or no cash flow to access assistance that provides them an allowance as well as breathing room to prepare for and adapt to change. It means these farmers won't have to sell their assets and risk taking away some or all of their future income-producing capacity from their farm. It also recognises that farm assets can be difficult to sell quickly and that during tough times these are often sold for less than they're worth.
Secondly, this bill proposes to pay a supplement to all eligible farm household recipients. That's in addition to their fortnightly income support payments. These temporary measures will help our farmers in need in the short term while we undertake an independent review of the program. The review, to be completed in the first half of 2019, will provide further guidance on the design elements of the farm household allowance well into the future. There will be some lump sum payments. This means that, if both members of a couple are receiving the allowance between September this year and June next year, they will receive 6,000 bucks each, or 12,000 per household. In all other circumstances, the maximum amount payable will be $7,200.
No farmer who lodges a claim for the farm household assistance on or before December will be disadvantaged. If they're eligible, they'll get back pay, right to the date of lodgement, and also receive the supplement. They will receive farm household assistance during the second payment, which is from December to June next year, and they will receive the maximum supplement.
The assistant supplement will give farming families much-needed cash to inject into their local economies. This will also help to put food on their tables and cover basic expenses such as their bills and school fees. As with the increases to the farm assets threshold, it will provide a safeguard for farm families who might be forced to liquidate farm assets to support themselves—and, heaven help us, that constricts their future. This assistance includes income support, independent financial assessment, individualised case management and an activity supplement that pays for advice and training. The safety net supports farmers in hardship while they take steps to improve their situation. And $5 million has been allocated to the Rural Financial Counselling Service so they can go out and talk to the farmers face-to-face and help them through these hard times.
We are working on ways to make the process simpler and quicker for farmers. I have already received email saying it is a little onerous, so we are working on that. We extended the Farm Household Allowance program from three years to four. All of these measures are immediate and on top of the $586 million in relief we have already announced, as well as concessional loans now available through the Regional Investment Corporation.
Many farmers find themselves in a difficult position. In my case, it is the dairy farmers. They don't want to put their hands out for a handout, so we are working to help raise awareness of the cost of milk. I recently wrote to the CEOs of Aldi, Coles, Woolworths and IGA and highlighted that just 20c a litre, 20c a dozen and 20c a kilogram from the profit margin would help our farmers. For the last eight years, the price of milk has been fixed at a dollar a litre. Nothing else on our shelves has remained constant during this time. In 2017 it was reported that the ACCC found the dairy pricing system to be outdated and skewed in favour of the large dominant supermarkets and processors, with farmers enjoying no real bargaining power and limited scope to rearrange their businesses and milk contracts to either accurately predict their current incomes or improve their selling options. The report made eight recommendations, including locking major processors into a mandatory code of conduct which would make milk pricing contracts more transparent, introducing more competition for farmers' milk and banning retrospective milk price cuts in mid-season, which has actually happened. Our local farmers in Gilmore want to have the ability to build their own resilience and futureproof themselves on their own merits as producers. This change in retail price specifically for milk will make a huge difference to them. I think the farm household assistance is just another part of the jigsaw puzzle and helping them get through these really tough times.
Before I came to this place—and I still have interest in it—I was a farmer in a district called Buckleboo. Buckleboo is 100 kilometres north of Goyder's line. That may not mean a lot to many Australians, but it means a lot in South Australia. Goyder's line is seen as the line north of which one should not engage in agriculture. But my family has been there for over 90 years and we have prospered, and so has the community. It is a successful farming community. This means I bring the personal experience of drought to this place. Probably the longest period of drought is around four years—the millennium drought, of course. I think we had six very substandard years over eight years. It was quite testing. Over the years, some things have been done better in helping farmers get through tough times—and I will come to that in a little while.
In 2009, the rains came back—they came back with a vengeance in parts of Australia. Up until the last little while, we have enjoyed reasonably good seasons, particularly where I come from. I understand that the drought in New South Wales and Queensland is very problematic at the moment. In some places, it is entering its sixth year. Where I come from, it is less pronounced. I have communities, though, in my electorate that are now looking at the third failure in four years. So things are toughening up. And we have some considerable soil erosion issues that we haven't seen for many, many years—in fact, since the advent of no-till farming. I'm very encouraged that the government is showing it's listening and it's making changes to drought assistance as the drought unfolds, as I think governments should. I commend the minister, the Treasurer and the Prime Minister on listening and making those adjustments.
This bill goes to some temporary measures that are attached to the farm household assistance. For those who don't know—I'm sure everyone in this place will—farm household assistance is the equivalent of Newstart, except there are two differences: one being that the person does not have to seek work, so they are able to receive Newstart assistance and continue to operate their farm. It's a very important tool for basically putting food on the table and keeping families in a good frame of mind. I mean that in the widest possible terms—looking after mental health.
The other difference, and it's a recent change to farm household assistance, is that the government has decided that people can continue on this assistance for up to four years. Newstart allowance is worth not quite $25,000 a couple. This bill, and the announcement by the Prime Minister a few weeks ago, now makes available two $3,000 payments per person. For a couple, it's $6,000 over the next 12 months. That another $12,000 on top of the $25,000, as long as they lodge up to 1 December. I think that is recognition that this is a drought that's having a lot of impact.
We're also increasing the net assets of a farming operation to be eligible for payments from $2½ million up to $5 million. This is a considerable change. A lot of farms are worth a lot of money, and we often say farmers can be asset-rich and income poor. This addresses that issue. Someone who still has assets of over $5 million should be able to make sure they can put food on the table, quite frankly. I think that's a good and powerful move.
But there are a whole lot of other things that swing within farm household assistance, and some other measures in other portfolios assist farmers to stay on the land and prosper. I thought—considering there had been considerable discourse around Australia when the Prime Minister made these most recent announcements, which came to a $190 million uplift at the time—that government gave only $190 million for farmers, but, in fact, since that time, in another announcement, the total assistance to farmers is up around $1.8 billion.
There are some important things available. I held a drought forum in Arno Bay, going back about 2½ weeks ago. There was about three days notice and about 75 farmers and families rolled up. I had a Centrelink officer there and also some rural financial counsellors. I was very grateful for their assistance. One of the things that became quite clear is that farmers do not necessarily have a full grasp of all the things that are available to them and sometimes underestimate the complexity of applying for that assistance. The golden rule here is: we are supplying rural financial counsellors; do not self-assess. Get some help. That is what the rural financial counsellors are for. They are built into the package.
Other things are available within that package; for instance, $1,500 for a farm enterprise evaluation. In layman's terms: this is some money for your accountant to put together the numbers that you can put on your form so you can apply for the farm household assistance. There's $4,000 for a farming operation to assist with skills training. It might be some business studies or it might be getting your computer operations up to speed. There are all kinds of things that can help farmers. It's very important because, at the end of the day, farmers are businesses and they need to operate in that world.
There's been a whole raft of other measures, including the $20,000 instant tax write-off for capital purchases that all businesses enjoy. The instant write-off now, after the recent upgrade, is for water, fodder and fencing, and that is a huge change. There are parts of my electorate where rainfall is preciously thin and where there are no underground water supplies, including on my own farm. In many places, there is not even a reticulated water supply. That means farmers are dependent on what they can capture on their properties. I've been espousing for a long time that they should investigate the possibility of plastic water runs and plastic-lined dams with plastic lids on them, which basically gives rainwater-quality water on farm that runs at one millimetre.
The figures are quite astonishing, and I've given them to the House before. Eyre Peninsula, which is where my farm is situated, uses about 11 gigalitres of water a year out of the reticulated system. If we were to situate a dam and run-off in a 400-millimetre rainfall area—and that's not that hard to find on Eyre Peninsula—just 7,000 acres would harvest all of that water. It would do it. No-one would ever suggest that we build this super dam in one place, but the ability is there for farmers to put aside maybe a hectare of land and put plastic on it—use an existing dam if they have one, line it with plastic and get rid of the evaporation by putting a lid on it—to virtually waterproof their farms. That indirectly takes all that pressure off, at least on the Eyre Peninsula and in some cases the Murray River system. This is an investment with great integrity. I encourage farmers to do that. With the changes to the instant tax write-off, when they get a good year they will have the ability to invest in something that's going to drought-proof their property for the coming years.
I was speaking recently to some quite large farmers who do a lot of fodder conservation. They have a number of sheds. One said, 'I've stopped selling, and I've got to tell you that, sadly, fodder is running out in South Australia.' The recent decision by the New South Wales government—I bear them no malice—to provide a freight subsidy for NSW farmers has actually shortened the food supply in South Australia and lifted its price. This farmer produces a lot of hay and he said, 'We've stopped selling, though, because we've decided that what we've got left we need to have for ourselves. We've made very good money through this period by selling this hay, so what we will do when the drought breaks and when we grow a good hay crop again is build yet another shed, which will be fully tax-deductible in the year in which we build it, and we'll fill that up with hay so we've got more hay for the next drought.' That is more reserves, more fat on their farming system, and an ability to supply a very important commodity to other farmers who haven't got to that point. That's what those incentives do.
On top of that, we have the concessional loans—the drought assistance and business improvement loans. The government announced only last week, I think, that they made available a swag of extra money for those loans. To give people some idea, there is no requirement to repay the principal within five years, and they operate at a 3½ per cent interest rate. Interest rates are fairly low in the market, but that is still below what anyone could expect to get from their bank. Up to 50 per cent of their debt can be financed in that way.
We also have 2½ thousand dollars for benchmarking properties for access to multi-peril crop insurance. It was interesting that, at the drought forum I held in Arno Bay, a number of farmers said that they'd taken out multi-peril crop insurance this year. They were dealing with the sellers of that insurance about how those payouts might work. I'll put one note of caution in: there seems to be quite a variance between those particular policies. One particular farmer had sown his crop and said, 'Because it has been so dry and it never came up, we actually reached the default date, so it's not considered to be a crop,' even though he had expended all his money on seed, fertiliser and the chemicals that went with the sowing. That's a little note of caution. The point is the government is assisting farmers to get into this area to try and manage these income shortfalls for themselves.
The most important federal government policy equipping farmers to deal with drought is the farm management deposits scheme, which was brought in by the Howard government. In the 2016 budget, we doubled the amount which farmers can put into these farm household deposits. For the uninitiated, this means that, in a high-income year, farmers can put money in a bank account with any of the major banks, and that money will get the normal interest from the bank—which I have to say at the moment is not very much—and it will get treated in the same way as any other account. There is a full tax deduction for the year in which they lodge it, and when they bring it back onto their income books—it can earn that interest while it's parked to one side—it will be assessed at the top marginal rate at the time. Of course, if you've got a drought and you're not paying tax because you have zero income or less, that is the time to bring your FMDs back into action. Those limits now are $800,000 for an individual and $1.6 million for a farming couple. The reason it's had to go up is that farms have gotten bigger and bigger, and many of them will spend anything up to half a million or a million dollars getting a crop in the ground. So it's no good equipping farmers for half a season of input; we need to be able to make them resistant to multiseasonal droughts. That's why those limits have been lifted. I do think, as I said, it's the best policy that a government has ever given Australian farmers to equip themselves for drought.
I might say there is a knock-on effect here too for local businesses because it actually keeps cash flow more constant in our local towns, because farmers have actually got money to spend in the season when they didn't get an income. I recount a story of one of my suppliers some years ago, when I was still farming. I was talking about FMDs and he said: 'Why can't I get that as a supplier? Why can't I get an FMD?' I said: 'It's difficult because we come down to this definition of what is a rural business and what is not a rural business. Have you noticed any difference since the FMDs have come in?' He said, 'What do you mean?' I said, 'Well, for instance, when it got to about 20 June in the previous years, and I'd had a reasonable season, I used to come in and buy all my fertiliser for next year and most of my chemical.' He looked at me and he said, 'Yes, you used to offload your tax problems on to me.' I said, 'I know!' It was in good humour, of course, but he's right. Farmers used to come in and unload in June to buy up big for the coming months. I said, 'What happens now?' He said, 'It's not happening anymore.' I said, 'I'm not doing it anymore; I'm using my FMDs.' He said, 'Yes, actually, you're right; we are getting a steadier income.' That FMD actually has a knock-on benefit for the farm merchandising and the farm-dependent rural businesses. As I say, it's the best thing available.
That's a big round off on drought policy generally and where the government is. I think it's a very comprehensive package. I do applaud these most recent changes, which are the temporary measures to get people through the current tight spot.
This bill, the Farm Household Support Amendment (Temporary Measures) Bill 2018, demonstrates this government's responsiveness to the needs of farming communities and our commitment to rural and regional Australia. The Farm Household Allowance program provides support for all farmers and their partners facing hardship, including drought. It's a time limited program, and from 1 August 2018 the government increased the time on payment from three to four years accumulative.
This bill proposes two temporary changes to the Farm Household Allowance program. The first change is to increase the net farm assets threshold to $5 million to begin on a date to be prescribed by a minister's rule and ending on 30 June 2019. The second change provides a supplement to all eligible farm household allowance recipients in addition to their fortnightly payments. These temporary measures are designed to help our farmers in the short term while we undertake an independent review of the FHA which will provide further guidance on the design elements of the farm household allowance into the future.
The increase to the farm assets threshold was specifically raised by farmers on the listening tour this government undertook in June 2018, with harsh drought conditions impacting their ability to provide the basics for their families. In fact, many of these farmers have not yet been able or were unable to access the farm household allowance. I will be introducing a minister's rule that will allow farmers with net farm assets up to $5 million to lodge a claim for FHA from 1 September 2018. Implementation arrangements to allow the processing of these applications will be in place from 1 October. People who are granted FHA under the temporary farm asset increase can continue to receive their payment after 30 June 2019 as long as they continue to meet all other eligibility requirements.
The bill also pays a supplement, called the FHA supplement, of up to $12,000 to a couple where both are recipients of the farm household allowance and up to $7,200 for single recipients. This additional support will benefit not only our farmers but the regional communities they live in. The allowance is not about paying for feed and fodder. It's about putting food on the table, paying household bills or putting diesel in the ute. But the farm household allowance is more than a social security payment. Recipients are supported to undertake a farm financial assessment and a financial improvement agreement, which is a plan to work towards improving their self-reliance. Recipients identify goals and undertake activities designed to move them towards a more sustainable future. These features of the program continue unchanged.
FHA also provides access to activity supplements of up to $4,000. This money can be used for eligible professional support, advice or training. This support affords farmers and their partners an opportunity to earn an off-farm income. Recipients will also continue to receive support through dedicated farm household case officers who work with recipients to assess their individual situation and to identify activities to improve their long-term situation. While on payments, farmers and their partners also have access to a healthcare card, pharmaceutical allowance, rent assistance, telephone allowance, energy supplement and remote area allowance. If it is not possible for recipients to achieve financial sustainability, notwithstanding the support offered through the farm household program, the program also supports recipients to consider alternative employment or transitioning away from farming with dignity.
This bill demonstrates the government's continued responsiveness to the needs of our farming communities. By amending the legislation, more farmers and their partners will be able to access the farm household allowance program, and eligible recipients will be paid a supplement in addition to their fortnightly income support payments. The bill increases the net farm assets test to $5 million until 30 June 2019, with the start date to be determined by ministerial rule. It pays a supplement of up to $12,000 for a couple where both are recipients of farm household allowance and up to $7,200 for single recipients. It helps farmers and their partners recover from the hardship. This bill benefits current and future farm household allowance recipients and the communities they live in. I thank the members for their contributions and commend the bill to the House.
The original question was that this bill be now read a second time. To this the honourable member for Hunter has moved as an amendment that all words after 'that' be omitted with a view to substituting other words. The immediate question is that the amendment moved by the member for Hunter be agreed to.