Farm Household Support Secretary's Rule 2014 [F2014L00614] -Continuing matters [2014] AUSStaCSDLM 183 (24 September 2014)

• Farm Household Support Secretary's Rule 2014 [F2014L00614]
• Prescribing of matters by 'legislative rules'

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Farm Household Support Secretary's Rule 2014 [F2014L00614]

Purpose	Prescribes matters the secretary must take into account in deciding whether a farm enterprise has a significant commercial purpose of character and a person has a reasonable excuse for committing a qualification failure or conduct failure, and kinds of requirements that must not be included in a financial improvement agreement, and classes of activities that may be specified in a financial improvement agreement for which an activity supplement is payable
Last day to disallow	17 July 2014
Authorising legislation	Farm Household Support Act 2014
Department	Agriculture

[The committee first reported on this instrument in Delegated legislation monitor No. 8 of 2014, and subsequently in Delegated legislation monitor No. 10 of 2014].

Issue:

Prescribing of matters by 'legislative rules'

This instrument is made by the Secretary of the Department of Agriculture (the secretary). Amongst other things, it prescribes matters the secretary must take into account in deciding whether a farm enterprise has a significant commercial purpose of character and a person has a reasonable excuse for committing a qualification failure or conduct failure.

In Delegated Legislation Monitor (Monitor) Nos 2, 5, 6 and 9 of 2014, the committee noted a novel approach (since 2013) in the drafting of Acts to provide for a broadly-expressed power to make legislative rules, and raised a number of significant concerns going to the implementation and implications of the displacing of the regulation-making power by such rules (see comments on Australian Jobs (Australian Industry Participation) Rule 2014 [F2014L00125]).^[1]

Section 106 of the Farm Household Support Act 2014 provides two general rule-making powers:

Minister's rules
(1) The Minister may, by legislative instrument, make Minister's rules prescribing matters required or permitted by this Act to be prescribed by the Minister’s rules.
Secretary's rules
(2) The Secretary may, by legislative instrument, make Secretary's rules prescribing matters:
(a) required or permitted by this Act to be prescribed by the Secretary's rules; or
(b) necessary or convenient to be prescribed for carrying out or giving effect to this Act.

The committee notes that the Office of Parliamentary Counsel Drafting Direction No. 3.8 advises on the process for incorporating two general rule-making powers in an Act as follows:

As a general rule, where there are 2 instrument-making powers, only one of those powers should contain a power to prescribe necessary or convenient matters. Consequently, 2 rule-making powers would take the following form:
(1) The [maker e.g. Minister] may, by legislative instrument, make [name of legislative instrument] prescribing matters:
(a) required or permitted by this [Act/Ordinance] to be prescribed by the [name of legislative instrument]; or
(b) necessary or convenient to be prescribed for carrying out or giving effect to this [Act/Ordinance].
(2) The [maker e.g. Secretary] may, by legislative instrument, make [name of legislative instrument] prescribing matters required or permitted by this Act to be prescribed by the [name of legislative instrument].
The necessary or convenient power should generally be attached to the maker who is likely to make more instruments.

Under section 106 of the Farm Household Support Act 2014, both the minister and the secretary have been given the 'required or permitted' power, with the secretary also having the additional 'necessary or convenient' power. In relation to this division of powers, the committee notes that the explanatory memorandum (EM) for the Farm Household Support Bill 2014 states only:

This section provides that both the Minister and the Secretary may prescribe rules by legislative instrument. The rules-making power under section 106 allows the Agriculture Minister or Secretary of the Department of Agriculture to make rules in relation to the Farm Household Support Act 2014.

The committee notes that this issue also arises in relation to Farm Household Support Minister's Rule 2014 [F2014L00687].

[The committee therefore requested the minister's advice on the appropriateness in this case of providing the secretary with broader rule-making powers than the minister, and the criteria used in making this decision.

More generally, the committee requested the minister's advice on what policy considerations were taken into account in deciding that the general-rule making power should be granted to persons other than a minister (Delegated legislation monitor No. 8 of 2014)].

MINISTER'S RESPONSE:

The Minister for Agriculture advised:

In considering my response to the issues raised by the Committee set out below, the following explanation of the Farm Household Support Act 2014 (the Act) provides the Committee with some context. The Act is complex in that it notionally modifies how the Social Security Act 1991 and the Social Security (Administration) Act 1999 operate, so that those Acts can apply in relation to payments made under this Act. Section 90, Simplified outline of this Part, explains how this works.
The Farm Household Allowance (FHA) is generally treated in the same way as newstart and youth allowance. This means that where there is a reference in the Social Security Act or the Social Security Administration Act to newstart or youth allowance, it is as if there were also a reference to farm household allowance. The farm household allowance, the activity supplement and the farm financial assessment supplement are all treated as if they were social security payments. As a result, the general rules in the Social Security Act and the Social Security Administration Act relating to how to make claims, how payments are made and review of decisions apply in relation to payments under this Act.
While the Act is comprehensive, in forming the policy settings that support farmers in hardship it was clear to me that overly prescriptive legislation could prevent a farmer in need from accessing support as intended, as has been the case in the past. The Secretary's Rule relating to 'whether a farm enterprise has a significant commercial purpose or character' provides a good example of the flexibility I sought in implementing the payment. The significant commercial purpose or character test is based on a ruling of the Taxation Commissioner (TR97/11 Income tax: am I carrying on a business of primary production) which has changed from time to time. Equally, the Secretary's Rule on the 'kinds of requirements not to be included in financial improvement agreements' is modelled on existing social security law, but deals with the special circumstances relevant to farmers rather than job seekers or students. Both of these matters relate to the day-to-day operation of the Act.
The Secretary's broad rule making power takes into account both the nature of the rules that would be necessary and the frequency with which rules would be made. The anticipated operational nature of the matters to which the rules will relate, and the likelihood that rules will be required to facilitate the alignment of the FHA with mainstream social security payments has been considered by the Senate Standing Committee for the Scrutiny of Bills, and agreed by the Parliament, indicating the nature of the breadth of the power is appropriate.
I also note that the matters dealt with in the Secretary's Rule all relate to matters which are 'required or permitted'. This shows the Act and rules that relate to matters which are 'required or permitted' deal with foreseeable issues, suggesting the use of the necessary and convenient power will be infrequent.
My response to the specific issues raised by the Committee in relation to the Secretary's Rule is set out below.
In its correspondence to me dated 20 March 2014, the Senate Standing Committee on the Scrutiny of Bills also raised issue with the delegation of legislative power under section 106 of the Act. The First Parliamentary Counsel, Mr Peter Quiggin PSM, provided me with advice on the general application and use of rule-making powers in response to that letter. This advice was provided to the Scrutiny of Bills Committee and relevantly states that [extract included below]:
OPC's view is that some types of provisions should be included in regulations and be drafted by OPC as the Commonwealth's principal drafting office, unless there is a strong justification for prescribing these provisions in another type of legislative instrument. These include the following provisions:
(a) offence provisions;
(b) powers of arrest or detention;
(c) entry provisions;
(d) search provisions;
(e) seizure provisions.
I note the First Parliamentary Counsel's comments on OPC's approach to the making of instruments rather than regulation and the consistency of this approach with the Legislative Instruments Act 2003 (the LIA) and the First Parliamentary Counsel functions and responsibilities under the Act. I also note instrument-making powers are commonly in the form of (or include) a power to "prescribe" particular matters. For example, the rule-making power in subsection 59(1) of the Federal Court of Australia Act 1976 (which was included when that Act was enacted in 1976). In this respect neither the Farm Household Support Secretary's Rule 2014 nor the Farm Household Support Minister's Rule 2014 [F2014L00687] are inconsistent with other legislative instruments. Accordingly I am satisfied the use of rules, as opposed to primary legislation or regulation, is appropriate.
In response to the question of the appropriateness of the Secretary having broader rule-making powers than the minister, the Monitor already notes OPC Drafting Direction 3.8 states that the 'necessary and convenient power should generally be attached to the maker who is likely to make more instruments' .The vast majority of decisions that may need to be taken under the Act relate to its day-to-day operation. As the Secretary is the delegate for these decisions, it is appropriate that the 'necessary and convenient' power is also held by the Secretary. This will allow for rules to be made in relation to matters which are not readily foreseeable but necessary for the smooth and timely operation of the scheme. I also note that the 'necessary or convenient' rule making power is limited to prescribing matters for carrying out or giving effect to this Act. In this respect I consider the power to be appropriately limited.

COMMITTEE RESPONSE:

[The committee made the following comments and requested the minister's response to the matters outlined below (Delegated legislation Monitor No. 10 of 2014)].

The committee thanks the minister for his response, which will inform the committee's deliberations and the upcoming briefing with FPC and officers from OPC.

However, in relation to FPC's advice on the general rule-making power cited by the minister, the committee notes that significant issues regarding the consequences and policy guidance for the use of the general rule-making power are not settled.

MINISTER'S RESPONSE:

The Minister for Infrastructure and Regional Development advised:

I note that the Committee's concern that consequences and policy guidance around the general rule-making power is not settled. I am advised that since Minister Joyce's response of 5 August 2014 you have met with Mr Peter Quiggin PSM, First Parliamentary Council and Mr John Leahy, Principal Legislative Counsel. Given this issue has much broader application to Commonwealth legislation than the Farm Household Support Act 2014 (the Act), the resolution of this at a generic level through your interactions with the Office of Parliamentary Counsel would seem the most appropriate course of action.

COMMITTEE RESPONSE:

The committee thanks the Minister for Infrastructure and Regional Development for his response.

As noted by the minister, the committee is pursuing a number of issues arising from the prescribing of matters by legislative rules, and will report on these in due course. The committee has therefore concluded its examination of this aspect of the instrument.

Issue:

Potential delegation of general rule-making power

Section 101 of the Farm Household Support Act 2014 provides that the secretary may delegate their powers to officers below the Senior Executive Officer level:

(1) The Secretary may, by signed writing, delegate to an officer of the Department all or any of his or her powers or functions under this Act, or the Social Security Act or the Social Security Administration Act (as those Acts apply because of Part 5 of this Act).
(2) The Secretary (the Agriculture Secretary) may, in writing, delegate all or any of his or her powers or functions under this Act, or the Social Security Act or the Social Security Administration Act (as those Acts apply because of Part 5 of this Act), to:
(a) the Social Security Secretary; or
(b) an SES employee or acting SES employee in the Social Security Department; or
(c) the Chief Executive Centrelink; or
(d) a Departmental employee (within the meaning of the Human Services (Centrelink) Act 1997).

The EM for the Farm Household Support Bill 2014 stated:

These delegation powers are intentionally broad, due to the interaction of the Bill with the Social Security Act and the Social Security Administration Act. They are also necessary because payments under the Bill will be delivered by DHS. Case management by DHS is central to FHA and to achieving FHA's objectives of supporting farmers and their partners who are in hardship while improving their capacity for self-reliance. Operationally, this will require DHS officers below the Senior Executive Officer level to have these powers delegated to them.

The committee notes the operational reasons given in the EM for the broad delegation of the secretary's powers. However, noting the committee's previous inquiries regarding the implications of the new general rule-making power for executive exercise and oversight of Parliament's delegated legislative powers (see comments on the Australian Jobs (Australian Industry Participation) Rule 2014 [F2014L00125]), a question arises as to whether the secretary's general rule-making powers under section 106(2) may be delegated under section 101 and, if so, what considerations might apply in that case [the committee therefore requested the advice of the minister in relation to this matter (Delegated legislation monitor No. 8 of 2014)].

MINISTER'S RESPONSE:

The Minister for Agriculture advised:

The committee notes that section 101 of the Act provides that the Secretary may delegate his powers to officers below the Senior Executive Officer level. It notes the operational reasons given in the explanatory memorandum for the broad delegation of the Secretary's power and seeks clarification as to whether the general rule-making powers may be delegated under section 101, and, if so, what considerations might apply in that case.
My advice is that there is no legal impediment to the Secretary delegating any or all of his powers or functions under the Act (section 101 Delegation of powers). While legally this rule-making power could be delegated, in practice, this delegation is not exercised. This is reflected in the Secretary's instrument of delegation to the Chief Executive of Centrelink and to senior executives within the Department of Agriculture (the department) where this power has been specifically retained. Additionally, in line with the Administrative Arrangements under the Administrative Arrangements Order, the department is responsible for 'rural adjustment and drought issues'. Given this responsibility I do not foresee any circumstances where the general rule making power would be delegated to an employee outside of the department or below the senior executive level within the department.

COMMITTEE RESPONSE:

[The committee thanked the minister for his response, made the following comments, and requested his response to the matters outlined below (Delegated legislation monitor No. 10 of 2014)].

However, the committee notes the Senate Standing Committee for the Scrutiny of Bills (the Scrutiny of Bills committee) has consistently drawn attention to legislation that allows delegations to a relatively large class of persons, with little or no specificity as to their qualifications or attributes. Generally, the Scrutiny of Bills committee prefers to see a limit set either on the sorts of powers that might be delegated or on the categories of people to whom those powers may be delegated. The Scrutiny of Bills committee's preference is that delegates be confined to the holders of nominated offices or to members of the senior executive service.

The committee also notes the operational justification given for the delegation of certain powers to officers below senior executive service level, and the minister's advice that he does 'not foresee any circumstances where the general rule making power would be delegated to an employee outside of the department or below the senior executive level within the department'.

In the committee's view, notwithstanding the minister's advice that there is no legal impediment to the delegation of the rule-making power in this case, there remains a question as to whether it is appropriate in any case that the general rule-making power be delegated (noting in particular the committee's concerns regarding the extent to which the general rule-making power diminishes the requirement for close executive oversight of the exercise of Parliament's delegated legislative powers).^[2] The committee therefore seeks the minister's further advice on this matter.

MINISTER'S RESPONSE:

The Minister for Infrastructure and Regional Development advised:

I note that the general rule-making power was not delegated in relation to the instrument currently being considered by the Committee, as it was made by the Secretary of the Department of Agriculture (secretary).
I also note that, as Minister Joyce advised in his previous response to the Committee of 5 August 2014, in practice the rule making power in section 106 of the Act has not been delegated. As an example, the secretary deliberately chose not to delegate the power to the Chief Executive of Centrelink, which contrasts with most other powers under the Act, which were delegated. In addition to the above, the secretary has informed me that at the current point in time, he has no intention of delegating his rule making powers, or that any such delegation is currently necessary for administration of Farm Household Allowance.
I have also been advised that the Office of Parliamentary Counsel has provided the Committee with a draft Drafting Direction that will clarify the issue of delegating the power to make instruments under future legislation. I understand that the Committee has also discussed this broader issue with the First Parliamentary Counsel and the Principal Legislative Counsel.

COMMITTEE RESPONSE:

The committee thanks the Minister for Infrastructure and Regional Development for his response.

As noted by the minister, the committee is pursuing a number of issues arising from the prescribing of matters by legislative rules, including the issue of subdelegation of the general rule-making power.

However, in this case, the committee notes the minister's advice that the delegation of the general rule-making power is neither intended nor necessary. Taking into account the scrutiny preference, as expressed by the Scrutiny of Bills committee, that the delegation of legislative power be only as broad as strictly required, the committee therefore requests that the Farm Household Support Act 2014 be amended to specifically exclude the delegation of the general rule-making power.

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^[1] See Senate Standing Committee on Regulations and Ordinances, Delegated legislation monitor No. 6 of 2014, 18 June 2014, Australian Jobs (Australian Industry Participation) Rule 2014 [F2014L00125], pp 5–22, available at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Regulations_and_Ordinances/Monitor

^[2] See Senate Standing Committee on Regulations and Ordinances, Delegated legislation monitor No. 6 of 2014, 18 June 2014, Australian Jobs (Australian Industry Participation) Rule 2014 [F2014L00125], pp 5–22, available at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Regulations_and_Ordinances/Monitor