Crimes Amendment (Penalty Unit) Bill 2022

2.1 This chapter considers the responses of ministers to matters previously raised by the committee.

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Crimes Amendment (Penalty Unit) Bill 2022

Purpose	This bill seeks to amend the Crimes Act 1914 to increase the amount of the Commonwealth penalty unit from $222 to $275, with effect from 1 January 2023.
Portfolio	Attorney-General
Introduced	House of Representatives on 9 November 2022
Bill status	Passed both Houses

Significant penalties^[1]

2.2 Item 1 of Schedule 1 to the bill amends the definition of 'penalty unity' in subsection 4AA(1) of the Crimes Act 1914 (Crimes Act) to increase the amount of a single unit from $222 to $275. Commonwealth pecuniary criminal and civil penalty provisions are generally expressed in terms of penalty units, with the penalty amount calculated by multiplying the value of a penalty unit as prescribed by the Crimes Act by the number of penalty units applicable.^[2] The effect of this amendment is therefore to increase the maximum civil and criminal penalties that apply across the majority of Commonwealth legislation.

2.4 The committee initially scrutinised this bill in Scrutiny Digest 8 of 2022 and requested the minister's advice.^[3] The committee considered the minister's response in Scrutiny Digest 1 of 2023 and requested the minister's further advice as to why it is both necessary and appropriate to increase the amount of a Commonwealth penalty unit by almost 24 percent, noting the limited explanation provided in the explanatory materials for the increase and that the increase will apply in addition to the usual indexation process.^[4]

2.5 The Attorney-General advised that the amount of the penalty unit has been increased four times by legislative amendment and once by automatic indexation since it was first instituted in 1992, increasing from $100 to $222. The

Attorney-General advised that these increases represent an increase of 122%, while average incomes have increased by 137% during the same period.

2.6 The Attorney-General advised that increasing the penalty unit amount over time in order to broadly align it with income levels ensures that fines remain an effective deterrent. The Attorney-General considered that this is vital given that fines are the most common sentencing disposition imposed by courts in Commonwealth matters, occurring in 31% of sentencing matters in the 2020-21 financial year. The Attorney-General noted that many of these sentences are imposed in the areas of financial, tax and fraud related crimes.

2.7 The Attorney-General advised that the public expects that courts have appropriate punishments available to them when sentencing individuals and corporations. The Attorney-General noted that penalties that do not have an appropriate maximum can be seen as a mere cost of doing business and cease to operate as a deterrent, particularly in the case of corporations.

2.8 Finally, the Attorney-General noted that the court is required to impose the most appropriate sentence, taking into account the relevant circumstances of each case. In this context, the maximum penalty will indicate the seriousness with which the offence is regarded by Parliament and the community but the actual fine imposed will in most cases be lower.

Attorney-General are dated to before the increase introduced by the Crimes Amendment (Penalty Unit) Bill 2022. With the changes introduced by the bill, the amount of the Commonwealth penalty unit has increased by 175% when compared to an increase of average incomes by 137%. With the automatic increase due to occur from July 2023, the difference between these two percentage rates may become more pronounced.

2.11 The committee accepts that it is important that penalty unit amounts are increased over time to align with income levels. Indeed, the committee's concerns relate to this point, noting that the increase proposed by the bill raises the amount of the penalty unit at a rate significantly above the rate in which incomes are increasing. While there may be legitimate reasons for taking this approach, very little justification has been provided in this instance.

2.12 The committee also considers that it is inappropriate to only consider penalty unit amounts in the context of average incomes. Rather, it would be more appropriate to consider real wage increases, which reflect the amount of inflation over a given period. The committee notes that the Attorney General's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers refers to inflation in this context, but not to average incomes, stating that 'expressing a penalty in penalty units (rather than a dollar figure) facilitates the uniform adjustment of penalties across legislation from time to time to reflect the changing value of money.'^[6]

2.13 Given the slower growth in real wages compared to average income over the relevant period, the discrepancy between the growth in the amount of a Commonwealth penalty unit and a person's income is more significant than the percentages stated by the Attorney-General would imply. The committee also notes that average income is not necessarily representative of general income levels given income inequality rates, and that other considerations are therefore likely to be relevant in determining an appropriate Commonwealth penalty unit amount.

2.14 The committee accepts that it is necessary to ensure that the amount of a Commonwealth penalty unit is adequate in ensuring effective deterrence. However, neither the explanatory memorandum for the bill nor the Attorney-General's response has provided evidence to demonstrate either that the previous amount was insufficient or that the new amount is required to ensure deterrence. The committee also notes that no explanation has been provided for how the amount of the increase was determined despite two requests being made for this information.

2.15 The Attorney-General has advised that concerns about deterrence relate particularly to the conduct of corporations rather than individuals. However, the committee notes that the Attorney-General's advice related in large part to the average income for individuals, a figure which does not relate directly to corporations. The committee also notes that if there is a specific concern that fines being imposed by the courts under financial, tax and fraud related crimes are inadequate to ensure deterrence, it is open to the government to instead increase the number of penalty units applying to those particular crimes.

2.16 As the increase introduced by the bill is significantly above that which would have occurred under the automatic indexation process, the committee expects a thorough justification for the increase to be included within the explanatory memorandum. This is particularly so as legislated penalty unit amounts may no longer align with the original intent, noting that these amounts would have been determined based on a general understanding of the way in which penalty unit increases would occur.

2.17 At a minimum, the committee considers that it would have been appropriate had the increase introduced by the bill been justified with reference to evidence: that the previous amount of the penalty unit was not acting as an effective deterrent; evidence that the new amount constitutes an effective deterrent; and information explaining how the new amount was determined.

2.18 The committee continues to have concerns about increasing the amount of a Commonwealth penalty unit by almost 24 percent, noting the limited explanation provided in the explanatory materials for the increase and that the increase will apply in addition to the automatic indexation process.

2.19 However, as the bill has already passed both Houses of the Parliament, the committee makes no further comment on this matter.

[1] Schedule 1, item 1. The committee draws senators' attention to these provisions pursuant to Senate standing order 24(1)(a)(i).

[5] The Attorney-General responded to the committee's comments in a letter dated 24 February 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 3 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest .

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests

Crimes Amendment (Penalty Unit) Bill 2022 - Commentary on Ministerial Responses [2023] AUSStaCSBSD 57 (22 March 2023)

Significant penalties[1]

Significant penalties^[1]