Drought Q&A

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What does the Budget say about drought program reform?

For the first time in over a decade there are no Exceptional Circumstances (EC) declared areas in Australia. The government has been working with industry, states and territories to review the existing drought programs so they can better support farmers to manage risks and prepare for future challenges. The time is right to move the reform process forward.

A major step in the reform process is closing the EC Interest Rate Subsidy (ECIRS). Successive reviews since 1997 have found that the ECIRS is ineffective and inequitable. Therefore the subsidy will not be available from 30 June 2012. The government will continue to support farm families experiencing hardship. The 2012-13 Budget provides $22.8 million over two years to continue household support for farm families through the Transitional Farm Family Payment.

What has changed?

 As of 1 May 2012, Australia is officially drought-free.

The improved seasonal conditions and expiry of all Exceptional Circumstances (EC) declarations provide the right time to close the ECIRS program. This environment also provides governments with the best window in over a decade for reform of drought-related programs.

Given there are no EC declared areas to trigger payments of the ECIRS, no farmers will be disadvantaged by the closure.

The government will continue to work closely with key stakeholders on future drought-related measures that will move away from crisis management to risk management and preparedness.

Farmers experiencing hardship will still be supported with a commitment of $22.8 million to continue household support through the Transitional Farm Family Payment for two years, as part of the 2012-13 Budget. This payment will be available regardless of location or industry and succeeds the Transitional Income Support program.

Other measures that help farm businesses better prepare for droughts, including the Farm Management Deposits (FMD) Scheme, will also continue.

Why has the government decided to close the EC Interest Rate Subsidy?

The government's goal is to help farmers better manage risks and prepare for future challenges rather than waiting until they are in crisis to offer assistance. Successive reviews of drought programs since 1997 have found that the ECIRS is ineffective and inequitable and can result in farm businesses being less responsive to drought conditions.

In making the decision to close the ECIRS, the government considered what helps farmers identify opportunities and threats, manage risks and prepare for future challenges, including drought.

Why has the government made the decision now?

 The government has always been clear on its intention to reform the EC arrangements to make drought-related programs more equitable with a focus on self reliance, preparedness and risk management. The government maintained the ECIRS while there were EC-declared areas, so those farmers experiencing drought who were receiving EC assistance were not disadvantaged.

The expiry of the last two EC declarations in Australia on 30 April 2012 means that no one will be disadvantaged by the decision. After years of drought, the seasonal conditions and outlook for agriculture across Australia are very promising. Now is the time to implement the findings of reviews of drought programs since 1997 and take a new approach.

What evidence is there to support the government's decision to close the ECIRS?

 Successive reviews of drought programs since 1997 have found that the ECIRS is ineffective and inequitable. For example, in 2009 the Productivity Commission's Inquiry into Government Drought Support found that the ECIRS:

  • may provide incentives to increase debt
  • may result in farm businesses being less responsive to drought conditions
  • led to farm businesses failing to adopt self reliant strategies such as sourcing off-farm income.

The Productivity Commission recommended that the ECIRS be terminated.

What consultation has occurred to support the decision to close the ECIRS?

In February 2008, Australian, state and territory agriculture ministers agreed that the EC arrangements were no longer appropriate and that drought programs needed to be improved to create an environment of self-reliance and preparedness, and encourage the adoption of appropriate risk management practices.

In response, the government conducted a national review of drought policy which included assessments of the climatic, economic and social impacts of drought and drought support measures. This review process included significant public consultation and over 400 submissions were received.

Key stakeholders including the National Farmers' Federation and state farming organisations have been widely consulted on the directions for reform of drought-related programs.

What are the resourcing implications for this change?

 As at 1 May 2012, there will be no EC declared areas in Australia and therefore no recipients of the ECIRS. No money is being saved by this decision.

What is the Transitional Farm Family Payment?

 The Transitional Farm Family Payment allows farm families in hardship to apply for a maximum of 12 months household income support, paid at the same rate as the Newstart Allowance. The household income support provided will be combined with individualised case management assistance and activities to help farm families improve their long-term security.

For how long can I receive payments under the Transitional Farm Family Payment?

 Recipients of the Transitional Farm Family Payment can receive a maximum of 12 months income support, paid at the Newstart Allowance rate. Recipients will be required to have quarterly discussions with a Rural Financial Counsellor to reassess their circumstances, against their action plan, to improve their long-term financial security.

When can I apply for the Transitional Farm Family Payment?

Applications for Transitional Farm Family Payments will be open soon. Updates will be provided on the drought section of the DAFF website.

I am currently receiving Transitional Income Support. Can I receive assistance through the Transitional Farm Family Payment program?

 If you are currently receiving assistance under the Transitional Income Support program, you will automatically transfer to the Transitional Farm Family Payment program for the remainder of your 12 month entitlement.

Why is the Transitional Income Support and the Climate Change Adjustment Program closing?

 The Climate Change Adjustment Program commenced on 1 July 2008 as a four-year program which is part of Australia's Farming Future. Both the Climate Change Adjustment Program and Transitional Income Support have always been time-limited programs and are scheduled to close on 30 June 2012.

I am receiving Farm Family Support under the WA pilot. Will I automatically transfer to the Transitional Farm Family Payment?

 No. Farm Family Support payments under the WA pilot will conclude on 30 June 2012. Recipients of Farm Family Support will not be automatically transferred to Transitional Farm Family Payments, as there are different eligibility criteria, but recipients can lodge an application with the Department of Human Services.

Who is eligible for the Transitional Farm Family Payment?

 To qualify for Transitional Farm Family Payments, a person must:

  • be a farmer
  • be an Australian resident
  • be in Australia
  • for the two years prior to commencing payments, must have:
    • been a farmer
    • derived a significant part of his or her gross income from the farm enterprise
    • contributed a significant part of his or her capital to the farm enterprise
    • contributed a significant part of his or her labour in work on the farm enterprise
  • meet the income and assets requirements, and other criteria, as specified in the Transitional Farm Family Payment Guidelines.

Do I need to be in an EC declared area to access the Transitional Farm Family Payment?

No. The payment is available for all eligible farming families in need, with or without an EC declaration.

Can sharefarmers and leaseholders receive Transitional Farm Family Payments?

 Yes, eligible sharefarmers and leaseholders can receive assistance through the Transitional Farm Family Payment program.

 Are there income and assets tests for Transitional Farm Family Payments?

Yes.

  • Income and assets tests are the same as for the Newstart Allowance (although farm assets are exempt for the purpose of calculating the amount of assistance to be paid).
  • The total value of liquid assets (immediate funds) including the applicant's partner (if any) must be less than or equal to $20 000. If the applicant's liquid assets are greater than $20 000 a waiting period may apply.
  • Total farm business net assets (includes both farm and non-farm assets and debt) must be less than $1.5 million.

Are Transitional Farm Family Payments taxable?

 Transitional Farm Family Payments are taxable and recipients should seek the advice of a financial adviser regarding their tax liabilities.

Are there any mutual obligations?

 Transitional Farm Family Payment recipients must develop or update an action plan. Transitional Farm Family Payment recipients who completed an action plan through the WA pilot Farm Family Support program may be able to provide their existing action plan to their Rural Financial Counsellor instead of creating a new one.

Transitional Farm Family Payment recipients must also undertake quarterly discussions with a Rural Financial Counsellor to review their progress against their action plan.

How can I get more information about Transitional Farm Family Payment?

Information on the Transitional Farm Family Payment program is available on the Department of Human Services' website or by phoning the Farmer Assistance Line on 1800 050 585.

Can I access Transitional Farm Family Payments early if I am in hardship?

 Farmers in severe financial hardship can receive Transitional Farm Family Payments on completion of their assessment, and their payments will be backdated to the date they lodged their application. These farmers will then have 12 weeks to complete or update their action plan with a Rural Financial Counsellor.

I have received 12 months of Transitional Income Support payments, am I able to receive the Transitional Farm Family Payment?

 No. If you require further assistance please contact the Department of Human Services to see if you are eligible for any other forms of government assistance at the Department of Human Services' website or by phoning 1800 050 585.

What is the government's current drought policy?

The objectives of the government's current National Drought Policy, established in 1992, are to:

  • encourage primary producers and other sections of rural Australia to adopt self-reliant approaches for managing a changing climate
  • maintain and protect Australia's agricultural and environmental resource base during periods of extreme climate stress
  • ensure early recovery of agricultural and rural industries, consistent with long-term sustainable levels.

These objectives remain relevant today, however the existing programs are no longer the most appropriate in the context of an increasingly variable climate.

The reform work aims to realign drought-related programs with the National Drought Policy by shifting the emphasis from crisis management to a preparedness and risk management approach.

What steps will the government take now in drought program reform?

The government is committed to putting a package in place that better help farmers, their families and rural communities prepare for future challenges, rather than waiting until they are in crisis to offer assistance.

Improved seasonal conditions across Australia and expiry of the final two Exceptional Circumstances declarations on 30 April 2012 provide the best window in over a decade to progress reform of drought-related programs.

Cooperation is key to a new national drought framework. The federal and state and territory primary industries ministers, through the Standing Council on Primary Industries (SCoPI), have asked officials to develop a proposal for a future national drought package. SCoPI will consider these proposals in October 2012. This will then need to be considered by the Australian, state and territory governments. SCoPI intends new policy to be implemented from 1 July 2014.

What are the timeframes around consultation with key stakeholders?

The department has been consulting with key stakeholders on drought reform and this consultation will continue.

The department will consult with key stakeholders, including the National Farmers' Federation, before primary industries ministers meet in October 2012 to consider proposals for a future national drought package.

What will drought assistance look like for farmers in the future?

It is likely that any future drought-related programs will be based on the principles for drought policy reform reconfirmed by the Primary Industries Ministerial Council on 15 April 2011. These programs will also draw on the outcomes of the review of the pilot of drought reform measures in Western Australia.

How do these changes fit with DAFF's Strategic Statement?

Moving the focus of drought assistance from crisis management to a preparedness and risk management approach aligns with the department's Strategic Statement which is to sustain the way of life and prosperity of all Australians. Our goals – across resources, productivity and markets – intend to improve the long-term productivity, competitiveness and sustainability of the agricultural, fisheries, forestry and food industries.

What support is the government providing to help farmers move towards preparedness?

The Australian Government funds several programs to help farmers and land managers better manage risks and prepare for future challenges.

There are tax measures available that can help primary producers better manage risks and prepare for future challenges including Farm Management Deposits: daff.gov.au/agriculture-food/drought/assistance/tax-relief.

Through the Carbon Farming Futures Program the government is providing $429 million for research and demonstration of technologies and techniques to help reduce agricultural emissions and to give land managers the tools and information they need to benefit from carbon farming. This work is part of the government's $1.7 billion Land Sector Package to assist land managers move to a clean energy future by reducing direct greenhouse gas emissions, storing carbon in the land, improving environmental health and promoting biodiversity.  

The government is also giving farmers and landholder the opportunity to generate extra income by reducing greenhouse gas emissions. The Carbon Farming Initiative (CFI) is a voluntary market scheme that provides a financial incentive for primary producers and land managers to reduce emissions. Land managers will be able to generate credits for reducing greenhouse gas emissions and these credits can then be sold to other businesses wanting to offset their own emissions. This is a long-term initiative and is part of the broader approach to put a value on carbon to transform the economy so that Australia can move to a lower and cleaner energy future. DAFF is working with Regional Landcare Facilitators (RLFs) around the country to provide an information service on the CFI. For more information about the Carbon Farming Futures Program or the CFI visit the climate change section of the DAFF website.

Research and development helps primary producers innovate and adapt to future challenges. Rural Research and Development Corporations are a partnership between the Australian Government and industry created to share the funding and strategic direction-setting for primary industry research and development (R&D), investment and the subsequent adoption of R&D outputs. More information about rural R&D corporations is available at the Rural R&D website.

State and territory governments also provide assistance aimed at helping farmers to better manage risks and prepare for future challenges.