Regional Investment Corporation (Drought Loans Expansion) Rule 2020 made under the Regional Investment Corporation Act 2018 Compilation No. 1 Compilation date: 1 October 2020 Includes amendments up to: F2020L01201 Registered: 1 October 2020 About this compilation This compilation This is a compilation of the Regional Investment Corporation (Drought Loans Expansion) Rule 2020 that shows the text of the law as amended and in force on 1 October 2020 (the compilation date). The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law. Application, saving and transitional provisions for provisions and amendments If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law. Self‑repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents Part 1—Preliminary 1 Name 3 Authority 4 Definitions 5 What is an eligible farm business? Part 2—Drought Loans Expansion Program Division 1—Prescribing Drought Loans Expansion Program 6 Drought Loans Expansion Program prescribed 7 Constitutional basis for program Division 2—Dealing with applications for expanded drought loans 8 Loan application must meet certain criteria 9 Informing applicants of outcome of applications Division 3—Making expanded drought loans 10 Expanded drought loan not to be made where farm business loan available 11 Purpose criteria—connection with drought 12 Capacity to repay loan and provide security 13 Financial criteria 14 Business activities and ownership criteria Division 4—Determining terms and conditions of expanded drought loans 15 Maximum amount of expanded drought loans 16 Extra terms and conditions of expanded drought loans 17 Setting interest rates Division 5—Collecting and dealing with payments and enforcing security 18 Corporation to pay amounts collected to Commonwealth 19 Decisions on foreclosure should be made by Board Division 6—Dealing with debt relating to expanded drought loans 20 Mediation 21 Waiver Division 7—Reporting to responsible Ministers 22 Quarterly reporting Division 8—Funding of expanded drought loans 23 Funding of expanded drought loans Division 9—Other matters relating to program 24 Charging of transaction costs 25 Directions by responsible Ministers Part 3—Other functions relating to program Division 1—Corporation functions 26 Preparing and publishing guidelines relating to program 27 Providing information and advice to responsible Ministers Division 2—Board functions 28 Ensuring internal review of decisions about loans 29 Setting interest rates 30 Developing and applying loan management policies and procedures Part 4—Transitional, application and savings provisions 31 Regional Investment Corporation (Drought and Small Business Drought Loans) (Cessation of Interest‑Free‑Period) Amendment Instrument 2020—transitional and application provisions Endnotes Endnote 1—About the endnotes Endnote 2—Abbreviation key Endnote 3—Legislation history Endnote 4—Amendment history Part 1—Preliminary 1 Name This instrument is the Regional Investment Corporation (Drought Loans Expansion) Rule 2020. 3 Authority This instrument is made under the Regional Investment Corporation Act 2018. 4 Definitions Note: A number of expressions used in this instrument are defined in the Act, including the following: (a) Board; (b) constitutional corporation; (c) constitutional trade or commerce; (d) Corporation; (e) Desertification Convention; (f) responsible Ministers; (g) farm business loan. In this instrument: Act means the Regional Investment Corporation Act 2018. affected area has the same meaning as in the Desertification Convention. Climate Change Conventions means: (a) the United Nations Framework Convention on Climate Change, done at New York on 9 May 1992; and (b) the Kyoto Protocol to the United Nations Framework Convention on Climate Change, done at Kyoto on 11 December 1997; and (c) the Paris Agreement, done at Paris on 12 December 2015. Note: The Convention, the Protocol and the Agreement are in Australian Treaty Series 1994 No. 2 ([1994] ATS 2), 2008 No. 2 ([2008] ATS 2) and 2016 No. 24 ([2016] ATS 24), respectively. In 2020, they could be viewed in the Australian Treaties Library on the AustLII website (http://www.austlii.edu.au). commercial debt means debt established on commercial terms, at commercial interest rates. eligible farm business has the meaning given by section 5. expanded drought loan means a loan by the Corporation to an eligible farm business, on terms and conditions that include the following: (a) the term of the loan is 10 years; (b) only interest is payable for the first 5 years of the loan; (d) the business must pay interest and repay the principal over the final 5 years of the loan; (e) the principal of the loan may be repaid (wholly or partly) at any time during the term of the loan without penalty; (f) all outstanding amounts must be repaid at the end of the term of the loan. program means the Expanded Drought Loans Program prescribed by section 6. 5 What is an eligible farm business? An eligible farm business is a farm business that: (a) is not located in an affected area; and (b) is not located in a Territory; and (c) is not solely or mainly engaged in producing commodities for constitutional trade or commerce; and (d) is not a constitutional corporation. Part 2—Drought Loans Expansion Program Division 1—Prescribing Drought Loans Expansion Program 6 Drought Loans Expansion Program prescribed (1) For the purposes of paragraph 8(1)(g) of the Act, this section prescribes the Drought Loans Expansion Program. (2) The Drought Loans Expansion Program is the program that: (a) consists of the following activities: (i) receiving applications for expanded drought loans, and dealing with the applications in accordance with Division 2; (ii) making expanded drought loans in accordance with Division 3; (iii) determining, in accordance with Division 4, the terms and conditions on which expanded drought loans are made; (iv) taking security for expanded drought loans; (v) charging borrowers for transaction costs incurred by the Corporation in relation to expanded drought loans; (vi) collecting and dealing with payments of interest on, and repayments of principal of, expanded drought loans, and if required, enforcing security taken for such loans, in accordance with Division 5; (vii) seeking, where the Corporation considers it appropriate, to recover any costs the Corporation incurs in taking action to enforce a loan agreement; (viii) periodically reviewing expanded drought loans and the terms and conditions on which they are made; (ix) dealing with debts relating to expanded drought loans in accordance with Division 6; (x) reporting to the responsible Ministers on expanded drought loans in accordance with Division 7; and (b) relates to expanded drought loans funded in accordance with Division 8. 7 Constitutional basis for program The constitutional basis for the program is paragraph 51(xxix) of the Constitution, so far as it provides a basis for implementing Australia's international obligations under the following: (a) the Desertification Convention; (b) one or more of the Climate Change Conventions. Division 2—Dealing with applications for expanded drought loans 8 Loan application must meet certain criteria (1) To obtain an expanded drought loan, an eligible farm business must make an application to the Corporation. (2) To be valid, the application must: (a) be in writing; and (b) include the information (if any) required by the Corporation; and (c) be accompanied by the documents (if any) required by the Corporation. (3) The Corporation is not required to consider an application that is not valid. 9 Informing applicants of outcome of applications The Corporation must ensure that an applicant for an expanded drought loan is informed of the outcome of their loan application as soon as practicable after a decision on the application has been made. Division 3—Making expanded drought loans 10 Expanded drought loan not to be made where farm business loan available The Corporation must not make an expanded drought loan to an eligible farm business where the business would be eligible to receive a farm business loan. 11 Purpose criteria—connection with drought (1) The Corporation must not make an expanded drought loan to an eligible farm business unless the loan will assist the business to: (a) engage in drought preparedness activities; or (b) manage or recover from the effects of drought by doing one or more of the following: (i) restructuring its existing debt; (ii) meeting its operating expenses; (iii) enhancing its productivity. (2) The Corporation must not make an expanded drought loan to an eligible farm business unless: (a) where the business intends to use the loan funds for the purpose mentioned in paragraph (1)(a)—the business is in financial need of assistance due to an event outside of its control; or (b) where the business intends to use the loan funds for the purpose mentioned in paragraph (1)(b)—the business is in financial need of assistance as a consequence of drought. (3) The Corporation must not make an expanded drought loan to an eligible farm business unless the business has a drought management plan that: (a) outlines the activities that the businesses proposes to spend the loan funds on; and (b) sets out the business's drought preparedness, management and recovery strategies. 12 Capacity to repay loan and provide security (1) The Corporation must not make an expanded drought loan to an eligible farm business unless: (a) the Corporation is satisfied that the business has the capacity to repay the loan; and (b) the business provides sufficient security for the loan. Types of security the Corporation must consider (2) For the purposes of paragraph (1)(b), the Corporation must consider requiring security in the form of: (a) a registered mortgage over land; or (b) a registered mortgage over livestock; or (c) a registered security interest in water rights. Note: The program guidelines published under section 26 will set out other kinds of securities that the Corporation will consider and require in relation to expanded drought loans. 13 Financial criteria The Corporation must not make an expanded drought loan to an eligible farm business unless: (a) the Corporation is satisfied that the business is financially viable, or has sound prospects of a return to financial viability within 10 years; and (b) the business: (i) owes commercial debt; and (ii) has the support of the commercial lender to the proposed concessional loan; and (c) the entity carrying on the business is not bankrupt or under external administration; and (d) the entity carrying on the business is registered for tax purposes in Australia with an Australian Business Number, and is registered under the A New Tax System (Goods and Services Tax) Act 1999. 14 Business activities and ownership criteria (1) The Corporation must not make an expanded drought loan to an eligible farm business unless: (a) all primary production aspects of the business are undertaken wholly within Australia; and (b) the business is carried on by: (i) a sole trader covered by subsections (2) and (3); or (ii) a partnership whose partners include a person covered by subsection (2) and a person covered by subsection (3) (whether those subsections cover the same partner or different partners); or (iii) a trust whose beneficiaries or unit‑holders include a person covered by subsection (2) and a person covered by subsection (3) (whether those subsections cover the same beneficiary or unit‑holder or different ones); or (iv) a corporation (within the meaning of the Corporations Act 2001), other than: (A) a public company (within the meaning of that Act); or (B) a constitutional corporation; whose members include a person covered by subsection (2) and a person covered by subsection (3) (whether those subsections cover the same member or different members). Note: Constitutional corporations are excluded from subparagraph 14(1)(b)(iv) because such corporations are not eligible for loans under the program – see paragraph 5(d). (2) This subsection covers a person who is an Australian citizen or permanent resident. (3) This subsection covers a person: (a) who has experience in operating a farm business; and (b) whose principal business pursuit is the eligible farm business. (4) An eligible farm business is a person's principal business pursuit where the person devotes the majority of their labour to, and derives the majority of their income from, the business. Division 4—Determining terms and conditions of expanded drought loans 15 Maximum amount of expanded drought loans (1) The Corporation must not grant a loan that exceeds the maximum loan amount. (2) The maximum loan amount, for an eligible farm business, is the lesser of the following: (a) an amount that would result in the business holding 50% of its total debt in Commonwealth‑funded concessional loans; (b) $2 million. (3) The total debt of an eligible farm business is the sum of: (a) the business's commercial debt; and (b) the amount owing under each Commonwealth‑funded concessional loan provided to the business. Note: The program guidelines published under section 26 must deal with the kind of loans that the Corporation considers to be Commonwealth‑funded concessional loans. 16 Extra terms and conditions of expanded drought loans The Corporation may determine the terms and conditions on which an expanded drought loan is made. Note: The loan must be subject to the terms and conditions mentioned in the definition of expanded drought loan in section 4. 17 Setting interest rates The Corporation must determine the interest rates on all expanded drought loans in accordance with the agreed methodology described in section 29. Division 5—Collecting and dealing with payments and enforcing security 18 Corporation to pay amounts collected to Commonwealth The Corporation must pay the Commonwealth, as soon as reasonably practicable, all loan repayments received by the Corporation from recipients of expanded drought loans (including principal repayments and payments of interest, but excluding payments of any transaction costs the Corporation charged the recipients in relation to the loans). 19 Decisions on foreclosure should be made by Board A decision of the Corporation as to whether or not to foreclose on an expanded drought loan should be made by the Board (not a delegate of the Corporation or the Board). Division 6—Dealing with debt relating to expanded drought loans 20 Mediation The Corporation must offer to undertake mediation in respect of debts relating to expanded drought loans, and, if the offer is accepted, undertake the mediation. 21 Waiver A decision of the Corporation to waive a debt relating to an expanded drought loan: (a) should be made by the Board (not a delegate of the Corporation or the Board); and (b) must only be made after the Corporation has consulted the responsible Ministers and taken their views into account. Division 7—Reporting to responsible Ministers 22 Quarterly reporting The Corporation must provide a report on expanded drought loans to the responsible Ministers as at the end of every March, June, September and December, including information regarding: (a) the uptake of expanded drought loans; and (b) details of the portfolio of expanded drought loans; and (c) financial performance information. Note: The Corporation also has the function of providing information about expanded drought loans to the responsible Ministers on request: see section 27. Division 8—Funding of expanded drought loans 23 Funding of expanded drought loans (1) The Corporation will be funded to make expanded drought loans through an appropriation made by an Act. (2) Funds for expanded drought loans will be provided to the Corporation upon the Corporation's request to enable the Corporation to advance loan funds to recipients of those loans as required. (3) The Corporation must: (a) only request funds as they are required to advance loan funds to recipients of expanded drought loans; and (b) only use funds provided for expanded drought loans for that purpose. Division 9—Other matters relating to program 24 Charging of transaction costs For the purposes of subparagraph 8(5)(b)(i) of the Act, the Corporation may charge transaction costs incurred by the Corporation in relation to loans granted under the program. 25 Directions by responsible Ministers (1) For the purposes of subparagraph 8(5)(b)(iii) of the Act, the responsible Ministers may give written directions to the Corporation relating to the program. (2) The responsible Ministers must not give a direction in relation to a particular expanded drought loan. Part 3—Other functions relating to program Division 1—Corporation functions 26 Preparing and publishing guidelines relating to program For the purposes of paragraph 8(1)(h) of the Act, the Corporation has the functions of: (a) preparing, in consultation with the responsible Ministers, written guidelines about the program, including guidelines about the following: (i) the types of security the Corporation will consider and require for expanded drought loans; (ii) how the Corporation will determine whether persons are Australian citizens or permanent residents; (iii) the right to request review of decisions to make or refuse expanded drought loans, and the process for requesting such reviews; (iv) the kind of loans that the Corporation considers to be Commonwealth‑funded concessional loans; and (b) publishing the guidelines. 27 Providing information and advice to responsible Ministers For the purposes of paragraph 8(1)(h) of the Act, the Corporation has the functions of: (a) providing information about expanded drought loans to the responsible Ministers on request; and (b) advising the Commonwealth on matters that will improve the operation and policy outcomes of expanded drought loans. Division 2—Board functions 28 Ensuring internal review of decisions about loans For the purposes of paragraph 15(1)(e) of the Act, the Board has the function of ensuring that the Corporation develops and applies procedures for reviewing decisions (the original decisions) to make or refuse expanded drought loans, that: (a) are transparent, robust and fair; and (b) require reviews to be carried out, and decisions to be made on reviews, by persons who were not the primary decision‑makers of the original decisions; and (c) are consistent with principles of procedural fairness. 29 Setting interest rates For the purposes of paragraph 15(1)(e) of the Act, the Board has the functions of: (a) agreeing with the responsible Ministers on a methodology for setting variable interest rates for expanded drought loans, that: (i) is to result in rates that only cover the Corporation's administrative costs to deliver expanded drought loans and the Commonwealth's borrowing costs to fund the Corporation to make such loans; and (ii) involves review of the interest rate for expanded drought loans each November and May, and, if necessary, revising it in line with changes of more than 0.1% in the Commonwealth 10‑year bond rate; and (b) ensuring that the Corporation: (i) applies any revised interest rate on the first day of the third month after the month in which the relevant review was conducted; and (ii) notifies affected recipients of expanded drought loans in advance of any revision of the interest rate. 30 Developing and applying loan management policies and procedures (1) For the purposes of paragraph 15(1)(e) of the Act, the Board has the functions of: (a) ensuring that the Corporation develops the policies and procedures described in subsection (2), having regard to the following matters: (i) the concessional nature of expanded drought loans; (ii) the effect on eligible farm businesses of taking action in accordance with those policies and procedures; and (b) ensuring that the Corporation applies those policies and procedures, and takes those matters into account when doing so. (2) Subsection (1) applies to policies and procedures for managing expanded drought loans in a prudential manner to minimise the risk of default, including policies and procedures for the following: (a) arrears management; (b) recovery action; (c) foreclosure arrangements; (d) waiving debt after consulting the responsible Ministers; (e) writing off debt; (f) handling disputes and complaints. Part 4—Transitional, application and savings provisions 31 Regional Investment Corporation (Drought and Small Business Drought Loans) (Cessation of Interest‑Free‑Period) Amendment Instrument 2020—transitional and application provisions (1) In this section: commencement day means 1 October 2020. Note: This is the day on which the instrument that made the relevant amendments commenced. relevant amendments means the amendments to this instrument made by the Regional Investment Corporation (Drought and Small Business Drought Loans) (Cessation of Interest‑Free‑Period) Amendment Instrument 2020. (2) Where an application for an expanded drought loan was made before the commencement day, this instrument applies in relation to the application and any loan offered on the basis of the application as if the relevant amendments had not been made. Endnotes Endnote 1—About the endnotes The endnotes provide information about this compilation and the compiled law. The following endnotes are included in every compilation: Endnote 1—About the endnotes Endnote 2—Abbreviation key Endnote 3—Legislation history Endnote 4—Amendment history Abbreviation key—Endnote 2 The abbreviation key sets out abbreviations that may be used in the endnotes. Legislation history and amendment history—Endnotes 3 and 4 Amending laws are annotated in the legislation history and amendment history. The legislation history in endnote 3 provides information about each law that has amended (or will amend) the compiled law. The information includes commencement details for amending laws and details of any application, saving or transitional provisions that are not included in this compilation. The amendment history in endnote 4 provides information about amendments at the provision (generally section or equivalent) level. It also includes information about any provision of the compiled law that has been repealed in accordance with a provision of the law. Editorial changes The Legislation Act 2003 authorises First Parliamentary Counsel to make editorial and presentational changes to a compiled law in preparing a compilation of the law for registration. The changes must not change the effect of the law. Editorial changes take effect from the compilation registration date. If the compilation includes editorial changes, the endnotes include a brief outline of the changes in general terms. Full details of any changes can be obtained from the Office of Parliamentary Counsel. Misdescribed amendments A misdescribed amendment is an amendment that does not accurately describe the amendment to be made. If, despite the misdescription, the amendment can be given effect as intended, the amendment is incorporated into the compiled law and the abbreviation "(md)" added to the details of the amendment included in the amendment history. If a misdescribed amendment cannot be given effect as intended, the abbreviation "(md not incorp)" is added to the details of the amendment included in the amendment history. Endnote 2—Abbreviation key ad = added or inserted o = order(s) am = amended Ord = Ordinance amdt = amendment orig = original c = clause(s) par = paragraph(s)/subparagraph(s) C[x] = Compilation No. x /sub‑subparagraph(s) Ch = Chapter(s) pres = present def = definition(s) prev = previous Dict = Dictionary (prev…) = previously disallowed = disallowed by Parliament Pt = Part(s) Div = Division(s) r = regulation(s)/rule(s) ed = editorial change reloc = relocated exp = expires/expired or ceases/ceased to have renum = renumbered effect rep = repealed F = Federal Register of Legislation rs = repealed and substituted gaz = gazette s = section(s)/subsection(s) LA = Legislation Act 2003 Sch = Schedule(s) LIA = Legislative Instruments Act 2003 Sdiv = Subdivision(s) (md) = misdescribed amendment can be given SLI = Select Legislative Instrument effect SR = Statutory Rules (md not incorp) = misdescribed amendment Sub‑Ch = Sub‑Chapter(s) cannot be given effect SubPt = Subpart(s) mod = modified/modification underlining = whole or part not No. = Number(s) commenced or to be commenced Endnote 3—Legislation history Name Registration Commencement Application, saving and transitional provisions Regional Investment Corporation (Drought Loans Expansion) Rule 2020 27 Mar 2020 (F2020L00329)) 28 Mar 2020 (s 2) Regional Investment Corporation (Drought and Small Business Drought Loans)(Cessation of Interest‑Free Period) Amendment Instrument 2020 23 Sept 2020 (F2020L01201) Sch 1 (items 3–5): 1 Oct 2020 (s 2) — Endnote 4—Amendment history Provision affected How affected Part 1 s 2..................... rep LA s 48D s 4..................... am F2020L01201 Part 2 Division 4 s 17.................... am F2020L01201 Part 4 Part 4................... ad F2020L01201 s 31.................... ad F2020L01201