Overview

The DisabilityCare Australia Fund Act 2013 was enacted to establish the DisabilityCare Australia Fund, which is designed to invest the revenue from an increase in the Medicare levy. This increase, from 1.5 per cent to 2.0 per cent of a person's taxable income, was implemented to bolster the Commonwealth's capacity to reimburse state and territory governments, as well as the Commonwealth itself, for their expenditure related to the National Disability Insurance Scheme. The Act was passed by the Parliament of Australia, aiming to ensure a stable financial foundation for disability care services through strategic investments. The DisabilityCare Australia Fund Investment Mandate Directions 2014, issued under the authority of the Minister for Finance and the Treasurer, provide the Future Fund Board of Guardians with specific directives regarding the Fund's investment strategy, balancing the goal of maximising returns with the need to maintain market stability and uphold the Australian Government's reputation.

Scope and Application

The DisabilityCare Australia Fund Act 2013 establishes the DisabilityCare Australia Fund, which is intended to invest revenues generated from the increase in the Medicare levy, specifically to support the National Disability Insurance Scheme. This Act applies to the Commonwealth, and the Board of Guardians of the Future Fund is responsible for managing the investments of the Fund. The DisabilityCare Australia Fund Investment Mandate Directions 2014, which are made under section 29(1) of the Act, provide the Board with written directions regarding the performance of its investment functions. These directions are intended to guide the Board in its investment strategy, with the objective of achieving a return on the Fund that meets a benchmark set by the Government. The Investment Mandate Directions are exempt from disallowance and sunsetting under the Legislative Instruments Act 2003. The Act's reach is national, and the Board must act in a way that is consistent with international best practice for institutional investment, and in a manner that does not disrupt domestic financial markets or harm the Australian Government's reputation in financial markets.

Key Provisions

The DisabilityCare Australia Fund Investment Mandate Directions 2014 (the Mandate), made under section 29(1) of the DisabilityCare Australia Fund Act 2013, provide written directions to the Future Fund Board of Guardians on how to invest the Fund. The Fund was created from the increased revenue of the Medicare levy, which increased from 1.5 per cent to 2.0 per cent of a person’s taxable income from 1 July 2014. The purpose of the Fund is to invest these revenues to enhance the Commonwealth’s ability to reimburse the State and Territories and the Commonwealth for expenditure related to the National Disability Insurance Scheme Act 2013. The Board has a statutory obligation to seek to maximise the return on the Fund, consistent with international best practice for institutional investment and any directions given by the responsible Ministers. The responsible Ministers, being the Minister for Finance and the Treasurer, are able to review the Mandate, in consultation with the Board, particularly in relation to any material changes to either investment conditions or the cashflow position of the Fund. Under the Mandate, the Government has directed the Board to aim to achieve a return on the Fund of the Australian three-month bank bill swap rate plus 0.3 per cent per annum, calculated on a rolling twelve-month (net of fee) basis. This benchmark return is subject to the Board being able to meet two primary objectives: sufficient liquidity to meet payments from the Fund, and minimising the probability of capital losses over a twelve-month period. In managing the investments of the Fund, the Board should minimise disruption to the operation of domestic financial and credit markets and act in a manner that minimises the potential to effect any abnormal change in the volatility or efficient operation of Australian financial markets. The Board is also required to act in a manner that is unlikely to cause any diminution of the Australian Government’s reputation in Australian and international financial markets. The Act imposes certain obligations on the Board, including the requirement to seek to maximise the return on the Fund. The Board is also required to ensure that its investment strategy is consistent with international best practice for institutional investment, subject to the directions given by the responsible Ministers. The Act further imposes obligations on the responsible Ministers, who must provide the Board with written directions on the performance of its DisabilityCare Australia Fund investment functions. The responsible Ministers are also required to consult with the Board in reviewing the Mandate, particularly in relation to any material changes to either investment conditions or the cashflow position of the Fund. There are no specific offences, penalties, or civil/criminal consequences outlined in the Mandate itself for breach of its provisions. However, the Act imposes potential consequences for breaches of its provisions, including the potential for civil or criminal penalties, depending on the nature and severity of the breach. The Act also provides for the responsible Ministers to review the Mandate and consult with the Board in relation to any material changes to either investment conditions or the cashflow position of the Fund. The responsible Ministers may also take other actions, such as providing additional directions to the Board or making changes to the Act, if they consider it necessary to ensure that the Fund is managed in a manner that is consistent with its objectives and the expectations of the Government.