Rural Advances Guarantee Act 1963

Approved borrower: A person to whom a bank has made or proposes to make a loan for the purpose of enabling or assisting that person to acquire land for the business of rural production, and who is approved by the Treasurer as a suitable person to undertake or conduct such business, having regard to the person’s ability and experience in that business. This is a dual test: the person must both need the loan to acquire land for rural production and be personally suitable in the Treasurer’s judgment.

Bank: Any body corporate carrying on the business of banking in South Australia (including the State Bank of South Australia and the Savings Bank of South Australia). It also includes any other person or body (incorporated or not) approved by the Treasurer as an authorised lender for the Act, either generally or in a particular case. This gives the Treasurer discretion to expand the lending channels.

Business of rural production: Defined to include agriculture, pasturage, horticulture, viticulture, apiculture, poultry farming, dairy farming, or “any other business (excluding forestry) consisting of the cultivation of soils, the gathering in of crops or the rearing of livestock”. Forestry is expressly excluded. The definition is broad but tied to primary production.

Director-General: Means the Director-General of Agriculture. This officer is the key source of valuation and viability advice to the Treasurer. The Director-General must make enquiries and furnish certificates, valuations, reports and other information appropriate and required by the Treasurer for the purposes of the Act.

The Treasurer: The Treasurer of South Australia, a body corporate constituted by the Treasurer’s Incorporation Act 1949. The guarantee is a liability of the State, administered by the Treasurer as a legal entity.

Guarantee: A contingent liability assumed by the Treasurer. It does not create a direct loan from the State. The borrower’s primary obligation remains to the bank. The guarantee may cover principal, interest, and expenses incidental to the loan and the bank’s recovery efforts. The guarantee is subject to statutory conditions: any variation of repayment terms after the guarantee needs Treasurer approval; the bank must take all reasonable steps to recover payments and inform the Treasurer of defaults.

Fair value: The valuation of the land stated in a written valuation attached to or incorporated in the Director-General’s certificate. The loan cannot exceed 85 per cent of that valuation. The Act refers to “fair value of the land, having regard to the particular business of rural production to be undertaken”. So the value is not simply market value but a value specific to the intended use.

30-year amortisation: The loan must be repayable by periodical payments at least equal to what would be needed to repay principal and interest by equal annual instalments over 30 years. This sets a minimum repayment standard.

Security: The borrower must give to the Treasurer or the bank (or both) such security as the Treasurer considers appropriate, whether by way of mortgage over the land and any other property of the borrower, or otherwise. This secures the State’s exposure under the guarantee and/or the loan itself.

Individual farmers and prospective rural producers: The Act is designed for persons who want to acquire land for rural production but lack the financial resources or credit standing to obtain a bank loan without a government guarantee. The borrower must be an “approved borrower” - a natural person (the Act uses “him”) who is approved by the Treasurer. This excludes corporations unless they are individuals; the definition of “person” includes a natural person but the Act’s language (“his ability”, “his family”) strongly suggests individuals. The Act primarily benefits those who would otherwise be shut out of the rural land market. It also imposes obligations: the borrower must supply information, provide security, adhere to the 30-year repayment schedule, and not vary terms without Treasurer approval.

Banks and other authorised lenders: Banks benefit because the guarantee reduces their credit risk on what would be a high-risk loan to an undercapitalised borrower. The bank is still required to take all reasonable steps to recover repayments and to inform the Treasurer of defaults. The bank must also accept that any variation to repayment terms after the guarantee is given requires Treasurer approval. Banks have statutory protection: if the borrower defaults, the State will pay, but the bank cannot unilaterally change the loan terms and expect the guarantee to hold.

The Treasurer (and the State of South Australia): The Treasurer acts as guarantor. This creates a contingent liability on the State’s budget. If borrowers default, the State must pay the guaranteed amount from general revenue. The Treasurer has the power to require security and can recover from the borrower through that security. The Treasurer also has discretion to defer interest or principal on the recommendation of the Director-General, which can reduce the risk of default but extends the State’s exposure.

Director-General of Agriculture: This officer is responsible for the factual foundation of every guarantee. The Director-General must certify the fair value of the land, the loan-to-value ratio, the borrower’s ability and experience, and the land’s adequacy to support the borrower’s family and repay the loan. This creates a significant administrative and professional liability for the Director-General.

Auditor-General: Must report annually on all guarantees given. This provides a measure of transparency, but only after the fact.

Taxpayers and the public: Ultimately, the guarantee is a form of public subsidy for rural land acquisition. Taxpayers bear the risk that a guarantee will be called and that the security taken may not fully cover the loss. The Act does not require the Treasurer to charge a fee for the guarantee; all costs fall on general revenue if a default occurs. This creates a moral hazard: the borrower and bank face lower risks than they would in an unguaranteed transaction.

Competing land purchasers: By enabling marginal borrowers to access credit, the Act may increase demand for rural land, potentially raising prices. Existing farmers and others who purchase land without government assistance may face higher land costs. The 85 per cent loan-to-value cap and required Director-General valuation aim to limit price inflation, but the effect depends on how liberally guarantees are granted.

Director-General’s duties: The Director-General must make such enquiries as are appropriate and as the Treasurer may require, and must furnish certificates, valuations, reports and other information relating to any guarantee application. Specifically, before a guarantee is given, the Director-General must provide: (a) a certificate of fair value; (b) a report that the borrower has the ability and experience to run the business successfully; (c) a report that the land is adequate to maintain the borrower and his family after meeting costs and loan repayments. These duties are mandatory conditions precedent to a guarantee.

Treasurer’s duties and powers: The Treasurer must not give a guarantee unless all conditions in s 3(2) are satisfied. The Treasurer has the power to: (i) approve a person as an approved borrower; (ii) approve a person as an authorised lender; (iii) determine the amount of the guarantee; (iv) require security on such terms as considered appropriate; (v) approve or disapprove any variation of repayment terms after the guarantee; (vi) agree to deferment of interest (up to two years) or principal (up to three years) on request of both bank and borrower and on recommendation of the Director-General; (vii) require undertakings and agreements from the borrower. The Treasurer also has the right to recover from the borrower under any security given, and to pay guaranteed amounts from general revenue without further appropriation.

Borrower’s rights: The borrower has the right to apply for a guarantee and, if all conditions are met, to receive the guarantee. The borrower also has the right to request deferment of interest or principal (though only if the bank also requests it and the Director-General recommends it). The borrower must be given an opportunity to comply with conditions; the Act does not create a right to a guarantee on application - it is entirely discretionary if conditions are met, because the Treasurer must still form the opinion that the borrower would not otherwise have adequate financial resources.

Borrower’s duties: The borrower must: (i) apply in writing and furnish information required by the Treasurer; (ii) obtain a bank loan or an offer of a loan subject to the guarantee; (iii) agree to repay by periodical payments at least equivalent to a 30-year amortisation; (iv) give security as required; (v) give such undertakings as the Treasurer requires; (vi) not vary repayment terms without prior Treasurer approval; (vii) avoid providing false or misleading information (an offence).

Bank’s duties: The bank must: (i) make or offer the loan subject to the guarantee; (ii) take all reasonable and necessary steps to ensure recovery of repayments and interest on due dates; (iii) keep the Treasurer informed of any default or delay by the borrower; (iv) obtain Treasurer approval before agreeing to any change in repayment terms with the borrower. The bank has the right to receive payment from the Treasurer under the guarantee if the borrower defaults.

Statutory conditions: Section 6 deems the guarantee subject to terms (a) (no variation effective without Treasurer approval), (b) (bank to take recovery steps), and (c) (bank to notify Treasurer of defaults). These apply automatically to every guarantee given under the Act.

Offence of false or misleading information: Section 8(2) provides that a person who wilfully or negligently furnishes the Treasurer with false or misleading information in connection with any application for a guarantee commits an offence punishable on summary conviction, with a fine not exceeding two hundred dollars. This is a relatively low maximum penalty in current terms (unchanged since 1963). “Wilfully or negligently” covers both intentional deception and careless provision of wrong information. The offence applies to the applicant or any person providing information; the section does not limit it to the borrower.

Regulations: Section 11 allows the Governor to make regulations necessary or convenient for administration, and to prescribe fines not exceeding one hundred dollars for breach of any regulation. This provides a secondary penalty regime for procedural or administrative breaches not covered by the Act itself.

Enforcement of the guarantee: The Act does not create a criminal penalty for default on the loan itself. If the borrower defaults, the bank may call on the guarantee. The Treasurer then must pay the bank. The Treasurer’s recourse is through the security taken (e.g., mortgage, other property). The Treasurer can take possession of the land and sell it, sue on the borrower’s covenant, or enforce any other security. The Act does not provide a statutory cause of action against the borrower; the Treasurer relies on the security documents.

No administrative penalties: There are no provisions for civil penalties, infringement notices, or director liability. The only monetary penalties are the court-imposed fines for false information and regulation breaches. The Act does not provide for disqualification of borrowers or lenders.

Enforcement by the Auditor-General: The Auditor-General must report annually on guarantees given. This is a transparency mechanism, not an enforcement power. The report may highlight defaults or mismanagement, but the Auditor-General cannot direct the Treasurer to act.

Practical enforcement: The effectiveness of enforcement depends on the quality of security taken. The Treasurer controls the terms of security and can require security over all property of the borrower, not just the land. However, if the borrower has few assets beyond the acquired land, the State may face a loss if the land value has fallen. The Director-General’s initial valuation is supposed to prevent overvaluation, but market downturns can still create shortfalls.

Treasurer’s Incorporation Act 1949 (SA): The Act relies on this to constitute the Treasurer as a body corporate capable of entering into guarantees and holding security. The guarantee is a contract made by the Treasurer as a statutory corporation.

State Bank and Savings Bank legislation: The definition of “bank” includes the State Bank of South Australia and the Savings Bank of South Australia. Their operations are regulated by other Acts; the Rural Advances Guarantee Act does not override those powers but complements them by enabling those banks to offer loans with a government guarantee.

Appropriation and financial management: Section 10(1) provides that payments under guarantees are made from general revenue “without any further appropriation”. This overrides the usual requirement that parliamentary appropriation is needed for spending. It creates a standing appropriation but only for money the Treasurer becomes liable to pay under a guarantee. This interacts with the Financial Management Act or the Constitution Act to the extent that it displaces normal appropriation control.

Mortgage and property law: The security required (mortgage over land and other property) will be governed by the general law of mortgages, the Real Property Act 1886 (SA) (if Torrens title), or the general law. The Act does not create any special priority or enforcement powers for the Treasurer; the Treasurer must follow standard mortgage enforcement procedures.

Other rural assistance schemes: The Act is not repealed or superseded by later rural assistance legislation. South Australia has other schemes (e.g., the Primary Industry Assistance Scheme, the Rural Assistance and Recovery Act), but the Act does not mention them. In practice, the Rural Advances Guarantee Act may have been superseded by more comprehensive programs, but it remains available. It is a narrow, land-acquisition-focused guarantee, not a general rural business assistance measure.

Taxation: The Act does not address tax treatment of the guarantee. Interest paid by the borrower may be deductible under income tax law, and the guarantee itself may have tax implications for the borrower or the bank, but those are determined by the Commonwealth tax law, not this Act.

Limitation of liability: The Act does not limit the total amount of guarantees that may be given. Each guarantee is a separate decision. Potentially, the State could expose itself to significant contingent liabilities without any cap. The only control is the requirement for the Director-General’s certificates and the Treasurer’s opinion.

Human rights: The Act does not address human rights. It predates South Australia’s Human Rights Act (if enacted) and provides no grounds for review of Treasurer decisions.

Interaction with common law contract: The guarantee is a contract between the Treasurer and the bank. The terms of s 6 are deemed to be included, but the parties can agree to additional terms? Probably not, because the Act sets mandatory conditions. The bank cannot contract out of the duty to take recovery steps or notify defaults.

1963: Original enactment: Assented to 21 November 1963, proclaimed 19 December 1963. The original Act contained sections 1-11, including a “Board” (likely the Agricultural Board or similar) that performed the functions now given to the Director-General, and a “Committee” that likely advised on applications. Section 5 (now deleted) dealt with a committee; section 3(2)(e) (now deleted) contained additional preconditions. The original Act also defined “the Board” and “the Committee”.

1982: Rural Advances Guarantee Act Amendment Act 1982 (No 11 of 1982, commenced 15 April 1982). This amendment altered the definition of “the Committee” (s 2, definition amended). The exact change is not detailed in the legislative history but the table shows the definition was amended.

1988: Rural Advances Guarantee Act Amendment Act 1988 (No 62 of 1988, commenced 15 September 1988). This was a major restructure: the definition of “the Board” was deleted from s 2; a new definition of “the Director-General” was inserted; s 3(2) was amended (most likely to substitute the Director-General for the Board in the conditions); s 4 was amended (duties of Director-General replaced duties of the Board); s 5 (about the Committee) was amended (the table shows “s 5 amended by 62/1988 s 5” - wait: the legislative history table shows “s 5 deleted by 7/2017 s 105” but earlier under “Provisions amended since 3 February 1976” it says “s 5 amended by 62/1988 s 5” - actually re-reading: under “Provisions amended since 3 February 1976” the entries for s 5: “deleted by 7/2017 s 105”. But earlier it says “the Board deleted by 62/1988 s2(a)” and “the Director-General inserted by 62/1988 s2(b)”. For s5, it appears the 1988 amendment may have amended it, but then 2017 deleted s5 entirely. The table is a bit unclear - we can only rely on what is printed. The 1988 amendment also amended s7 (deferment powers) to replace references to the Board with the Director-General and to add the requirement for Director-General recommendation. The original s7 may have had a different structure.

2017: Statutes Amendment and Repeal (Simplify) Act 2017 (No 7 of 2017, Part 29, sections 103-106, commenced 15 March 2017). This was a “simplification” act. It amended the definition of “bank” in s 2 (removing outdated references); deleted the definition of “the Committee”; deleted s 3(2)(e) entirely; deleted s 5 in its entirety; and deleted s 7(b) (which had probably contained a redundant provision). The effect was to remove the committee structure and simplify the conditions. After 2017, the Act is leaner: no committee, no s 5, and no s 7(b).

No later amendments: The Act has not been amended since 2017. It remains in force but could be considered a legacy scheme. The legislative history notes that references to other legislation or bodies may be obsolete; this suggests the Act is not regularly reviewed.

The source text for this Act does not mention any litigation history. No reported cases are cited in the Act itself, and no case names appear in the legislative history notes. This does not mean litigation has never occurred under the Act; it simply means that the official text provided gives no information about court cases. Given that the Act created a government guarantee scheme administered by the Treasurer, with narrow eligibility criteria and mandatory preconditions, the likelihood of litigation is relatively low. Disputes may have arisen over valuation, the reasonableness of the Treasurer’s opinion on financial resources, or the enforcement of security after a default. However, such disputes would likely be settled or resolved through administrative review (if available) rather than reported decisions. In South Australia, private legal databases may reveal a small number of cases; but for the purposes of this deep dive, the source contains zero litigation history. The Act itself does not create a right of appeal or review of the Treasurer’s decisions. There is no provision for merits review in the Act. Judicial review under general administrative law principles (e.g., for jurisdictional error or unreasonableness) may be available, but the Act’s discretionary language - “the Treasurer may guarantee” - gives wide latitude. A borrower denied a guarantee would face a high bar to challenge. A bank seeking payment under a guarantee might bring a contract action; if the Treasurer disputes liability, litigation could occur. But again, nothing in the source indicates that has happened. The 2017 amendments deleted provisions that might have been the subject of disputes; for example, section 3(2)(e) was deleted. It is impossible to know why without extraneous material. The lack of litigation history in the source text may reflect the fact that the Act has been used sparingly, or that disputes were resolved administratively. The Auditor-General reports, mentioned in s 9, could provide insight but are not part of the source. Overall, readers should treat the Act as a relatively uncontroversial scheme that has generated little public case law.

Subjective opinion on financial resources: The Treasurer may only guarantee a loan if, in the Treasurer’s opinion, the borrower “would not otherwise have, or be in a position to obtain, adequate financial resources to acquire land”. This is a subjective test with no objective criteria. A borrower who actually has other resources or could obtain them through means the Treasurer considers inadequate might be denied. But a borrower who claims inability could still be approved even if the Treasurer’s opinion is wrong. This creates significant discretion and potential for inconsistent treatment. There is no appeal mechanism in the Act.

85 per cent LTV cap is on “fair value” not market price: The loan cannot exceed 85 per cent of the value stated in the Director-General’s valuation. If the purchase price is higher than the valuation, the borrower must make up the difference from other sources. The valuation is stated to be “having regard to the particular business of rural production to be undertaken”, which could be lower than a general market value. A borrower might pay above valuation and then not qualify for a loan large enough to cover the purchase.

30-year amortisation minimum: The loan must be repayable with periodical payments at least equal to what would be needed to repay principal and interest in equal annual instalments over 30 years. This is a minimum. The actual loan term could be longer, but the payments must be at least that much - so the loan cannot have a longer amortisation with smaller payments. This restricts flexibility. If interest rates rise, the required payment could become onerous, yet the Act does not permit the borrower to extend the amortisation without Treasurer approval.

No variation without Treasurer approval: After a guarantee is given, any change to repayment terms agreed between bank and borrower is ineffective unless the Treasurer approves in writing. This means the borrower and bank cannot agree on a temporary payment holiday, interest reduction, or extension without the Treasurer’s consent. This reduces the bank’s ability to work out a default, as the Treasurer must be involved.

Deferment requires both bank and borrower to request it: The Treasurer may defer interest (up to 2 years) or principal (up to 3 years), but only “at the request of both the bank and the borrower”. If the bank refuses to join in a request, the borrower cannot get deferment. The Director-General must also recommend. This is a high bar.

No fee for guarantee: The Act does not require the borrower to pay any fee for the guarantee. The Treasurer may require undertakings and agreements, but no fee is mentioned. This means the taxpayer bears the full cost of administering and risking the guarantee. This could lead to overuse or moral hazard; borrowers have no skin in the game beyond the security.

Security can extend beyond the land: The Treasurer may require security over “any other property of or to which the borrower may be or become possessed or entitled”. This can include future property, personal property, and even assets not used in the rural business. Borrowers may not realise how extensive the security can be.

Old legislation, low fines: The maximum fine for false information is $200, set in 1963 and never increased. In real terms, $200 in 1963 is worth about $3,000 today, but the penalty is fixed. It is a relatively minor deterrent. Similarly, regulation fines are capped at $100. This may not adequately penalise serious fraud.

No explicit sunset or review: The Act does not contain any sunset clause. It remains perpetually available, but amendments in 2017 indicate a desire to simplify rather than repeal. The Act may be unused but still legally available; someone could apply for a guarantee today. The administrative machinery (Director-General, valuations) still exists, but the relevant government departments may have changed names or functions.

Potential incompatibility with modern lending standards: The 85 per cent LTV and 30-year amortisation may be outdated. Modern rural lending often involves higher loan-to-value ratios or longer terms, and lenders may not want to be bound by the rigid requirements of this Act when they could offer unguaranteed commercial loans. The scheme may be uncompetitive.

For a borrower seeking a guarantee: First, identify a bank or authorised lender willing to make a loan subject to the guarantee. The bank must be one carrying on banking business in South Australia or an entity approved by the Treasurer. The borrower must then prepare an application in writing to the Treasurer, providing all information the Treasurer requires. The borrower must not supply false or misleading information; doing so is an offence. The borrower must also obtain a written valuation of the land from the Director-General of Agriculture (or have one prepared that the Director-General will certify). The Director-General will assess the fair value for the proposed rural business. The loan amount must not exceed 85 per cent of that valuation. The borrower must also demonstrate that they have the ability and experience to run the business successfully; the Director-General will report on this. The borrower must show that the land is adequate to maintain the borrower and family after meeting costs and loan repayments - again, the Director-General reports. The borrower must obtain from the bank a loan or an offer of a loan that is expressly subject to the guarantee. The repayment terms must require periodical payments at least equal to what would be needed to repay principal and interest in equal annual instalments over 30 years. The borrower must give security to the Treasurer or the bank (or both) as the Treasurer requires - typically a mortgage over the land and possibly other property. The borrower must also give any other undertakings the Treasurer demands, such as not to sell or further encumber the land without consent. If the guarantee is given, the borrower must adhere strictly to the repayment terms and cannot agree with the bank to vary them without obtaining prior written approval from the Treasurer. If the business suffers hardship, the borrower may request the bank to join in a request to the Treasurer for deferment of interest (up to two years) or principal (up to three years). The Director-General must support the request. The borrower must maintain the security and not take actions that would diminish it.

For a bank: Before making a loan, ensure the borrower complies with all conditions for the guarantee. The bank must not vary repayment terms after the guarantee without Treasurer approval. The bank must take all reasonable steps to recover payments on time. If the borrower defaults, the bank must promptly inform the Treasurer. The bank must also provide all information requested by the Treasurer for the guarantee and for monitoring.

For the Director-General: Must establish procedures to evaluate land value, borrower ability, and land adequacy. Must issue certificates and reports in a timely and accurate manner. Must keep records to support the Treasurer’s decisions.

For the Treasurer: Must verify that all conditions under s 3(2) are satisfied before issuing a guarantee. Must decide on the appropriateness of security and undertakings. Must maintain records of all guarantees, monitor defaults, and report to the Auditor-General. Must approve any variation requests and deferment applications only on Director-General recommendation. Must also decide whether a borrower “would not otherwise have adequate financial resources” - a judgement call that should be documented.

General compliance: There is no requirement to publish guidelines, but best practice would be to develop internal guidelines for exercising discretion to ensure consistency. The regulations under s 11 may prescribe forms, fees (though not prohibited, none set), and procedures. Compliance with those regulations is mandatory; breaches can lead to a fine of up to $100. The Act itself does not require periodic reporting to Parliament beyond the Auditor-General’s annual report. The Treasurer should ensure that any payments under a guarantee are properly accounted and recovered from the borrower where possible. Any money recovered must be paid into general revenue.