Frequently Asked Questions
Drought Concessional Loans Scheme (DCLS) ‒ Western Australia
V5 March 2017
Updates at www.agric.wa.gov.au/rbdc
Briefly
● $10 million is available to eligible drought affected farm businesses in WA.
● Applications close at midnight on Friday 30 June 2017 or until funding is fully committed, whichever occurs first.
● The DCLS loans have a term of five years, with the possibility a further two (2) years if there are ‘extenuating circumstances’.
● The loan amount is limited to 50% of eligible farm business debt, to a maximum of $1million, at an initial concessional interest rate of 2.53%.
● DCLS loans can be used to restructure an existing Farm Finance Concessional Loans Scheme (FFCLS).
● Drought concessional loans will be available for any combination of Debt Restructuring, Operating Expenses, and Drought Recovery and Preparedness Activities.
● Farm businesses will need to demonstrate they are in a ‘drought’ area by first obtaining a valid ‘Rainfall Deficiency Report’ from the Australian Bureau of Meteorology (BoM) – see below.
● The Drought Concessional Loans Scheme in Western Australia is administered through the Rural Business Development Corporation (RBDC). The Department of Agriculture and Food, Western Australia will provide services to the RBDC to administer the loans.
Why is the eligibility criteria based on the Bureau of Meteorology’s data instead of individual rainfall and/or state/territory based data and records?
The Australian Government has set all eligibility criteria for the Scheme. The Bureau of Meteorology’s rainfall dataset allows for a nationally consistent, independent, repeatable and timely approach to determination of rainfall deficiency assessment.
The Bureau’s data is based on long-term records from an extensive network of standardised rainfall gauges and consistent observation practices. The data has undergone world-leading quality control and thorough review to ensure it conforms to international best practice standards set by the World Meteorological Organisation.
Rainfall data that is not part of the Bureau’s national dataset was not considered reliable for the purpose of assessing loan applications under the Drought Concessional Loans Scheme, as it has not been collected using standardised instruments and observation practices or undergone sufficient quality control or review.
What is a Rainfall Deficiency Report?
A valid Rainfall Deficiency Report indicates if your farm business is located in an area that has experienced:
● A rainfall deficiency, which is equivalent to, or worse than, a 1 in 20 year rainfall deficiency event (a rainfall deficiency at or below the 5th percentile), which extends for 12 months or more within the latest two year period, as assessed by the Bureau of Meteorology.
If your report shows that your farm business, whether wholly or partially, is located in such an area, the report will be considered evidence, should you be able to demonstrate a significant financial impact has or is being experienced and that this significant financial impact is a result of the effects of drought, and not as a result of other causes/reasons. This means that you have met clause 11c of the Drought Concessional Loans eligibility criteria.
● A rainfall deficiency, which is equivalent to, or worse than, a 1 in 10 year rainfall deficiency event (a rainfall deficiency at or below the 10th percentile), which extends for 12 months or more within the latest two year period, as assessed by the Bureau of Meteorology.
If your report shows that your farm business, whether wholly or partially, is located in such an area, then you must provide evidence of a significant financial impact has or is being experienced, as well as significantly reduced income and/or significantly increased expenditure that is directly related to drought conditions .
If your farm business is not located wholly or partially in either of these rainfall deficiency areas, you will not meet clause 11c of the Drought Concessional Loans eligibility criteria, and therefore are not eligible for assistance under the Drought Concessional Loans Scheme.
How do I request a BoM Rainfall Deficiency Report for my farm business?
A report can be obtained using the Bureau of Meteorology – Australian Rainfall Deficiency Analyser. The valid Report must be submitted with your application within 60 days of the ‘Date Produced’ date on the report. The Australian Rainfall Deficiency Analyser weblink is accessible via www.agric.wa.gov.au/rbdc.
Can I submit an application without a BoM Rainfall Deficiency Report?
No. Applications received without this report will be regarded as incomplete and will not enter the assessment queue. Information on how to obtain the report is available on the Rural Business Development Corporation (RBDC) website via www.agric.wa.gov.au/rbdc.
Can I use my own rainfall records as evidence that drought has financially impacted my farm business in my application?
No. Under the scheme guidelines, the RBDC will only accept a valid BoM Rainfall Deficiency Reports as evidence that a farm business has experienced the necessary rainfall deficiencies.
The Drought Concessional Loans Scheme is a national program. Using Bureau rainfall data ensures a consistent, objective and equitable assessment of each application regardless of where the farm business is located.
I currently do not fall in either a 1 in 20 or 1 in 10 event. Does this mean that I am not eligible for a Drought Concessional Loan?
If your Rainfall Deficiency Report does not show that your farm business has experienced, either wholly or partially, a rainfall deficiency which is equivalent to, or worse than, a 1 in 20 year or 1 in 10 year rainfall event which extends for 12 months or more within the last two years, you are not eligible for assistance under the Drought Concessional Loans Scheme.
However, it is important to note that the Bureau of Meteorology updates the rainfall deficiency data used for the summary maps and reports on a monthly basis. Updates occur on the 22nd day of each month (or the next business day). As such, the eligibility of a particular area in terms of meeting Clause 11(c) as outlined in the scheme guidelines may change with time.
There is also assistance for farm businesses through other Australian Government programs. For farm families experiencing hardship, the Interim Farm Household Allowance helps meet daily living expenses and is available Australia wide.
What if I disagree with my BoM Rainfall Deficiency Report?
Applicants who wish to request a review about the decision on their loan application should contact the RBDC. Information about this process is detailed in Section 16 of the scheme guidelines.
It will not be possible for an applicant to achieve any alterations to data presented in the Bureau of Meteorology Rainfall Deficiency Report irrespective of supplementary information provided.
This is because rainfall data that is not part of the Bureau’s national dataset cannot be relied upon for the purpose of assessment for consideration under the Drought Concessional Loans Scheme, as it has not been collected using standardised instruments and observation practices and undergone sufficient quality control or review.
Why is the map on my BoM Rainfall Deficiency Report different to the Rainfall Deficiency Summary Map on the webpage?
The Bureau of Meteorology analyses rainfall for all periods between 12 and 24 months long, in each two year assessment period for every individual grid cell across Australia. This equates to 91 potential time periods. The analysis determines which grid cells in a particular area have recorded a rainfall value at or below the 1 in 20, or 1 in 10 year rainfall deficiency thresholds.
The map shown on your Rainfall Deficiency Report displays only the driest of these 91 potential periods at the specified coordinates during the two year assessment period. For example, if your farm business experienced its driest period from 1February 2015 to 31January 2016, rainfall deficiencies for only this particular twelve month period will be shown on the map of your location and surrounding area on the Rainfall Deficiency Report. This period might not represent the lowest rainfall deficiencies for the other areas shown on this map, outside your location.
The Rainfall Deficiency Summary Map, however, shows the lowest rainfall percentiles recorded for every grid cell over all of the 91 potential periods in each two year assessment period. As such, the maps will be different.
I have a Farm Finance Concessional Loan; can I also apply for a Drought Concessional Loan?
Yes, however, the combined maximum loan amount available under the Drought Concessional Loans Scheme and the Farm Finance Concessional Loans Scheme will be up to 50 per cent of total eligible debt to a maximum of $1 million.
For what purposes are Drought Concessional Loans available?
Drought Concessional Loans are available for the purposes of restructuring existing eligible debt (including a Farm Finance Concessional Loan) and providing new debt for operating expenses or drought recovery and preparedness activities, or a combination of these.
Will I have to meet principal payments during the term of the Drought Concessional Loan?
No. Interest only payments are available for the loan term.
At any time during the five year term of the Drought Concessional Loan, loan recipients may prepay the whole or any part of their loan without incurring any additional fees.
How do I demonstrate that the significant financial impacts experienced by my farm business are as a result of the effects of drought?
Applicants must obtain a Rainfall Deficiency Report before submitting their application. This report will show if your farm business is located in an area experiencing either a 1 in 20 year rainfall deficiency or 1 in 10 year rainfall deficiency.
If your report confirms that your farm business is in a location which has experienced at least or worse than a 1 in 20 year rainfall deficiency, then the Report will be considered as sufficient evidence that the significant financial impacts are due to the effects of drought. You still need to provide evidence of the Significant Financial (and Production) Impact in Q8 of the Drought Management Plan, but not prove that the cause of the Impact was due to drought.
If your Report indicates your farm business is in a location which has experienced a 1 in 10 year rainfall deficiency, evidence must be provided of significantly reduced income and/or significantly increased expenditure that is directly related to drought conditions. You need to provide evidence of the Significant Financial (and Production) Impact in Q7 and Q8 of the Drought Management Plan to prove that the cause of the Impact was due to drought.
Should your Report indicate neither of the above outcomes, then you are not eligible for a Drought Concessional Loan.
Do I need to have the on-going support of my commercial lender?
Yes. The scheme guidelines require your commercial lender to support the proposed arrangements for a Drought Concessional Loan.
Can an overdraft balance be included in the calculation of eligible debt?
No. The scheme guidelines state the funding of normal or additional working capital is an example of ineligible debt. Therefore, in normal circumstances overdraft facilities will be excluded from your eligible debt calculations.
Exceptions will be considered where there is clear evidence (for a period of more than one year) of a significant hard-core component of the overdraft facility.
Will I have to pay loan establishment or other costs for a second time if I am successful in my application to refinance my Farm Finance Concessional Loan to a Drought Concessional Loan?
Successful applicants will be required to meet the actual costs of establishing the Drought Concessional Loan, e.g. costs of title searches, mortgage registrations. These costs are expected to range between $184 and $750. However, if you are refinancing your Farm Finance Concessional Loan, utilising the same security, the RBDC may not need to undertake some of the activities associated with the establishment of a new loan, thereby keeping any additional costs to a minimum.
Applicants who, after the five year term, are approved under Extenuating Circumstances for an additional term of up to two years will be required to pay a non-concessional interest rate, principal and interest payments, and cover the annual loan administration costs.
Can I apply to refinance a Farm Finance Concessional Loan into a Drought Concessional Loan?
Yes. However, applicants wishing to refinance a Farm Finance Concessional Loan must refinance their entire loan with a Drought Concessional Loan, and any interest accrued to the date of refinance must be paid by applicants.
Applicants will need to satisfy the eligibility and loan assessment criteria for the Drought Concessional Loans, as well as any reporting requirements of the Farm Finance Concessional Loans Scheme loan, such as proof of expenditure.
Can an ABN which is held in different names from the names of the applicants be used to support the application?
No. The applicants must have their own ABN and be registered for GST.
If I bought my farm business less than three years ago, would I be eligible for a Drought Concessional Loan?
No. The scheme guidelines require applicants have owned and operated their farm businesses for at least the past three consecutive years.
What if there are two or more related businesses involved? Are all the businesses eligible to apply for their own Drought Concessional Loan?