Welcome to Edition 85 of Boardroom Brief.
This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
YOUR KEY BOARDROOM BRIEF
Fast-track tax relief for small and medium businesses awaiting royal asset. On 18 October 2018, the Treasury Laws Amendment (Lower Tax for Small and Medium Businesses) Bill 2018 passed through both Houses of Parliament and now awaits royal assent. Under the new legislation, businesses with a turnover below $50 million will have a tax rate of 25% in 2021-22 (rather than from 2026-27). Similar timing changes will also apply to the roll out of the 16% tax discount for unincorporated businesses. The measure is part of the Coalition Government’s commitment to deliver tax relief five years earlier than planned, and is expected to benefit over three million SMBs and trigger greater investment, more jobs and higher wages. See the Hon Josh Frydenberg’s media release.
Proposed GST reforms introduced into Parliament. Staying true to the Government’s announcement earlier this month, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 and explanatory materials were introduced into Parliament last week. The reforms are expected to deliver an additional $9 billion in untied funding to the states and territories over 10 years, and an additional $1 billion in perpetuity once fully implemented. Specifically, the Bill proposes to: (i) establish a more stable and predictable equalisation standard, based on the fiscal capacity of the stronger of New South Wales or Victoria; (ii) introduce a GST relativity floor, initially set at 70 cents and ratcheting up to 75 cents in 2024-25; (iii) permanently boost the GST pool with direct Commonwealth cash injections; and (iv) during the transition period between 2021-22 and 2026-27, ensure that states and territories get the better of the old or the new system over the period (with the Productivity Commission charged with reviewing the effectiveness of the new GST distribution system at the end of the transition period). The Government has confirmed that its additional contribution to the GST pool will not be offset or partially offset by a decrease in other grant funding to the states. The largest beneficiary of the new regime will, of course, be Western Australia, but (as the long and tortured title of the Bill suggests) all States will benefit on the Government’s projections. At the cost, of course, of increased national debt.
Takeovers Panel makes additional final orders against former Molopo directors. The Takeovers Panel has taken the unusual step of making compensation orders against directors of a target company. Further to the Panel’s declaration of unacceptable circumstances against Molopo Energy Limited (Molopo) for not keeping shareholders informed of transactions it entered into over a four-month period during which Molopo was the subject of an off-market takeover bid, the review Panel made additional final orders against certain former Molopo directors to compensate Molopo and one of its shareholders for costs they incurred during the initial Panel proceedings. The Panel emphasised the ‘blatant disregard’ by the former directors of their disclosure obligations on numerous occasions, at times over extended periods. Whilst rare for the Panel to make orders against directors personally, the decision underlines its preparedness to do so when it thinks such orders are appropriate to protect the rights or interests of persons affected by unacceptable circumstances.
Government consults further on the Corporate Collective Investment Vehicle Bill. On 15 October 2018, the Government released its third tranche of the draft Corporate Collective Investment Vehicle (CCIV) Bill and explanatory materials. This follows its earlier consultations on Tranche 1 and Tranche 2, which focused on the regulatory framework for CCIVs. The CIVV will allow Australian fund managers to market to participating Asian financial markets using a well-recognised corporate structure vehicle, complementing the Asia Region Funds Passport initiative introduced into Parliament earlier this year. The third tranche materials focus on: (i) the independence requirement for the depositary of a CCIV; (ii) external administration arrangements; (iii) deregistration; (iv) takeovers and disclosure requirements; and (v) other consequential amendments to accommodate the new CCIV regime. Submissions can be made until 26 October 2018.
ACCC and Australian Energy Regulator publish Annual Report 2017-18. On 18 October 2018, the Australian Competition & Consumer Commission (ACCC) and the Australian Energy Regulator have jointly released the Annual Report 2017-18. The Report notes that the ACCC secured almost $170 million in penalties for breaches of competition and consumer law, concluded over 100 in-depth investigations and assessed 281 mergers in the last financial year. See ACCC’s media release. As noted in previous editions of Boardroom Brief, we appear to be entering a period of increased enforcement activity by regulators, and Directors would be well advised that their companies’ compliance programmes are up to date and being enforced.
THE WEEK AHEAD
Morrison Government loses majority. Last Saturday’s by-election in Malcolm Turnbull’s former seat Wentworth — held by the Liberal Party, and its predecessors, since Federation — saw a swing of around 20% against the Government. The likely win for independent Dr Kerryn Phelps will mean Prime Minister Scott Morrison faces a hung parliament and a delicate negotiation with crossbenchers to retain control of parliament in what will be only the third minority government since 1943. A difficult environment – if it wasn’t already – to undertake any bold reforms, or formulate policy (including in response to the Hayne Royal Commission).
Deadline for submissions on the draft GST Bill is this Wednesday. The Senate Economics Legislation Committee will then release its report on the Bill on 8 November 2018.