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.  

In this Edition, we provide an update on the government’s temporary full expensing measure and consultations for the draft superannuation legislation, and consider a novel conviction of dishonest conduct.  We also look ahead to the potential impacts of the proposed critical infrastructure reforms.

YOUR KEY BOARDROOM BRIEF

Government to expand eligibility for legislated temporary full expensing measure. The Federal Government has announced that it will expand eligibility for the temporary full expensing measure to drive further investment, create more jobs and support the nation’s economic recovery from COVID-19. The temporary full expensing measure is a central element of the Government’s JobMaker Plan, which temporarily permits certain businesses to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed. The Government will introduce legislation to expand access to the full expensing incentive to enable more Australian-based businesses with a track record of investing in Australia to be eligible for the measure.  The legislation introduces a new alternative test for full expensing – companies must have less than $5 billion in total statutory and ordinary income (excluding non-assessable non-exempt income) in either the 2018-19 or 2019-20 income year, and those companies must have invested more than $100 billion in tangible depreciating assets in the period 2016-17 to 2018-19. This change will mean businesses may be eligible for full expensing due to the income of an overseas parent or related company. See the Treasurer’s media release. 

ASIC succeeds with a conviction of dishonest conduct in novel circumstances. In the first criminal prosecution for offending of this kind, ASIC has convicted a former financial adviser and fined him $30,000 for engaging in dishonest conduct in relation to attempts to artificially satisfy the minimum spread requirements for companies seeking to be admitted to the ASX. ASIC alleges that the former consultant applied for shares in four companies that were undertaking IPOs or were in the process of relisting on the ASX, and that the applications for shares in the companies contained false information about the applicant’s address. This conviction demonstrates the growing interaction between ASIC and the ASX. Directors of companies undertaking IPOs or recompliance issues are reminded that they will be subject to ASIC scrutiny in relation to ASX Listing Rule matters in addition to Corporations Act matters.  See ASIC’s media release. 

Treasury consults on exposure draft legislation for Your Future, Your Super package. As part of the suite of 2020-21 Budget initiatives, the Federal Government has released exposure draft legislation and explanatory material in relation to the Your Future, Your Super package for public consultation. Relevantly, this package proposes to require employers to make contributions into an employee’s existing fund if new employees have an existing fund but do not choose a fund to receive contributions and proposes to require APRA to conduct an annual performance test for MySuper products. The Government aims to legislate the Your Future, Your Super measures by the end of the year, with a start date of 1 July 2021. See the Treasurer’s consultation page. 

ASIC’s proposal to simplify the ASIC Derivative Transaction Rules. Mandatory reporting of over-the-counter (OTC) derivative transactions has been the norm for traders since the GFC. ASIC is now proposing to update its Derivative Transaction Rules to harmonise the international standards in relation to the reporting of OTC derivative transactions, resulting in reduced cost and complexity for the industry. ASIC has released its consultation paper setting out these proposed changes, and is currently seeking the views of interested stakeholders on the reforms. 

OVER THE HORIZON

The future of investment in Australia’s critical infrastructure. After a whirlwind year of FIRB reforms (although most temporary), the next stage of the Government’s reforms aiming to protect the nation’s “critical infrastructure” continues to progress with the release of the Exposure Draft of the Security Legislation Amendment (Critical Infrastructure) Bill. The stated aim of the Bill is to introduce an enhanced regulatory framework to better protect essential services by uplifting the security and resilience of Australia’s critical infrastructure. The ambit of “critical infrastructure” has been significantly broadened beyond what was initially specific assets in the electricity, gas, water and ports sectors only to now include assets in the communications, financial services, energy, healthcare and transport sectors (amongst others). While we are expected to reap the benefits of enhanced security with respect to assets in these essential sectors, it remains to be seen whether these benefits will outweigh the (likely inevitable) adverse impacts on foreign investment in these sectors.

China trade.  Following the shock of wine tariffs and more recent complaints over Chinese Government sanctioned tweets on sensitive military matters, the Commonwealth Government seems likely to formalise its complaints over early Chinese import restrictions on Australian barley with the WTO.  With the possible exception of iron ore, Australian exporters of nearly all products and services to China will need to think strategically about the possible loss (or at least, substantial diminution of) one of their most significant export markets, as trade tensions begin assume a level of global geopolitical significance.

Oil price rally. With the news of three possible vaccines and the prospect that international travel may soon be back on the cards, oil stocks in Australia have rallied. An OPEC gathering next week in Vienna to consider extending supply cuts will determine whether the rally is likely to continue.