A round up of key relevant legislation, enacted or proposed, over the last month including the Harper reforms to competition laws, consultation on whistleblowing reforms, the proposed strengthening penalties for corporate and financial sector misconduct, reforms to stop corporate avoidance of employee entitlements at taxpayers’ expense and exposure draft legislation to support innovation in financial services.
In this issue, you will find:
The balance of the most significant changes to Australia’s competition laws in over 40 years were assented to on 27 October 2017 and commenced on Monday 6 November 2017. The changes are a response to the recommendations of the Competition Policy Review in 2015 chaired by Ian Harper.
See recent G+T Alert for details of the reforms.
The ACCC has also released the following interim guidelines and forms on the new misuse of market power, concerted practices and authorisation (merger and non-merger) provisions:
Treasury has consulted on its exposure draft of the Treasury Laws Amendment (Whistleblowers) Bill 2017 (Bill) and supporting explanatory material. The Bill creates a single whistleblower protection regime in the Corporations Act 2001 (Cth) to cover the corporate, financial and credit sectors, and creates a new whistleblower protection regime in the taxation law, to protect those who expose tax misconduct.
The reforms to the Corporations Act include:
- expanding the protections to a broader class of people;
- expanding the types of disclosures that will be protected under the framework;
- allowing disclosures to parliamentarians and the media in certain circumstances, if pre-conditions are satisfied;
- imposing new stringent obligations to maintain the confidentiality of a whistleblower’s identity;
- making it significantly easier for a whistleblower to bring a claim for compensation where he or she has been victimised;
- creating a new civil penalty offence so that law enforcement agencies will be able to take action against companies where the civil standard of proof can be met; and
- requiring all large companies to have a whistleblower policy in place, with penalties for failing to do so.
The new whistleblower protections in the taxation law are broadly consistent with the enhanced protections under the Corporations Act, and will facilitate disclosures about tax misconduct being made directly to the ATO.
The Government’s recently formed Expert Advisory Panel will now consider the exposure draft legislation, including assessing it against the recently released report of the Parliamentary Joint Committee on Corporations and Financial Services into Whistleblower Protections in the corporate, public and not-for-profit sectors.
The Government will consider the Expert Panel’s advice and the feedback received from the consultation before finalising the legislation for introduction to Parliament in the last sitting week of the year.
See the Treasury website for further information.
Treasury has released a Position paper: Strengthening penalties for corporate and financial sector misconduct (Paper) for public consultation. The Paper follows concerns that the penalties in legislation administered by ASIC in the corporate, financial market and financial services sectors may not be effective and do not reflect community perceptions as to the seriousness of engaging in certain forms of misconduct.
The key positions put in the paper include:
- expanding the range of civil penalty provisions and increasing the maximum civil penalty amounts in the Corporations Act 2001 (Cth) and the National Consumer Credit Protection Act 2009 (Cth);
- increasing the penalty amounts in the Australian Securities and Investments Commission Act 2001 (Cth);
- allowing ASIC to seek remedies to remove benefits illegally obtained or losses avoided in civil penalty proceedings brought under the above legislation;
- increasing maximum terms of imprisonment for a range of offences. The most serious Corporations Act offences will increase to the highest penalties available under the Corporations Act;
- increasing maximum fine amounts for other criminal offences, and standardising them by reference to a formula based on the length of the available prison term;
- for strict liability offences, increasing the lowest level fines and allowing ASIC to deal with these offences through the existing penalty notice regime as an alternative to prosecution; and
- allowing ASIC to deal with a wider range of offences through infringement notice regimes.
See the Treasury website for further information.
The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP in a joint media release with the Minister for Employment, Senator Hon Michaelia Cash, has announced that the Government will introduce new laws into Parliament aimed at limiting corporate misuse of the Fair Entitlements Guarantee (FEG) scheme.
The FEG scheme is an avenue of last resort that assists employees when their employer’s business fails and the employer has not made adequate provision for employee entitlements. However, some company directors are misusing the FEG scheme to meet liabilities that can and should be paid directly by the employer rather than passed on to Australian taxpayers.
The proposed changes will:
- penalise company directors and other persons who engage in transactions which are directed at preventing, avoiding or reducing, employer liability for employee entitlements;
- ensure recovery of FEG from other entities in a corporate group where it would be just and equitable and where those other entities have utilised the human resources of the insolvent entity on other than arm’s length terms; and
- strengthen the ability under the law to sanction directors and company officers with a track record of insolvencies where FEG is repeatedly relied upon.
For further background, see also Consultation Paper Reforms to address corporate misuse of the Fair Entitlements Guarantee Scheme dated May 2017.
As promised in the Federal Budget earlier this year, Treasury has released draft legislation and draft regulations proposing an expanded legislated sandbox for testing financial services and consumer credit businesses. Together, the draft legislation and draft regulations propose significant reforms to ASIC’s regulatory sandbox which will greatly expand the scope of the licensing exemptions. Currently, the licensing exemptions are facilitated by ASIC legislative instruments and permits an entity providing certain financial services or engaging in certain consumer credit activities to do so without holding an Australian financial services licence or an Australian credit licence.
The Government has introduced the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 which, if passed, will amend the Income Tax Rates Act 1986 (Cth) to provide that a corporate tax entity will only qualify for the lower 27.5% corporate tax rate if:
- no more than 80% of its assessable income is of a passive nature (for example, interest, dividends or royalties);
- the aggregated turnover of the corporate tax entity for the income year is less than the aggregated turnover threshold for that income year (which, for the 2017-18 income year is $25 million and for the 2018-19 income year, is $50 million).
The amendments will apply from the 2017-18 income year.
See the Minister for Revenue and Financial Service website for more information.