Jim Chalmers (Rankin, Australian Labor Party, Shadow Treasurer) Share this | Hansard source

Thanks very much for the opportunity to speak on the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020. As the member for Curtin and others, including my friend and colleague the member for Whitlam, have noted in their contributions, a properly functioning insolvency regime is critical to ensuring that funds flow properly in Australia and gives lenders, borrowers and creditors the confidence to do business and support each other. We have seen relief provided during the peak of this crisis with the temporary relaxation of rules related to trading while insolvent.

This arrangement recognised the depth, the magnitude and the seriousness of the crisis that we are in; it recognised the temporary restrictions that were placed on business and the difficult situation that many businesses were in; and it gave directors some relief from civil penalties for trading while insolvent. These were only temporary arrangements, and the government has since announced the measures in this bill before us now, which aim to provide a more streamlined insolvency process for small business. The key features of the bill are the implementation of a new debt-restructuring process for small incorporated companies and a new streamlined liquidation pathway for small incorporated companies.

The new debt restructuring process provides a debtor-in-possession model, which will allow small business owners to retain control of their businesses while implementing a restructuring plan that's been agreed by their creditors. These plans will be developed in conjunction with a new category of independent small-business restructuring practitioner.

The government also says it's introduced safeguards to prevent the process from being used for corporate phoenixing, which is very important—it's a practice that's estimated to cost Australians up to $5 billion every year. The bill also introduces a new simplified liquidation pathway for small businesses, designed to reduce the costs of winding up businesses that will not survive.

In summary, the bill implements significant reforms to the Australian insolvency framework—reforms which the government says will help Australian small businesses restructure following the COVID-19 pandemic. There's no more important time for the government to be providing support to small businesses. It's crucial that distressed businesses have access to the right processes and structures necessary to reboot their businesses or, if necessary, to wind down their operations in an orderly manner. It's clear that not all businesses will survive to the other side of this crisis. To the extent that we can appropriately help some of those restructure their business and emerge on the other side, we, on this side of the House, obviously support that as well. But we need to remember that not all small businesses can access these provisions, and some may actually be worse off.

Most Australian small businesses are sole traders or partnerships, and they won't benefit from changes to the Corporations Act to make restructuring their debts easier. Indeed, in lots of ways, they have the most to lose. As we've seen so many times, when restructuring or insolvency goes wrong, it's frequently small businesses and subcontractors who end up holding unpaid invoices. So, for an ordinary tradie who works as a subcontractor to a larger business, a poorly run insolvency process can lead to disaster for them. Sole traders may be left struggling to meet payments on their house or to put food on the table for their family. We need to be conscious and cognisant of that part of the small-business community in particular.

That's why we'll be moving amendments to this bill to ensure that there is a review process and a sunset clause in place—not because we disagree with the idea of streamlined insolvency and restructuring but because we know the stakes are so high if this insolvency process is wrong.

The government's claiming these reforms are the most significant for insolvency in 30 years, and yet they appear to have been implemented with very limited consultation. Treasury only had the exposure draft legislation up on their website for five days. When you consider the magnitude of what we're thinking about here, that's clearly not good enough. We still haven't seen submissions in relation to this legislation. We've done a lot of consultation of our own, though. We know that there is anxiety about the lack of consultation, and people are worried about the detail of the draft laws that are before us.

Labor support the sensible reform of these laws. We want small businesses to have the support and structures they need. But, time and time again, we've seen in this place the big announcement, the rushed through legislation, and the subsequent issues that emerge because there hasn't been enough consultation and there hasn't been enough consideration of the detail. That's why we think a sunset clause is necessary, to ensure these changes aren't locked in without an appropriate review. A requirement for review on its own is not sufficient, given the government keeps missing legislative requirements for reviews. Our amendments will ensure that these very significant changes to the Corporations Act are appropriately reviewed and considered before being made permanent.

Overall, we are supportive in principle of these changes. We support small business. We support them not just in word, but in deed. That's why we have been fighting, for example, for the JobKeeper payment not to be cut prematurely, because 1.5 million Australian workers and, I think, 400,000 Australian businesses are still relying very heavily on JobKeeper. If you want to support small business, you can do something about insolvency, but you should also do something to ensure that you don't pull the rug out from under small businesses before they're ready to go out again.

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