Wednesday, 12 February 2020
Commonwealth Registers Bill 2019, Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, Corporations (Fees) Amendment (Registries Modernisation) Bill 2019, National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Bill 2019; Second Reading
I'm pleased to be speaking on the Commonwealth Registers Bill 2019 and the second reading amendment that has been circulated in my name, which I now formally move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House:
(1) congratulates the Government for finally taking action to implement a Director Identification Number and tackle illegal phoenixing, nearly three years after Labor first committed to the policy; and
(2) calls on the Government to accelerate the modernisation of business registers project".
It's good to see this bill return to the House, albeit in a different form. It's a bit like the return of an old friend—once spurned but comes back and is loved by all. It was back in November last year that I introduced amendments to the coalition's creatively titled Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 which would modernise business registers. The bill before the House today has picked up my schedule and introduced it. I don't know whether it was because of intransigence or just downright stubbornness that the Assistant Treasurer, who at that point in time spoke against my bill, has now got the liquid paper out and has moved it again in the government's name. I don't care. What I'm concerned about is ensuring that we take effective action against illegal phoenixing in this country.
If people want to know why I moved that schedule, it was after receiving numerous representations from Labor MPs who had had come to them businesses or creditors who had lost money through the immoral, illegal activity of bad operators—thousands and thousands of dollars. In fact, the explanatory memorandum to this bill tells us that anywhere between $3 billion and $5 billion per annum is being lost to bad operators through illegal phoenixing. But a real motivator came in the form of a woman by the name of Tara Teo, a young mum who attempted to start a family business in my electorate. Tara's story made national headlines last year when A Current Affair told the story of her attempts to start a business. She was one of many, many people who were caught up in the collapse of an organisation known as JUMP! Swim Schools, a franchise system operating throughout the country. I caught up with Tara last week, and I told her that I was going to raise her matter in parliament. I do that today to honour her and the thousands of people like her. But I was very keen to say: I cannot give you hope that you're going to recover the monies that were lost to you. The ACCC is currently pursuing the matter. I've written to the ACCC and asked what plans are afoot to ensure that some of the creditors might benefit from any of the penalties that may be awarded against the business, JUMP! Swim Schools. But I don't want to give false. That's a long and drawn out process. She's lost a lot of money. Thousands of other people have lost a lot of money as well.
Tara entered into an agreement with JUMP! Swim Schools two years ago to purchase a swim school franchise, which she intended to operate in Albion Park, in my electorate. Her initial investment of $150,000—a lot of money!—was to build the facility and get the business started. She wasn't a fool. Often we think about people in these circumstances as being gullible, perhaps, and not reading the fine print. But Tara had done her due diligence. She did the research. She looked into the company at the time. JUMP! Swim Schools had 66 trading sites throughout Australia. She'd invested her money, but a year later nothing had been built. When she chased things up she was shocked to discover that the company had been trading insolvent since March 2016. The company went into liquidation, and Tara lost everything. Meanwhile—and here's the rub—the CEO of the company, a bloke by the name of Ian Campbell, was able to go to the United States and open 11 new franchises in another jurisdiction, and not just in the United States of America; his company has operated franchises in New Zealand, Brazil and Singapore. I take this opportunity to send a message to the regulators in those countries to watch this fellow. He's got form. I hope that there isn't another round of victims in New Zealand, Brazil, Singapore or the United States because of the immoral actions of this bad operator.
I urge other members of the public to listen to people like Tara in their electorates and to hear about the real harm being done by dodgy, phoenixing business. We know it's a big drag on the economy, but the numbers belie the personal costs. There's the cost to the family from the emotional stress they go through when they not only lose their hopes and their livelihoods but are left with a crippling debt—Tara's husband is now working night shift in the steelworks—and no immediate means to repay it.
I am genuinely pleased to see that this bill is before the House. It's about the establishment of a modernised legislative regime for Australia's business registers, which are currently woefully outdated and running on a range of ancient systems. This is a commitment that the government first made back in 2016. It arises out of a recommendation from the Productivity Commission which dates back to September 2015, when they issued their final report, entitled Business set-up, transfer and closure. So it's taken us a long time to get from that Productivity Commission recommendation to this bill being before the House today. One can only imagine—in fact, we don't have to imagine; we can calculate. If PricewaterhouseCoopers are right and the annual cost of illegal phoenixing in this country is somewhere between $3 billion and $5 billion a year, the five years of inaction by this government has cost the economy—those small businesses, those creditors—somewhere close to $25 billion. That is immoral. That is unconscionable.
I'm pleased to see the bill before the House. It's probably worth explaining some of the reasons why this is so important. It might surprise many members of this place, who jumped on a plane to travel down here to Canberra to attend this session of parliament, that you actually have to go through more identity checks to buy a plane ticket than you do to set up a business and become a company director in this country. Let me say that again: you need more identity checks to get on a plane to come to Canberra than you do to establish yourself as a director of a company.
Under the current arrangements, no individual verification of the identity of directors is occurring in a way that can stop the recidivist phoenix operators, the bad operators, doing again and again and again what they've done to people like Tara Teo and her family. This legislation will put in place the machinery to ensure that that loophole is closed down. It is not before time. It was a commitment made as part of the government's so-called National Business Simplification Initiative, which was intended to reduce the time businesses spend interacting with governments so they can get on with the business of keeping the economy moving. We say that that is a worthy goal.
Perhaps the fact that this bill has been delayed for so long since its announcement has been because the government in this area, as in so many other areas, are just incapable of making decisions and then making those decisions operative. In every critical area in our economy we see the same pattern of behaviour: announcements are made, but they are not followed through because of the divisions and incompetence of the governing parties—divided among themselves, unable to make a decision in their party room and then unable to make that decision operative. We have multiple examples of that before the House at the moment.
It is also worth pointing out that the government has assigned $60 million in funding for this project, a project for a major IT upgrade that is going to involve a significant upgrade of a number of outdated IT systems. When we've consulted with industry and others who have some expertise in the rollout and upgrade of systems such as this they say that that is woefully inadequate. So I'd invite the minister responsible, when he comes back to the dispatch box to sum up in the debate, to say what contingency they have put in place to ensure that they have allocated sufficient funds to ensure that this essential project gets up and running, so that the reality matches the rhetoric; so that businesses have the systems in the background to enliven this legislation. If they are unable to satisfactorily answer that question, what we'll have is just another example of the government making a big announcement but, through their own incompetence and inability to follow through on these things, that being insufficiently executed.
I want to say something about director identification numbers. This is an important feature of this bill. It's absolutely critical. Everyone from the Australian Institute of Company Directors to the small business associations and the small business ombudsman have said, 'This is absolutely critical to addressing the issue of phoenixing.' A director identification number will provide a unique identifier for directors of Australian companies, providing traceability over time. Suppose you put your hand up and say, 'I want to register with ASIC as a company director.' ASIC provides you with a unique director identification number. Like your tax file number, that stays with you for life.
What that enables ASIC to do, and what that enables creditors, shareholders and others to do, is track a particular shareholder, particularly if they've been involved in recidivist activity, to ensure that the full force of the law can be brought down upon them if they are barred—that they're not able to re-register, because the systems are in place to stop that. I welcome the fact that the government is putting this legislation into the House as well, called for by business, called for by Labor, committed to by Labor at the last election, an integral part of the bill that we put forward in November last year and picked up by the government, and I welcome that.
We have a serious problem with phoenixing in this country. We do want to ensure that this bill is implemented, that it passes this House and that it passes swiftly in the other place. But we also want to ensure that the money, the funding, is set aside to ensure that the systems can be upgraded and that the work can be underway swiftly, to ensure that the director identification number and the registry upgrades—something this country sorely needs and something that corporate Australia sorely needs—can be put into place. In so many ways, the government has failed.
With those brief comments, I put the minister on notice. When he comes back to sum up, I want him to be able to explain to the House how $60 million is going to be sufficient for this significant IT upgrade, this significant registry upgrade to be completed, and what contingencies the government has put in place to ensure that this critical change, to stamp down on phoenixing in this country, can be delivered. With those comments, I commend the bill to the House.
The original question was that this bill be now read a second time. To this, the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.
Before I invite other speakers, I understand that it is the wish of this House to debate this order of the day concurrently with the four related bills, as they appear on the program. I believe there is no objection. There being no objection, I will now allow that course to be followed. So the question, I repeat now, is that the amendment be agreed to.
It's an honour to rise today and speak in favour of this motion and about how it relates my great electorate of Braddon on the north-west and west coasts and King Island in Tasmania. My electorate is home to a number of small to medium businesses that are significant on a global scale. It is also home to around 9½ thousand small businesses that add to Tasmania's positive GDP growth. All of Braddon's great businesses are playing a critical role in driving our economy forward. These small businesses provide the engine room of our economy in Tasmania.
As a small business owner myself I understand the challenges and risks that business sectors face each and every day. I understand what it's like to borrow too much money and to have to employ people week in, week out and ensure that they are gainfully employed through slack periods in one's business. I understand the burden of compliance and the levels of bureaucracy that are placed around small businesses and that sometimes appear critical and crippling to those small-business operators.
In my first speech in this place, I said that this was a particular issue I wanted to fight and support. I made a commitment to my electorate and to those small to medium business owners that I would do everything I could to ensure that those businesses right across Australia, including those in Braddon, are given the room to grow, the room to expand, to flourish and to employ more people and create even more jobs. As a small business man I understand and I value the efficiencies and the streamlined processes within government departments. I also understand that reducing the regulatory burdens imposed on businesses allows them to focus on what's important to them, which is running their business. They've got enough to do, running their own show, without worrying about government bureaucracy and interdepartmental glitches.
We need to think about the human side and how these regulatory burdens stifle business growth—how they impact those mum-and-dad businesses on the ground. Once again, they've got enough to do, running their own show, without having to worry about red and green tape. I know that most nights most mums and dads who run these businesses are locked away in their home offices, trying to negotiate through unnecessary and complex bureaucratic paperwork, instead of spending precious time with their kids and their families and instead of looking after themselves and their own wellbeing. That's why this legislation is important.
The Commonwealth Registers Bill 2019 and associated bills fulfil the government's 2018-19 budget commitment to reduce regulatory burdens imposed on businesses. Currently there are 34 legal registers that are administered by the Australian Securities and Investments Commission and the Australian Business Register. These registers include but are not limited to the entity name, identity and information; registers of banned or disqualified persons; business name registers; managed investment scheme registers; and registers of disqualified company directors—just to name a few.
Another inefficiency with the current system is that business owners often have to provide the same information time and time again. It does their head in. The duplicative nature of going to one department and explaining your life, only to have to go to another department, must cripple businesses and their confidence. Amongst other things, it certainly would frustrate them. This is because 32 existing registers aren't linked, despite them holding exactly the same information and data. This is an issue that business owners in Braddon raise with me almost daily. It's frustrating, it's time-wasting and it costs the business owner their bottom line. It's nonsensical.
The bill addresses this problem and will integrate the current 32 business registers into one single, efficient platform. The Morrison government is one that delivers on its promises and does what is needed to streamline how businesses engage with government, and this is important on so many levels. This bill modernises business registers to address registry fragmentation and improves business user experience. Protecting Braddon's small businesses from unscrupulous company directors is also important to me. As a former company director I understand this full well, as does the Morrison government. I've listened to the advice from the Australian Institute of Company Directors and the Business Council of Co-operatives and Mutuals and I've heard firsthand the examples they provide of this unscrupulous aspect creeping into boards of directors, only to have this fall into the lap of honest, hardworking folk who are getting about this business every day.
Loopholes that allow current corrupt company directors to avoid paying what they owe to our honest, hardworking business owners by shutting down their debt ridden companies and transferring their assets to another company must be closed. It's estimated that the cost to Australian businesses and to the economy as a result of this dishonest practice is between $2.9 billion and $5 billion annually. But what this dishonest practice does in terms of destroying business confidence, and those hardworking folk that run these businesses, is immeasurable. We can't measure the burden that that places on them.
With this in mind, I welcome the introduction of the director identification number, the DIN. The DIN is a unique identifier that a director will keep forever. This means that going forward a director's profile and relationships across companies will be traceable. This will provide greater insights to regulators, to businesses and to individuals to identify affiliated directors and prevent them from fictitious identities. It will also provide a means by which we can control unscrupulous fiduciary requirements being mislaid or not carried out on the part of company directors. This acts as further deterrent—to detect and address unlawful behaviour. It protects our small business operators. This will result in yet another important protection for our businesses right across the electorate of Braddon, and, in fact, right across Australia, and for that I commend this bill to the House.
We're supporting this bill principally because it adopts a Labor policy that Labor's been campaigning on for many years now, and we're glad to see the Morrison government finally adopt it because it's sensible policy, and that of course is the introduction of director identification numbers for company directors.
The package of these bills delivers two outcomes. It creates a new Commonwealth business registries regime, allowing ASIC and other business registers to be up to date and meet modern requirements. As I mentioned earlier, it also introduces a new director identification number requirement, requiring company directors to provide proof of identification before registering their companies. The introduction of director identification numbers will improve the ability of regulators to combat illegal phoenixing, which costs the Australian economy billions of dollars every year. Dodgy phoenix companies impose an enormous cost on ordinary, hardworking Australians.
Phoenixing of a company occurs when dodgy directors deliberately burn a company in an attempt to avoid their obligations to employees, taxpayers and honest businesses. It occurs, unfortunately, in a number of industries in Australia. You see it quite often when a particular company has a liability to creditors—maybe for loans, maybe for other areas related to insurance, maybe for rectification works—and they shut the company down owing creditors all of this money, owing average working Australians liabilities. They simply go away and establish a company under another name. And because you can't pierce the corporate veil under Australian corporate law and go directly after those directors, because of the notion of limited liability in corporation law, they get away with it. It is one of the most despicable acts that anyone can undertake. But, unfortunately, in a lot of circumstances it is legal in Australia. It's hoped that, with this new requirement for directors to have a number associated with them as they apply for the establishment of businesses and become directors of businesses, this problem will be ameliorated in Australia.
Phoenixing has effects that reach across the community, ruining innocent people's lives and livelihoods. Labor first committed to director identification numbers back in 2017, and has previously moved amendments in the House of Representatives to force the government to vote for a director identification number. Unfortunately, they voted against it. They voted against Labor's proposal to establish director identification numbers. One suspects purely because it was put forward by the Labor Party, not because it wasn't good policy, not because it didn't make sense, not because the Australian people didn't want them, purely because it was put forward by the Labor Party, and that is quite sad. It is quite infantile really when you think about it. It is quite childish and sad. And that's evident in the fact that they have now put it forward in this bill, that it's an integral part of this bill. There is basically no difference between Labor's proposal and this one, but, in what was only an infantile act, they chose to vote against it when it was put forward by the Labor Party.
Labor's previous amendment to the introduction of a director identification number had widespread support from the Australian Council of Trade Unions, the Australian Institute of Company Directors, the Australian Chamber of Commerce and Industry and, of course, the Small Business Ombudsman. The Master Builders Association and various stakeholders, particularly in the building industry, and the small business sector were also supportive of Labor's policy. Stakeholders agree that a director identification number is crucial in helping to combat illegal phoenixing in Australia. The director identification number reform will require directors to actually provide 100 points of identification, allowing regulators to properly tackle the problem at its heart and keep track of people when they attempt to close down companies with liabilities to creditors, and just move on and establish a new corporate entity and hope the whole issue will go away and that nothing will go wrong. Less identification is needed to start a company than to open a bank account. That's a problem in Australia that has led to unfair and unjust outcomes. That needs to be rectified. Thankfully, the government is heeding Labor's advice and doing that through this bill. It's been too easy to fraudulently register directors and too hard to track individuals who regularly engage in fraudulent phoenixing.
Action must be taken to ensure that dodgy directors are accountable. They simply can't be left to continue shutting down companies in order to swindle entitlements from workers and leave suppliers and tradies in the lurch. Make no mistake: these directors have put in place deliberate strategies that are specifically designed not only to defeat their creditors but also to defeat the Australian Taxation Office. Unfortunately, some of them are very adept at it and have been getting away with it for years. It's not uncommon to hear stories of people doing this two and three times.
The Morrison government has finally come to the table on this issue. We support giving new powers to regulators to combat illegal phoenixing. Labor's pressure on the government has seen them backflip and look to implement the DIN and modernise business registries. After campaigning against Labor's policy, it is clear the Morrison government has now accepted the wisdom of Labor's policy and has done the right thing by providing this legislation to the parliament.
I wish to pay tribute to the member for Fenner, who has put a lot of work into this issue and has led the debate and has campaigned for this as part of Labor's economic team. Without the concerted campaign and efforts of people like the member for Fenner and the current shadow Treasurer and the current shadow minister for health, we wouldn't have seen such vocal opposition to what phoenixing amounts to in our economy and what it does to our economy, nor had the spotlight shone on it. I congratulate them. The Treasurer knows he needs to act to protect customers, but he's been dragging his feet. The Liberals have always been slow to act when it comes to this issue. But, thankfully, they are now adopting Labor's policy and have introduced this legislation. It is time the government focused on protecting the vast majority of scrupulous businesses from the harm caused by the dodgy few, rather than avoiding any responsibility.
This bill provides, finally, for the director identification number, with 100 points of identification required prior to being registered under the director identification number system. It will ensure that regulators can keep track of directors when they are doing the wrong thing, not only by their employees—importantly, by their employees—but also by creditors and their customers, and those who have business dealings with them.
The bill also provides for a new Commonwealth business registries regime, allowing ASIC and other business registers to be updated to meet modern requirements. This is an area with a fast pace related to technological change and modernisation of business registries. This will allow ASIC and other business registers to be updated to meet those requirements.
On the whole, I commend the bill to the House. I thank those on the Labor side who campaigned for director identification numbers, and I thank the federal government for finally listening to the Labor Party and the Australian people and implementing this much-needed reform.
Goldstein, as a community, wants to make sure that we have proper financial regulation for our country and that businesses, small businesses and directors live up to their responsibilities and obligations to the Australian people. I don't think it's particularly different to any other electorate around the country.
What we have in the Commonwealth Registers Bill 2019 is a sensible and pragmatic approach by this government to address a couple of things. Most importantly, it addresses wrongdoing and problems that occurred in the past when directors engaged in phoenixing and used it as an opportunity to cleanse themselves of their directorial history. The simple process of establishing a director identification number will play an important and critical role in making sure that those who do the right thing—who fulfil their duties and obligations, consistent with the law and the purpose of an organisation—are respected and that those who do the wrong thing by workers, by creditors and by those people with whom they have engaged in business are held to account. Of course, the opposition are standing up and claiming credit and everything else. Well, in the end, they had the chance to do many of these things before, when they were in government, and they chose not to. It's taken this government to get on with the job of making sure that dodgy directors out there are held to account. That's what we're doing. We don't talk the talk, as they like to; we walk the walk. That's what we're focusing on: making sure that we get the right outcomes.
We want Australians to have a high degree of trust in people who are engaged in enterprise, who are innovating, who are putting their capital, their energy and their labour on the line to build a more successful country. We want people to engage in an economic environment anchored around trust because that's the pathway to more investment and more money going into growing businesses to create jobs. That's the very fulfilment of the Liberal ideal—that, through shared participation, innovation and reward for effort, through a trust based system anchored around property rights and contracts, we get economic development, which advantages everybody. That's what this bill, in its own, small, modest way, contributes to. It makes sure that dodgy directors are held to account. If they have engaged in conduct for which they should be held to account, just because the business has closed down does not mean they should be able to operate other businesses or other directorships without regard to their past misconduct. It is incredibly important that we hold to account people who do the wrong thing by Australians.
The other thing this bill does, which is very important, is make sure that the registers of the Australian Business Register and ASIC are harmonised to integrate 32 existing business registers into a single platform to be administered by the Australian Business Registrar. This is a relatively straightforward measure, when you look at it in terms of the engagement that Australian people have around business registrations, but it's incredibly important for streamlining so many of the processes used when engaging with government. We'll be able to use the power of technology in a very simple and straightforward way to remove burdens, barriers and hurdles for everyday Australians who want to make good wicket and good stick out of their lives. We want people to register businesses. If they're registering businesses then, in the words of the Prime Minister, they're having a go; they're taking the risk because they can see the potential for growth into the future. While this isn't going to dramatically change people's behaviour, it's one small barrier that can be streamlined to the advantage of investment and growth and to remove complexity and hurdles from people's lives. Of course, to do so, the government is putting in place the IT infrastructure that underpins Australia's business registry services which need to be addressed to meet demand for registry services now and into the future. To facilitate the implementation of the new registries system a legislative package has been drafted that creates a new regime that is flexible, technology neutral and governance neutral—in short, designed to make sure that Australians can do what they need to do best.
Exactly, there you go! I'm very happy to see the member for Ryan endorsing this very strongly. We haven't had a word yet from the member for Longman about whether he shares that sentiment, but I cannot imagine that he would take a different view.
There you go; he is on board as well. It seems even the opposition is on board with such a proposal. That is a welcome thing. Maybe there is a time where we can find a point to unite, though I have no doubt that somehow there will be some sort of rubbish amendment put forward by the opposition with the objective of simply trying to virtue-signal or draw attention to themselves, to the detriment of getting outcomes in this parliament. We have seen a fair bit of that in this parliament already.
I see some members are exercised when I say such things, but the reality is that past behaviour certainly does inform future behaviour. In any case, the minister can appoint an existing body to the registrar. Different registrars can be appointed for different functions and powers under the legislation. The registrar will make data standards that determine what information will be collected, how it will be collected and the manner in which the information will be maintained—simple, dry, boring, impactful public policy.
Sometimes what the government needs to do is actually find pathways to remove barriers so people are able to get on with their lives. Technology empowers us to do that in a way that hasn't always been done in the past. Doing that with business registers and harmonisation enables us to implement the values of our government, clearly encouraging more people to invest in enterprise, to have a go and, as the Prime Minister says, to get a go. The other point, around the introduction of director identification numbers, is exactly the same thing. Freedom comes, as the Prime Minister said in a different context today, with responsibility and empowerment.
There is another component to it, which is that responsibility begets and depends on accountability. The point around director identification numbers is to implement a simple and straightforward means by which people can be held accountable for their past conduct. At every point, this simple administrative piece of legislation empowers and enlivens the spirit of this government and of liberal values to be implemented in law, and the member for—I can't even remember what your electorate is. Which one is it? Is it Holt?
Mr Hill interjecting—
The member for Holt is interjecting and causing challenges and problems because he knows deep down in his heart that it's true—that this government is getting on with the job of implementing these important but simple reforms. That is why I, and people on this side of the chamber, support the legislation. Maybe, in time, members of the opposition will grow up and be able to support this legislation too.
What we have just seen here is history-breaking. The member for Goldstein has never seen a regulation that he didn't want to abolish, and he has just stood in the chamber right now, before us all, supporting the introduction of new regulation. I urge all members present to take down this date. It is a red-letter day. Mark it in your diary. I suggest to us all that we might even celebrate the anniversary of this date in a year's time, because I suspect we will never hear anything of that like again. Then, to end that amazing contribution to this debate, he urged the Labor Party, we here in the opposition, to support our own policy. We are so grateful that you have finally dragged yourselves out of your abyss of not wanting to support any consumer protection regulation in financial services and corporations and have actually decided to support our policy in this area.
Just to be very clear, this legislation does two very important things. Firstly, it modernises a whole range of registers and registries that are kept by ASIC and others, which are important for our corporate regulation, our consumer protection, and are important for regulating a number of licensee-holders et cetera.
But much more important than that is that this legislation will introduce a company director identification number. That is something that we on our side, the Labor side, have been calling for for years. It is something that I, as a member of the Joint Committee on Corporations and Financial Services, was strongly pushing the government towards in the last parliament. ASIC itself has been calling for this for a very long time. This is strongly supported. It is particularly supported because of the problem that we see in phoenixing activity in corporate Australia. Australia is not alone in phoenixing activity, but it is a particularly pernicious activity that we see in corporate Australia because of those who are left high and dry as a result of it.
It's important to explain the issue. People might think, 'Director identification number—that's pretty straightforward, that makes sense, why do we need this?' It's quite important to understand that right now, under the way our corporations are governed, if a person is registered as a director as John Smith, and then they go on the register as a director of another company as J Smith, they are two different people as far as ASIC is concerned. There are discrepancies all over the place in these registers. The director register is but one, but it is the most important one. Fixing this up, having a clear identification number so that there is one entry and it is very clear what company someone is a director of and their identity is clear, is so important for being able to manage the regulation of our corporations. It serves an important purpose not just for the regulator, but for investors, for shareholders, for creditors and for employees.
So we are very keen to support this legislation and this critical change. This change has been urged by a number of industry professionals for a long period of time to assist in cracking down on illegal phoenixing activity. I can tell you, as a former corporate prosecutor, that it is actually incredibly difficult to get into the space of prosecuting people for phoenixing. There's no offence of phoenixing, of course, but there are offences around shadow directors, and there are offences around people setting up companies and becoming a director of a company when they have been banned and prohibited from being a director of a company. What we see with phoenixing is where people deliberately remove assets from a business, transferring them into another one, winding that business down, leaving it full of debts, leaving it with its obligations to its creditors and employees. So often I have people coming to my office complaining about someone who has done precisely this, leaving them or their loved one with unpaid wages, unpaid superannuation, often for years, and who has set up business again but is completely off the hook when it comes to their obligations to their creditors to and, more importantly, to their employees.
So it is particularly important that we find ways of cracking down on this. Director identification numbers are a very important part of how we do this, so that we know when a director is involved in companies that are being wound up, especially where they're involved in winding up multiple companies, so that we know if it's the same director or the same group of directors. It's important that when they try to set up companies in the future, the corporate regulator is able to make sure that they are not going down that same pathway again. It's important that if they've been banned from being a director we are able to make sure that they don't pop up again and do this to some other unsuspecting creditors and employees.
Just to give an example: in 2018 a Western Australian business owner was sentenced to five years jail in relation to illegal phoenixing activity and ordered to pay back $890,000 in fraudulently obtained money. This related to 20 charges relating to his labour hire operations, which he had been operating from the late 1990s to 2009. In court the ATO alleged that he intentionally accumulated debt over this time, liquidated his businesses to avoid paying the bills and then set up operations through different corporate entities each time.
The capacity to track this is completely fraught because of the way our registers are currently managed. This has a damaging impact. As you can tell from that example, it's not just creditors and employees who are left ripped off: it's all of us. The ATO is often the biggest creditor that is left unpaid as a result of these activities. Indeed, the government has estimated that phoenixing activity costs the economy up to $5.1 billion a year. That is staggering.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has said that they support the director ID number. It has received unanimous support as a policy that is key to weeding out shonky directors from corporate Australia. Also over many years numerous committee reports in this parliament have called for this to happen. But it's just like we've seen with the implementation—or rather I should say 'lack of implementation'—of the recommendations of the Hayne royal commission. I'm sure members present and those listening will remember the Hayne banking royal commission. That was the royal commission that the government tried for several years to avoid holding.
That's right; they voted against it 26 times. Now, two years after this legislation was promised, we're finally getting around to debating it.
The other issue that arises with this—and ASIC flagged this when it gave evidence to parliamentary committees, and it's related to this whole suite of legislation—is that we're not ready to go yet. We can't just update the existing registers. It's not just about the legislative framework. Literally the computer databases that the existing registers are running on are about to fall over. We can't just update them. ASIC needs to upgrade all of its systems to accommodate this very important change in our corporate regulatory framework.
I know that Assistant Minister Buchholz, who is at the table, is aware of this because we have sat on committees that have looked into these things. It's really important in this context that the government makes sure that ASIC is properly funded to quickly deliver, on the most recent technology, the upgrades that it needs to its registers and databases to deal with the significant changes around the director identification number. It's all very good and well us standing in this place supporting such important legislation, but, even if we get the frameworks right, if the regulator is not empowered and empowered financially to get on with the job then we will still be confronted with this same issue for many years to come. For two years we have been waiting for this legislation to be brought on by this government, but it has obfuscated. I think about the number of employees who have walked into my office—and I daresay they have walked into the offices of nearly every member of parliament here—to complain about their being the victim of phoenixing activity, with lost wages and lost superannuation.
Small businesses in our electorates have been left with unpaid bills. They are facing cash flow shortages. They acquired materials to do whatever work they were doing for that business. They supplied that business with goods and services and they have been left high and dry. That's why there's that $5 billion cost to our economy every year. We have been waiting two years for this legislation to come forward. That's $10.2 billion that has been lost to the Australian economy through illegal phoenixing. That could have been significantly reduced by having the director identification numbers introduced.
ASIC has been crying out for it for years. Parliamentary committees, in parliament upon parliament, have been saying we need to get on and deal with this. Industry groups, those involved in regulation and those involved in law enforcement in the corporate space, such as me, have been saying that this is such an obvious problem that needs to be solved. It's very good that the government is now finally getting on with the job of resolving it. We're very happy to see the government pick up this policy, which was ours. We wholeheartedly support this happening. We urge the government to make sure that they properly fund ASIC to deliver on this commitment and that it is able to do it soon.
I rise in support of the Commonwealth Registers Bill 2019 and the related bills. We are surrounded by Australians with new and innovative business ideas and ventures that they dream of starting from the ground up. Every day we drive past local businesses that are just looking for the confidence to invest. They want to help their business and the community they love grow and thrive. They just want to give back to our strong Australian economy. We see businesses that would love to employ more staff or even buy some new equipment so that they can provide a quicker service to their customers and a safer environment for their employees. We see businesses take on apprentices or trainees to give them a leg-up in their career in the industry by helping them to develop new skills, or we see businesses reskilling their current employees.
Every single one of these businesses provides us with a service we probably wouldn't be able to live without, even if we don't realise that right now. This is why the Morrison government has always stood behind and backed our Australian businesses every step of the way. The Morrison government remains committed to rewarding the aspiration of every Australian business, encouraging them to get out there and invest, giving them opportunities to grow our economy even further through their business. When Australian businesses gain the confidence they need and are encouraged to get out there and invest, the economy flows. This means that businesses can employ more staff, build a stronger and more assured workforce, provide even better goods and services to their customers, create much-needed jobs in the local community and help everyday Australians embark on their chosen career path.
As a business owner of 19 years I know only too well how important it is to have a thriving and confident business with a team of experienced and skilled employees and employers running them, and a coalition government that will back them all the way. Strong and confident businesses go hand in hand with a booming economy that's gathering more and more strength every day, which will create more jobs for employees and endless opportunities for businesses across Australia.
That is what these bills are about. They are about cutting the red tape for all Australian businesses so that it is simpler to do business in Australia. This, in turn, will help businesses across the country thrive, grow and feel much more confident as they invest in doing business. When you provide businesses with a simpler way of doing business and an easier way to guide them on their journey, to achieve their business goals, they don't get caught up in all that red tape. They are able to get out there, thrive, grow and achieve their goals. This is what we want for our Australian businesses. We want our businesses to grow, we want them to be more confident, we want them to achieve success, we want them to be able to provide employment, we want them to boast a strong workforce, to skill our employees and we want them to invest, because this is what makes our economy flow.
Making it simpler to do business will also create more and new innovative businesses that could benefit the everyday Australian and our economy. We have millions of Australians out there with unique and creative ideas who might be wondering if they'll be able to create a business out of their idea or go into business. But when you start a business, it can be hard to know what to do first or how to go about sharing your idea with the world. As a result, many business ideas get tossed aside because it's too hard to get started. They're being told that it's not the right time to start a business or it's too complicated to get the business set up. It would be a shame, if we don't simplify the way we do business, to miss out on a great business initiative in Australia or to have the idea taken overseas, where a business is easier to set up. Our economy would miss out on reaping the benefits of this brand new business, and so would we, which would be a real pity.
When we make it simpler to do business it will lead to an increase in profits, allowing a business to reinvest in their business by hiring new staff and purchasing new equipment. It will allow businesses to create more value and will support them in developing and reskilling employees. Creating an experienced and trained workforce allows them the opportunity to grow and make a difference, to give back to our strong economy, to get out there and help our community. It will inspire businesses to get updated with the latest technology and acquainted with the digital world. Simplifying the way an Australian does business will also allow employers to spend more time at front of house in their business, encouraging their employees and finding more innovative ways of growing, and bringing in business and connecting with customers, instead of spending hours and hours going through things like paying invoices and checking up on the back end of their business.
In short, embracing the act of making it simpler to do business in Australia will be a huge win for our businesses across the nation. Many businesses are unable to get off the ground, are in danger of closing—or have closed—or don't have the confidence to invest and take on more employees. One reason for this is all the rules and regulations surrounding business practices. These need to be trimmed and simplified if we want to continue to back and provide more opportunities for Australian businesses.
How will our businesses continue to expand and grow if they don't have the confidence to invest or take on new employees because of all these rules and regulations? So let's simplify some things and allow Australian businesses the breathing space to grow, expand and thrive. Australia is one of the most exciting places in the world to do business, start a new business or invest. Let's keep it that way. Let's reward Australian businesses and their aspirations by making it simpler, faster and smarter to do business. Our business community is truly the backbone of Australia's economy, and they deserve to be given the confidence to achieve their goals and continue to provide their customers with fantastic goods and services, and their employees with benefits, opportunities to develop their skills and great wages.
For example, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 will, one, provide the legislative flexibility for the government to fulfil its 2018-19 budget commitment to modernise the Australian Securities and Investments Commission business registers and the Australian Business Register, and will integrate the 32 existing business registers into one platform to be administered by the Australian Business Register. Two, modernising the business registers will address registry fragmentation, improve business user experience, reduce risks of ongoing operating, foster data driven innovation and enable better use of registry data. Three, the IT infrastructure underpinning Australia's business registry services needs to be addressed to meet demand for registry services now and into the future. Four, to facilitate the implementation of a new registry system a legislative package has been drafted that creates a new regime that is flexible, technology neutral and governance neutral. Five, the registrar will make data standards that determine what information will be collected, how the information will be collected and the manner in which information will be maintained. And, finally, the registrar can make a disclosure framework to provide the basis for disclosing protected information to the public. The disclosure framework is designed to replace a one-size-fits-all approach to publicly available data to one where information is disclosed using a risk based approach.
Australia currently has more than three million small and medium size businesses that employ around seven million Australians. The electorate of Longman has 13,146 small to medium businesses as of April 2019, all of whom are giving back to their community where and when they can and providing important economic significance.
The Morrison government has already reconfirmed its commitment to backing small businesses and its plan for a strong economy with this year's announcement of an agreement to establish the $540 million Australian Business Growth Fund with the four major banks, HSBC and the Macquarie Group. The fund will provide equity funding for small and medium size businesses, helping them to grow and fulfil their potential by accessing capital to create more jobs, a stronger workforce and to grow and expand.
The Morrison government has always invested in our small and medium businesses. This is evident by the fact that business confidence from traders across Australia increased after the result of last year's federal election. Not to mention that the Morrison government's achievements in reducing unemployment and creating jobs in the past few years have helped businesses as more people have disposable income.
The personal tax cuts for 2018-19 have assisted people to reduce credit card debt and discretionary spending. I have seen what the Morrison government has achieved for local businesses over the years. As a business owner I know how important it is to have governments who will always back our Australian enterprises; believe in their value; reward them for their aspirations; equip Australians with the skills that Australian businesses need to boost their success, deliver better wages and more jobs; and keep encouraging investment and keep our economy flowing. We must continue to support and inspire confidence in a sector that drives our economy by making it simpler for our Australian businesses to do business on a daily basis. I commend the bill to the House.
When Megan was seven years old her dad lost his job. Megan told me that she kind of enjoyed it at the time. Rather than having to go to work every day, he would stay home and help her organise her toys. She'd get to walk to school with him, which she only realised later was because the family couldn't afford the petrol. Megan's dad had been the victim of phoenixing in which a dodgy director had shifted the assets out of the company, shut the firm down and caused him to lose his job.
The impact of phoenixing on the Australian economy is massive. PwC estimated that in 2016-17 the impact was at least $5 billion a year. That's $3.2 billion in unpaid bills, $300 million in unpaid employee entitlements, $1.7 billion in unpaid taxes and compliance costs. The stories of phoenix activity are legion. There were suggestions that phoenixing was one of the reasons for delays in the building works recently conducted at Parliament House. I have spoken to tradies on the Gold Coast, in Canberra, in Melbourne, in Sydney and in Western Australia who've told me they've been the victims of illegal phoenixing activities. Phoenixing erodes the very bedrock of business, which is trust. Who wants to get into business with a handshake if there's a risk that the person you're dealing with could ultimately rip you off? Phoenixing is a huge risk for Australia's tradies, who stand to lose the most.
At the heart of this problem—and the point that the Melbourne university and Monash University team made when they were looking at phoenixing several years ago—is that it is currently extraordinarily easy to register as a company director. It's so easy, in fact, that—as one expert told the Senate committee—you can almost register your dog as a company director. The tax commissioner told a senator on a Senate estimates committee:
I could appoint you as a company director without you even knowing …
The problem came to light a few years ago when a Liberal backbencher turned out to have three listings on the director registry with three different birthdays. I'll accept that that was likely inadvertence rather than malice, but it does illustrate the problems in our director identification system.
It's currently much harder to open a bank account than it is to register as a company director. If you want to open a bank account, you've got to pass the 100-point ID check. If you want to register as a director, you simply sign up. That's a problem that so many people in business have said needs to be changed. The list of those who want a director identification number includes the Institute of Company Directors, the Australian Small Business and Family Enterprise Ombudsman, the Productivity Commission, the Tax Justice Network, the Australian Chamber of Commerce and Industry, Master Builders Australia, the Australian Council of Trade Unions, the Australian Restructuring Insolvency and Turnaround Association and, of course, the phoenix project at Monash and Melbourne universities.
That's why, three years ago, the member for Gorton, Senator Gallacher and myself announced that Labor supported a director identification number. We believed that it was critical to move from this outdated system and to put in place a director identification number that recognised the scourge that phoenix activity imposes on the economy; yet the government has failed to act. Three years on—if you believe PwC's estimates to the cost—means we're now $15 billion on. That's $15 billion that's been ripped out of the pockets of tradies, taxpayers and workers as a result of the Abbott-Turnbull-Morrison government's go-slow on implementing a director identification number. The problem was so serious that the Australian Restructuring Insolvency and Turnaround Association noted that the bill had lapsed after the May election. In the words of ARITA chief executive, John Winter:
Despite the claims of action by government, unfortunately, almost nothing is really being done.
Phoenixing activity is like tanking in sport. We see allegations of tanking in the AFL, Major League Baseball, Olympic badminton, Asian soccer and the National Hockey League, and it never fails to elicit outrage from sports fans. In the same way, if you mention phoenixing to tradies, they'll immediately tell you about times when they've been ripped off, when they've done the work and haven't been paid for it.
The government has taken three years just to get this bill to the parliament. I worry that the implementation may take longer. The government has taken two worthy projects and bolted them together. The worthy project of modernising business registers is worth doing. We have over 30 business registers. They are outdated, they need to be updated and linked together. But as I understand it—and I hope the Assistant Treasurer will correct me if I'm wrong—that project has been tied to the project of implementing a director identification number, with the two jobs being tendered together. A director identification number is a straightforward measure.
Mr Sukkar interjecting—
I'll take the interjection from the minister. The minister is saying you shouldn't have to pay twice. The thing is, Minister, if you delay this by a single year, you may save a few bucks for the taxpayer—
Thank you, Deputy Speaker. Minister, you may save a few bucks for the taxpayer, but you will cost tradies, workers and taxpayers $5 billion. That's the annual cost of delaying this measure. So if you think that you are able to delay for a year and save taxpayers, say, $100 million, you've missed the fact that, of the compliance costs, $1.7 billion are in unpaid taxes. So the taxpayer will be worse off, because phoenixing will go on for another year, taxpayers will lose another $1.7 billion—PwC's own numbers, commissioned by the government—and any savings made by tying the simple director identification number project to the complicated business register project will be lost.
It's Labor that has consistently led this debate; Labor that has consistently called for action on a director identification number. We are pleased to see this bill finally before the House today—three years late—and we urge the government to move with all possible speed. We had all sorts of delays with the previous minister. Minister Kelly O'Dwyer, when she had the portfolio, was talking about using biometrics to do it, suggesting that the minister just hadn't thought through the implementation in detail. The government announced that it was going to do this at the beginning of last year, but then didn't move after the election to take action. Australian tradies, workers and taxpayers deserve better.
I thank all those who contributed to the debate on this legislation. This legislative package does very important work. It creates a new act, called the Commonwealth Registers Act, and makes related amendments to a suite of existing laws to create a new Commonwealth business registry regime. This set of bills will introduce a single business register that will fundamentally improve and streamline how businesses engage with government.
To facilitate the implementation of a modernised registry system, new legislation has been drafted that is technology neutral and governance neutral. Schedule one of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 will provide the legislative flexibility for the government to modernise Australian business registers into a single platform to be administered by the Australian business registrar. Modernising the business registers will address registry fragmentation, improve business user experience, reduce risks of ongoing operation, foster data driven innovation and enable better use of registry data.
The IT infrastructure underpinning Australia's business registry services urgently needs to be upgraded to meet current and future demands. The modernising business register legislative regime will allow a registrar, a Commonwealth body appointed by the minister, to create data standards and disclosure frameworks to assist them in carrying out their registry functions and powers. Director identification numbers are being progressed, as has been noted by many, as part of the MBR program, to ensure that it's integrated with other important registry data.
Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill provides for the introduction of a legal framework for director identification numbers, which will require all directors and alternate directors of registered bodies to have a unique identifier. Importantly, once a director has been issued with a director identification number, that unique number will remain with them forever—meaning their directorships across companies and over time can easily be tracked. This will assist regulators and external administrators investigate a director's involvement in what may be unlawful activity, including illegal phoenixing activity, which has been a problem for successive governments. Beyond helping to combat illegal phoenixing, simple and more effective tracking of directors and their corporate history will have a range of attendant benefits, including reducing time and cost for administrators and liquidators; thereby improving the efficiency of the insolvency process. In addition, it will help businesses identify who they are dealing with or potentially thinking about doing business with.
I would say in relation to some of the remarks made during the debate that, as helpful as the shadow Assistant Treasurer has tried to be, firstly, in plagiarising the government in moving amendments originally by lifting our original bill as an amendment, they got caught out, sadly, when they did that because their amendments which were lifted from the government cross-referenced bills weren't part of the bill that they were seeking to amend. That was a bit embarrassing for the shadow Assistant Treasurer, but we give him a little bit of leeway there.
In relation to the point that was just made about the importance of ensuring that we do the job once, that we do it properly and that taxpayers certainly aren't forced to do it twice in a costly way or in a way that's not effective, the director identification numbers—for those on the other side who don't understand—only work when they are linked to the company registers. We know there are 32 registers. It only works if they are linked to those. When we're dealing with legacy systems that desperately need upgrading, you must upgrade those systems simultaneously with the implementation of the DIN, and that is what we are doing. That is what these bills seek to do. I, therefore, commend the bills to the House.
The original question was that this bill be now read a second time. To this, the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.
Original question agreed to.
Bill read a second time.