Senate debates

Monday, 9 August 2021


Treasury Laws Amendment (2021 Measures No. 1) Bill 2021; In Committee

8:04 pm

Photo of Rex PatrickRex Patrick (SA, Independent) Share this | Hansard source

by leave—I move amendments (1) and (2) on sheet 1217, revised, together:

(1) Clause 2, page 2 (at the end of the table), add:

(2) Page 38 (after line 8), at the end of the Bill, add:

Schedule 3 — Financial reporting obligations for large proprietary companies

Part 1 — Repeal of instrument

ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840

1 The whole of the instrument

Repeal the instrument.

Part 2 — Grandfathered exemption

Corporations Act 2001

2 Subsection 1408(6) (table item 7)

Repeal the table item.

Part 3 — Application

3 Application

(1) This item applies to a company if, immediately before the commencement of this item, the company was exempted from complying with subsection 319(1) of the Corporations Act 2001 by the ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840.

(2) Despite the amendments made by Parts 1 and 2, that exemption continues to apply to the company in relation to the 2021 22 financial year.

4 Instruments that provide relief from requirements of Corporations Act — Lodgment of annual reports by large proprietary companies

(1) Despite anything contained in the Corporations Act 2001, ASIC may not make a legislative instrument, however described, if that legislative instrument would have the effect of relieving the class of companies referred to in subitem (2) of the requirement to comply with subsection 319(1) of the Act for a financial year.

(2) The class of companies is the class of large proprietary companies that was relieved from the requirement to comply with subsection 319(1) of the Corporations Act 2001 due to the operation of the ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840 as in force immediately before the commencement of this Schedule.

This is not the first time I've moved this amendment. I do hope it is the last. If needed, I will move it again and again and again, on every Treasury bill that comes through the Senate. I'll do it for however long it takes to repeal what is a completely unjustifiable and indefensible exemption, which gives dozens of Australian billionaires the chance to keep their private companies' financial statements and how much tax they do or don't pay a secret. There's an old saying that there's one rule for the rich and another rule for everybody else. Well, in this case, that is literally the truth. We've had a legal loophole for more than a quarter of a century that continues to keep Australia's super rich free from scrutiny and likely facilitates aggressive tax minimisation.

For senators who haven't kept abreast of this, my amendment will rid the Federal Register of Legislation of an extraordinary provision in the Corporations Act which exempts a select list of large proprietary companies from having to lodge financial reports with the Australian Securities and Investments Commission. That exemption includes the companies' financial statements and directors' declarations to ASIC. This is highly problematic. The exemption has inappropriately created and entrenched in place a highly privileged class of companies that are not subject to the transparency and disclosure regimes that apply to every other company. If my amendment passes, then that completely inappropriate and unjustified legislative privilege will be abolished.

While this is a question of principle, it should be clearly understood that the current exemption has highly undesirable effects. The opaqueness created by not filing accounts with ASIC creates an environment that encourages aggressive tax-minimisation behaviour. Dubious practices thrive in circumstances in which transparency and accountability are limited. It's only when you turn the lights on that you can see the cockroaches running across the floor.

Transparency will also help other businesses that deal with these privileged companies. When an entity wants to have dealings with a company, they go to ASIC and seek information about the company, which may help them to make decisions about whether they want to trade or deal with that particular company. That isn't possible with these privileged companies. They operate in a shroud of secrecy.

This exempt proprietary company list was created through legislation introduced in the parliament in 1995 by the Keating Labor government, which, as part of wider corporations law changes, made a temporary exemption to allow companies time to adjust to a new corporate reporting regime. At that time, there were 2,000 companies. Concerns were expressed at the time. In August 1995, the Parliamentary Joint Committee on Corporations and Securities issued a report reviewing the amendment to the 1995 bill. As to the grandfathering exemption, the committee argued:

… although the provision will ease the transition for some companies from the existing legislation to the new structure the indefinite operation of this provision is not justified on any policy grounds.

Then Senator Baume, a Liberal senator, moved an amendment to the 1995 legislation to provide that the Australian Securities Commission, which was the forerunner to ASIC, undertook a review of the exemption in two years. The review never took place.

The Senate Economics References Committee conducted an inquiry into multinational tax avoidance across the 44th and 45th parliaments. Amongst the submissions received was one from ASIC, which raised strong concerns about the continuation of the reporting and disclosure exemption of the privileged group of companies. That led the Senate economics committee to recommend:

… that the government require all companies, trusts and other financial entities with income above a certain amount to lodge general purpose financial statements with the Australian Securities and Investments Commission.

My amendment, which I have moved previously, will implement that recommendation, which was in effect initiated by ASIC and endorsed by the economics committee. In practical terms, my amendment removes the special status of some of these companies. There are currently 1,119 companies on the exempt list, some of them owned by very familiar names. The list includes Australia's wealthiest individual, Gina Rinehart, and protects many other notable figures influential in business and, indeed, politics. The list includes media barons such as Kerry Stokes and Bruce Gordon, retail moguls like Frank Lowy and Solomon Lew, agricultural empires such as Baiada and Manildra Group, and logistics magnates including Anthony Pratt and Lindsay Fox.

If my amendment is enacted, their companies will have to lodge financial reports with ASIC going forward. They'll be subject to the same scrutiny as everybody else. And we'll see how much tax they do, or don't, pay. Of course, each time an amendment to eliminate this exemption has been debated in the Senate, the coalition have opposed the change. Each time, they have conspicuously failed to offer any policy rationale for maintaining the status quo. Treasurer Josh Frydenberg once did claim that the super-rich individuals and their families would be at risk of being kidnapped if any of their financial accounts were made public. This was and still is a laughable claim. There is no evidence to support this whatsoever. Tens of thousands of corporate directors and shareholders are already listed in ASIC's publicly listed databases, including details of corporate addresses. Why would a select group of the super rich be exempt? In any case, prospective kidnappers can just go to the Australian Financial Review's top 200 list to see who their target might be.

The truth is, there is no credible rationale for an ongoing exemption from a quarter of a century ago and there is no policy rationale for it now. Why, then, have the coalition been so resistant to reform? The exemption does include many generous donors to the Liberal and National parties. I encourage senators, and members of the public, to go and look at Michael West Media, which has looked at every single one of these companies and cross-referenced their donations to the Liberal and National parties. And therein lies the explanation.

It's another old saying that money talks, and, for a quarter of a century, money—especially old money and politically assertive money—has been pretty influential in the years of the Liberal and National parties. Getting rid of a temporary exemption that has lasted for more than a quarter of a century is long overdue. The amendment will remove an unjustified measure, one that favours a select group of companies over the majority of others and could facilitate aggressive tax avoidance. Once again, we will see today where the coalition stand and whether they have an argument to defend a law that unjustifiably advantages the super rich. Where do they stand? And what do they stand for? This amendment provides a clear and simple test for the coalition.


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