Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Chair of the Parliamentary Joint Committee on Corporations and Financial Services, I present two reports of the committee: Personal Liability for Corporate Fault Reform Bill 2012; and Tax Laws Amendment (Clean Building Managed Investment Trust) Bill 2012. I will speak briefly on both reports.

Ordered that the reports be printed.

by leave—I move:

That the Senate take note of the reports.

I particularly want to spend more time on the Personal Liability for Corporate Fault Reform Bill 2012, but the other one tabled, as senators will be aware, is the Tax Laws Amendment (Clean Building Managed Investment Trust) Bill 2012. This legislation was referred by the House of Representatives Selection of Bills Committee to the joint parliamentary committee on 20 September. We received only four submissions in relation to the Personal Liability for Corporate Fault Reform Bill but they were very worthwhile submissions. We held a public hearing in Sydney on 22 October and at that hearing we took evidence from the Law Council of Australia, Chartered Secretaries Australia, the Treasury and the New South Wales Department of Premier and Cabinet.

This bill implements the Council of Australian Governments' Principles on Directors Liability reform which has the aim of harmonising the imposition of personal criminal liability for corporate fault across all of the Australian jurisdictions. It is part of the COAG National Partnership Agreement to deliver a seamless national economy. It commits all Australian jurisdictions to a nationally consistent and principled approach to the imposition of personal criminal liability on directors and corporate officers for corporate fault. It aims to remove regulatory burdens on directors and corporate officers that cannot be justified on public policy grounds and to minimise inconsistency between Australian jurisdictions in the way that personal liability for corporate fault is imposed in Australia.

The bill proposes to: amend a number of Commonwealth acts to remove personal criminal liability for corporate fault where such liability is not justified; remove the reverse onus of proof where the directors themselves must establish a defence to a charge; replace personal criminal liability for corporate fault with civil liability where a non-criminal penalty is appropriate; and clarify the circumstances where personal criminal liability is justified. If implemented properly, this will be a significant improvement to the crazy laws that have developed over time and, I might add, primarily under state Labor governments, that have put a huge burden onto company directors, completely out of proportion to their responsibilities.

The reforms in this bill are a culmination of earlier views on the area of personal liability of directors. They note 'an increasing tendency for personal liability provisions to be introduced in Australian law as a matter of course and without robust justification'. Certainly, 'without robust justification' would be an argument that has been put by every organisation that is involved with company directors. As a result, in some cases a company director could face a criminal penalty for a breach of the law by a corporation when he or she had no knowledge of or any control whatsoever over that breach. Further, imposing personal liability without justification has been a very inefficient way to run law. The argument has been put that the threat of excessive risk of personal criminal liability has led directors to take a cautious approach to their strategic and entrepreneurial responsibilities. In fact, Professor Bob Baxt, perhaps the doyen of company directors, has estimated that about $16 billion a year is lost to the Australian economy by the cautious approach and by the loss of talent in the company director field because of fear of prosecution.

Witnesses to this inquiry recognised that the bill's reform will reduce the level of risk for directors and the burden on company directors while providing greater certainty. It will focus on key areas of liability laws while reducing the burden of these laws to enable greater focus on corporate performance, which presumably is what a board of directors is there for in the first place.

When the reforms are implemented by all jurisdictions, the number of laws containing directors liability provisions nationally will be significantly reduced. For example, New South Wales anticipates the number of its statutes with personal liability provisions will be reduced from 1,000 currently to around 150. I commend the New South Wales government for its leading role in the area of directors liability reform. I also note that the Campbell Newman government in Queensland has made the point that currently there are over 300 state provisions that company directors who operate not just in that state but nationally, including Queensland, need to be aware of.

The Law Council of Australia, the Institute of Company Directors and Chartered Secretaries Australia have all expressed concern with the reverse onus of proof in section 8Y of the Taxation Administration Act. The Institute of Company Directors said, 'The effect of section 8Y of the Taxation Administration Act is that if a corporation commits a taxation offence, a director of the corporation will be deemed to be guilty of the same offence.' In other words, the provision reverses the fundamental legal principle that a person is innocent until proven guilty. The Law Council argued in favour of removing that and certainly challenged the argument from the ATO that said the section was used to 'prosecute directors who repeatedly and seriously neglected their company's tax obligations'. It is argued that if the legislation is aimed at repeated and serious neglect then the reversal of burden of proof on the whole national pool of directors rather than just the very small minority is clearly inappropriate.

While supporting the general aim of this legislation, the coalition continue to have some concerns about the issues that have been raised by some of the witnesses. There was concern from the Chartered Secretaries Australia and the Law Council of Australia that the COAG principles and guidelines are not adequate to properly implement this reform and they would like to see a model provision brought in so that this can be used as the basis. The Office of Parliamentary Counsel has said that it is not feasible to develop a model provision, but we remain concerned about this. The committee made two recommendations in regard to this and, in my view, it is extremely important to look at recommendation 2, which is that within 12 months of the operation of this bill the Treasury implement a review of the areas that continue to concern stakeholders and provide a copy of that review both to the minister and to our committee, so that we can continue to ensure that this bill does what it is set out to do—reduce red tape and reduce the ridiculous situation that has developed in terms of personal liability of company directors in Australia and the consequent cost that has had on our economy because of concerns about being innovative or concerns simply about putting your name forward.

I would like to move now to the second bill, Tax Laws Amendment (Clean Building Managed Investment Trust) Bill 2012, which the committee has supported in its report. The committee received six submissions on this bill. This legislation reduces the final rate of withholding tax on fund payments from Australian clean building managed investment trusts to foreign investors in 'information exchange countries'. For fund payments made to these investors, the bill cuts the withholding tax rate from the current rate of 15 per cent to 10 per cent. This conditional 10 per cent will apply if the managed investment trust invests in new, energy efficient office, hotel and retail buildings that commenced construction on or after 1 July 2012.

It is not surprising that stakeholders support this reduced rate, this incentive, for foreign investors to invest in Australian clean buildings. Some would argue that it should be aimed at all Australian building stock but it is not. I seek leave to continue my remarks. (Time expired)

Leave granted; debate adjourned.