Monday, 9 August 2021
Treasury Laws Amendment (2021 Measures No. 1) Bill 2021; In Committee
I table two supplementary explanatory memoranda relating to the government amendments to be moved on this bill. On behalf of the government, I seek leave to move government amendments (1) to (5) and (7) to (10) on PG150 together.
(1) Schedule 1, page 3 (before line 4), before the heading specifying Corporations Act 2001, insert:
Part 1—Main amendments
(2) Schedule 1, item 31, page 13 (line 5), omit "At the end of Chapter2G", substitute "After Part2G.4".
(3) Schedule 1, item 31, page 17 (lines 13 to 26), omit subsections 253RB(4) to (7).
(4) Schedule 1, item 31, page 18 (lines 21 to 35), omit subsections 253RC(4) to (7).
(5) Schedule 1, page 21 (after line 15), after item 33, insert:
Part 2—Other amendments
Corporations Act 2001
33A In the appropriate position in Chapter 2G
Part 2G.6—Exceptional circumstances
253T Exceptional circumstances—AGM
(1) A public company is taken to comply with subsections 250N(1) and (2) in relation to an AGM if:
(a) the company is in a class of companies specified in a determination under subsection (2); and
(b) the company holds the AGM within the period of extension specified in the determination.
(2) ASIC may, by legislative instrument, make a determination specifying a class of public companies, if ASIC considers that it may be unreasonable to expect the companies in the specified class to hold AGMs within the time required under section 250N because of a situation that is beyond the control of those companies.
(3) The determination must specify a period of extension of that time.
(4) The determination may be subject to specified conditions applying to public companies in the specified class. A company to which a condition specified in the determination applies must comply with the condition. The Court may order the company to comply with the condition in a specified way.
(5) Unless revoked earlier, the determination is repealed at the end of 12 months after the day on which it commences.
253TA Exceptional circumstances—virtual meetings
(1) An entity may hold a meeting of its members, using virtual meeting technology only (even if this is not required or permitted by the entity's constitution expressly), if:
(a) the entity is specified in a determination under subsection (2); or
(b) the entity is in a class of entities specified in a determination under subsection (2).
(2) ASIC may make a determination specifying an entity, or a class of entities, if ASIC considers that it may be unreasonable to expect the specified entity, or entities in the specified class, to hold meetings wholly or partially at one or more physical venues because of a situation that is beyond the control of the entity, or the entities in the class.
(3) The determination is:
(a) a notifiable instrument, if it specifies an entity; or
(b) a legislative instrument, if it specifies a class of entities.
(4) The determination may be subject to specified conditions applying to the specified entity, or to entities in the specified class. An entity to which a condition specified in the determination applies must comply with the condition. The Court may order the entity to comply with the condition in a specified way.
(5) Unless revoked earlier, the determination is repealed at the end of 12 months after the day on which it commences.
(6) A reference in this section to an entity is a reference to any of the following:
(a) a company;
(b) a registered scheme.
33B After section 1344
1345 Exceptional circumstances—giving documents
(1) Subsections (2) to (4) apply in relation to a document that is required or permitted under this Act to be given by an entity to another entity (the recipient) if:
(a) the entity giving the document is specified, or is in a class of entities specified, in a determination under subsection (5); and
(b) the document is specified, or is in a class of documents specified, in the determination.
Giving document by electronic communication etc.
(2) If the determination specifies that the document, or documents in that class, may be given in accordance with this subsection, then the document may be given:
(a) by means of an electronic communication; or
(b) by giving the recipient (by means of an electronic communication or otherwise) sufficient information to allow the recipient to access the document electronically.
(3) However, electronic communication or electronic access may only be used if, at the time the electronic communication is used or information about the electronic access is given, it is reasonable to expect that the document would be readily accessible so as to be useable for subsequent reference.
Extension of time
(4) If the requirement or permission mentioned in subsection (1) is for the document to be given within a particular time, the document is taken to have been given within that time if:
(a) the determination specifies a period of extension of that time that applies to the giving of the document by the entity to the recipient; and
(b) the specified period of extension starts after the determination is made; and
(c) the document is given by the entity to the recipient within the specified period of extension.
ASIC may make determination
(5) ASIC may make a determination specifying:
(a) an entity, or a class of entities; and
(b) a document, or a class of documents, required or permitted to be given under this Act (including a class that is any such document); and
(c) one or more matters mentioned in subsections (6) and (7).
(6) ASIC may specify that the document, or documents in that class, may be given in accordance with subsection (2) (giving document by electronic communication etc.), if ASIC considers that it may be unreasonable to expect the specified entity, or entities in the specified class, to give the document, or documents in the specified class, in a physical form because of a situation that is beyond the control of the entity, or the entities in the class.
(7) To the extent that the document, or documents in that class, are required or permitted under the Act to be given by the entity, or the entities in the class, within a particular time (the original time), ASIC may specify a period of extension of that time applying in relation to the giving of the document or documents in that class, if ASIC considers that it may be unreasonable to expect the entity, or entities in the class, to give the document, or documents in the class, within the original time, because of a situation that is beyond the control of the entity, or the entities in the class.
Other matters relating to determination
(8) A determination under subsection (5) is:
(a) a notifiable instrument, if it specifies an entity; or
(b) a legislative instrument, if it specifies a class of entities.
(9) The determination may be subject to specified conditions applying to the specified entity, or to entities in the specified class. An entity to which a condition specified in the determination applies must comply with the condition. The Court may order the entity to comply with the condition in a specified way.
(10) Unless revoked earlier, the determination is repealed at the end of 12 months after the day on which it commences.
(11) This section has effect despite any election (however described) by an entity to be given a document in a physical form.
Part 3—Application and transitional provisions
Corporations Act 2001
(7) Schedule 1, item 34, page 23 (line 25), omit the heading to section 1679F, substitute:
1679F Amendments made by Part 1 do not apply on and after 1 April 2022
(8) Schedule 1, item 34, page 23 (line 26), omit "16 September 2021", substitute "1 April 2022".
(9) Schedule 1, item 34, page 23 (line 27), before "Schedule 1", insert "Part 1 of".
(10) Schedule 1, item 34, page 23 (line 31), omit "16 September 2021", substitute "1 April 2022".
These amendments address feedback from the Senate Economics References Committee report which was tabled on 30 June 2021 and stakeholder feedback received as part of the committee's inquiry. The extended relief will give certainty to many listed and unlisted companies that have 30 June and 30 September year ends and are expected to hold their annual general meetings in the second half of this year or early next year. The amendments remove the requirement for companies and registered schemes to notify members of their right to opt in to receive meeting related documents in hard copy. That is they will not have to notify (1) within two months of the bill passing and (2) within two months of a person becoming a member.
This addresses feedback received during inquiries into the bill by the Senate Economics Legislation Committee and the Senate Economics References Committee. Stakeholders noted that the notification requirements introduced unnecessary regulatory burden because they require companies to send a bespoke notification. However, this is mitigated by the following: first, many members have already consented to receiving electronic copies; second, the company or the registered scheme will only be able to send documents via electronic means if the company has the member's electronic communication details; third, members who have not provided electronic communication details may receive a postcard with details on how to access the documents online; and, finally, members who have opted in to hard copy documents will continue to receive hard copy documents.
In addition, alternative notification requirements are being explored for future permanent reforms. Entities will also have greater certainty that as exceptional circumstances arise from time to time, such as the coronavirus crisis, ASIC will have the permanent power to issue relief. This relief includes extending the time frame in which an AGM must be held; allowing for meetings to be held virtually; allowing documents, whether or not meeting related, to be sent electronically regardless of standing elections to receive hard copies; and extending the time frame for an entity to provide documents to members. Overall the amendments provide greater flexibility and certainty for businesses to meet obligations during the disruptions caused by the coronavirus crisis. We also oppose schedule 1 in the following terms:
(6) Schedule 1, item 34, page 22 (line 17) to page 23 (line 3), section 1679B TO BE OPPOSED.
(11) Schedule 1, items 35 and 36, page 24 (lines 1 to 4) TO BE OPPOSED.
The TEMPORARY CHAIR: The question is that amendments (1) to (5) and (7) to (10) on sheet PG150 be agreed to.
Question agreed to.
The TEMPORARY CHAIR: The question is that item 34 in section 1679B and items 35 and 36 of schedule 1 stand as printed.
I move government amendment (1) on sheet RS134:
(1) Schedule 2, item 55, page 37 (after line 16), at the end of Part 10.56, add:
1683B Review of operation of laws
(1) The Minister must cause a review of the operation of the amendments made by Parts 1 and 2 of Schedule 2 to the amending Act to be conducted by an independent expert within 6 months after the second anniversary of the commencement of this section.
(2) The person who conducts the review must give the Minister a written report of the review.
(3) The Minister must cause a copy of the report to be tabled in each House of the Parliament within 15 sitting days of that House after the report is given to the Minister.
(4) The report may set out recommendations to the Commonwealth Government.
(5) If the report sets out one or more recommendations to the Commonwealth Government, the report must set out the reasons for those recommendations.
Government response to recommendations
(6) If the report sets out one or more recommendations to the Commonwealth Government, as soon as practicable, and in any event within 3 months, after the report is first tabled in a House of the Parliament, the Minister must cause:
(a) a statement setting out the Commonwealth Government's response to each of the recommendations to be prepared; and
(b) the statement to be published on the Department's website.
1683C Amendments made by Schedule 2 to the amending Act cease to have effect if review of operation of laws is not conducted
(1) This section applies if the Minister:
(a) fails to cause a review to be conducted in accordance with subsection 1683B(1) within the period required by that subsection; or
(b) is given a written report of a review conducted in accordance with subsection 1683B(1), but fails to cause a copy of the report to be tabled in each House of the Parliament within the period required by subsection 1683B(3); or
(c) is given a written report of a review conducted in accordance with subsection 1683B(1) that sets out one or more recommendations to the Commonwealth Government, but fails to cause a statement to be published on the Department's website within the period required by subsection 1683B(6).
(2) This Act and the ASIC Act have effect, on or after the day mentioned in subsection (3), as if the amendments made by Parts 1, 2 and 4 of Schedule 2 to the amending Act had not been made.
(3) The day (the sunsetting day) is:
(a) the day after the end of the period referred to in the applicable paragraph of subsection (1), unless paragraph (b) of this subsection applies; or
(b) if there is more than one applicable paragraph in subsection (1)—the earliest day determined under paragraph (a) of this subsection for each of those paragraphs.
(4) To avoid doubt, nothing in this section affects the validity of anything that is done, or not done, in reliance on this Act or the ASIC Act as in force before the sunsetting day.
Labor will not be supporting this amendment. This amendment would require a review of the amendments relating to schedule 2 within six months after the second anniversary of it commencing. Also, it removes the changes to schedule 2 if a review isn't conducted within that time period or isn't tabled in the parliament within 15 sitting days after the minister receives it or if a statement outlining the government's response to a review isn't made public. Let's call this out for what it is. This is an agreement or a deal reached between the government and One Nation that duds mum and dad shareholders. Putting in a statutory review two years after the measures in schedule 2 take effect does absolutely nothing for these shareholders or for retirees. They will still be kept in the dark by potentially dodgy directors who will be allowed to get away with misleading or incorrect disclosures. We didn't support the changes in the original bill and we certainly do not support the amendments proposed here by the government in their attempts to get One Nation's support.
I'll start by joining Senator Gallagher in calling this amendment out for what it is: a sweetener for Pauline Hanson's One Nation. I'd also like to make the point, as I did in my speech on the second reading, that schedule 2 of this bill will water down the requirement for companies to continuously disclose information material to their valuation, and I repeat the point that this will be to the benefit of the big institutional shareholders who rely on getting the good oil and the inside running and will be to the detriment of millions of ordinary Australians who rely on timely and accurate information about their investments. What we've learned is that this rigging of Australia's share market in favour of the top end of town is being facilitated by none other than Pauline Hanson's One Nation party. For all the mythology about them being here for the battlers, they're going to come in here tonight and sell out mum and dad shareholders to the forces of global capital that they like to talk so much about.
The amendment includes a two-year sunset clause for these provisions. If that were all the amendment was, then I could see why One Nation might come at it, but the amendment also says that the sunset clause will only be triggered if the government doesn't conduct a review within the two-year period. In other words, as long as the government gets someone in the Treasury to write a 10-page report in two years, the watering down of continuous disclosure obligations will remain in place. That means that, if passed today, even with this amendment, the watering down of continuous disclosure obligations will remain in place, and neither Senator Hanson nor Senator Roberts should pretend otherwise. So here they are today, joining with the LNP to do the bidding of the top end of Wall Street, the top end of the City of London and the top end of global capital. Today, they sit here, brothers and sisters in arms with the big investment banks, with private equity and with the hedge funds. One Nation are showing today that it's not about the people who vote for them; it's actually just all about them.
A review of the continuous disclosure reforms by an independent expert has to be commissioned within six months of the second anniversary of the bill's commencement. This will ensure that there is a legislative process for considering the effect of the continuous disclosure reforms.
The CHAIR: The question is that government amendment (1) on sheet RS134, moved by Senator Hume, be agreed to.
by leave—I move amendments (1) and (2) on sheet 1354 together:
(1) Clause 2, page 2 (table items 3 and 4), omit the table items.
(2) Schedule 2, page 25 (line 1) to page 38 (line 8), to be opposed.
I am moving these amendments as flagged in my second reading contribution and to mirror what the member for Whitlam in the other place did. These amendments are very simple. They remove schedule 2 from the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021. Labor does not support the weakening of continuous disclosure rules and damaging corporate transparency. The measures contained in schedule 2 would make it easier for companies and company directors to get away with withholding information or providing misleading information to shareholders. Without corporate disclosure rules, dodgy directors can get away with not releasing crucial information to shareholders, and the overwhelming majority of good directors know that this is not in anyone's interests. I went through this in more detail in my second reading contribution. Labor strongly supports this amendment and we would urge the Senate to support it as well.
I didn't do a second reader on the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021. I do support the electronic meetings that have been proposed by the government. Schedule 1 is good. However, I won't be supporting schedule 2, for similar reasons as Senator Gallagher mentioned. It allows the possibility for directors to withhold information, in some way mislead or just not have to be careful about what it is that they provide to the stock market. I can see Senator Hume shaking her head.
It's funny: the laws that we had prior to COVID worked. They worked for some considerable period of time. I'll use a simple example of responsibility that contrasts what's happening here. It turns out that, if you're an individual without many resources and you fill out an insurance form and you make one mistake when you fill out that insurance form, then, guaranteed, the insurance company will not meet its obligations or will decline the insurance, through one error. Yet, when you've got a team of people supporting you in a corporation and you make a mistake—you somehow put something out to the market that is wrong or you mislead by omission—that's deemed to be okay. There's a huge contrast here in the way we treat a corporation versus a person. The laws that we had in place prior to COVID worked well, and we shouldn't seek to change them.
The CHAIR: The question is that amendment (2) on sheet 1354, moved by Senator Gallagher, as amended by government amendment (1) on sheet RS134, be agreed to.
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
(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.
I just want to put on the record that we have supported Senator Patrick's amendment many times. We see merit in it. We have also, though, taken this up with the Treasurer—Senator Hanson is an astute negotiator. She's extracted commitments from the Treasurer: to investigate and to back up his claims. We make decisions based on data. What we'll be doing is giving the federal Treasurer a chance. If he doesn't deliver, then we'll be back with Senator Patrick. But if he can deliver—there are certain sensitive issues involved, and we want them clarified before we start taking capricious action.
I'd like, through you, Chair, to ask Senator Roberts to provide more details in relation to the arrangements that he or Senator Hanson has negotiated with the Treasurer. What's the time frame for this investigation, for example?
I have no problem with Senator Patrick asking a question, through you, Chair. These matters are, as he said, under discussion with the Treasurer. The Treasurer has undertaken to do a review in a timely way, and we will await that. I won't be giving the time frame.
Chair, this is a question for Senator Roberts: what sort of time frame are we looking at? Is it next week, because, honestly, it shouldn't take him any longer than that, surely? You're looking at political donors over here, mate. I would have expected a higher standard out of One Nation. Seriously. Your people need to know you're not even—you don't want the bigwigs at the end of town, or is One Nation getting donations from them now as well? Maybe you can answer the question as to whether One Nation is receiving one donation from any of those being grandfathered. I'm sure that, if you don't tell me, then Michael West will.
We believe in getting the data. We have supported and followed Senator Patrick's excellent arguments. We have been given a counterargument. We treat both parties with respect. That's the way we operate. We get the data. Then we make a decision. That's it.
Through the chair again: Senator Roberts, I was wondering if you could give us some sort of time frame. Are we looking at next week, a month, two months, three months, Christmas, next election? Are you running at the next election? What are you doing? What sort of time frame are we looking at here, mate? I think One Nation owes the Australian people that answer at the very least. Give me the time frame that you've put on the Treasurer and when you're going to get that information.
Senator Patrick, you know that the government opposes this amendment. It has absolutely nothing at all to do with the bill. We know that this is simply a delaying tactic that is imposing costs and uncertainty on businesses. This is not how governments should do business or will do business.
Could the minister please explain to everybody that has to be on that list why they've got to be on that list, because they're all dying to know straight from your mouth why they have to be on that list and your billionaire mates do not. Maybe you can explain to them straight down the line why there's such a difference between your mates up here that give you political donations and the ones down here that have to be on that list.
I go back to your previous statement, where you said it adds cost to businesses. This would only add a cost to 1,192 rather well-off businesses, and I'm trying to understand why you would give them a cost advantage over all the other businesses that have to do exactly what this exemption exempts these large companies from doing—that is, to simply lodge a financial return with ASIC. You're describing a situation, which is actually the offence here, where very large companies owned by wealthy people somehow have to do something less than other companies, which may be struggling a bit. How is it that that is fair, Minister?
Senator Patrick, I think you're putting words into my mouth. What I said was that this bill will reduce costs on business and that your amendment is nothing more than a delaying tactic. If this bill is delayed, it will impose costs on businesses.
That's a laughable comment. This bill has been sitting in your very disorganised legislative schedule for some period of time, and it's quite disingenuous to suggest that a day or two—as this goes back to the House, to be supported by the government—is a reason not to support it. That cannot possibly be the reason not to support it. Again, I ask—because you haven't answered this in the many times that I have moved this bill, and I understand you might think it doesn't relate to the bill, but in actual fact it has been ruled in order; we don't move amendments that are not in order, that don't relate to a bill; it does relate to this bill—specifically around the amendment: what is the policy rationale for maintaining the exemption on these 1,190 large proprietary companies?
What bill do you reckon we could tack that on to, to make that fair for everybody and not just your political donors out there? You tell me what bill we can tack that on to that you'd be prepared to then support, because we're all dying to know in here, Minister.
Senator Lambie, I understand you feel very passionately about this issue, and perhaps a private senator's bill would be better placed to address this issue. That way, it could go through a committee and be better scrutinised and it would get the oxygen that clearly you both would like it to have.
We don't need to do a committee on this because the economics committee has already looked at it. They received a submission from ASIC that said: 'Please remove the exemption,' and the committee made a bipartisan recommendation or endorsement to remove it. We don't need to have a committee into this. Blind Freddy could see that this is an unacceptable situation that we have in Australia, where we have a group of companies that have a special privilege. They don't have to lodge their financial returns, their affairs are kept completely secret and they can engage in aggressive tax minimisation; that's all okay. As a company director—and I am a company director—I can't go to ASIC and work out whether or not I should deal with these companies, because there's no information there that helps me do that. It's a serious question, and it's not me that wants to know; it's my constituents that want to know. I can tell you, from communicating with my constituents directly through phone calls and through Facebook and even from feedback on Twitter, Australians want to understand why this exemption exists—what the policy rationale is for maintaining this exemption. It's quite in order for me to ask that question. The fact that you're unable to answer it tells me there is no policy rationale. I'll let everyone know that I did talk to the Treasurer about a week ago about this bill and I said to him: 'Lay out on the table what the concerns are,' and I didn't get a response.
Can I just give perhaps a policy rationale? There is a difference between a proprietary company, a privately owned company, and a public company. That distinction has been recognised in the law since we had the two types of companies. It is recognised that a proprietary company has an obligation to give less disclosure because the shares are privately owned, as opposed to a public company where the shares are more widely held. So that distinction has always been recognised.
The second point to know is that anyone watching the actions of the ATO over the last 10 or so years with respect to attacking aggressive tax minimisation would see that anyone, whether a proprietary or a public company, engaging in very aggressive tax minimisation schemes is subject to the most onerous of penalties from the ATO.
I thank Senator Scarr. I get on extremely well with Senator Scarr and I also listen to what he has to say. The fault in his argument is this: those private companies pay public tax, and there is an opportunity, through the lack of disclosure, for those private companies to not pay the public tax that they ought to. And that's not right.
The other problem is that, be it a private company or a public company, I ought to be able to understand the entity I am dealing with and not have that entity shrouded in secrecy. I understand you're saying that private companies do have particular arrangements, and in some sense I agree that that's appropriate, but, to the extent that it cuts into public aspects, like the amount of tax they pay or how they interact with other entities, it should be made public. Again, this is a recommendation from ASIC. I think, respectfully, Senator Scarr, they know a lot about companies, how they operate and the distinctions that go with that. I do appreciate your attempt. It's certainly more than I got out of the minister, so I thank you.
I've been listening very intently to this debate. I was on the economics committees during those inquiries. We've had this debate in this chamber many, many times. I can't remember whether we have had a private senator's bill, Minister, but I would be very surprised if we haven't.
I was just going to add to what Senator Patrick said. Senator Scarr, there is a fundamental difference in the law, as you say, between public and private companies. That's actually why so much tax minimisation occurs through private companies. They're much easier to hide, in terms of shell companies. We have no beneficial ownership register in this country, which is something the Greens have been fighting for at least a decade, and, because they have less onerous restrictions, they do get used a lot more often for aggressive tax minimisation. I'll answer the question Senator Patrick asked of the minister—through you, Madam Temporary Chair: there is no policy rationale for this at all. This is purely about protecting the donors of the LNP.
I'm just wondering if the minister has spoken to any representatives from the exempt companies about these amendments at all in the past—how long's it been going on for now, 25 years? Let's say, since the pressure has really been on, in the last six months, have you spoken to any representatives from these exempt companies, and if you have—
I don't have a list of the companies that you're referring to. I do remember having a conversation with Senator Patrick last time this came up. I think you tabled a list, Senator Patrick, and I think in return I tabled a list of donors to the LNP. Does that sound right? I know that we've been on this roundabout before.
The most important thing, though, is to recognise that this amendment has absolutely nothing to do with the bill at hand. We know, Senator Patrick, that what you're trying to do is delay the passage of this bill. This bill is exceptionally important, not just because it provides temporary relief to organisations that require the use of technology to meet their regulatory requirements in the Corporations Act to hold meetings, distribute materials and execute documents but also because these changes are sensible, incremental and permanent changes to Australia's continuous disclosure regime.
We know that we have discussed this before. In response to the COVID crisis, in May last year, we announced these temporary changes. They introduced a fault element to continuous disclosure regimes so that companies are only liable for failing to disclose certain price-sensitive information in the market if there has been knowledge, recklessness or negligence. That was given at the time, importantly, under the heightened level of uncertainty for companies issuing market guidance and the threat of opportunistic class actions, by litigation funders, against companies who made those announcements and whose reasonable forecasts were ultimately proved to be inaccurate, though they were reasonable forecasts at the time.
These issues and these changes were also considered by the Parliamentary Joint Committee on Corporations and Financial Services, which recommended in its report in December last year that these temporary changes, which were due to expire in March this year, be made permanent. So the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 does exactly that. It makes these important changes to the Corporations Act 2001, and they apply to both civil penalty provisions and private actions. They make those civil penalty provisions and private actions permanent.
Companies and officers will also not be liable for misleading and deceptive conduct where the continuous disclosure obligations have been contravened unless the requisite fault element is also proven. The introduction of this fault element for private actions also brings Australia's continuous disclosure regime far better into line with the approaches taken in both the United States and the United Kingdom. But, importantly, the changes don't affect ASIC's ability to prosecute criminal breaches or issue administrative penalties, and ASIC can continue to issue infringement notices without proving fault.
The reforms will allow businesses to reallocate resources towards improving efficiency and output as opposed to defending class actions, which are economically inefficient and do not contribute to the public good. As members of the PJC and members on this side of the house know, Federal Court data shows that class action filings have increased by 325 per cent in just the last decade and, according to industry data, this increase is almost entirely attributable to shareholder class actions. Shareholder class actions, above all else, generate windfall profits for class action law firms and for litigation funders and they do little, if anything, to compensate shareholders, particularly those mums and dads that those opposite are so fond of talking about. Indeed, the class action damages that actually go to legal costs can be as high as 60 per cent. As my good friend the member for Mackellar knows, in the Dick Smith case, $18.75 million, or 75 per cent of the settlement proceeds in that case, went to legal costs.
According to insurance provider Marsh in their submission to the PJC inquiry, companies in the ASX 200 saw the costs of their directors and officers insurance premiums increase by over 250 per cent between 2011 and 2018 and another 118 per cent in 2019. On top of that, smaller companies may be forced to not renew or significantly reduce their D&O cover. Of course the small percentage of money that does flow to a company's old shareholders is being funded by the company's new shareholders. This is a circular problem that doesn't serve shareholders' best interests. I also note that ASIC data shows that, when the period between 1 March and 31 March 2019 is compared with the same period of 2020, material announcement by disclosing entities increased 6.7 per cent year on year. That means 8,509 material announcements per day in 2019 compared to 9,015 per day in 2020.
Given the deep ties between the Labor Party and class action law firms and litigation funders, the government can well understand why those opposite may oppose these changes—although I am surprised, Senator Patrick, that you would assist them in that process.
Recommendation 29 of the PJC report said:
The committee recommends the Australian Government permanently legislate changes to continuous disclosure laws in the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020.
That was backed up by Jennifer Westacott, the chair of the BCA, who said, 'These are very sensible changes that will let company directors focus on our biggest challenge, creating the jobs that we need to fuel our economic recovery.'
Temporary changes to continuous disclosure rules were a crucial measure that helped give businesses the certainty they needed to keep functioning through the pandemic. As we recover, permanent changes will be critical to building the confidence to power our recovery with new jobs. You, Senator Patrick, are standing in the way of that legislation proceeding. Angus Armour, the head of the Australian Institute of Company Directors, said: 'This is a critical step in acknowledging the challenges faced by the business community to rebuild in the wake of COVID-19. This measure allows for directors to provide greater disclosure in this uncertain environment at the same time as it maintains measures to discipline irresponsible companies to protect the community.' Daniel Moran of ASX Limited, in his submission to the PJC dated 17 June 2020, said:
As you can see, Senator Patrick, this is an exceptionally important piece of legislation, and while I understand that you love slapping this amendment onto everything that moves—everything that has a TLAB in front of it—it is simply a matter of showmanship. In fact, I think that you are making a mockery of what is a very serious and important issue and an important change for our business community and for our economy more broadly.
Please do not stand up and suggest that I am in some way doing this for any purpose other than proper transparency around large companies. My amendment is a good amendment for public purpose, and to suggest somehow that it might delay the passage of the bill is just ridiculous. All that would happen is that the bill would go back to the House tonight and it could be passed in the other place tomorrow. That could be easily done.
I want to address a couple of points that were raised. Firstly, the minister did table a list of 1,119 companies, as a result of estimates, but I can assure you that at no stage have I received a list of donors from the Liberal Party, as might have been suggested. I concede the minister was unsure about that; I'm just making it clear in her mind that that has not happened. However, in the spirit of continuous disclosure, perhaps the minister might undertake to provide me with the most recent list of financial donors to the Liberal Party.
Thank you, Senator Patrick. I will do exactly the same thing as I did the last time you raised this amendment: I will direct you to the AEC website, where all of those donations are appropriately listed.
I just want it on the record that we do not appreciate the minister's comments back to Senator Patrick, questioning his motives. We think this is entirely wrong. Senator Patrick has shown that this is a very important issue to him, as it is to us. We support him in doing that. We have taken a different tack this time, as I explained. But if this is not addressed we'll be back on his track.
I want to thank you very much, Senator Roberts, for all the good faith in which you have approached the Treasurer about these issues. We will always deal with the crossbench and, indeed, the opposition in good faith when they approach the government with particular issues. I thank you for the respect that you have shown, and it will be returned.
According to the AFR, ASIC told parliament back in 2015 that the lack of availability of public financial reports for exempt companies reduces the transparency about possible indicators of tax avoidance or tax minimisation. Why did the government ignore ASIC's advice?
We can talk about this all night if you like. Quite frankly, where you're sitting right now, you should have an answer to that. Basically, ASIC told parliament that the lack of availability of public financial reports for exempt companies reduces transparency about possible indicators of tax avoidance or tax minimisation. I don't think I can say it any more clearly than that. Okay? It's reported. It's done. It's true. And in the meantime you have completely ignored that. Why has the government ignored ASIC's advice? We're talking about tax avoidance here, and I can tell you people have had enough of this sort of rubbish! ASIC itself is concerned about what is going on with these top 1,000 companies, many of which would be your donors. We have a problem here, and Australians have woken up to you. It's not going away. So please answer the question: why is it so important for ASIC but it's not important to the Liberal Party when it comes to transparency and tax avoidance? We've got a health crisis and an education crisis, and you're out there saying we cost too much money, yet you're sitting there letting these companies get away with tax avoidance.
Thank you, Senator Lambie. I understand that this is an issue about which you feel exceptionally passionate, and I respect that, although I will say that those companies do disclose to ASIC and they also disclose to the ATO. The issue that you're concerned with, I think, is that they don't disclose publicly, and that's the difference. But they do pay tax and they do disclose to ASIC.
The CHAIR: The question is that amendments (1) and (2) on sheet 1217, moved by Senator Patrick, be agreed to.