Minister for Financial Services, Superannuation and Corporate Law
9 June 2009 - 14 September 2010
Address to Better Regulation Business Forum
Old Parliament House, Canberra
16 June 2010
I'd like to thank Lindsay for organising this inaugural Better Regulation Business Forum. It's a great initiative to get ministers, business and senior Government officials together to informally discuss how we can reduce complexity.
Just as Lindsay and Craig obviously have better regulation as one of their key priorities, as Minister for Corporate Law, I also see reducing unnecessary red tape as a key part of my job.
I've framed my task as dealing appropriately and firmly with those who seek to do the wrong thing, while embarking on efforts to reduce the compliance burden on those doing the right thing.
I'll talk to you today about a few of our measures to do so.
Those that I'm most enthused about are Standard Business Reporting and the work of the Financial Services Working Group.
Standard Business Reporting
SBR is an initiative which doesn't get too much publicity – understandably, as it is a fairly dry topic.
But it is an important topic.
And it is one where Australia really is leading with world's best practice.
SBR is part of COAG's drive to reduce the regulatory burden for business.
It is a major whole-of-government reporting reduction project designed to streamline business-to-government reporting through the provision of online reporting tools. It will save business time, money and effort.
The 87 forms within the current scope of the project include Tax File Number declarations, Pay As You Go Payment Summaries, Business Activity Statements, financial statements, and State Revenue Office payroll tax returns.
Standard Business Reporting has the potential to simplify processes for over 240 financial, accounting and payroll software developers, over 100,000 accountants, and about 2.1 million businesses.
Once fully implemented, it is expected to save Australian business about $800 million a year.
Led by the Treasury, SBR has been co-designed by 13 Commonwealth, state and territory government agencies in partnership with software developers, business and their accountants, tax agents, bookkeepers and payroll professionals.
SBR will go live from 1 July 2010, with take-up by business expected to accelerate in the next four years.
As part of this year's Budget, the Government announced that we will provide $89.9 million over four years to support the continuation and operation of the program.
Financial Services Working Group
A key area of deregulatory reform that we identified in Opposition was in relation to disclosure documents.
We firmly held – and hold – the view that excessively complex disclosure in financial services not only generates an unjustifiable compliance burden for financial services providers but it also counterproductive.
Reams of disclosure documents mean that investors and consumers are less likely to read the information that they really need to be aware of – and it also fosters a false sense of security among investors.
Hence we established the Financial Services Working Group in February 2008, comprised of officials from Treasury, the Department of Finance and Deregulation and ASIC.
We asked the group to develop simple, standardised and readable financial services disclosure documents, which would be easy for consumers to read and understand, and make it easier for them to compare products. The shorter documents are also saving industry in printing and mailing costs.
With all due respect, we knew that asking public servants to collaborate with lawyers to produce simple, straightforward documents was a courageous approach! So an essential part of the project involved market research, document design and consumer testing.
The Working Group also established an industry and consumer advisory panel, and undertook regular public consultation at key points in the process of developing policy and draft legislation.
We saw the First Home Saver Account as a good starting point for developing shorter, simpler and more effective disclosure.
Legislation was passed in 2008 for a concise four-page Product Disclosure Statement that gives consumers a summary of all the key information they need to make an informed decision. We are now monitoring how consumers and industry respond to the First Home Saver Account PDS, and we applying those lessons in streamlining disclosure documents for other financial products.
The Working Group released a public consultation paper and examined the issue of simple ‘within product' or ‘intra-fund' advice relating to superannuation products. In July 2009, ASIC released guidance and class order relief that enables millions of Australians to access low-cost, simple advice on their superannuation investments. The ASIC guidance provides detailed, practical examples showing how superannuation funds can make simple advice available to their members under the current law.
The Working Group is now in its final stage of examining product disclosure documents for margin lending, superannuation, and simple managed investment products.
Corporate Reporting Bill
The Corporate Reporting Reform Bill, which will be before Parliament tomorrow, contains several major proposals that will reduce the regulatory burden on Australian business.
In developing the Bill, we consulted extensively with stakeholders from the business community to ensure that the reforms would deliver the promised outcomes, while reducing the costs and complexity of red tape.
The Bill cuts red tape in four broad areas:
- It reduces the reporting obligations of the 11,000 companies limited by guarantee. This will be of particular benefit to not-for-profits, which make up the overwhelming majority of companies limited by guarantee.
- It streamlines parent-entity reporting, relieving parent entities of the requirement to prepare financial statements for both the parent entity and the consolidated group.
- It relaxes the statutory requirement that companies may only pay dividends from profits, replacing the profits test with a more flexible solvency-based requirement, while ensuring that safeguards are in place to protect shareholders and creditors.
- It allows companies to change their financial year-end date to minimise the burden on companies and their auditors, particularly during peak reporting periods.
As many of you would be aware, the Ministerial Council for Corporations, which I chair, is currently progressing a COAG project which is revising the way that criminal liability is imposed on directors for corporate fault.
The provisions which have caused the most concern are those that deem directors liable simply because of their stewardship of the company, regardless of whether they participated in, or had any ability to influence, the misconduct.
COAG has chosen to adopt this area as one of its deregulation priorities not only because of the increasing number of statutory provisions that impose this type of liability, creating an unmanageable regulatory burden for directors of both large and small companies, but also because the burden is, in many cases, simply unfair.
In December last year, COAG decided on a set of principles that will guide reforms to federal, state and territory laws. Each government is currently identifying the legislative provisions that should be reformed in line with these principles, and all jurisdictions are scheduled to enact legislation by the end of 2010 to implement the reforms. All future legislation that imposes liability on directors will also be required to comply with the principles.
There are some things that directors do need to be liable for. But making directors personally liable for a wide range and growing number of things reduces the chances of concentrating the minds of directors on the really important issues that we want directors to be focussed on.
On 7 May this year, I announced the commencement of national regulation of licensed trustee companies.
This long-awaited initiative implements decisions made by COAG in 2008, and sees responsibility for the regulation of trustee corporations transferred from the States and Territories to the Commonwealth.
Previously, trustee corporations that operated in more than one jurisdiction had to comply with multiple regulatory regimes. The new Commonwealth regime will replace eight separate State and Territory regimes.
The new regime is designed to:
- increase consumer protection;
- cut red tape and lower compliance costs for trustee companies conducting business in more than one jurisdiction; and
- lower barriers to entry.