Brian Mitchell (Lyons, Australian Labor Party) Share this | Hansard source

I do rise to support the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, but I really must respond to the member for Boothby. What a lot of rot from this alumnus of the IPA—that bunch of neo-Liberal right wingers who still believe absolutely in the failed policies of trickle-down economics. They somehow believe that if you give more money to the top end of town and give more money to the corporations and the CEOs, somehow, it will magically trickle down to the rest of the population. It hasn't worked in America for 40 years. The middle class in America has been gutted. It is non-existent now because of the failed policies of Reagan and Thatcher, and this mob over here wants to see them imported into Australia. We have one of the greatest societies, one of the greatest economies and one of the greatest countries on earth built on egalitarianism and built on a sense of a fair go. It was built on a fair industrial relations system and a fair sense of equity of income, and these guys want to tear it down because, somehow, they look at America and they actually like what they see. They like to see the middle class gutted, they like to see the billionaires become multibillionaires and they somehow think that's good for the rest of us. It hasn't worked. It just hasn't worked. The evidence is before your eyes.

The member for Boothby was talking about high taxes—what a cheek! I mean, the government has come into this place actually proposing higher taxes for Australians earning up to $87,000 a year, tax cuts for people earning more than $180,000 a year and tax cuts for corporations of up to $50 billion over 10 years.

Mr McCormack interjecting—

It is $50 billion in tax cuts over 10 years. I will take the minister's interjection. Yes, I accept what he's saying. Well, it is $65 billion actually, when you take the total. Some $65 billion in tax cuts to corporations over the next 10 years is the government's grand plan. Why? Because they say it's going to be better for the economy. But their own figures show that if you give $65 billion back in tax to the big corporations, the net result for GDP—for growth in this country—will be an incredible, magnificent, rocketing 0.1 per cent over 10 years. That's their grand plan for economic growth in this country. There will be $65 billion in tax handouts to big banks and corporations and 0.1 per cent growth in GDP. What an absolute joke! They think they're the best economic managers that this country has to offer. I've got news for them: evidence says otherwise.

The member for Boothby—a goldmine of ridiculousness—said that if we don't give tax breaks to big corporations they will all lose the incentive to be here. That somehow there will be this big flood of companies leaving Australia because they will lose the incentive to be here. They will go somewhere else with their business. What a load of rubbish! There are countries in this world that charge companies a lot more tax than Australia. They manage to keep their companies and they manage to keep their corporations. Business will stay wherever they can make a profit, and every business knows that there are good profits to be made in Australia. It's a stable economy, it's a stable political system, and people have relatively good incomes. Despite the efforts of those opposite who want to cut incomes, cut penalty rates and increase taxes on middle Australia, Australia is a good place to do business. I'm pleased that the minister acknowledges 25 years of uninterrupted economic growth thanks to the policies implemented by Labor under Hawke and Keating.

We all love a tax cut. I love a tax cut. Who doesn't love a tax cut? But you have tax cuts when you can afford them. How this mob over here can say: 'Oh, we can give $65 billion to big corporations and banks, but to pay for it we're going to take $3.8 billion over the next five years off universities. We're going to take billions of dollars out of schools. We're going to take money out of hospitals. We're going to take money out of infrastructure.' Honestly, the people of Australia want services and goods. They want a standard of living. They know they're not going to get it from a $65 billion handout to corporations and banks.

Now let me get to the substance of this bill—having dealt with the member for Boothby's ridiculous contribution. I note that the bill comes before the House in an amended form following amendments moved by Labor in the Senate which were successful. The changes initiated by Labor will require a review of this bill's safe-harbour provisions after two years to ensure that there are no unintended consequences. That's important because, even with the best of intentions, we don't know where this is going to go so we need to review it after two years. We're pleased that the Senate agreed and that the government agreed to implement those amendments.

This bill makes some significant changes to the way companies act when trading insolvent. It provides breathing space for responsible change in corporate structure or business practices to enable a business to get through tough times. Today, it's an unfortunate reality that announcing an intention to enter voluntary administration can be, in effect, the kiss of death for a struggling business. You go into voluntary administration in order to try and keep your business going, but that signals to the market that somehow you're in deep trouble. What happens of course is that suppliers stop supplying and customers stop buying. Voluntary administration is supposed to send a signal to the market that although a company is struggling, it's salvageable. Unfortunately, the very act of entering into it can set off a chain of events that can make matters worse, and that's an outcome in no-one's interest except the vultures who swoop in to devour the entrails. We see that happening all the time: companies go into voluntary administration and some joker comes in and swoops it up at a cheap price and carries on the business. That's not fair.

Currently, companies must stop trading as soon as the directors believe they may be insolvent. That makes sense. You shouldn't be able to trade and take on new liabilities when you suspect that you don't have the means to pay your existing bills. But it's a rule that is so inflexible that, arguably, it can do more harm than good. This bill seeks to allow some flexibility with conditions, and the conditions are important. With safe harbour, this legislation will create a safe harbour for company directors from personal liability for trading while insolvent. A key condition is that directors must be honestly and diligently taking a course of action that is reasonably likely to lead to a better outcome for the company than the immediate appointment of an administrator or liquidator. The intent is sound. We all would much rather see a struggling business get back on its feet than close its doors.

Labor's amendments, which the government has agreed to incorporate, will see the safe-harbour provision reviewed after two years to ensure there are no unforeseen consequences. That's a sensible measure, bringing together both flexibility and accountability. Importantly, safe harbour is not available where the company is failing to meet its obligations to pay its employees, including superannuation; where the company fails to meet its tax reporting obligations; and when a person fails to provide an administrator or liquidator with certain required information, such as a company's books.

So, while supportive of this bill, I am disappointed, however, that it fails to deal with the issue of phoenixing. Phoenixing occurs when a company's directors strip cash and assets from a company, liquidate the company and then reopen for business with a different ABN and different signage. Closing the business down in such a manner strips employees of their entitlements and creditors of their ability to sue for payment. Phoenixing rips off creditors and staff, but also the wider Australian community. A report earlier this year by the University of Melbourne and Monash University said that phoenixing companies, which cost the Australian economy billions of dollars a year, is too easy, too cheap, lucrative and largely invisible. PricewaterhouseCoopers estimated the cost to the economy at a staggering $3.2 billion, simply from companies that go bust and then start up again, having wiped off their obligations to their employees and their creditors.

I do note the news from this week, where the government has been dragged, kicking and screaming, into finally taking action on phoenixing, four months—four months!—after Labor unveiled our own policy to tackle dodgy directors. Since May, this side of the House has been calling for the introduction of company director ID numbers, which make it easier for authorities to track the spivs who kill their companies and start up again. Director IDs are backed by the Productivity Commission, the Australian Institute of Company Directors and the Australian Small Business and Family Enterprise Ombudsman. It's taken the government four months, but it's reluctantly come on board—although not all the way. We note that penalties are still too low and that the government has failed to introduce an objective test for transactions that deprive hardworking and innocent employees of their entitlements. So, I acknowledge the announcement this week, but it's a shame the government had to be dragged into making the decision rather than coming to it early. And it's a shame that it did not take the opportunity to include antiphoenixing provisions in this bill.

Part 2 of this bill sets out new provisions to stop the enforcement of ipso facto clauses that are triggered when a company enters administration. An ipso facto clause creates a contractual right that allows one party to terminate or modify the operation of a contract upon the occurrence of some specific event. Currently, such rights may allow one party to terminate a contract because of the financial position of the company, even though the company is still meeting its obligations to that party. So, for example, if a company has a short-term lack of liquidity which leads directors to appoint a voluntary administrator, an ipso facto clause might allow a major supplier to cancel their contract even though the administered business is still meeting all its payment obligations to that supplier. Cancelling supply may then starve the business of the opportunity to continue to trade while it restructures, which then brings on a liquidation which may otherwise not have occurred. So the operation of such clauses may in fact destroy the ability of the business to restructure, destroy the value of the business and prevent the sale of the business as a going concern.

The regulation power under this bill includes an anti-avoidance mechanism to enable the government to respond to possible contractor agreements that are drafted or prepared in a way to circumvent its provisions. Regulations can carve out certain contracts from the application of these clauses. This amendment will not stop parties from terminating a contract with a company for any other reason, such as a breach involving nonpayment or nonperformance, so those rights are protected. This legislation, in theory, gives business, and particularly small business, a fighting chance of making its way through a tough time, utilising fresh eyes and fresh ideas and without stigma.

Of course, prevention is better than cure. Ideally, we should be doing more to encourage businesspeople to receive practical training in finance, employment responsibilities, resilience and adaptability. Stronger businesses are in everyone's best interests. Carl Gunther, New South Wales Head of Restructuring and National Turnaround Lead notes:

Whilst legislative changes proposed by government are a key element to reform, ultimately early intervention by company directors when indicators of financial distress arise is the best form of defence to claims of insolvent trading. Director's reluctance to call for help continues to result (sadly) in the high volumes of insolvencies in Australia and until this changes no amount of legislative reform will make a difference.

So it's pertinent to note that those opposite are making such training harder by cutting back on TAFE and continuing to encourage the failed privatisation of the training sector. We urge them in all sincerity to give a good, hard look to what they are doing to the TAFE and training sector in this country. Too many paid-up students have fallen victim to failed private organisations, and I still shake my head at a system that allowed Careers Australia to vacuum $40 million out of its own accounts, send them offshore and then, just months later, close the business down, claiming it had no cash. So today's legislation is a start, but we need to dig deeper.

This bill may indeed change the face of Australia's corporate culture. It may even give experienced directors more confidence to join start-up boards. Time will tell. We are cautiously optimistic, but our final position will be evidence based. The results of the review in two years will be instructive. This legislation is about business, and Labor is a friend of business—especially small business.

Mr Littleproud interjecting—

No, the chicken hawk can laugh, but Labor really is a friend of business and small business. The fact is we know small business is the engine of employment in this country and we are friends of small business. You can't go around calling corporations small businesses. It's just a nonsense. You can't go around calling Westpac and Commonwealth Bank small businesses.

We know small business runs on tight margins and we know times can get really tough, which is why we have an open mind about the merits of the legislation. Australia is home to 2.1 million small businesses and Tasmania home to 37,000 of them, a number of them in my electorate. They employ around 100,000 Tasmanians. They are vital, especially in regional communities like mine. I know it's almost a rite of passage for small business to criticise government, but the real threat to small business is big business, and it's time this government got on the side of small business and stopped protecting their big-business mates.

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