Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Industry) Share this | Hansard source

I rise to speak to the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020, and support the amendment moved by my colleague the member for Whitlam. The intention of the bill is to help small businesses that are in some financial trouble or under stress, and I would like to talk to that in the bill.

Of course, this government, which likes to boast its support for small business, has not always covered itself in glory when it comes to supporting small business in reality. It was this government and this Treasurer that forgot about sole traders when introducing support in our economy in the name of JobKeeper. It was this government and this Treasurer who failed to support small businesses sufficiently when they reduced JobKeeper too early in a recession, where recovering businesses needed the support of this government. And yet the decision of the Prime Minister and the Treasurer of this government to cut JobKeeper, and to abolish it by March, will indeed precipitate the collapse of many small businesses. That's why Labor has been resolute in its view that Australians need more support at this time, because of the economic situation we find ourselves in. We are in no way content with the situation, but, unfortunately, I do anticipate that there will be many small businesses that won't survive next year, won't even survive this financial year, because of the premature withdrawal of a wage subsidy.

What is really essential to understand, and I don't think the government initially did understand this, is that JobKeeper is there to support the businesses and the workforce. We know that they didn't understand that, because in March this year they were not going to have a wage subsidy. In fact, when asked by the Labor opposition whether or not they would be introducing a wage subsidy, the Prime Minister, in this place, at that dispatch box, said: 'There is no need for a wage subsidy. There is no need for JobKeeper.' So, effectively, we closed the parliament—and it was to be closed for five months—without having a wage subsidy. Of course, they had to return to parliament within two weeks and introduce that subsidy. We welcome that. We welcome the change of heart and mind of the Prime Minister, but we do think that the government is again failing to support small businesses sufficiently by prematurely cutting the subsidy. The JobMaker policy that is to take over from JobKeeper won't be sufficient, because you can only get support under JobMaker if you're adding to your headcount, and these businesses that rely on JobKeeper will not be able to add to their headcount and, therefore, will not get one cent of support from the government when they lose JobKeeper in March.

With respect to the substance of this bill, just over two months ago the Treasurer and the Assistant Treasurer announced what they called the US chapter 11 style insolvency reforms. While, at face value, the reforms in the bill before us have some elements in common with the chapter 11 debtor-in-possession model of insolvency, closer inspection has shown that this was another example of a government that is always there for the photo-op but not the follow-up. The government is framing this as a small business measure, but I think there are very valid reasons to question the extent of the claim, which I will detail shortly.

Of particular concern about how the government has approached these reforms is that the preliminary work done on this legislation was purely for that photo-op announcement and, of course, the media blitz that followed. Prior to the announcement, no small business group was consulted, and no insolvency experts or accounting bodies were consulted or engaged with by this government. And when the legislation regulations were released for consultation, as the member for Dunkley has just said, stakeholders were given just four working days and a weekend to absorb and critique the complex reforms in this intricate area of law. The only reason you would rush something like this is that you view transparency as optional and constructive criticism or stakeholder engagement as non-essential. It's the behaviour of a government that does not respect due process and wants to ram through permanent reforms under the guise of a once-in-a-century pandemic. It's the lack of transparency and lack of consideration of stakeholder feedback as well as the rushed nature of these reforms and the government's refusal to consider what unintended consequences may arise from making these permanent and complex changes on the run that Labor is concerned about.

In fact, Labor supports the overall policy objectives of the Corporations Amendment (Corporate Insolvency Reforms) Bill. We support the intent of this bill, and I want to put on the record our support for measures that, as the government claims, 'support small business' and 'reduce the costs of external administration for small businesses and the compliance burden for insolvency practitioners, helping more businesses remain viable and improving the returns to creditors and employees when the business is unviable'. And it is a reasonable proposition to put forward measures that 'create a debt restructuring process for eligible small companies, provide temporary relief for eligible companies seeking to enter the formal debt restructuring process and create a simplified liquidation process for a creditors' voluntary winding up of an insolvent company'. But let's look a bit more closely at the details.

First of all, a majority of small businesses are not eligible for these reforms. The measures in this bill are only for incorporated businesses; they are not for sole traders—the group in our economy that is often forgotten by this government—and not for partnerships, and they are not for family businesses structured in other non-incorporated ways. Let me say that again. The majority of small businesses cannot and therefore will not access these reforms. So, for the florist who is a sole trader, the tradie who works for themselves as a subcontractor and the food truck vendor who has seen their business obliterated due to the COVID-19 crisis, their best scenario is the status quo. They are not going to access these initiatives, if enacted.

For those people who are still owed money from the start of the process of accessing these insolvency measures, that isn't necessarily a problem in and of itself, but, at a time when your cash flow is weak or non-existent and you have to chase, by yourself, everything owed to you, this may push the insolvency issue further down the supply chain to these sole traders. Remember, when we're dealing with people who are under financial stress, we have to think of that company but also its creditors. And, when we are looking to put together these reforms, we have to consider: Are there unforeseen, unintended victims of these reforms? Will creditors be worse off? Will other small businesses—other unincorporated businesses—be worse off if we don't get these laws right?

I would suggest that, if we don't get them right, the answer is absolutely, 'Yes, there will be adverse consequences for others.' You have to wonder whether the government has fully considered the ramifications of these reforms and the impact on the cash flow of other non-incorporated, small businesses. How many more sole traders, partnerships and family business will be left with increasingly late or unpaid invoices? Will credible insolvency practitioners vacate the field and new less experienced advisers come in and provide less adequate advice? What flow-on effects from the reforms could result in an uptick of illegal phoenixing activities, and, as some experts have warned, what impacts will this have on the credit availability for small businesses? We already know that small business credit is extremely tight and that the government's failed SME loan guarantee program, which only saw five per cent of the promised $40 billion taken up, was rejected by the banks.

Labor has been inundated by concerned stakeholders highlighting the lack of clarity in the powers, duties and obligations of different parties in the restructuring process, concerns about inappropriate individuals potentially being qualified as restructuring practitioners and concerns about the scale of businesses potentially captured by the eligibility criteria. One of the more perplexing things that has arisen is that many of the issues related to this bill could have easily been considered in a methodical fashion pre COVID if the Assistant Treasurer had actually done his job. Specifically, I mean that, as part of the insolvency 'safe harbour' provisions that were passed three years ago, the minister was required to establish an independent review within two years of that legislation. The requirement exists under section 588HA of the Corporations Act. It was due to happen in September last year, and it has not happened. We have not seen any public evidence that this review has begun.

Among a litany of scandals that cloud the actions of this government, the commissioning of statutory review may not be as explosive as sports rorts, exports rorts or the Leppington Triangle land deal, but it does remind us that some people in this government think they are a law unto themselves. He hasn't done the review required of him under the Corporations Act. If you were to really characterise this government, one of the words that comes to my mind is 'lazy'. It is a very lazy government and doesn't even do what's required of it under law.

It isn't the intention of Labor to stop these measures that will help struggling businesses. We want the government to be held to account, to do its job and to do what is reasonable to address any adverse effects these reforms create. Labor will seek to amend the bill in a sensible way. First, we think there needs to be a sunset clause in the legislation—ideally, at the two-year mark of 31 December 2022. That's enough time for the measures to have been used and for any adverse consequences to be identified and any solutions to be developed, especially if the intention is to extend or make these reforms permanent. To assist in putting forward the evidence on these effects, a statutory review should be commissioned. Noting that the minister responsible for the last statutory review—the Assistant Treasurer—believes himself to be above the law, we need to urge their compliance. We need to demand their compliance. So, should the minister not fulfil his legal responsibility to start a statutory review by 31 December 2021—that is, after one year of operation—the sunset clause should kick in. That is the most feasible way for small businesses to have their voices heard. We need accountability and transparency and we need to ensure that the government is doing its job.

So, whilst we support the intentions of this bill, we know there are many small businesses under financial stress, much of which has been precipitated by government decisions to withdraw support at a time of a recession. You will know, Deputy Speaker Mr Mitchell, in your electorate when JobKeeper goes unfortunately so too will jobs and many small businesses. It doesn't have to happen. It's a wilful decision of the government to abandon small businesses across Australia by the premature withdrawal of JobKeeper.

Whilst these reforms may well do what they're intended to do, there's been little consultation and very little engagement. We have a minister who is derelict in his duties not to comply with statutory reviews in other legislation and, therefore, we need to compel him and the government to do the right thing here. We ask the House to support the amendment, which I think will provide greater encouragement, and demand the government do its job properly.

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