Scott Morrison (Cook, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The government is committed to supporting the Australian innovation ecosystem by providing a tax and regulatory environment that will help innovative Australian businesses raise capital, grow and succeed; and get more Australians into more and better-paying jobs.

This government, the Turnbull government, is the government of innovation, jobs, business creation and growth. We want to see new businesses and new enterprises get off the ground and get going in creating prosperity for all Australians.

As promised in the budget, we are putting in place the world's most forward-leaning regulatory sandbox for fin-tech development.

The Turnbull government sees an active fin-tech sector as a critical driver of more competition in our banking and financial system. We want to see more competition, because it will increase the pressure on financial service providers—traditional and emerging—to be more responsive to customers' needs, to the needs of businesses, to the needs of families, to the needs of householders, and deliver better outcomes for Australians.

I am a strong believer that choice empowers customers, households, families and small businesses, to seek the financial services that best suit their needs without being tied to businesses that don't listen to them.

The enhanced regulatory sandbox will allow firms to test new products and services without needing to obtain a financial services licence or a credit licence from ASIC first. It will allow trial and error in a controlled environment, giving firms a chance to confirm their concept through initial testing with clients.

In simple terms, this will help Australians and Australian businesses to access cheaper financing and better financial products so they can grow and they can invest. The productivity benefits that will flow from this are substantial. They're huge. Most investment equals more jobs and better wages.

Those in business know the importance of meeting customer needs. The regulatory sandbox will provide a means to test market demand. It will give firms looking to do things differently—to do things better for customers—a real leg-up and clear air to get going. It will reduce the time it takes to make their products and services available to customers and it will mean entrepreneurs are more informed in making decisions on their offering before applying for a licence.

We have worked hard to develop a legislative regulatory sandbox which builds on ASIC's licence exemption. But we have also been mindful of ensuring the firms in the regulatory sandbox maintain protections for retail customers.

The government's enhanced sandbox is about helping fin-tech businesses overcome the initial regulatory burden and costs of licensing that may otherwise hinder innovative change—disruptive change that will see our banking and financial system become more competitive and more tailored to the needs of customers around the country.

Schedule 1 to this bill takes the first step. It extends the regulation-making powers in the Corporations Act, establishing the foundation for the government's new framework.

The regulations will then set out the detail regarding eligibility criteria, the types of products and services that can be tested, and conditions that will need to be met during testing.

Prescribing the detail in regulations will mean timely adjustments can be made in response to the evolving market. This will ensure the regulatory sandbox stays fit for purpose in this rapidly moving sector. This approach, which combines legislative authority and flexibility, sets Australia apart from its international peers.

The draft regulations were released for public consultation between late October and November of last year. The government will consider those responses as we work to finalise the design of the regulations.

Under the proposal released for consultation, businesses will be able to test a wider range of new and innovative fin-tech products and services. This includes holistic financial advice, the issuing of consumer credit contracts and facilitating crowdsourced funding.

An extended 24-month testing time frame was proposed and will give more time for businesses to adjust their offering as they evaluate commercial interest and test the validity of their concepts.

As I've mentioned, while businesses will be able to operate without a licence, they will still be required to meet key consumer protection requirements, including responsible lending obligations, best interests duty, and to have adequate compensation and dispute resolution arrangements.

I believe the regulatory sandbox will be a game changer for Australia. It will support businesses that can revolutionise the financial services sector, bring the positive disruption that brings real benefits to customers right across the spectrum of innovation, including payments, insurance, credit, data and analytics and personal finance management.

Customers are already benefiting from the emergence of fin-tech firms. These nimble and consumer focused firms are putting pressure on traditional financial service providers and models to be more responsive and to deliver better outcomes for Australians—Australians that would get locked out on the opportunity to access capital. These firms, these innovations, bring the channel of finance that can see their business dreams, their economic dreams, being realised.

I would like to thank the fin-tech sector for their work with the government—their very proactive work with the government—to develop the regulatory sandbox and other initiatives we have progressed in the last two years.

The regulatory sandbox will no doubt be a source of many breakthrough innovations in fin-tech in the coming years.

Schedule 2 to this bill makes a number of minor technical amendments to the early stage venture capital limited partnership, venture capital limited partnership and tax incentives for early stage investor regimes to clarify the income tax law and ensure that these provisions operate in accordance with their original policy intent.

The tax incentives for early stage investors measure and the new arrangements for venture capital limited partnerships measure were introduced as part of the National Innovation and Science Agenda. Together, these measures are designed to promote an innovative, risk-taking and entrepreneurial culture by providing incentives for investors to invest in Australian innovative, high-growth potential start-ups and venture capital. This is where growth comes from. This is where more and better-paid jobs come from. This is where higher wages come from.

The amendments being made by this bill will ensure that investors in innovative Australian businesses continue to benefit from effective, generous government support and have certainty as to how these programs are intended to operate.

Full details of the measures are contained in the explanatory memorandum.

Debate adjourned.