Jane Hume (Victoria, Liberal Party) Share this | Hansard source

My apologies. Senator Cameron is always good-natured and always cheerful! This is a bill that the opposition actually supports, and he was miserable giving his not quite 20 minutes to the chamber today on the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017. This is a man who, quite clearly, didn't understand the content of the bill. He peppered it with bile, spewing forth throughout, reading the contents of his speech today in the chamber. Quite clearly, Senator Cameron is a man who has invested in nothing in his life. He has taken no risks in investment in his life other than, potentially, investing in whatever might give him a comfortable retirement.

I would like to touch on four areas today: why I support this bill very enthusiastically; the specific provisions of the legislation and what the bill, in fact, does; the broader contribution of crowdfunding, generally, to Australia's economic prosperity; and how this builds on the work that the coalition is doing to support small businesses and start-ups in Australia.

Why would the government support this particular bill? In Australia we are not simply a nation of dreamers, we are a nation of doers. To provide my colleagues with some context to this: in June 2016 there were 2.2 million businesses trading across Australia. The number of new start-ups in the year prior to that was up 1.2 per cent. Indeed, the coalition's innovation agenda ushered in the promise of easy access for start-ups to crowdsourced equity funding, funding for incubator support programs, and tax incentives for investors.

Prime Minister Morrison has said that those in this country willing to have a go should get a go, and that is fairness. He has been very clear that this bill forms part of the coalition's determination to deliver on that promise. This is in step with many other advanced economies that have embraced crowdsourced equity funding in support of business growth, from the UK's Financial Conduct Authority, which provides compelling and renowned alternatives for funding business development, to Singapore, which has recently made similar changes of its own to ensure a more streamlined and simplified framework for businesses to start up and to invest.

So the legislation that we are discussing today is very much some of the metal behind that vision that the government has set out in that initial work on the innovation agenda. While the title of this bill doesn't sound particularly exciting, it will have an impact on thousands of businesses and individuals who aspire to bring ideas to the market. They will have more access to money to do so and will have their chance to have a go and make their dreams come true. That is truly exciting.

So that's why good government matters. It's about making the changes that genuinely, really count, rather than just whining and complaining all the time and finding something to be miserable about. Extending that good framework for crowdsourced funding is a key example of the former. I honestly think that Senator Cameron has spent way too much time in opposition. I think five years of opposition is beginning to take its toll. He has nothing good to say anymore, even about a genuinely good piece of legislation. Crowdsourced funding enables start-ups and small to medium sized businesses to raise money from the public to finance their businesses. These can be very small amounts from a broad range of investors. There may be quite a large number of investors. Companies that have less than $25 million in assets and annual revenue can raise up to $5 million a year using crowdsourced funding. When I became a senator, I stood in this chamber and said that in 20 years I wanted to be able to look my children in the eye and assure them that my generation did all that it could to create a prosperous and productive Australia. If we get this right, those born after 1992, currently aged 26 and under, not only will lead the entrepreneurial charge but will now be equipped to do so. Legislation like this will help ensure that future generations lead the charge for growth and business development in this country, the like of which we have never known.

Let's talk very briefly about what this bill actually does. Under the existing law, companies must use a crowdsourced funding, or CSF, platform, usually online, to make their investment offer. This is run by an intermediary that must have an Australian financial services licence authorising them to provide crowdsourced funding services. The intermediary acts as a gatekeeper between the company and investors and checks the company and the investment information that the company provides before the offer is placed on the website. For example, the crowdsourced funding website must have a warning for investors about the risks of investing through crowdsourced funding, as well as copies of the offer documents for each investment, which have important information about the business making the offer. The website must also have an online portal that potential investors can use to ask the company and the intermediary questions about the investment.

The bill we're discussing in the chamber today makes an essential legislative amendment to the Corporations Act by extending the legislative framework for crowdsourced equity funding beyond public companies to proprietary companies as well. It builds on an already established crowdsourced funding equity framework for public companies which commences at the end of this month.

'What is crowdsourced funding?' I hear you ask, Acting Deputy President. Crowd-sourced equity funding is a relatively new and innovative concept. It enables businesses to source capital from a very broad range of investors online. Typically, each investor will contribute a small amount of money in return for an equity stake in the business. The coalition consulted at length on this extension of the policy to proprietary companies, and the submissions received as part of this consultation expressed widespread support for extending the crowdsourced equity funding model and framework to proprietary companies. Extending the framework to proprietary companies builds on the existing framework for public companies and, as such, will incorporate many of those existing features of the public company framework that I mentioned earlier, such as the obligations for intermediaries and the process of making crowdsourced funding offers.

In Australia, private companies or proprietary companies are limited to 50 non-employee shareholders, so, to ensure that proprietary companies can effectively access the framework without breaching that cap of 50 non-employee shareholders for proprietary companies, investors who acquire shares through crowdfunding offers will not be counted in that shareholder cap. Subsequent transfers by crowdfunding investors who onsell their shares will also be exempt if the company is not listed on the financial market.

Crowdfunding priority companies will be exempt from takeover provisions, also consistent with the light-touch regulatory approach of the equity crowdfunding regime. The takeover rules are in fact very complex and would be very, very costly for proprietary companies using crowdsourced funding to understand and comply with. Recognising that this is in fact an extension is a new approach to the proprietary company framework in Australia. These companies will face some additional obligations, such as a minimum of two directors, financial reporting in accordance with reporting standards, and restrictions on related party transactions. This demonstrates the robust nature of the safeguards contained in the legislation before the chamber today while still embracing new start-up and business ventures and allowing them to grow, to expand and, hopefully, to thrive.

In addition, it is important to know that proprietary companies that raise $3 million or more will also be required to maintain audited financial statements. To ensure consistency with the proprietary company framework, the bill also increases the audit threshold for eligible public companies from $1 million to $3 million. Finally, the bill removes the temporary new public company concessions in the Corporations Amendment (Crowd-sourced Funding) Act 2017. These concessions will be grandfathered for companies that register with a public company status prior to the bill taking effect after royal assent. These changes will not blur the lines between public and proprietary companies. It is perhaps worth noting that 98 per cent of Australian registered companies are in fact proprietary companies, and start-ups in particular adopt this structure. An inflexible approach would result in a much higher regulatory burden that deters business growth.

I'd like to touch on the contribution of crowdsourced funding to the economy. I've already outlined the specific impact of this legislation and the changes in detail. As mentioned, crowdsourced funding enables start-ups and small to medium-sized businesses to raise money directly from the public to finance their businesses and can be sourced from a variety of investors. We're seeing significant good-news stories already in Australia as a result of crowdsourced funding techniques. Indeed, since the equity crowdfunding framework was originally passed, in March last year, Australia has seen its first crowdsource-funded power retail company launched, a company called DC Power Co. It's hoped that this particular company will tap into almost two million solar households, and potentially six million by the year 2050. This solar energy disruptor has claimed a world record for the most people ever around the world participating in a crowdfunded equity raising, with over 17,625 retail investors taking part. It's a brilliant example of the contribution crowdsourced funding can make to Australia's economic prosperity. This particular company intends to seek investment from up to 95,000 people in order to raise a total of $4.75 million. So it's not the future of raising capital; in fact we're already facing the reality of how capital is raised, and this is what this bill specifically acknowledges.

When we look at the bigger picture, crowdfunding offers a foundation for start-ups that automatically creates more job opportunities, which are of course essential to a growing economy. Moreover, generating a buzz around a forthcoming product or service often leads to more sales and more revenue generated. So crowdsourced funding can be a marketing tool as well as an equity-raising tool. The coalition thinks this is a good thing, and the coalition is delivering on legislation to make it possible. Business thinks this is a good thing. Entrepreneurs think this is a good thing. Innovators think this is a good thing. So the coalition thinks this is a good thing too.

There are other ways small businesses and start-ups are being supported by the coalition. Let me turn now to talk about some of those other ways in which small businesses are being supported. The government's support of small businesses and start-ups does not start and end with crowdsourced funding; although it does make it easier, it's only one part of the puzzle. There are a range of initiatives already in place that make entrepreneurship and small business easier in Australia. Let me talk first about the Entrepreneurs' Program, which helps businesses increase productivity and competitiveness, linking them with funds and access to a national network of private sector advisers and facilitators across Australia. This is the government's flagship initiative for business competitiveness and productivity. It provides a range of grants, offering ventures up to 50 per cent of expenditure on a particular project, and applicants can seek free expert advice on ventures to address their knowledge gaps.

Another initiative is the CSIRO Kick-Start program, which is driving innovation by supporting local start-ups. It focuses on the research and testing of companies that have a new idea, a novel product or a service. It gives small to medium enterprises that are in the start-up phase access to the CSIRO's research expertise and capabilities and helps them grow and develop their businesses. Eligible companies have to be registered in Australia for GST, have an annual turnover of $1.5 million or less in the current and past two financial years and have been registered as a company for fewer than three years. They receive dollar-matched funding to research, develop or test a product or a process with commercial potential.

Another one of my personal favourites is the Biomedical Translation Fund, which supports start-ups operating in the area of health and wellbeing. It was established originally as part of the coalition's National Innovation and Science Agenda, and it's armed with over $250 million of Commonwealth capital and an additional $250 million from private sector capital. So far, ten investments have been made through the Biomedical Translation Fund, the BTF, including $7.5 million in a start-up company called Global Kinetics in April this year. Global Kinetics is an extraordinary company. It creates watches that measure movements, whether they be tremors, dyskinesia or other movement disorder symptoms. They collect data on the frequency and severity of those movements, which can change the lives of patients with Parkinson's disease.

We also have the R&D tax incentive to help all businesses stay ahead of the curve through a tax offset and encourage innovation, even in the smallest of ventures. From 1 July 2016, companies with an annual turnover of under $20 million can claim a 43.5 per cent refundable tax offset against R&D expenditure that amounts to $100 million or less. All other eligible companies can claim a 38.5 per cent non-refundable tax offset. For R&D expenditure under $20,000, companies can only make a claim if it was undertaken with a research service provider or a cooperative centre.

There are a number of other programs run by the government that can provide incentives, whether they be financial or otherwise, to help young companies get off the ground, like the Venture Capital Limited Partnerships program in Australia, which attracts foreign investors to Australia and boosts the local venture capital market with tax benefits. To be eligible for that, funds must register as a venture capital partnership under the Venture Capital Act 2002 and make commercial, non-property, non-construction or non-infrastructure investments and hold them for at least 12 months. Those investments must be in ventures where the total assets are valued at under $250 million, 50 per cent of the assets are located in Australia and at least 50 per cent of the employees are in Australia. Tax benefits for VCLPs include flowthrough taxation treatment, exemption from capital gains tax on the share of profits made by the partnership and the ability to claim carried interest on the capital account instead of revenue.

Another program is the Austrade Landing Pads initiative, which aims to give Australian start-ups a leg-up in the global market by immersing them in one of five world-class innovation hubs. Start-ups accepted into Landing Pads in Singapore, Berlin, Shanghai, Tel Aviv or San Francisco benefit from an on-the-ground presence plus access to networks, talent, mentors and investors. To be eligible, start-ups must demonstrate a strong vision, scalability, traction and differentiation and explain how 90 days in a landing pad in one of those five markets could help their venture. Austrade provides workspace, an accelerator and free services, but participants have to fund their own travel, accommodation, living costs, visas, insurance et cetera. Austrade may also provide funding, potentially, for global start-ups in Australia through Export Market Development Grants.

Without doubt, the Morrison coalition government is doing significant work to put small business and start-up development at the core of its innovation agenda. It requires constant work. It's not something about which any government could afford to be complacent.

As credit becomes tighter, it impacts the viability of some businesses. So it is important—it is absolutely critical—that we, as a government, are constantly looking for better ways to help incentivise development and embrace the future, and crowdsourced funding goes such a long way towards that. It's not the only solution, and I think I've made that clear today. There are other ways to help and encourage young businesses, start-ups, small to medium enterprises, people with a good idea and people with a dream. How do we help them get a chance, get their first foot in the door, get a leg-up? How do we help their businesses grow and thrive and survive? Crowdsourced funding is part of the puzzle.

The Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill strives to balance supporting investment, reducing compliance costs and maintaining appropriate investor protections for proprietary companies as well as for public companies. I believe, and the coalition believes, that this legislation will go a long way to ensuring that Australia embraces crowdsourced funding—the concept of crowdsourced funding, and the opportunities that come with it—as a viable route by which small businesses and start-ups can establish themselves, grow, expand, flourish and, hopefully, employ more Australians, because, when it comes down to it, that's what it's all about. That's why we want businesses to grow. That's why jobs and growth are so important to the coalition. Jobs aren't ends in themselves; they're a means to allow society to grow and to flourish, to survive and to thrive.