Paul Scarr (Queensland, Liberal Party) Share this | Hansard source

At the outset I'd like to acknowledge the important work that Senator O'Neill has been doing, along with Senator Barbara Pocock, in relation to the matters arising from the terribly disappointing lapses by PwC. I want to pick up, and perhaps emphasise and buttress, one point Senator O'Neill made, and that is with respect to the important role of whistleblowers. I passionately believe that doing our best to empower whistleblowers, both in the public sector and in the private sector—in particular, in relation to matters at a federal level that touch on compliance with federal laws—is of crucial importance. Those whistleblowers who have reached out to Senator O'Neill and to Senator Barbara Pocock are courageous individuals, and there should be somewhere they can go to get support and guidance as to how to navigate the very complicated maze of their duties and obligations as employees, as partners and as professionals and be given the assistance to navigate those important issues and the support needed.

No doubt those whistleblowers who've reached out to Senator Barbara Pocock and to Senator O'Neill were under—and perhaps are still under—immense personal strain, dealing with all the mental pressures associated with arriving at a decision, such that they were left with no option but to reach out to parliamentarians, people outside of the firm, to bring their attentions into the public domain. They have to deal with the issue of whether they're going to continue to have a job. They've got to deal with the issue of whether they'll be able to fine another job after they've potentially been exposed as whistleblowers. It's a very complicated thing.

It is in the best interests of our civic society that support is provided to those people who are considering being whistleblowers and those who become whistleblowers. Not only is it important for the whistleblowers themselves; it is also important that both the public sector and the private sector know that those whistleblowers will have support, will have someone in their corner who can enforce the statutory obligations on their employers not to intimidate or harass them. That is vitally important, because the protections for whistleblowers on the legislative books at the moment are simply paper protections. What hope does an individual whistleblower have in exercising those protections on the face of the statute when they don't have the resources that their employer has and they're trying to deal with all those other pressures?

I know the Joint Standing Committee on Corporations Law and Financial Services—on which I serve and am very happy to serve, under the chairing of Senator O'Neill, and Senator Barbara Pocock is also a member of that committee—has in the past recommended the establishment of a whistleblower protection agency that covers not just the public sector but also the private sector. And the area of domain in relation to the private sector, if it wanted to be limited, could be limited to matters touching upon federal law. That includes the Corporations Act. That includes financial services. That includes aged care. That includes many other areas of law, such as the disability sector, where issues continually arise, and I think that would be a very welcome step forward. So, I just wanted to make those preliminary comments—which went for nearly five minutes; as senators can forgive me, it's a matter I'm extremely passionate about, because I think it would be a wonderful thing if this Senate could progress laws of that nature to set up an agency in that regard.

I want to talk about schedule 5 of the TLAB. It is a schedule that causes me considerable concern as someone who used to be a company secretary and general counsel of an ASX 200 company and who's been involved in my fair share of capital raisings over that time. I think I did about six capital raisings in the middle of the last global financial crisis, in quick order. So I do bring to this discussion some immediate relevant experience.

The first point I want to make is that Senator Walsh, in her contribution, talked about integrity and raised the integrity of the opposition with respect to its contributions in relation to this bill. Whilst I respect Senator Walsh, the integrity we on this side of the chamber are focused on is the integrity of the then opposition leader, now Prime Minister Albanese, in promising in January 2021 not to make any changes to franking credits, when now we have these changes in TLAB schedules 4 and 5. What about the integrity of the Prime Minister saying on ABC Radio on 30 March 2021 that Labor wouldn't have any changes to the franking credit regime? What are schedules 4 and 5 other than changes to the franking credit regime? What about the integrity of the then shadow Treasurer, Jim Chalmers, saying on 17 January 2022, when it came to tax changes:

We won't be doing franking credits … I couldn't be clearer than that.

Well, he couldn't be clearer than that, and it couldn't be more clear that schedules 4 and 5 depart from those commitments of both the Prime Minister and the Treasurer not to interfere with the franking credit regime. What do we have now in this TLAB? Interference with the franking credit regime.

I want to commend my colleague Senator Bragg in relation to the coalition senators' dissenting report, which I found incredibly useful in preparing this speech. I want to quote from the report on some of the organisations, stakeholders, who have registered their deep concern with the amendments that have been proposed in TLAB schedule 5:

The Corporate Tax Association suggested that there would be great uncertainty for companies 'who have no history of payment of dividends, such as where a company is recently listed'.

Shaw and Partners referred to data that had been generated in the United Kingdom following the abolition of a similar system in the UK:

It was called the advance corporate tax. It was abandoned in '99 after 26 years in operation. From the stats that I've read, in 2000, the UK pension funds and insurance companies owned 39 per cent share of total UK stock market. Fast-forward to 2020 and that figure had fallen drastically to just four per cent.

When you fiddle with things such as the franking credit regime, when you interfere with prior practices regarding the raising of capital and the paying of dividends by listed public companies, they will consider whether or not it is worth their while, especially if they have options, to shift somewhere else, like Singapore. I can remember that, during my period as a company secretary, we were repeatedly approached by the Singaporean government to shift our headquarters and listing from Australia to Singapore. That's what's happening. It's a competitive market in terms of capital, and changing policies like this has consequences.

I note in the report's paragraph 1.23 this statement from Wilson Asset Management: 'Large Australian companies with mature franking account balances are put at an advantage over small to medium-sized entities.' This is one of my particular concerns about this legislation. When you look at the relevant section in the bill—207-159, 'Distributions funded by capital raising'—there's a latent bias towards large companies which have a history of paying franked dividends. It is going to be very hard for new companies, small and mid-sized companies, that do not have a long history of paying franked dividends. Why? Because when you read the test it says:

(1) This subsection applies to a distribution (the relevant distribution) of a kind made by an entity if all of the following conditions are satisfied:

(a) either:

(i) the entity has a practice of making distributions of that kind on a regular basis and the relevant distribution is not made in accordance with that practice; or

(ii) the entity does not have a practice of making distributions of that kind on a regular basis;

The necessary meaning of those two subsections, when you read them together, is that if you're a company that has, say, just recently been listed and you've been going through a development phase in building a commercial enterprise—it could be an IT company, it could be a mining company, it could be any new venture—you are simply not going to have a practice of making particular types of distributions. And when do you actually achieve this threshold of 'a practice'? Is it after two distributions or three distributions? Do four distributions mean a practice? What happens if, say, it's a mining company and we go through something like the GFC? It makes a half-year distribution and an end-of-year distribution, and then it suspends distributions for two years because the market falls out of the relevant commodities, and then it recommences paying distributions. Is that a practice? I wouldn't have thought so. Compare that with the situation of a large bank which typically makes regular distributions and has done so over a number of years.

So, almost by definition, under this section it is going to be much, much harder for a small or medium-sized company to meet that test than it is for a large company that is in the ASX 50 or ASX 20. We're actually setting up a disincentive. This is a disincentive to a company to list on the ASX. This is a disincentive.

There will be people making a decision about where to list their company—on the NASDAQ, on AIM in London, in Singapore, on the DAX in Germany—and they will be considering their options. They will look at this test when they're doing their due diligence, and it is going to be very hard for any startup or new venture to meet this test—impossible. Therefore, when they make a dividend payment, when they engage in a capital raising in close proximity to the dividend payment, they're going to come under the scrutiny of this section. The smaller and mid-sized companies that have newly listed are the ones who are going to fall within the province of this section—not the big ASX 50 companies who have got a regulatory practice but companies who don't have that history. And they're exactly the sorts of companies we should want to attract to our financial markets. They're exactly the sorts of companies we want to list on the ASX or any other market that is operating in Australia. We want to attract their investment. Yet this is a disincentive—another disincentive. We've seen barrier to investment after barrier to investment erected by this government since its election in 2022. You can add this one to the list.

All the expert stakeholders—the brokers, the Corporate Tax Association, professors, the Tax Institute, the SMSF Association, the lawyers advising big companies—all raise exactly the same point. This is going to be a disincentive to investment, and there will be people making decisions in boardrooms around this country who will look at this piece of legislation, once it's introduced, and say this is just another reason not to invest in Australia or another reason not to list in Australia. You are sending exactly the opposite of the message we should be sending to people.

Too often, senators sitting on the other side of the chamber forget that companies have options. They don't have to do business here. They can invest their capital somewhere else. They can list somewhere else. They have options. Capital has options. It can go across borders. It can find a home somewhere else. It's the employees who don't have options. The employees of those companies don't have those options.

So, essentially, because you're hurting, you're providing a disincentive to companies to set up in Australia and to list in Australia, and eventually you're going to hurt the whole Australian economy. Most of all, you're going to hurt the potential and current employees of those companies—Australian employees of companies that decide it's all too hard to invest in Australia and invest their capital overseas.