Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

So the bill is now on, is it?

Jacinta Collins (Victoria, Australian Labor Party, Parliamentary Secretary for School Education and Workplace Relations) Share this | Link to this | Hansard source

Yes, Senator.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The bill is now on! So here we go. This is a government that is in outrageous shambles. This is a government that is weak, that is incompetent, that is dysfunctional, that is divided, that could not run a—

Concetta Fierravanti-Wells (NSW, Liberal Party, Shadow Minister for Ageing) Share this | Link to this | Hansard source

A chook raffle!

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

They could not run a chook raffle. I was going to say something else there, Mr Deputy President, but I would not have wanted to be unparliamentary.

We are dealing here, of course, with the Corporations Amendment (Phoenixing and Other Measures) Bill 2012—a very serious issue. Phoenixing activity is something that the coalition is very concerned about. It is activity which is typically associated with directors who transfer the assets of an indebted company into a new company, of which they are also directors, effectively in order to avoid paying debts that they are required to pay.

The government has previously attempted to address this, and again and again, parliamentary committee after parliamentary committee has pointed out the deep flaws in the government's approach, has sent the government back to the drawing board, has told the government: 'The way you are trying to go about it is not fixing the problem; the way you are trying to go about it is going to capture all of the companies across Australia rather than just targeting companies that are actually engaged in fraudulent phoenixing activity.' And here we have a report before us, which I have not actually been able to officially see yet—which nobody in the Senate other than members of the committee have been able to officially review yet. I am led to believe that there are some recommendations in the report on this bill, from government members, on how this legislation needs to be improved and needs to be amended, yet the Senate has not been given an opportunity to even consider the report that Senator Polley, on behalf of the Chair of the Senate Economics Legislation Committee, has just tabled.

So this is a government that is in disarray. This is a government that has to continue to chop and change with the program because it does not have a clue what it is doing. This is a government that can never follow proper process. This is a government that always gets itself into trouble because it would not know what proper process was if it fell over it. People across Australia are sick and tired of this government. They know that this is the worst and most incompetent government in the history of Federation. They know that it is a weak, incompetent, divided and dysfunctional government. The chopping and changing with the program here in the Senate today is just another reflection of the deep division and dysfunction in this government.

We in the Senate are now being asked to make a judgment on this legislation without having the benefit of being able to properly assess and review the report of a committee that was charged by the Senate to review the merits or otherwise of the legislation. Quite frankly, that is not good enough. There is a proper process to be followed here. When the Senate asks one of its committees to review the merits or otherwise of a piece of proposed legislation then all senators from across the chamber should have the opportunity to properly review its findings, to make judgments on whether or not they might want to change a previously held position.

As I have said, the coalition are strongly opposed to fraudulent phoenixing activity, and we support all appropriate measures to stamp out this practice. The problem is that this government's approach does not do that. This government's approach does not actually do anything to fix fraudulent phoenixing activity—in fact, this government, in this legislation, has not even defined what phoenixing activity is! This is a piece of legislation that gives a blanket increase in powers to ASIC, which will impose all sorts of additional burdens and risks on companies across the board and which, despite repeated attempts to achieve some improvements to the government's approach, has not been improved in any way, shape or form.

We have to remember that last year the government included a series of different measures, supposedly to target aspects of phoenixing activity in the Tax Laws Amendment (2011 Measures No. 8) Bill and the Pay As You Go Withholding Non-compliance Tax Bill 2011. After these particular bills were examined by the House of Representatives Economics Committee, that committee made a unanimous and bipartisan recommendation that the govern­ment not proceed with those provisions. The House Economics Committee made a unanimous finding that the government got it wrong, that the government's approach was incompetent—that it was not right, that it was not going to achieve what the government said it wanted to achieve. This is the House Economics Committee, because the only committee report that I can rely on as a senator in relation to the government's approach to phoenixing activity is the House Economics Committee inquiry report, related to a different bill! I have not had the benefit of being able to review the Senate Economics Legislation Committee inquiry report into this bill—which is a completely outrageous change in process, and mismanagement of process, which of course we have come to get used to from this bad and terrible Labor government. In its report the House Economics Committee:

… notes concerns from the business community and its representatives that the Bills potentially apply to the broad range of directors whether engaged in phoenix activity or not. The committee recommends that the Government should investigate whether it is possible to tighten the provisions of the Bills to better target phoenix activity.

That was the assessment of a committee that included government members. Given that it had Labor members on the committee that came up with that sort of assessment, that is as damning as you are going to get from a Labor member of parliament in relation to their own government. As I say, go back to the drawing board, you have not got it right. You have come up with a piece of legislation that is targeting all company directors and all companies. You are telling us you are trying to fix phoenixing activity but in fact you are coming in with this grab-all of red tape, of additional powers for ASIC that is going to have implications for company directors across the board. Go back to the drawing board is what Labor members of the House Economics Committee said.

I gather that Labor senators on the Senate Economics Committee inquiry equally had concerns about the government's approach to this legislation. But I would not know because I have not been able to review what government senators of the Senate committee actually thought in relation to this particular piece of legislation.

Senator Marshall interjecting—

Senator Marshall, it has only just been tabled. I was asked to make this speech on the second reading on behalf of the coalition within two seconds of Senator Polley having tabled the Senate Economics Legislation Committee report, which was due for tabling later this afternoon. This chopping and changing by this government is just another sign of a government in disarray. It is another sign of a government that has lost the plot. It is another sign of a deeply divided, weak and incompetent government where nobody knows who is in charge anymore, nobody knows who is doing what. This is a government that is all over the place. I say to the people of Australia, 'You are right, this is a government that should be up for the chop.' This is a government that should face an election sooner rather than later, because they are in their dying days. The level of incompetence that is now on display here today, the level of dysfunction, the level of absolute incompetence and disarray that is yet again on display here today in the Senate just shows to anyone who did not already know that this is a government that deserve to be kicked out at the next election and the sooner the better.

After the damning assessment of the government's previous attempt to introduce measures to arrest phoenixing activities when Labor members of the House Economics Committee told the government to go back to the drawing board, the government did exactly that. The government withdrew the provisions in relation to phoenixing from the Tax Laws Amendment (2011 Measures No. 8) Bill because clearly on reflection they conceded that those provisions did not actually appropriately target phoenixing activity. So here we have this latest foray, and pardon for being suspicious, pardon for suspecting that this incompetent government wants to avoid scrutiny by the Senate. What have the government got to hide? Why are the government tabling a report that is supposed to advise senators on the merits or otherwise of the government's approach on phoenixing and then trying to ram this legislation through within two seconds of having tabled the report, before anyone has got a proper chance to consider the findings and recommendations in that report? It might well be that on reading the coalition senators' dissenting report and considering the recommendations that we have made on how this legislation could be improved, Senator Siewert might be of the view that the coalition perspective on this is quite reasonable and quite legitimate. It could well lead to a change of position by the Greens or otherwise. But this arrogant, contemptuous government come into this chamber and want to rush through a piece of legislation that they clearly believe has got some flaws in it because if they were confident that this piece of legislation would stand the scrutiny of the Senate they would not ask the Senate to pass judgment on it before we have been able to properly consider the report that was tabled only a little while ago.

I understand that this arrogant government and this arrogant minister do not take seriously the role and responsibility of the Senate to scrutinise the activities of executive government. This minister does not care much about the proper democratic processes. This minister knows that proper scrutiny by the Senate is a bit of a nuisance when you have got a bad and incompetent government like the current one, coming in with one bad piece of legislation after the other. This is a minister who knows that he is part of a bad, incompetent government and part of a divided, deeply dysfunctional government. He of course knows that the reason the Senate is being messed around like this today is that his government cannot organise the processes properly. This should be of serious concern to any of the reasonable and mature people on the Labor side, but nobody is here to stand up and take a stand against what is being asked of the Senate today.

As I have mentioned, the coalition are strongly opposed to fraudulent phoenix activity and we support all appropriate measures to stamp out this process. We recognise that phoenix activity can cause significant harm to workers and small business people who are denied their legitimate entitlements. If left unchecked, it can erode the reputation of Australia's strong business community and reduce confidence in our world-class corporate regulatory framework. However, we are concerned that the government's approach to this important public policy matter is confused, ad hoc, piecemeal and not appropriately targeted.

The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 is meant to enhance the ability of ASIC to combat phoenix activity. The bill gives ASIC significant new discretionary powers to place a company into liquidation. These powers can be used in a wide range of circum­stances. The bill also alters the publication requirements of corporate insolvency notices to allow for publication on a single ASIC administered website. Finally, the bill establishes a duty for receivers, adminis­trators and liquidators to notify the secretary of FaHCSIA upon their appointment to a company that is a paid parental leave employer.

Look at this. The attendants in the Senate are very helpful. We of course had to ask for this document. As I am on my feet speaking on this legislation, being asked to pass judgment on this legislation on behalf of the coalition, I am being handed a copy of the still warm report. It is a photocopy; it is not even a properly printed copy. I bet that the Senate printers were not even ready to have it properly printed. I am being handed a copy of this report as we are standing here debating this legislation. This is outrageous. This government every day is going from bad to worse. Whenever people across Australia think that it cannot get any worse it does, and we are continuing down this slippery slide to the next election, which no doubt will result in a pretty firm judgment by the Australian people.

This is a report that includes recom­mendations by the government as well. Government senators on this committee are unhappy with this legislation. Government members of this committee are recom­mending that the government review proposed subsection 489EA(6). I am sure that Senator Siewert and Senator Marshall—Senator Marshall, are you on Economics Committee?

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I am a participating member like you are.

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator Cormann, address your comments through the chair.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I accept that admonishment, Mr Acting Deputy President. Here we have got three recommendations from the government senators on this committee to change this piece of legislation. So even government senators do not think that this legislation is up to scratch. Even government senators think that this legislation needs further change.

This incompetent, dysfunctional, weak and divided government, which is treating this Senate chamber with absolute contempt, wants all senators to consider this legislation, this set of proposals, without having had the benefit of properly considering both the recommendations by government senators and the recommendations that were made in the very good dissenting report by coalition senators. I suspect that this will be the first time that Senator Marshall will be able to read the coalition senators' dissenting report, because it is not usual practice that government senators are provided with a copy of dissenting reports before they are tabled. There are some very good recommendations in the coalition senators' dissenting report. The first is:

That the Senate oppose this Bill.

The second is:

That the government undertakes a comprehensive and co-ordinated legislative approach to combating fraudulent phoenix activity that includes an appropriate definition of 'fraudulent phoenix activity'.

It might well have been that the eloquent words of Senator Bushby, who is the Deputy Chair of the Senate Economics Legislation Committee, might have persuaded Senator Marshall to change his mind, or, if not Senator Marshall, perhaps Senator Siewert. Who knows? The point is that the reason we do these reports, the reason we have these inquiries into legislation, is so that the Senate has a proper opportunity to assess the legislation based on the judgment that was made by one of its committees.

Recommendation 3 by coalition senators is:

That regulators including ASIC ensure that they fully utilise existing legislative and regulatory powers to combat fraudulent phoenix activity.

One thing that became very clear during the inquiry, as I understand it, is that ASIC actually already have a lot of powers that at present they are not utilising, either because they have not got the resources or because they are not appropriately prioritising those activities. They have already got a lot of powers that they could use to better target fraudulent phoenix activity. Forever increasing regulatory powers, forever increasing red tape, does not do anything to fix the problem any better. If you have got an organisation that is not utilising its powers now, either because it has not got the resources or because it has not got the appropriate prioritised agenda, that organisation will not do anything just because the government, with the flick of a pen, increases its powers and increases red tape.

Recommendation 4 from the coalition senators' part of the report is:

That any proposed broad new powers for regulators such as ASIC that would apply to corporations and directors that are not engaged in fraudulent phoenix activity be subject to proper public scrutiny and debate rather than be bundled into legislation that is supposed to apply to only one discrete policy area.

I could not have said it better myself. What a sensible recommendation by the coalition members on the Senate Economics Legislation Committee. But, of course, senators across the chamber will not have had the opportunity to properly consider the findings and recommendations that were made by coalition senators, because nobody in this chamber has actually had an opportunity to review the coalition senators' dissenting report and recommendations.

I finish where I started. This is a serious policy issue. This is an issue that the coalition actually wants to see properly addressed. This legislation does not do that. For the government now to come in in another fit of incompetence, to abort proper process and to force the Senate to deal with this legislation without actually having had an opportunity to consider a report that was put together, at its request, by a committee of the Senate is just completely outrageous and inappropriate. It is just another demon­stration of an arrogant, incompetent govern­ment on its last legs, a government which clearly does not know where it is going these days, a government that is so focused on itself that it does not know how to focus on the public interest anymore. This is a government that is so weak, so incompetent, so divided, so deeply dysfunctional. It is time for this government to go. It is time for this government to face the Australian people so that the Australian people can pass judgment on this terrible and ongoing Labor Party incompetence.

Matt Thistlethwaite (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 is important legislation and is part of this government's Protecting Workers' Entitlements package, part of a continued process of ensuring workers' hard-worked-for entitlements are protected in circumstances where companies trade insolvently, go bust and go into liquidation, leaving workers stranded without access to important entitlements such as accumulated annual leave, accumulated long-service leave and redundancy entitlements.

This is not controversial legislation. It has been part of this government's process of ensuring that there are a suite of reforms that adequately protect workers' entitlements in this country. In fact, when this legislation was reported on by the House of Representatives Standing Committee on Economics, a member of that committee reported to the House on 27 February 2012:

The committee considers that the bill comprises uncontroversial measures that will assist in curbing the amoral practice of phoenixing. Indeed, in a briefing issued on 23 January 2012, the law firm Minter Ellison stated:

The … bill contains some reasonable measures for facilitating the protection of workers' entitlements. and these measures are unlikely to affect the position of the majority of directors.

Therefore, the committee has decided not to inquire into the bill and recommends that the House or the Federation Chamber consider the bill forthwith.

That was the determination of the House economics committee, clearly advising that this legislation is not controversial. That is why I find Senator Cormann's contribution to this debate somewhat amusing. Really the contributions from those opposite are all about protecting the interests of big business at the expense of those who will benefit from this legislation, and that is of course workers in this country who are seeking to avoid situations where their hard-fought-for and hard-won entitlements go unpaid in circumstances where companies go bust. This is an important improvement to our corporations power and an important addition in the fight against unethical and immoral practices within the corporate world.

The process of phoenixing is something that is abhorred by the Australian public and not supported by any member of this parliament. We have heard all the stories about businesses setting up one day, trading themselves to a point where they can no longer hope to repay their creditors and then completely walking away from obligations that they have entered into in good faith. We see failed businesses being left without being wound up, simply abandoned without any attempt to fulfil any of the company's obligations to its stakeholders, only to see that same enterprise, the same persons involved, begin trading soon after the failure, often within the same industry, often with the same directors and in some cases with an almost identical name. This practice leaves in its wake a destructive mess that costs the economy a great deal and hurts innocent people, both inside and outside the business. That is phoenixing.

I find Senator Cormann's comments regarding a lack of definition of the circumstances of phoenixing to be somewhat perplexing given that they are clearly defined in this legislation. They are defined in proposed section 489EA, which empowers ASIC to order the winding up of a company in four clearly separate and distinct sets of circumstances—and these are outlined in the provisions of the bill.

Phoenixing, in short, is a process of allowing a company to go broke—but never winding it up or paying out anything to its creditors—and then simply starting up a new company as if the destruction of the other one had never happened. We see this practice all too often in this country, particularly, unfortunately, in the construction industry and the textiles, clothing and footwear industry. According to the Australian Taxation Office, there are about 6,000 phoenix companies in Australia and between 7,500 and 9,000 directors of those companies. It is a practice which plagues many industries in Australia. We know the damage done to our economy by shonky practices in an industry that is this nation's lifeblood—I speak, of course, of the construction industry—although we are seeing this practice creep into other industries and we are seeing more and more people being hurt.

The Australian Security Industry Association, in response to a report into the security industry by Fair Work Australia, has called for greater compliance and enforce­ment to address issues such as rates of pay, sham contracting and, of course, phoenixing. Even in the energy industry, we are beginning to see reports that ASIC is investigating Mr Ben Polis over the collapse of his business, Polis Australia, trading at the time as Green Energy Australia. Unfortun­ately, we are starting to see a lot of this in the retail energy sector. Basically all you need to have to start up a company trading as a retailer in the energy industry these days is a laptop computer and a mobile phone—you can then begin taking and signing up customers. ASIC is looking into allegations that, in this particular case concerning Mr Ben Polis, the assets belonging to Polis Australia were transferred to his new business without payment. When it collapsed, Green Energy Australia owed $397,000 to creditors. We then see Mr Polis running a new company, which has risen from the ashes like the mythical bird itself, trading as EnergyWatch. At the same time, the Fair Work Ombudsman is investigating the failure to pay $500,000 in staff entitlements to employees of EnergyWatch.

In an article for the Sydney Morning Herald on 12 April this year, Maurice Blackburn Lawyers raised the example of the directors of a printing business telling a pregnant worker that she had 'caused an inconvenience' and giving her the sack just before Christmas. The directors of the company, Wongtas, were taken to court over this in 2010. Soon after, the directors of Wongtas placed this company into liquidation and registered a new company—Wangtas—which recommenced the same operations at the same location. The Federal Court has held that the liquidation of Wongtas had been carried out for the purpose of avoiding potential penalties under the Fair Work Act. Even with that Federal Court ruling, proceedings could not be maintained against Wongtas because the company no longer existed. Unfortunately, that means that this pregnant employee was not paid her wages—and of course she never got her job back. This bill introduces a series of measures to help people hurt by such practices by strengthening ASIC's capacity to deal with phoenixing. ASIC will be empowered to place companies into liquidation when they have been abandoned by their directors.

This bill also gives effect to commitments made to amend the process for access to the General Employee Entitlements Redundancy Scheme, GEERS. GEERS was established by the former government following the collapse of National Textiles. We all remember that National Textiles was a company owned and operated by the brother of then Prime Minister John Howard. The company had fallen in a heap, leaving all employee entitlements unfunded. GEERS was set up in its wake. GEERS allows employees to access entitlements in situations where unpaid wages, accrued long-service leave and other forms of applicable leave have been lost because a company has failed. GEERS aims to provide employees with access to these entitlements in a fair and reasonable time frame. However, a significant downfall of the current scheme is that it requires a failed company to be placed into liquidation before employees can seek, through GEERS, to access those unpaid entitlements. As I have pointed out, in phoenixing situations it is often the case that the company is simply abandoned rather than being wound up or liquidated. When this occurs, employees are not eligible to access GEERS. In order to have an abandoned company placed into liquidation, a court order must be sought, and this court process often takes a lengthy period of time at great cost to those seeking the order for liquidation. In the case of employees seeking such an order, a considerable amount of their entitlements are often eaten up in legal fees rather than going towards those next steps in life which inevitably flow from losing your job in the collapse of the company.

Even worse is the situation for employees who are seeking access to an abandoned company in the case where the company has been deregistered. In that scenario, orders must be sought to have the company reinstated and then you still have to go through the process I outlined to get it liquidated—all this to access a scheme which, in its current incarnation, is meant to be a last resort for employees to get the entitlements they need to move on with their lives. It is a government sponsored scheme which often takes an unbearable and unrealistic amount of time to access.

This bill will allow ASIC to place a company into liquidation in a reasonable time frame, therefore allowing employees to access GEERS in that reasonable time frame. That will mean that the pain and cost of litigation can be avoided. That is why this is a positive reform. The new ASIC powers will follow the same rules which apply when a company is deregistered by the com­mission. These new, common-sense powers will mean that companies which are clearly no longer trading and have been abandoned can be wound up and placed into liquidation. This will give employees caught up in a corporate collapse the certainty they deserve of access to their unpaid entitlements.

In addition, this bill introduces a provision requiring companies placed in administration to use a single website for the posting of public notices. At the moment, many companies going through such a liquidation process place such notices in metropolitan newspapers where they are often missed by creditors and employees who have an interest in ensuring that the liquidation process is completed. A new single website—a single point of call—for people in such situations will ensure they have access to the information they need to begin the process of regaining their entitlements. At the moment we see the administrators placing notices in the ASIC Gazette as well, and that is required by the Corporations Act. But, again, a single port of call through a website is a common-sense approach that allows administrators and stakeholders to keep up to date with developments and have easy access to the information that they require.

These measures make an important improvement to our corporations power. The bill means that employees caught up in unethical and unjustified phoenixing pro­cesses can have access to the government's GEER Scheme in a fair and timely manner. It delivers on the commitments that this government has made as part of its Protecting Workers' Entitlements package. It strengthens ASIC's powers to place companies into liquidation when they have been abandoned by their directors and allows for a cost-effective process involving the publication of insolvency notices in a single, publicly available website.

Phoenixing is corporate Australia at its worst. It is unethical, it is immoral and, importantly, it is un-Australian. This bill represents an important step in tackling this broad and far too wide problem in our economy. I commend the bill to the Senate.

Concetta Fierravanti-Wells (NSW, Liberal Party, Shadow Minister for Ageing) Share this | Link to this | Hansard source

I rise to speak on the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. This is an area in which I have a particular interest, given the work I did formerly at the Australian Government Solicitor's Office, and for quite a number of years I was involved in insolvency practice. Phoenixing, particularly in relation to the winding up of companies that had failed to pay their tax, was my daily bread and butter. It is interesting to hear Senator Thistlethwaite speak on this issue. More often than not the companies that do engage in phoenixing activities are, as Senator Thistlethwaite justly says, in the construction industry. That is where I saw many of the worst examples of phoenixing. Often I would have discussions with union officials—sad discussions with union officials—who had come to me representing their members because companies had not paid, in particular, their dues to the Australian Taxation Office and therefore in any eventual winding up the workers had a very difficult place in the pecking order. I want to place this on the record because it is my view that this area needs much more attention than this bill gives it.

Can I present some practical examples relating to some of the things that Senator Cormann and, to some extent, Senator Thistlethwaite said. Senator Thistlethwaite focused on some high-profile windings up. I would like also to place on the record that I had my fair share of interesting windings up. In fact, Senator Marshall, I actually wound up the holding company that ran that famous piggery. That was a very interesting exercise. There are certainly some very interesting characters on the list of serial directors who set up companies and then deliberately send them into phoenixing arrangements and trade insolvently, particularly those with whom the Australian Taxation Office has come into close contact. I will not put names on the record.

The point I make is that any package that deals with phoenixing must look at what existing powers are available to the Commonwealth—and they have always been available to the Commonwealth, yet some of those powers have not been used. One of the most common situations I found myself in was where I would be winding up a company which had directors that had previously had companies; those companies went into liquidation, then they set up companies with similar names and they went into liquidation. Often I would be dealing with directors who had had a string of companies that had been wound up, and here they were again before the courts being wound up. Why? Because, regrettably, there had not been a prosecution, there had been underresourced regulators, there had been insufficient follow-up on complaints and there had been inadequate penalties to act as a deterrent. Unfortunately, if these directors are not prosecuted for insolvent trading and the regulator might have the powers to prosecute but does not have the resources to undertake those prosecutions, the inevitable will happen: these companies will go into liquidation; the creditors—often the workers—will not get their entitlements; and another company will start up down the road the next week.

Another issue with phoenixing that I found in my experience was the use by companies and company directors of the voluntary administration provisions, which also enabled them to undertake creative accounting and enter into arrangements which often paid 5c in the dollar and then again, ultimately, the company could be put into liquidation and the directors would start up again.

My concern with this legislation is not that I do not want to combat phoenixing but that the measures to combat phoenixing should be packaged up in a much broader reform than is currently before us. Senator Thistlethwaite mentioned section 489EA and ASIC orders for the winding up of a company. The legislation may well canvass that sort of issue, but what is clear is that work done by the Senate Standing Committee on Economics as well as work previously done by Senator Sherry and other assistant treasurers provides a much better and much more comprehensive starting point for the direction of this legislation. This is not a definition of what phoenixing activity is. This is a broad definition of the talks about the winding up of a company. It does not go into the specifics of the sorts of phoenixing activity that we see daily.

Senator Cormann referred to the work of the House of Representatives Standing Committee on Economics, and that committee presented a unanimous and bipartisan recommendation that the government not proceed with provisions. It specifically commented:

... the committee notes concerns from the business community and its representatives that the Bills potentially apply to the broad range of directors whether engaged in phoenix activity or not. The committee recommends that the Government should investigate whether it is possible to tighten the provisions of the bill to better target phoenix activities.

As I understand, the government sub­sequently withdrew the provisions from the bill which the Economics Committee was then considering and has yet to provide an indication as to how they will tighten the provisions to better target phoenixing activities as recommended by the committee. A number of senators were involved in a Senate inquiry which, while it came from the other aspect of considering activities of liquidators, nevertheless touched on phoenixing. Senator Williams in particular went into more detail in relation to some companies he had had experience with. We have yet to see a government response to that committee report, which also touches on these matters and lends credence to my appeal to the government that this is a far wider issue than what this legislation currently canvasses, particularly in fairness to all—not just the corporate sector—small businesses and workers who often find themselves at the lower end and ultimately are the ones who suffer the most as a consequence of companies going into liquidation. In the construction industry it is the subcontractors, the workers and the businesses providing materials who ultimately will not be paid.

The necessity for a clear definition is fundamental to any legislation. It is fundamental that that definition include the fraudulent activity which is the cornerstone of phoenixing activities. The definition should be targeted at the specific activities which the government is seeking to eliminate. A clear definition would protect those legitimate companies and ensure they do not inadvertently get caught up in what is quite draconian legislation. My criticism is that there needs to be greater definition of what phoenixing is about. While Senator Thistlethwaite touched on this, there is a range of areas which, in my experience, could be looked at. When one examines whether a company has been engaged in phoenixing activities, there is a range of Commonwealth areas with which the company could have had involvement—the tax office or a range of other aspects of government—which would have given certain indicators. For example, directors may have previously been directors of companies which had gone into liquidation. One accepts that some companies do go into liquidation as serial offenders. I dealt with one colourful character frequently in the courts. I must have wound up 10 or 12 of his companies. He repeatedly turned up in the courts, in my case because we were winding him up for failure to pay tax.

Yes, there is a rightful role in relation to ASIC improperly overseeing and enforcing legislation but my point is that I would like to see ASIC utilise more fully the existing powers available to it. While the government is now looking to add additional powers, a far better reform package would look at the existing powers ASIC and other organisations to see how they can be better utilised. The concern I have, as Senator Cormann expressed, is that the government seems to be taking an ad hoc and piecemeal approach to the targeting of fraudulent phoenixing activities by introducing different pieces of related legislation in an unco­ordinated manner rather than withdrawing the current bill, looking at this matter in a much more global way, engaging in meaningful consultation with stakeholders to address their legitimate concerns and determining a comprehensive and co­ordinated legislative approach to this important public policy matter.

As a starting point—and I mentioned Senator Sherry before—the government should consider the proposals paper on combating phoenixing activities released in November 2009 by Senator Sherry, who was then the Assistant Treasurer, one of five assistant treasurers in the short history of the Labor government. Of the 11 proposals for combating phoenixing activities in that proposals paper, none are reflected in these new ASIC powers. The 11 proposals may in fact be a good place for the government and the new Assistant Treasurer to start when they go back to the drawing board, as they properly should on this important area of policy.

The coalition has a number of other concerns about the government's approach to phoenixing activities including how effective previous regulatory efforts have been in combating this practice, the appropriateness of available penalties and the lack of recognition by the government of the role and capacity of liquidators in taxing phoenix activities. I mention the report the Senate committee had undertaken in relation to liquidators' activities because we have yet to see the government's response. I think that is an important component if we are going to consider phoenixing activities. I echo Senator Cormann's comments on Senator Mark Bishop, the chair of the economics committee, in the report tabled by Senator Polley a few moments ago. Can I also place on record that tabling a report on an important piece of legislation and then having the legislation follow shortly thereafter is really indicative of the shambolic way that this government runs its Senate procedures. But even Senator Bishop makes comments in relation to the definition of winding up by ASIC and, indeed, even Senator Bishop makes references to how the definition needs to be improved.

I turn now to the coalition senators' dissenting report, which picks up the Treasury proposals paper and the document that I referred to in relation to Senator Sherry. I would like to quote from the Treasury proposals paper issued in November 2009, which describes the systematic way that such phoenix activity is conducted:

Fraudulent phoenix activity involves the evasion of tax and other liabilities such as employee entitlements through the deliberate, systematic and sometimes cyclic liquidation of related corporate trading entities.

Coalition senators recognise that phoenix activity causes significant harm, most especially to workers and small businesses who are denied their legitimate entitlements. They state correctly:

If left unchecked it can erode the reputation of Australia’s strong business community and reduce confidence in our world class corporate regulatory framework.

Despite efforts of this government, it still does not get it right.

The coalition senators' dissenting report refers to the unanimous and bipartisan recommendation of the House of Representatives Standing Committee on Economics and then goes on to state the obvious—that there is no definition of fraudulent phoenix activity. The report picks up the point made by the Australian Institute of Company Directors:

We are firmly of the view that if new legislation is being introduced to target a specific problem, then the legislation must clearly define the issue sought to be addressed and specifically regulate that problem.

It is very clear that the government has not made any meaningful attempt to define what constitutes fraudulent phoenix activity or to delve into the specifics of what that activity entails. You cannot make a meaningful attempt to reduce phoenix activity if you do not specifically and properly define what that activity is and what it entails, and be a lot more specific about it. As I said, whilst the bill does make an attempt to significantly increase ASIC's powers, it fails to address the existing powers and how those powers have been utilised. In any reform in this area, one does have to examine the deficiencies in the current regulatory framework to see why activity has gone unchecked.

Phoenixing activity has been a factor of corporate life. I used to practice in this area in the early 1990s and mid-1990s. We still have these issues. I take Senator Conroy's point that governments of both persuasions need to look at this area. (Time expired)

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. It is a pleasure to speak on this bill, as it is great Labor policy. Before I get into the substance of my speech I would like to comment on some of the previous contributions. I want to commend in some respects the contribution just made by Senator Fierravanti-Wells, but unfortunately I think she will probably be dragged into the office of the shadow minister, Senator Cormann, because Senator Fierravanti-Wells's contribution has really made his look very ordinary. It is very clear when you contrast the two contributions that Senator Fierravanti-Wells has actually come to grips with some of the issues and some of the problems that this bill is trying to seek to address. Given Senator Cormann's contribution, one would not even think that he had the most basic understanding of what the actual problem was. So I do feel for you, Senator Fierravanti-Wells. You should not come in outshining the shadow minister in the way you did, and I am sure he will have some very harsh words for you.

It was an extraordinarily ordinary contribution by Senator Cormann, who ran a line about the fact that he did not have access to the committee report prior to it being tabled today. I flicked through the Notice Paper to see whether Senator Cormann is a member of the Senate Economics Legislation Committee, and indeed he is. He is a participating member of the committee. As every senator in this place would know, the committee has to meet and endorse the draft of the report prior to it being circulated. All Senator Cormann had to do was ring up and say, 'I would like to see a copy of that report,' just like every other senator can do and does have to do. But for some reason it is beyond Senator Cormann to have the wit or the nous to actually help himself and ring up, and get a copy of the report so that he could be informed by it.

He then went on to acknowledge that the only part of the report that the committee does not have access to and that government members do not have access to is the opposition's dissenting comments, which of course are kept secret from everybody else—but not the report itself, as everyone knows. I do not really think we can believe very much of what Senator Cormann has to say on this bill. He certainly was not portraying the reality about the existence of the report to the Senate, and I suspect the rest of his contribution was equally as poor.

I also want to pick up on what Senator Fierravanti-Wells said. She very clearly identified the serious nature of this problem and how it has been ongoing. In fact, I like the example that she used, in that, when she was practising in this field as a solicitor in the nineties, a director had gone through the phoenixing of 10 to 12 companies yet was still around. I think that demonstrates that there is a very serious problem.

Senator Fierravanti-Wells's position—reflected also in the dissenting comments in the report—is that we should have a look at what existing powers ASIC has and utilise them before we go into relegislating. If Senator Fierravanti-Wells knows this has been a problem for 20-odd years, ASIC obviously does not have the power to do something about it and they need extra legislative muscle to tackle this problem. Of course, that is why the government are legislating, because we need to give ASIC the powers and the ability to crack down on phoenixing. It simply is not good enough to say, 'We acknowledge that this problem is there and we think it is terrible but we are going to allow it to flourish.' That is what the opposition are saying today. They are going to oppose this legislation. They acknowledge that it is a serious problem that needs to be dealt with, but they are going to oppose it and let this problem flourish.

Senator Fierravanti-Wells at least had one criticism of the legislation, saying that it does not go far enough. If it does not go far enough, that is something the government will have to revisit. But, Senator Fierravanti-Wells, put up some amendments. If you want it to go further, put up some amendments for the government to consider. But let us go as far as we want to go. We think we are going far enough at this point in time. We may have to come back and revisit this in the future if it does not close the loopholes that have been identified, but if you do not think it goes far enough, support how far it does go and put up some amendments to make it go further. We can accommodate that fairly easily; we can at least look at amendments. You would think you would do that. But to simply say, 'We do not think it goes far enough, so we are going to say no' is really just the way this opposition work in this place and of course in the House. Their answer to every problem is to simply do nothing and say no. Whenever the govern­ment tries to proactively move to close loopholes, to stop people being ripped off, to stop phoenixing of companies so that people pay their tax and entitlements to working people and to take away this blight from the business community, the opposition say no and frustrate the government. They want to oppose it. There is never any constructive engagement with the government; they simply say no. I do not think it is good enough.

But I am pleased by and do get some confidence from the fact that Senator Fierravanti-Wells at least understands the issue and what is at stake. I just think it is very disappointing that someone who obviously understands it has not had the courage to stand up in the party room and say, 'Actually, this is good stuff and we should be supporting the government and encouraging the government to go further.' But it is obvious to everyone what the stumbling block in the opposition party room is. It is the shadow minister who has not got a clue about this particular issue. It is a bit of an embarrassment, as was his contribution today.

The Labor Party are getting on with the work of implementing the protecting workers' entitlements package and fulfilling our commitment to cracking down on companies that undertake phoenixing behaviour. In our market based economy there is a responsibility of government to represent the public interest. When the private sector writes off carbon pollution, for instance, as an externality, it is the role of government to ensure that the true cost is accounted for. When the private sector fails to provide appropriate infrastructure, it falls to the government to intervene with initiatives such as the National Broadband Network. When there is evidence of widespread sex based discrimination in Australian workplaces, it is the responsibility of government to take action. We have taken action in that regard and I will be tabling a report on legislation that the government are moving in that area later today.

In an ideal world, the government would not be forced to take this kind of action. But, unfortunately and increasingly, we bear witness to shameless, cynical behaviour by elements of our business community. Phoenixing represents a particularly heinous form of corporate cynicism whereby a company enters into a calculated collapse in order to escape its financial obligations to its workers and other creditors. Soon afterwards, these companies are seen to rise from the ashes, much like the mythological bird. The Australian Taxation Office estimates that there are approximately 6,000 phoenix companies in Australia today. This is not a small problem; it is a significant problem. It is well past time that it was addressed and it is well past time that the opposition supported the government in doing this.

The government seeks to address in this bill the complex issue of phoenixing in three separate ways. Firstly, and most significantly, the bill seeks to empower ASIC with the ability to place abandoned businesses into liquidation in appropriate and prescribed circumstances without applying to the courts. Effectively, it seeks to thwart the current practice whereby a business can enter into a state of limbo, neither living nor dead, thus avoiding certain financial obligations. Previously, newly unemployed workers have sometimes been able to gain access to certain outstanding entitlements through the General Employee Entitlements Redundancy Scheme, GEERS. At present, however, it is a precondition that corporations are actually placed into liquidation before their former employees are able to sue for their entitlements through GEERS. Unfortunately, this does not always happen as it should.

Workers who have just lost their incomes and who are often neither financially nor emotionally equipped to do so find themselves faced with the requirement to undertake court action before being able to gain access to the entitlements that they are owed. I think that is an incredibly unfair burden on workers at the moment. They are the ones who are forced to take a company to court to force it into liquidation before they are able to access their entitlements. That is not an appropriate thing for workers to have to do, especially when in nearly every case they have lost their income and do not have any other income at that particular time. It is the role of government through its regulators to force that issue and ensure that that action is taken quickly and efficiently. These actions will represent a significant step towards the realisation of the government's protecting workers' entitlements package.

The bill also seeks to change the reporting requirements of newly insolvent companies. External administration notices will be required to be made available on the ASIC website. This is a sensible and modern approach to an existing outdated and costly system. Senator Thistlethwaite, whose contribution I commend to everybody, went through that process in some detail. Currently businesses are required to publish a notice of their insolvency either in a newspaper or in the ASIC Gazette. This approach does not befit the digital age. It is essentially decentralised and lacking in clarity. The requirement to publish a notice of external administration on the ASIC website will reduce the administrative burden on creditors, who are currently required to monitor numerous newspapers for relevant notifications, particularly as there is no set newspaper or day of the week on which notices must be published. It will make it far easier for all interested parties, including workers, to gain access to this often crucial information.

Furthermore, this measure will result in significant savings to the creditors of companies that enter into external administration. It is estimated that this reform will result in approximately $15 million of savings, some of which will undoubtedly find its way into the pockets of deserving ex-employees.

Finally, this bill will require liquidators to inform FaHCSIA in the event that they are appointed to an employer with Paid Parental Leave responsibilities. This will ensure that FaHCSIA will have the information it needs to determine whether to persist with parental leave payments to the company in question or whether it would be more appropriate to direct those payments to the individual employee. This final amendment forms but a minor part of a suite of reforms that this bill seeks to implement, yet it gives me great pleasure to commend it. Paid parental leave is a triumph of this government and another example of good Labor policy. Australians, particularly Australian women, have long fought for the right to paid parental leave and over 150,000 working parents have so far enjoyed the fruit of that labour. It must be gratifying for these parents to know that the government continues to place great importance on the right to paid parental leave, as this bill shows.

Workers and fair-minded business people must also find it gratifying to see that this government is pressing on with its agenda of reform and is tackling the complex issue of phoenixing—a despicable practice, a sad symptom of corporate greed and a strong argument for continued vigilance by a government that is not afraid to intervene on behalf of Australian workers. I commend this bill to the Senate.

Jacinta Collins (Victoria, Australian Labor Party, Parliamentary Secretary for School Education and Workplace Relations) Share this | Link to this | Hansard source

I thank those senators who took part in the debate on the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. On behalf of the government, I would like to thank the stakeholders for their contributions at the various stages. This bill delivers on the Gillard government's protecting workers' entitlements package, its election com­mitments and part of its insolvency reform package, announced on 14 December 2011. There is no rush or surprise in any of it. The bill strengthens ASIC's powers to place into liquidation companies that have been abandoned by their directors. It will benefit the employees of those abandoned companies by enabling quicker access to their unpaid entitlements through the government's employee assistance scheme. The bill also paves the way for a more streamlined and cost-effective process involving the publication of insolvency notices via a single, publicly available website. This will benefit creditors of companies in external administration by reducing the cost of complying with these regulatory obligations and making it easier for creditors to keep track of information about companies in external administration. The bill, as Senator Marshall said, also contains some miscellaneous amendments in relation to paid parental leave and the powers of the court in relation to company reinstatements.

In conclusion, this bill will ensure that ASIC can step in to wind up a company to ensure that employees receive quicker access to their entitlements from the government's employee assistance scheme. By imposing a requirement on insolvency practitioners to inform FaHCSIA of their appointment, the bill will ensure FaHCSIA becomes aware when a company goes into external administration, so as to allow it to take over responsibility for paying employees under the Paid Parental Leave scheme. The bill also implements an important part of the government's insolvency reform package by facilitating the establishment of a single, insolvency notices website. I commend the bill to the Senate.

Question agreed to.

Bill read a second time.