Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I want to begin by focusing on the issue of the definition of a small business. We have heard today that there are numerous definitions for small businesses. It is obviously something that deserves a wider discussion and a wider debate. I note that when we in this chamber debated and passed legislation for a tax cut for small business and for depreciation allowances to be raised significantly on assets we used a $2 million-turnover threshold. Originally the government had proposed a tax cut for small businesses with a threshold of less than $5 million, if my memory serves me correctly—certainly, that was what was put out into the media—and later that was changed to $2 million. The Greens have always used a $2 million-turnover threshold in our policy on small business, but I understand the ABS and ASIC use a threshold of 15 or 20 employees. Senator Xenophon raised a point in relation to the Australian Bankers' Association's submission around the potential for financial securities firms with fewer employees to be writing literally tens of millions of dollars, if not more, in revenue—for example, they could be working on derivatives.

We also have the very obvious situation arising now in the new economy. Senator McKim is not here, but he is a big fan of the shared economy. We have seen virtual businesses, like Uber and others, that are low-employee businesses, generating billions of dollars of revenue. I think this is something we need to consider. My question to the minister is: will your five-year review include looking at potential uses or abuses of this system by businesses that in revenue terms are obviously significantly larger businesses than most small businesses? Will you consider, in line with some of the submissions we have seen, reducing the time frame for conducting your post-implementation review to two years rather than five years? If not, can you explain why five years is appropriate?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

In response to the final question, the five-year review period that is contained in the legislation is an outer limit. It is open to the government to conduct the review sooner. I do not think we would want to do it too soon, before we had a reasonable amount of lived experience to make an informed judgement as to whether and to what extent there ought to be further improvements to the framework that has been put in place through this legislation.

The other issue that Senator Whish-Wilson raised was about the definition of a small business. When you pursue a tax cut for small business, the assessable income levels are not necessarily a key determiner when it comes to drawing a line in the sand as to who is in and who is out. But for the purposes of this exercise of extending to small business protections that are generally available to consumers, in the context of unfair contract terms, our advice, and what has come out of the consultation process, is that the easiest way for small business to apply an appropriate test is to look at the headcount—and that is what I said in my summing-up speech. 'Businesses with less than 20 employees' has been chosen by the government for the definition as it is a commonly used headcount measure and has been found by the Australian Bureau of Statistics to provide a good proxy for a small business. The headcount approach is also considered the easiest for small business to implement. If you wanted to apply to this context any other indicator, as legitimate as it might be in the context of the tax system, you would add a further complication to the way the proposed protections in this legislation would be applied to small businesses, and that is certainly not something that the government would want to do.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Could I move to the issue of the transaction value thresholds. From reading the explanatory memorandum, I understand that a survey was conducted which, over a period of months, talked to small businesses and collated data and information on what might constitute a threshold that would be useful for this bill in respect of the unfair contract terms that we are looking at. The value that the government has come up with is $100,000 within a year and $250,000 over a longer period of time. Can you confirm that that would cover 80 per cent of the businesses you surveyed and whether you feel that the other 20 per cent, who would still constitute small businesses, would unfairly miss out if we were to have in place a transaction value threshold that did not incorporate the majority of small businesses.? I refer you to the use of the word 'most' in paragraph 1.13 of the draft explanatory material, which stated:

The consultation process indicated the preferred transaction value threshold would encompass most small business transactions.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I thank Senator Whish-Wilson. The first point I would make is a correction to what the senator has just said: we are not excluding any small business. If you are a small business with up to 20 employees, you are eligible for this extended protection from unfair contract terms, which at present is only available to consumers.

This is ultimately a matter of balance. What we have said is that we only propose to extend this protection from unfair contract terms to transactions of up to $100,000 when they are payable under a contract of 12 months or less and $250,000 for the up-front price payable under a contract for more than 12 months. Obviously, this is a matter of balance. It does cover 80 per cent of small business transactions. In the context of the small businesses and the stakeholders that we have surveyed, the threshold is set to provide the right balance between giving small business confidence to engage in contracts while encouraging them to seek legal advice for more substantial contracts.

Obviously, when you make a decision to extend to business a protection that, historically, has only applied to consumers, you do need to draw a line somewhere in order to ensure that you do not go too far. The current figure was the product of very extensive consultation with the sector about what would be a suitable way to capture most day-to-day contracts. The thresholds take into account that lengthy consultation with industry. Our consultation included liaison with the states and territories, and they all endorsed that figure. Our bill, in its current form, gives small business protections that they have never had. Amendments that force this back to consultation could derail this process and, therefore, prevent small businesses from enjoying these benefits. I would have thought that it would be better to get this bill through, see how it operates in practice and then make a judgement on what further adjustments may or may not be appropriate after the review, which has to take place within a five-year period.

I know that Senator Whish-Wilson has flagged an amendment to essentially increase the threshold of the up-front price payable under a contract of 12 months or less from $100,000 to $300,000 and to increase the up-front price payable under a contract of more than 12 months from $250,000 to $1 million. The government will not be able to support these amendments. Indeed, if the amendments carried, we would not be able to support the amended bill in that form in the House of Representatives, which would mean a delay in this additional protection, which we are proposing to put in place for small businesses in appropriate circumstances—namely, in the context of contracts of up to $100,000 where the up-front price is payable under a contract of 12 months or less and up to $250,000 where the up-front price is payable under a contract of more than 12 months. So I would encourage the Senate to keep that in mind.

I understand the argument that Senator Whish-Wilson is putting forward. Ultimately, it is a matter of judgement; it is a matter of balance. We believe that we got the balance right, based on the extensive consultation that we have conducted. Ultimately, the safeguard is that there is a review due to take place down the track, so we will be able to reassess as to whether there ought to be an adjustment to where that line in the sand is drawn. I would very much urge the Senate today to support this bill, as proposed by the government, in order to get this additional protection for small business underway as soon as possible and for us to have a conversation about what further improvements might be made down the track at a later stage.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I notice a number of stakeholders said that they were disappointed with the legislation—obviously, there are criticisms in different areas—simply about the fact that it did not meet the spirit of the government's promise, going to the last election, that they would extend to small business these contract terms from consumer law. For example, the Australian Newsagents Federation said:

The majority of Newsagents have approx. 6-8 main multi-year contracts …

They also talk about their lease agreements being long-term lease agreements and say:

These contracts will in most cases be excluded by the current bill thresholds. These are the contracts that can often lack equity, that cause small business owners stress, and that can also restrict their control to manage their own businesses.

These are important submissions that are made by key stakeholders in this debate. They also raise concerns about a number of issues in relation to what constitutes the up-front price payable in the UCT Bill and they make some suggestions there about amendments to the legislation that we have here in front of us. They also talk about exempting the up-front price of the goods and services and exempting the main subject matter of the contract. There are a number of exemptions that we could have sought today to finetune this bill. I accept the minister's assertion that these are things that could be reviewed in two years time or in five years time. But I think this issue, where we could simply extend the transaction value threshold from $100,000 to $300,000, will not do anything to impact the legislation. It should not have any issues across the small business community. I notice a number of groups that represent larger businesses put up criticisms of this bill; they do not want to see it happen. I think this is a very simple one for us to do here today. It would be very disappointing if the government did not show any flexibility in this regard. These are, I think, very good amendments that we can say, now, with confidence will capture 95 per cent of small businesses in this country, which is much more in the spirit of what the government promised when it promised this legislation going into the last election. It would be an easy thing to do.

I think it is threatening the Senate, as you have just done, Senator Cormann, to say that it will be on our heads if this legislation gets rejected by the upper house in this country, when actually what we are asking to do is very simple and would improve the bill, and it probably has majority support in the Senate. I would ask what particular issue you have with extending this to $300,000. In asking you that, I would like you to consider another thing that the Australian Newsagents Federation said in their submission:

… in the exposure draft explanatory material ‘context of amendments’ 1.7, it argued a rationale that higher value thresholds should be excluded on the basis that, ‘‘it may be reasonable to expect that they (small businesses) undertake appropriate due diligence (such as seeking legal advice)’, and that, ‘the onus on small businesses to undertake due diligence when entering into high-value contracts’ should be maintained. It is overly simplistic and ingenuous to assume that by taking legal advice and doing due diligence that a small business operator will necessarily be able to inject equity and fairness into their contracting relationships with several multinational organisations who they contract with, or to easily walk away without losing their business, particularly on renewal. This is unrealistic when the more powerful party may use their market power to be particularly inflexible.

They do state in their submission that the majority of their standard form contracts are for over $100,000, yet under your definition they constitute small businesses, with newsagents being employers of just a few people. So why is this an example here, where essentially your legislation is take it or leave it? Can you address those concerns?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Let me right up-front object to Senator Whish-Wilson's suggestion that I was somehow threatening the Senate. That is just a ridiculous, juvenile, union politics type proposition. What I was doing was presenting very clearly the government's position. In the same way that Senator Whish-Wilson is quite entitled to express the view of the Australian Greens, I am entitled to present a view on behalf of the Australian government. It is the Australian government which is proposing this reform, this additional protection for small business from unfair contract terms. What I am doing, Senator Whish-Wilson, is providing some advice to the Senate about what the implications of certain courses of action would be. Obviously it is entirely up to the Senate to make its judgement, but it would be very remiss of me not to be very clear about what the implications of different courses of action would be.

The second correction I have to make is that all of Senator Whish-Wilson's commentary and all of his questions seem to suggest that somehow we are excluding from this legislation some small businesses that otherwise come within the scope of this legislation. That is just not true. If you qualify as a small business under the definition of 'small business' in this legislation—that is, if you have fewer than 20 employees in your headcount—then you qualify for the protections that come, in terms of protections so far available only to consumers, from unfair contract terms.

It stands to reason that you do not want to offer that protection on an open-ended basis. It is a level of interference in the free market, and you ought to do that in a cautious and balanced way. In the way that we have determined these thresholds, based on extensive consultation, we are confident that our additional protection will cover 80 per cent of small business transactions by relevant and eligible small businesses. It would be bad economic policy if we were to increase the threshold by too much, because the message we would be sending to small business is that they do not need to do their homework in relation to some of their larger contracts. We would be suggesting that small business do not have to do their due diligence when it comes to these larger contracts: 'Don't worry; the government is here to protect you.'

We have said that a certain category of transactions—transactions of up to $100,000 in value for contracts of 12 months or less or up to $250,000 in value for a period of more than 12 months—will come within the scope of this extended protection, which historically has been available only to consumers. We are making that available to small business, consistent with the commitments we made in the lead-up to the last election. We are keeping faith with the commitments we make to small business in the lead-up to the last election. So, as well as having delivered a tax cut for small business, as well as having pursued wide-ranging reforms to strengthen the position of small business in our economy, this is another part of our broader economic plan to strengthen growth, create more jobs and create better opportunity for people to get ahead.

In the end, when you put in this additional regulatory mechanism, you have to draw the line somewhere. We have made judgement, based on consultation, having considered all of the outcomes of that consultation very carefully. Senator Whish-Wilson is entitled to disagree with the judgement the government has made. All I would say is that the government is very confident that we have got this right. This will be subject to review down the track and there might well be some adjustments once we see how this operates in the market. But, if this does not proceed through the parliament based on the proposition that the government has put forward, you are preventing small business from getting access to this additional protection from unfair contract terms. That is a matter of fact. That is not a threat; that is a matter of fact. In the end, I would say to the Senate: please consider this as you are making final judgements on which way to vote in relation to the Greens amendments.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

I do not want to disappoint the minister, but I will be moving an amendment that the threshold be moved not to $300,000 but to $500,000.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Day, are you seeking leave to move this amendment?

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

Not at the moment; I am just speaking in this current discussion. Minister, I have been an independent contractor; I have been on both sides of the desk on this.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

You are big business.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

I was not always a big business; I was a very small business; I started off as a trade contractor. So I know both sides of this argument. I accept and acknowledge the sincere view of the government and its advisers that a $100,000 limit is about right. But, with all due respect, I think I would lean towards the balance in judgement—I think that was the minister's phrase: that it was a matter of balance in judgement—and I would be more inclined towards the judgement of those who are actual practitioners in this field and independent contractors rather than the government's view.

At the moment, there is not a threshold. Somewhere around $100,000 has been the figure that the government has landed on. It has been suggested that it should be at least $1 million, or in fact some would suggest that there should be no limit at all to the availability of access to contracts that are deemed to have unfair provisions. I for one am a great believer in law of contract. I think the sanctity of contracts is absolutely essential in a modern economy. The terms are what they are. When you sign a contract, 'You pays your money and you takes your chances,' as we used to say. As to so-called 'unfair contracts', I really do not like that term; it is an oxymoron or a contradiction in terms. But when we get these 'unfair terms' or 'non-contract terms' within a contract that say, for example, that one of the terms is that one party can just change its mind unilaterally, change numbers or change dates, then that is not a contract. All right—both might sign to say that. But I think that particular issue does need to be addressed.

Minister, $100,000 in a contract is not very much these days. A lot of contracts go for a lot higher than that. I have seen many, many small businesses—even employers or organisations with more than 20 employees—sign contracts that are much, much higher than that, and then they are subjected to all sorts of terms and conditions which really do not belong in any self-respecting contract.

So, as much as it might disappoint some in the independent contractor world who would like no limit or at least $1 million, I will be moving an amendment that increases the threshold limit from $100,000 to $500,000, and I ask the government to please, for once, consider and listen to those who have actually been doing these sorts of things for many, many years and to listen to those who have to live with these contracts in the independent contractor world.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I will be brief. I thank Senator Day for his comments and the spirit in which those comments have been made. In the end, we can obviously keep an argument going for a very long time about whether it should be $100,000, $200,000, $300,000 or $500,000. We have obviously gone through a very extensive consultation process. We have made a judgement on what would be an appropriate starting position.

What we would say is that what we are proposing is much better than what is there now. At the moment, the threshold is zero because, at the moment, no contract gets the additional protection. I understand the arguments that are made. But in the end we have made a judgement. That is the judgement that we are putting forward for the Senate's consideration. Let us get these provisions under way. Let us get them working. Let us get them protecting small business from unfair contract terms within a particular framework.

I am also pleased to confirm that the Minister for Small Business, Bruce Billson, has agreed to conduct the review of this legislation in two years rather than five years. The legislation as currently drafted facilitates this, because, as I have indicated in answer to a question from Senator Whish-Wilson, the five-year review timetable is a timetable of up to five years. So I am putting on the record now, on behalf of the government and on behalf of Minister Billson, the government's commitment to conduct the review in two years, which is also something that Senator Xenophon has raised with the government. So I hope that that satisfies the Senate.

The issue at hand is the same issue that Senator Whish-Wilson and Senator Day have raised. Even though they cannot agree between themselves on what the appropriate threshold is in terms of contract value, they are pursuing the same principle. But what I would suggest is: why don't we get this legislation underway? Why don't we get it in place, on the basis of the judgements the government has formed, based on consultation with small businesses? Let us have the review thrash out how it is working, whether it needs improving and whether there is any need for further changes, and then let us cross that bridge when we get there.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I do have a question to ask the minister, in relation to his indication that the government will support a review of this legislation and the impact of it and its effects, within two years after the legislation has been passed. I understand that the coalition will support a broad ranging review with the Senate Economics References Committee in relation to this, and if there is going to be another review, an independent review, of the legislation, I would be pleased to hear from the minister on that. But, at the very least, we ought to have the Senate looking at this through the Economics References Committee position. I am not sure if the minister wants to respond now?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Just to confirm that what Senator Xenophon said there is absolutely right: the government has agreed to support a review through the Senate Economics References Committee within two years of this legislation coming into effect.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

That is a commitment, essentially, that, as a coalition, you will support that. Can I now go to the amendments that are before the chamber and also the foreshadowed amendments of Senator Day. It is very rare—

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Xenophon, no amendments have been moved as yet.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Thank you, Mr Temporary Chairman, for picking me up on that. I refer to the foreshadowed amendments of the Australian Greens and Family First. It is a rare and beautiful thing to see Family First and the Australian Greens on a unity ticket! I agree with both of them. Senator Whish-Wilson has experience in business and Senator Day has built up a very successful business. I do not think it is a small business now, but it started off as a small business and he has dealt with small businesses. I commend him for what he has done and the way he has built up a business that has employed so many Australians—South Australians, in particular.

The current thresholds are too low. Senator Day's foreshadowed amendment and that of the Australian Greens indicate that there are many, many transactions that will not be caught by this bill. It is too narrow. The case of those who will sign a one-year contract that is worth more than $100,000 is an example. The Newsagents Federation have given examples. When entering into leases and the like there are issues that need to be ventilated.

This is the question I have for the minister. I support the increases foreshadowed by both the Australian Greens and Family First, but I understand from Senator Canavan's contribution in this debate that if the amendments are passed in this chamber the government's position is that this will be a stumbling block because it will need to go back to COAG. If that is the case, does the government have a view about reflecting the will of at least this chamber and making a commitment to go back to COAG, even if this bill is passed in its current form, to at the very least reopen the discussion about increased thresholds, as suggested by Senator Whish-Wilson and Senator Day? That, to me, would be one way out of this so at least we would be moving forward on that.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

The point I would make is that this is obviously a new proposition. Up until now there were certain protections from unfair contract terms in place for consumers. We are now extending those to small business. We have made a judgement on the appropriate thresholds for contract value based on consultation with small business stakeholders and with the states and territories.

In the end—and I said this in response to the contribution by Senator Day as well—we can go round and round in circles. Out of 76 senators, everybody might have a different view as to where the right line in the sand is. The government have made a judgement based on consultation with stakeholders and with the states and territories. We are posing the legislation on that basis. If the legislation is passed by the Senate and by the House of Representatives, small businesses across Australia will start to enjoy the benefits of this protection. I would envisage that the review that the government has committed to two years after the legislation has come into effect will consider this issue of appropriate thresholds for contract value and, no doubt, will make recommendations at that point on how these thresholds and other matters should be or could be improved.

If we amend this legislation now to give effect to the spirit of what the Greens and Senator Day, in unison, have put forward then it will be a stumbling block. Senator Whish-Wilson regrettably described that as me threatening the Senate. No, I am just informing the Senate about the circumstance that we are in. If the Senate were to insist on that amendment now rather than to make it the subject of a review in two years time then it would mean that no small businesses across Australia would be able to benefit from the additional protection from unfair contract terms that is proposed in this legislation. In practice, that would mean that the thresholds would continue to be zero, where they are now. The question is: do we leave them at zero or do we lift them to $100,000 and $250,000 respectively, with an undertaking that this will be something that will be looked at in two years time by the Senate Economics References Committee inquiry? Obviously that judgement and choice is not entirely for the Senate, but it is very important for the Senate to be aware of the implications of any decision we may make.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

I will not say that they are wrong, but I am sure the minister and the government would concede that their judgement might be a little bit out on this threshold number. This is important legislation. Do not get me wrong, Minister. I commend the government on this, and I particularly commend the business minister for his diligence, for the way he has consulted and for the way he has gone about it. But the same logic applies that you are using, Minister. You are saying, 'Let's see how a $100,000 limit goes and we will review it.' We are saying, 'Our opinion, based on more informed research, is that it should be at least a $500,000 limit. Let's see how that goes.' You say that your $100,000 limit captures 80 per cent of business. What is wrong with trying to capture 90 per cent or even 95, 96, 97, 98 or 99 per cent? I think the same logic applies.

The principle of this legislation is to introduce a threshold so that a contract entered into up to a certain amount could be rejected because of a difference of opinion between the government and its advisers and a number of contractors. I would implore the minister to talk to his counterpart in the other place. If it came down that this place suggested that our view is that $500,000 needs to be the threshold to encompass as many independent contractors and other contractors as possible, I would implore the minister to support that.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

This will be my final contribution on this point because, in the end, I think we might have to agree to disagree. With all due respect to the very honourable senator, who I hold in very high regard, it is not the same proposition. This is a new regulatory intervention in the marketplace. Right now, as I have indicated, there is no protection for small business from unfair contract terms, so called. This is something that is exclusively available as a consumer protection to consumers. What the honourable senator is suggesting is that we should start with a high threshold rather than cautiously test the impact on the economy will be by essentially putting an initial step forward of a carefully calibrated threshold of $100,000 and $250,000 respectively. These are not based on an arbitrary decision by the government and its advisers; they are based on extensive consultation. You have commended the small business minister on the extent and the quality of the consultations that he has conducted and, indeed, Minister Billson is an outstanding advocate for small business; Minister Billson works tirelessly to ensure that he gets these sorts of judgement calls right, based on balancing the various legitimate perspectives.

I would go back to where I started: it is very important to ensure that we have the right balance between giving small business that additional protection and giving them confidence to engage in contracts and protecting them from unfair contract terms, but this is not an open-ended proposition. We do not want to create a circumstance where small business does not think that for larger contracts they still have to conduct appropriate levels of due diligence—that they somehow think that the government's regulatory framework will be a blanket protection for them, no matter what. Obviously, when you have more significant contracts, it is important that small business, as any other business, engages in the appropriate levels of due diligence and makes relevant judgements in the context of that. I think I have contributed as much to this argument as I can; I have gone out of my way to put on the public record the government's reason for the judgements we have made.

In the end, I think it would probably be most useful if either Senator Whish-Wilson or Senator Day—one after the other, in whatever order—were to move their amendments and then the Senate could pass judgement. I would say again: the government has made a decision about the thresholds not on an arbitrary basis, but after careful consideration of the outcomes of relevant consultations. If the Senate were to increase the thresholds, the Senate would be preventing small business from getting access to this additional protection for contracts of a value of up to $100,000 for contracts with less than 12 months to run and of a value of up to $250,000 for contracts with more than 12 months to run. I would say that this is a cautious initial step pending a review in two years' time to look at how this new extension of the regulatory powers of the Commonwealth in this space has worked in the economy before we make further judgements down the track. I do not think we should start high and then be forced to bring it back. I think we should start at the appropriate level identified by consultation and then make judgements down the track on how best to proceed.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I will be very quick. I appreciate what the minister has said, but I also think that the points made by Senators Day and Whish-Wilson are very valid. If we are going to do this, let's do it properly. If the stumbling block is that it has to go back to COAG, then at the very least we ought to get a commitment from the government in respect of these amendments, if either of them is passed. I think it is important that the Commonwealth shows great leadership on this; it should pick up the points made by Senator Whish-Wilson and Day to improve the legislation, to have greater coverage and to give greater certainty to small businesses, which after all are a significant driver of economic growth and jobs growth in this country.

My position is this: I will support the amendments of both Senator Day and Senator Whish-Wilson, if they are so moved. It depends on what the opposition will do in respect of that. I understand that, if the opposition supports them, then it is inevitable that they will get through. I hope that can be used as a responsible lever to try to get at the very least a concession from the government that it will use its leadership role in COAG to put this on the agenda to expand the thresholds sooner rather than later to reflect the concerns of Senators Day and Whish-Wilson. That is my position. I hope that these amendments are passed. If we do not pass these amendments we will lose the opportunity in respect of that. Whilst I welcome the coalition's commitment to agree to a Senate inquiry, all that will achieve is to look at those changes and it will not oblige the government to go down that path. It is important that we use this opportunity to reflect the concerns on the thresholds from across the spectrum. I will support the increased thresholds if these amendments are put by either or both Senators Day and Whish-Wilson and then the government needs to make a decision whether to make an unambiguous, unequivocal statement that at the end of the day if these amendments are not accepted it will do what it can to put this on the agenda for COAG.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

I have three questions for the minister. No. 1 is: is it correct that this bill will only apply to standard form contracts? My second question is: when the minister says that the House will not accept any amendments to the thresholds if these amendments are passed by the Senate, is the minister aware that Independent Contractors of Australia wants a limit of a million dollars or unlimited; and is he aware that it will be the government, and not the Senate, that will bear the criticism on this? My third question is: when he says that the government has agreed to a review in two years, is he simply referring to a referral to the Senate Economics Committee, in which case government approval is not necessarily required in any event?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Firstly, it is correct that this relates only to standard form contracts. Secondly, I am aware of the view of Independent Contractors. Obviously there is a diversity of views here and the thing to bear in mind is that this legislation is proposed to apply in the economy as a whole. It is not something that just applies to independent contractors. It something that small business across the whole of the Australian economy will be able to be access. As such, we obviously have to make a balanced judgement in that context. In relation to the final question, the government was asked whether we would support an inquiry by the Senate Economics References Committee and we were happy to offer that support in the two-year time period, which was the question that was put to us. While Senator Leyonhjelm may well be right that government support is not necessary on all occasions, depending on how the numbers lie, but I would have thought that government support for such an inquiry is at least helpful. I was not trying in any way to overstate what we had agreed to; I was just responding to a straight question as put to me by Senator Xenophon with a straight answer.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

by leave—I move the Australian Greens amendments (1) to (4) on sheet 7751 together:

(1) Schedule 1, item 8, page 4 (line 7), omit "$100,000", substitute "$300,000".

(2) Schedule 1, item 8, page 4 (line 10), omit "$250,000", substitute "$1,000,000".

(3) Schedule 1, item 31, page 9 (line 21), omit "$100,000", substitute "$300,000".

(4) Schedule 1, item 31, page 9 (line 24), omit "$250,000", substitute "$1,000,000".

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I indicate to the Senate that Labor will be supporting Senator Whish-Wilson's amendments. Lifting the threshold means that the application of unfair contract term provisions to small business will be far wider than if the threshold remained at $100,000. Indications are that the majority of small business groups support unfair contract term provisions applying to their business to business contracts. This is evidenced by the recent media announcement that major representative groups, including the Independent Contractors of Australia and the Council of Small Business Australia, will campaign against the government for what they consider to be a broken promise in that the coalition went to the last election promising small business it would bring this measure in, but the $100,000 threshold narrows who will be affected or will benefit from the changes. Labor notes the original preferred position of Independent Contractors of Australia was no threshold, and the stakeholder consultation from the start has also indicated to the government that they want new laws to apply to the vast majority of small businesses. Having said that, I think we have to acknowledge the point that has been made that a line has to be drawn somewhere, and as a consequence we will not be supporting Senator Day's foreshadowed amendment.

While I am on my feet, I might deal with Senator Leyonhjelm's foreshadowed amendments on sheet 7759. Labor will be supporting those amendments to the implementation time of the legislation. Labor notes that serious concerns have been raised about the six-month time frame for the implementation of this legislation, and these concerns are exacerbated by the increase in the threshold given this will increase the scope of the legislation. Feedback in this regard has been received from groups such as the Australian Bankers' Association. Given amending the thresholds in isolation will have consequences for these groups who need more time to implement, Labor will be supporting the amendment.

I have said that in one block because I think we will probably spend a considerable of amount time on these matters given the positions are quite clear in terms of what the government has said and what the crossbenches have said. I have made it very clear what Labor's position is. I trust the matter can be resolved.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

We understand the line in the sand argument. The Senate's job as the house of review is to improve legislation and the government does not always get to have it its own way. As I mentioned in my speech on the second reading, we support having unfair contract terms extended from small business to business. This is something we have campaigned about for years. The government has an opportunity to listen to our concerns and what we have outlined about the amendments. There is absolutely no reason we cannot incorporate 95 per cent of small business transactions, as the government's own survey shows, and have that reviewed in two years' time. I totally agree with Senator Day on this issue. There are still a number of other issues with the bill that we can finetune over the next two years.

The Greens will also support Senator Leyonhjelm's amendment on sheet 7759—the extended time for the implementation of this bill—but we believe that the $300,000 stakeholder limit that we have put on this is clear from the evidence received by the committee. We do not believe that it should extend any further at this stage. We are happy with $300,000, so we will not be supporting Senator Day's amendment.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

The question is that the amendments on sheet 7751 moved by Senator Whish-Wilson be agreed to.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

by leave—I move Family First amendments (1) to (4) on sheet 7757 together:

(1) Schedule 1, item 8, page 4 (line 7), omit "$100,000", substitute "$500,000".

(2) Schedule 1, item 8, page 4 (line 10), omit "$250,000", substitute "$1,500,000".

(3) Schedule 1, item 31, page 9 (line 21), omit "$100,000", substitute "$500,000".

(4) Schedule 1, item 31, page 9 (line 24), omit "$250,000", substitute "$1,500,000".

We have had a discussion about whether the threshold should be $100,000, whether it should be $300,000. I am moving that the threshold be $500,000 to get a more comprehensive sample of contractors who may be affected by this legislation. I ask honourable senators to support my amendments.

Question negatived.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

I move amendment (1) on sheet 7759:

(1) Clause 2, page 2 (table item 2), omit "6 months", substitute "12 months".

This is a very minor amendment and it simply reflects feedback that I have had, and I am sure others have had the same feedback, to the effect that six months is an insufficient period for a number of major organisations to adjust their contracts to take account of the legislation. Indeed, the Bankers' Association sought 12 months and Westpac sought two years and has been earbashing everyone who wants to pay attention. The fact is that adjusting standard form contracts in a period of six months is quite a challenge. I think this is a minor amendment which will allow them practical time in which to accommodate the provisions of this act.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I will just indicate quickly the position of the government. We do not support this amendment. We have proposed in the legislation a six-month transition period. There will be guidance and assistance from the ACCC and from ASIC and there will be a 12-month 'light touch' implementation of the regulatory change.

Furthermore, in terms of providing some more detail on how the ACCC will work with industry once the protections are in effect, the ACCC will work with business and industry groups to identify problematic contract terms and encourage compliance. This approach was taken for the consumer protections when they were first introduced and led to most businesses choosing to delete or amend problematic terms.

Where a business does not fully cooperate with the ACCC or comply with the law, further action such as through informal and administrative means or court action may be pursued privately or by the ACCC. For instance, since the introduction of the consumer protections the ACCC has conducted in-depth investigations into 15 matters and instituted court proceedings against four businesses.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

Could I just indicate I am aware of the involvement of the ACCC on this issue and also the announced policy of a 'light touch' in relation to ACCC participation in the implementation. Frankly, I find that concerning. The ACCC should enforce the law. Its discretion as to whether it applies a heavy touch or a light touch worries me greatly. I would much prefer that we simply allow 12 months for the people affected by these contracts to adjust their operations and keep the ACCC's 'touch' out of the whole affair.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I would just say this is an approach that has been used by governments of both persuasions. Indeed, when I was sitting on the other side of the chamber, that is exactly the way the previous government pursued the implementation of changes to our financial advice laws. So this is a well established principle. When you have a regulatory change of this nature, regulatory agencies like ASIC and the ACCC obviously implement these changes sensibly in the early period of implementation.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

The question is that the amendment moved by Senator Leyonhjelm on page 7759 be agreed to.