Australian Regulatory Compliance Review

Basel II update

APRA Basel II specialist, Katrina Squires has given an update on outstanding issues following Basel II implementataion in Australia on 1 January 2008.

These include:

• APRA’s review of ADIs' own internal capital adequacy assessment process (ICAAP);
• the inclusion in the internal ratings-based approach to credit risk (IRB) prudential standard (APS 113) of the Basel II Framework’s proposals that would permit ADIs’ own counterparty credit risk estimates;
• review the 20 per cent risk-weight currently assigned to margin lending exposures;
• reviewing applications for internal models for interest rate risk in the banking book

Draft Corporations Amendment Regulations: managed investment schemes

Treasury has released draft Corporations Regulations for consultation until 28 March 2008.

These draft regulations will amend the Corporations Regulations 2001 to remove the requirement for managed investment schemes (registered schemes) to notify the Australian Securities and Investments Commission of the top 20 interest holders each year as part of a scheme’s annual review.

The draft regulations will align the treatment of registered schemes with the treatment of public companies in relation to the member reporting requirements amendments introduced in the Corporations Amendment Regulations 2007 (No. 5).

Climate change, emissions trading and corporate social responsibility

I recently attended a stimulating panel discussion organised by the Australasian Compliance Institute on issues businesses need to consider in dealing with climate change.

The discussion showed that there is a lot of regulatory activity by different organisations across Australia relating to energy efficiency which is not co-ordinated or well-publicised. COAG is currently reviewing these.

The Government is already considering requiring companies to report on sustainability.

Key regulatory points include understanding the obligation to report emissions (do you know the size of your carbon footprint, do you have to report?) and the risk of committing greenwashing.

Do you have a reporting and risk management structure? If you don't know the size of your carbon footprint, how can you manage it and comply with the new laws?

Are you part of a supply chain that requires emissions control?

Is there an industry standard for your business (such as the finance industry's Equator Principles)?

Emissions Reporting

Do you know the quantity of your business's emissions?

The National Greenhouse and Energy Reporting System will commence on 1 July 2008.

The reporting system is expected to cover up to 900  medium and large companies, of which around 300 will be reporting for the first time.

From 1 July 2008, corporations will be required to register and report if:
− they control facilities that emit 25 kilotonnes or more of greenhouse gas (CO2 equivalent), or produce/consume 100 terajoules or more of energy; or
− their corporate group emits 125 kilotonnes or more greenhouse gas (CO2 equivalent), or produces/consumes 500 terajoules or more of energy.

Reporting on greenhouse gas emissions, reductions, removals and offsets, and energy consumption and production will be mandatory for corporations that exceed thresholds. Companies will need to establish whether they are obliged to report and, in corporate groups, they need to identify who will report. They need to determine what they have to report and fromm where. Submissions on the policy paper closed on 27 February. See the fact sheet (pdf)

Most large users should already be registered under the Energy Efficiency Opportunities Act 2006 .

Are you "greenwashing"?

Greenwashing involves misleading use of environmental claims for your product (some businesses do not have data that supports their "green" claims but claim they are green anyway)  The ACCC is already looking at green marketing and carbon offset claims.

As this year progresses, it is likely that the regulatory effect of climate change will intensify.

Your staff may also have strong views on how you comply.

BONUS LINKS: 

Department of Climate Change

Australian Conservation Foundation

The environmental legal system in Australia

Friends of the Earth: Code Red

Green Building Council of Australia

Review of Australia's national innovation system

The Minister for Innovation, Industry, Science and Research, Senator Kim Carr, has announced a review of Australia's national innovation system.

The Review Panel will identify gaps and weaknesses in the innovation system and develop proposals to address them. In particular, it will:

• Identify a set of principles to underpin the role and participation of the public sector in innovation.
• Develop a set of national innovation priorities to complement the national research priorities, ensuring the objectives of research programs and other innovation initiatives are complementary.
• Identify regulatory and other barriers to innovation and recommend ways to minimise these.
• Examine the scope for simplifying and reducing program duplication and ensuring that any support provided is well-targeted and easy to access.
• Consider the appropriateness, effectiveness and efficiency of the Research and Development (R&D) Tax Concession Scheme in promoting innovation and make recommendations to improve innovation outcomes.
• Consider ways to improve the governance of the national innovation system to support higher expectations of government agencies and industry.
• Assess the appropriateness, effectiveness and efficiency of the Cooperative Research Centres (CRC) Program and make recommendations to improve innovation outcomes.

Deregulation update

In a speech to the Sydney Institute, the Minister for Finance and Deregulation, Lindsay Tanner has reported on progress on deregulation and repeated the Government's commitment to change.

"We are serious about change.

I understand that business wants certainty and stability.  I’m not seeking endless change for change’s sake. But that is no reason to allow excessive and unnecessary regulatory burdens to remain in place indefinitely."

He identified the biggest challenge as establishing an entrenched culture of continuous regulatory improvement and reform. He has appointed economist, Nicholas Gruen, to work with him on this.

Progress to date

"We are working with states and territories through the Council of Australian Governments (COAG) to address areas of regulatory duplication or inconsistency between different levels of government.

Our Business Regulation and Competition Working Group has been meeting to progress an accelerated program of reform which will be presented to COAG in late March.

These measures will be targeted at reducing the  cost of regulation to business.

For example, the Standard Business Reporting initiative will allow businesses to submit BAS statements, state tax returns, ASIC documents and ABS survey responses through a simpler, faster and easier process using their own record keeping software.

Streamlined environmental assessment processes will stop the time wasting process of two groups of environmental assessors looking at the same information and holding up approval processes.

Nationally consistent occupational health and safety laws will allow multi-state employers to roll out the same training and safety programs across all work sites.

The recommendations of the Banks Review will be revisited. The Banks Review made over 170 recommendations but many of these have not been implemented.  We want to turn these recommendations into real outcomes for business. 

The Productivity Commission will also conduct  regular reviews of the regulatory burden in individual sectors of the economy.

The Government’s response to the Commission’s 2007 report into the regulatory burden in the primary sector will be delivered as soon as possible.

Agriculture Minister Tony Burke has already announced the deregulation of the single desk arrangements for wheat exports. ...

Transport Minister Anthony Albanese has concluded a bilateral open skies agreement with the United States, which will benefit Australian consumers and businesses....

Minister for Superannuation and Corporate Law Nick Sherry and I recently announced the formation of the Financial Services Reform Working Group to solve this problem (the Financial Services Reform Act disclosure regime) .

Consultation papers on the new national employment standards, the design and regulation of the first home saver accounts, implementation of a carbon emissions reporting scheme, and proposed amendments to the export cargo legislative framework have already been released.

The Assistant Treasurer has established a Tax Design Review Panel to examine how to reduce delays and improve the quality of tax law changes.

The Office of Best Practice Regulation (OBPR) has moved into the Department of Finance and Deregulation, reflecting its central role in improving the quality of regulation.

The OBPR will continue to administer the best practice regulation principles and be a regulation watch-dog on government departments, agencies and Ministers.

Regulatory proposals will not come to Cabinet unless the OPBR agrees that adequate regulatory impact analysis has been performed. "

Trans-Tasman disqualification of disqualified directors

The Minister for Superannuation and Corporate Law has announced that the Government will introduce legislation to ensure that persons who are disqualified from managing companies in New Zealand will also be disqualified in Australia.

The amendments to the Corporations Act 2001 will be modelled on the existing New Zealand provisions to ensure cross-border consistency.

Additionally, disqualification in another country will constitute a ground for the Australian Securities and Investment Commission to apply to an Australian court for an order that that person be disqualified in Australia.

Draft legislation will be developed over the  coming months.

Demutualisation of Health Insurers: CGT relief for policyholders

The Assistant Treasurer has announced that the new Government intends to confirm's the previous Government's policy of providing relief from capital gains tax (CGT) for policyholders of health insurers who receive shares when their health insurer demutualises.

The Government will ensure that policyholders who receive shares will not be subject to a CGT taxing point at the time they receive the shares.The Government also intends to provide relief from CGT for transactions that relate to the mechanism that allows policyholders to receive shares.

Issued shares will be held on trust for ‘lost policyholders', who, for example, are unable to receive shares because they reside overseas or have not agreed to receive their shares.  This framework will facilitate the issue of shares to the trustee and the transfer of shares from the trustee to policyholders without adverse or advantageous CGT consequences to either the trustee or the policyholder.

The Government will also provide policyholders with a cost base for their shares that is based on their share of their health insurer's net tangible assets. Pre‑CGT policyholders will receive a market value cost base. A similar ‘net tangible assets' based cost base will also be provided for any rights that post‑CGT policyholders surrender for a cash payment, rather than shares, as part of their health insurer's demutualisation.

Legislation giving effect to this measure will be introduced as soon as practicable, following consultation on the design and the implementation of the amendments. A discussion paper will be released shortly.

The changes will apply from 1 July 2007.

Austrac issues generic customer identification form

Austrac has issued a generic customer identification form (pdf) for reporting entities as an example of what they may choose to use under 'safe harbour' to identify and verify customers of designated services.

The procedure may only be used where the relationship with the individual is deemed by the reporting entity to present a medium or lower money laundering or terrorism financing risk.

Austrac issues draft AML managed investment rule

Austrac has issued draft AML/CTF Rules (pdf)to allow customers who acquired interests in a managed investment scheme between 12 December 2007 and 30 January 2008, to be treated as pre-commencement customers under the AML/CTF Act, so that the identification procedures requirements do not apply to them.

A public consultation period is open until 10 March 2008.

See here for background

National Health and Hospitals Reform Commission established

Federal Cabinet has formally approved the establishment of the National Health and Hospitals Reform Commission.

The Commission will provide an interim report on a long-term health reform plan to the Commonwealth Government by the end of 2008, and a final plan in mid 2009.

Issues for the Commission include:

• The rapidly increasing burden of chronic disease;
• The ageing of the population;
• Rising health costs; and
• Inefficiencies exacerbated by cost shifting and the blame game.

The Commission will focus on health financing, maximising a productive relationship between public and private sectors, and improving rural health.

Inspector-General of Taxation: review of the potential revenue bias of ATO in private binding rulings involving large complex matters

The Government has released the Inspector-General of Taxation’s report on the Review of the potential revenue bias in private binding rulings involving large complex matters.

The review looked at whether there is a ‘pro-revenue’ bias evident in private binding rulings (PBRs) issued by the Australian Taxation Office (the Tax Office).

The Inspector-General found no evidence of undue revenue bias in PBRs. However, he did find that the perceptions of undue revenue bias by the Tax Office are widespread.

The Inspector-General has recommended that the Tax Office should act to reduce the widespread perceptions of revenue bias among large business PBR applicants by:

• increasing transparency, improving  communication and more clearly demonstrating objectivity;
• clarifying and adhering to the  processes and protocols that govern inter-agency interactions; and
• further reducing delays in large  business PBR processes.

The Tax Office agrees, in part or  wholly, to all of the recommendations contained in the report.

Emissions projections

The Government has released a report (by sectors) on Australia's progress towards achieving  its targeted reductions in greenhouse gas emissions under the Kyoto Protocol.

Legal professional privilege claim rejected: Cadbury v Amcor and Visy

In Cadbury Schweppes Pty Ltd (ACN 004 551 473) v Amcor Limited (ACN 000 017 372)[2008] FCA 88 the Federal Court rejected the ACCC's claim for legal professional privilege and public interest immunity privilege in relation to 111 witness statements drafted by ACCC investigators in connection with the ACCC proceedings against Visy .

Cadbury sued Amcor following the judgment in ACCC v Visy (and Amcor joined Visy) but the ACCC sought to prevent Amcor and Visy from producing those documents to Cadbury on discovery. Its claim failed.

However, Visy’s implied undertaking, an obligation distinct from legal professional privilege, to use the documents only for a purpose relating to the ACCC proceedings may or may not still prevent production of those documents to Cadbury in these proceedings.

Privilege was upheld in respect of Amcor witness statements held by Amcor's external solicitors.

Mutual Recognition of Cross-Border Financial Services Regulation

In an address by Dr Ken Henry, Secretary to the Treasury, to the ASIC Summer School he outlined the Treasury’s perspective on the important policy issues associated with the mutual recognition of securities regulation generally and, specifically, with the United States and New Zealand.

Dr Henry discussed the importance of global finance markets to Australia and Australia’s approach to the regulation of cross border securities regulation.

To date, six overseas markets, including the Chicago Board of Trade and the Chicago Mercantile Exchange have been granted licences to operate in Australia.

In respect of foreign financial service providers, "the Corporations Act also requires a person who carries on a financial services business in Australia to hold an Australian Financial Services Licence ... An exemption may be provided if the foreign financial service provider is regulated by an overseas regulator and the financial services on offer are already prescribed as being suitable for an exemption.

As at May 2007, there were 289 foreign financial service providers, including 132 entities from the United States, with an exemption."

Dr Henry also discussed mutual recognition of Australia – New Zealand securities offerings:

On 22 February 2006 the Governments of Australia and New Zealand signed a treaty on the Mutual Recognition of Securities Offerings.

This regime is expected to come into effect early this year. It will allow an issuer to extend an offer that is being made lawfully in one of the countries to investors in the other, host, country without having to comply with most of the substantive requirements of the host jurisdiction’s fundraising laws applying to domestic offers.

The practical effect is that the one prospectus may be used in both countries, reducing compliance costs and furthering the integration between the two markets."

Misleading advertising: Prouds was/now ads unlawful

In Australian Competition and Consumer Commission v Prouds Jewellers Pty Ltd  [2008] FCA 75 the Federal Court held that 'Was/Now' discount advertising by Prouds Jewellers Pty Ltd was misleading in breach of the Trade Practices Act 1974.

The advertising of certain jewellery was in the form of price comparisons such as 'Was $199 / Now $99.50' and appeared in Prouds' February 2006 Summer of Love catalogue and its May 2006 Love You Mum catalogue. The case related to the 'Was/Now' price advertising of 17 items that appeared in both catalogues.

Justice Moore concluded that the 'Was/Now' advertising conveyed to consumers that the jewellery items had been offered for sale for a reasonable period immediately before the catalogue promotion at the 'Was' price. He also observed that: "The difference between those two ['Was/Now'] prices would be seen by the hypothetical consumer as the savings that would be achieved by him or her by purchasing an item during the sale period."

Justice Moore found that each of the 17 items had not in fact been offered at the 'Was' price in that period and concluded that the 'Was/Now' advertising of each of the items in both catalogues was misleading.

The contravening conduct of Prouds flows from the fact that goods offered for sale in the context of dual pricing, were not offered for sale at the "was" price in the period immediately before the sale. In my opinion there would be no contravention of the Act (and assuming continued use of the dual pricing promotion manifest in the two catalogues considered in this case) if the goods had been offered for sale at the "was" price for a period of two months preceding the sale period. While there can be no precision about the length of the anterior period, it must represent a period of substance in which the price the goods were offered for sale at the "was" price and, negotiated discounts aside, would have been purchased at that price. If the period was unduly short, then the publication of the "was" price in the context of dual pricing would remain misleading or deceptive. 

Prouds consented to implementing a trade practices compliance program.

1000th post

This is my 1000th post since this weblog began as a spin-off of my other sites on 17 July 2004 ! Here's my first post (the passage of CLERP9).

If you google "australian financial services compliance" it is the number 1 website.

Thank you for reading.

Review of directors' liability and financial reporting

Is our corporate regime causing directors to be overly cautious when making decisions, particularly in fast-moving and complex business situations?

In a speech  to ASIC's Summer School by Minister for Superannuation and Corporate Law Nick Sherry (delivered by Treasury Secretary Ken Henry) it was announced that Treasury is examining these issues to improve and clarify the corporate governance regime and will consult widely with industry and the regulators:

The Minister believes that it is important that this project looks beyond the Corporations Act to examine issues such as the emerging trend for other legislation to impose personal liability on company officers for corporate fault.

It is important that corporate law reflect modern thinking about the use of criminal, civil and administrative sanctions for misconduct, while also permitting flexibility in decision-making. The Minister has indicated to Treasury that this is a high priority project.

The speech also highlighted two key areas which the Government has identified as areas requiring review — executive remuneration and corporate sustainability reporting.

APRA's statement to Senate Standing Committee on Australian financial institutions

The Chairman of APRA John Laker has given his views on the effect of the current market turbulence on Australia's ADI's (banks, building societies and credit unions), insurers and superannuation funds to the Senate Standing Committee on Economics.

In a statement (pdf) on 21 February 2008 he commented on the implications of this turbulence for the financial institutions which APRA supervises and on APRA’s activities over the last year.

He concluded that the ADI sector is well-positioned to withstand the impact of global developments although "As a group, ADIs have been affected by recent turmoil in other ways as well:
• ADIs have faced increased wholesale funding costs as global credit markets, on which many ADIs have relied increasingly over recent years, have turned much more risk-averse;
• those ADIs in particular that make use of securitisation markets to fund their residential mortgage lending have found that source of funding has virtually dried up;
• in addition, some ADIs have exposures to certain high-profile domestic corporates now under stress because of their reliance on short-term debt to fund their businesses."

Although the recent equity market declines have unwound all of the 2007 market gains in major industrial countries and in Australia, the declines in equity markets will not have a significant impact on the profitability or capital levels of the general insurance industry. In the superannuation sector recent declines in equity markets will reduce the asset values of accumulation funds but these losses must be set against the substantial cumulative gains over the past few years..

Taxation arrangements for managed funds and property trusts

The Government has asked the Board of Taxation to review the taxation arrangements that apply to managed funds.

The Minister also released a consultation paper on interim changes to trading trust rules which apply to real estate investment trusts.

In conducting the review, the Assistant Treasurer has asked the Board, within the broad policy framework for the taxation of trusts as outlined in the Terms of Reference, to consider:

• international developments especially those in the US, UK and Canada.
• alternatives to the use of present entitlement to determine the income tax liability of beneficiaries and trustees, but which also provide broadly similar taxation outcomes for beneficiaries, having regard to the costs and benefits of those options;
• the international competitiveness of Australia's real estate investment trusts; and
• the desirability of extending relevant aspects of the recommended changes to the tax arrangements for other trusts.

Included in the review will be options to reform the trading trust rules in Division 6C of the Income Tax Assessment Act 1936 which particularly affect real estate investment trusts.

The consultation paper covers:

• Ways to clarify the scope and meaning of investment in land for the purpose of deriving rent.
• A 25 per cent allowance for non-rental income from an investment in land could be created to clarify the meaning of ‘primarily' in the context of investing in land for the purpose, or primarily the purpose, of deriving rent.
• An expansion of the range of financial instruments that a trustee could trade or invest in without triggering company taxation.

The Board will provide a final report around the middle of 2009.

The Council for the Australian Federation

The Council for the Australian Federation has been created by the Premiers and Chief Ministers of all States and Territories as a means of working together to improve the way that the States and Territories deliver key services.

The Council met on 21 February 2008 in Adelaide. Professor Ross Garnaut briefed Council members on the interim findings from his climate change review.

The communique (pdf) also announced that the Premiers and  Chief Ministers reaffirmed their commitment to co-operative Federalism and that they agreed to:
· harmonise State and Territory approaches to driver licencing and registration schemes and senior travel concessions;
· an improved approach to urban water planning; and
· improve vehicle safety standards.

Internet filtering

The Australian Communications and Media Authority's (ACMA) has published its first report on international developments in internet filtering technologies and other safety initiatives.

The report, Developments in internet filtering technologies and other measures for promoting online safety (pdf), draws together current key trends and makes observations about content, communication and e-security risks online.

Schedule B has a useful summary of existing online content regulation.

Garnaut Climate Change Review Interim Report

An Interim Report has been released to provide an overview of the early directions and findings of the Garnaut Climate Change Review, as a basis for community discussion.

The report says that Australia must now put in place effective policies to achieve major reductions in emissions. The emissions trading scheme (ETS) is the centre-piece of a domestic mitigation strategy. To achieve effective mitigation at the lowest possible cost, the ETS will need to be supported by measures to correct market failures or weaknesses related to innovation, research and development, to information, and to network infrastructure.

A Draft Report will be released by 30 June 2008 and a Final Report by 30 September 2008.

Workplace relations update

The Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 has been referred by the Senate to the Employment, Education and Workplace Relations Committee. Its report is due by 28 April 2008.

UPDATE 21 February: The Age is reporting that the Senate committee inquiry into Labor's proposed new laws has agreed to fast-track its report for completion by March 17.

Productivity Commission inquiry into paid maternity leave and parental leave

The Australian Government has announced that the Productivity Commission will undertake an inquiry into paid maternity, paternity and parental leave.

The Productivity Commission will identify the economic, productivity and social costs and benefits of providing paid maternity, paternity and parental leave.

The Commission has been asked to report by February 2009.

The Human Rights and Equal Opportunity Commission (HREOC) recommends as a minimum a government-funded 14 week paid maternity leave scheme paid with two weeks paid paternity leave, at the level of the federal minimum wage.

Principles guiding approval of foreign government related investment in Australia

The Treasurer has published the principles guiding his consideration of foreign government related investment in Australia.

Significant foreign investment proposals must be notified to the Australian Government and examined by the Foreign Investment Review Board (FIRB).

The principles set out the main factors that are considered in determining, on a case‑by‑case basis, whether particular investments by foreign governments and their agencies are consistent with Australia's national interest.

The principles set out the additional factors that need to be considered in relation to investment proposals by foreign governments and their agencies over and above those that apply to normal private sector proposals.

The 6 principles are:

1. An investor's operations are independent from the relevant foreign government.

2.  An investor is subject to and adheres to the law and observes common standards of business behaviour.

3.  An investment may hinder competition or lead to undue concentration or control in the industry or sectors concerned.

4.  An investment may impact on Australian Government revenue or other policies.

5.  An investment may impact on Australia's national security.

6. An investment may impact on the operations and directions of an Australian business, as well as its contribution to the Australian economy and broader community.

Government nominates Petrol Commissioner

Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen, has announced Mr Pat Walker as the Rudd Government's nominee for the new Petrol Commissioner.

The full-time commissioner will be predominantly be responsible for overseeing the ACCC's monitoring of the fuel prices in Australia as well as providing an annual report on the ACCC's findings.

The government is continuing to look seriously at the options raised by the ACCC's report on petrol prices, including measures to increase retail price transparency.

The proposed appointment of Mr Walker as an ACCC Commissioner is subject to the approval of the Governor‑General and requires acceptance of at least four States and Territories.

Access by persons with a terminal medical condition to their superannuation benefits

The Superannuation Industry (Supervision) Amendment Regulations  2008 (No. 1) amend the Superannuation Industry (Supervision) Regulations 1994 to create a new condition of release to allow persons with a terminal medical condition unrestricted access to their superannuation benefits.

The change complements the  Tax Laws Amendment (2008 Measures No. 1) Bill 2008 which was introduced into the House of Representatives on 13 February, to make superannuation lump sum payments tax free where paid to persons suffering from terminal medical conditions.

Discussion paper on National Employment Standards

The Australian Government has released an exposure draft of its proposed ten National Employment Standards (NES), together with a discussion paper calling for public feedback by 4 April 2008.

The NES will cover the key minimum entitlements for all Australian employees, to apply from 1 January 2010.  These entitlements will be guaranteed in legislation so that they cannot be excluded or modified in a way that undermines the safety net.

The NES are:

1. Maximum weekly hours of work
2. Requests by parents for flexible working arrangements
3. Parental leave (and related entitlements)
4. Annual leave
5. Personal/carer’s leave and compassionate leave
6. Community service leave
7. Long service leave
8. Public holidays
9. Notice of termination and redundancy
10. Fair Work Information Statement

Governance of self managed superannuation funds

The Minister for Superannuation and Corporate Law, Senator the Hon Nick Sherry, has announced he has commenced consultation with a range of industry organisations and practitioners about a range of practices in self managed superannuation funds (SMSFs).

The Government is closely monitoring developments in the SMSF sector to ensure that trustees, and potential trustees, are aware of the risks involved and provided the skills necessary to run a superannuation fund in a prudent fashion.

SMSF's currently comprise more than 368,000 entities, over 700,000 thousand members, and more than $300 billion in assets.

Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008

The Treasurer has introduced the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2008 to implement the tax changes promised in the election.

The changes will take effect in three stages: from 1 July 2008, 1 July 2009 and 1 July 2010.

From 1 July 2008:

the lower limit of the 30 per cent threshold will rise from $30,001 to $34,001; and

the low income tax offset will increase from $750 to $1,200. The low income tax offset will continue to phase out from $30,000 at a rate of 4 cents in the dollar for every dollar of income over $30,000.

From 1 July 2009:

the lower limit of the 30 per cent threshold will rise from $34,001 to $35,001;

the low income tax offset will increase from $1,200 to $1,350; and

the 40 per cent tax rate will be reduced to 38 per cent.

From 1 July 2010:

the lower limit of the 30 per cent threshold will rise from $35,001 to $37,001;

the low income tax offset will increase from $1,350 to $1,500; and

the 38 per cent tax rate will be reduced to 37 per cent.

Client legal privilege in federal investigations

The Australian Law Reform Commission (ALRC) has recommended 45 changes to the handling of claims of client legal privilege over material sought by federal investigatory bodies and royal commissions of inquiry. The ALRC report Privilege in Perspective:  Client Legal Privilege in Federal Investigations, follows litigation on this issue during the AWB Royal Commission.

The net effect of the recommendations in this Report is to affirm the importance of client legal privilege as a fundamental principle of the common law that only may be abrogated in exceptional circumstances, and to provide, through federal client legal privilege legislation, a confirmation of the default principles in relation to privilege and a framework for making and resolving claims of client legal privilege in federal investigations.

The central idea behind the ALRC’s recommendations is the need for a single federal statute addressing the application of privilege in all federal investigations.

Other key proposals include:

• extending privilege to advice on tax law provided by accountants, where that advice is sought by the Australian Taxation Office (ATO)—in effect, formalising the ATO ‘accountants concession’.
  
• introducing a model fast-track procedure for resolving disputes about privilege;
  
• improving lawyers’ understanding of their legal and ethical obligations in this complex area, through targeted legal education; and
• clarifying and strengthening the professional disciplinary procedures to apply in cases where the assertion or maintenance of privilege claims may amount to unethical conduct.

Austrac publishes AML/CTF enforcement manual

Austrac has published a manual (pdf) outlining its policies on the use of its enforcement powers under the Financial Transaction Reports Act 1988 (FTR Act ) and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

AUSTRAC has available to it various enforcement powers under both the FTR Act and the AML/CTF Act. Under the AML/CTF Act Austrac has power to:
• Pursue civil penalty orders (via the Federal Court);
• Seek injunctions to restrain conduct in breach of a civil penalty provision;
• Accept enforceable undertakings in relation to certain matters;
• Issue remedial directions in certain circumstances;
• Require external audits relating to risk management and compliance to be undertaken;
• Require a money laundering and terrorism financing risk assessment;
• Issue infringement notices for certain contraventions;
• Exercise various information-gathering powers; and
• Execute monitoring warrants.

Corporate governance in Commonwealth companies

The Commonwealth Authorities and Companies Amendment Bill 2008 (Bill) has been introduced into Parliament. The Bill proposes substantive amendments to the Commonwealth Authorities and Companies Act 1997 (CAC Act) to align it with the Corporations Act in terms of corporate governance.

Subsection 34(1) of the CAC Act currently defines a Commonwealth company as “a Corporations Act company in which the Commonwealth has a controlling interest”. The definition expressly excludes companies in which the Commonwealth has a controlling interest through one or more interposed authorities or Commonwealth companies. The expression “controlling interest” has been interpreted at common law to mean the ability of the Commonwealth to control a majority of votes at a meeting of members (in particular, at an annual general meeting).

The proposed amendment would broaden coverage for determining control of companies under the CAC Act. This would allow for greater accountability to the Australian Government and the Parliament. It will also improve the alignment between the CAC Act test for control and the tests in the Corporations Act.

Other amendments proposed by the Bill include:

• aligning the penalty for a breach of director's duties involving dishonesty or recklessness to those imposed by  the Corporations Act (ie 2,000 penalty units, imprisonment for 5 years, or both).
• imposing a penalty for a failure to disclose material personal interests.
• creating an offence if directors are present or vote on matters in which they have a material personal interest.

Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008

The Government has introduced the Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008.

It is based on the principles announced in Labor's election campaign here.

The Financial Sector Legislation Amendment (Review of Prudential Decisions) Bill re-introduced

The Government has re-introduced into the Parliament  The Financial Sector Legislation Amendment (Review of Prudential Decisions) Bill 2008 which lapsed when the election was called last year. It amends financial sector legislation to ensure that individuals and entities can seek appropriate review of APRA’s decisions, while ensuring that APRA is still able to act decisively to address prudential risks. The measures include:

• the introduction of a court‑based process for disqualifying an individual from operating an entity regulated by APRA;
• enhanced flexibility and consistency through streamlined directions powers;
• removal of the requirement for ministerial consent for certain APRA decisions which do  not involve broader policy issues; and
• an expansion of the availability of merits review for APRA decisions.

The Bill follows a consultation paper last year.

Tax Laws Amendment (2008 Measures No. 1) Bill 2008

The Government has introduced Tax Laws Amendment (2008 Measures No. 1) Bill 2008 to implement a number of improvements to Australia’s taxation system, including the following:

Superannuation Lump Sums Paid to the Terminally Ill
The Bill will ensure that superannuation lump sum payments that are paid to a persons suffering from a terminal medical condition will be tax free, subject to conditions.

The Rudd Government has brought forward the date of effect for the measure so that it applies to payments made on or after 1 July 2007 rather than the 12 September 2007 that was originally announced by the former government.

Tax Deductibility for Trees Established in Carbon Sink Forests
This measure will encourage the establishment of carbon sink forests and highlights the Government's commitment to addressing climate change.

Under the changes the establishment costs will be immediately deductible for trees established in carbon sink forests in the 2007-08 to 2011-12 income years inclusive.  After this initial period, establishment costs will be deductible over 14 years and 105 days at a rate of 7 per cent per annum.

To be eligible for the deduction, the taxpayer must be carrying on a business and the carbon sink forest must meet Environmental and Natural Resource Management Guidelines.

Political Donations
The Government will remove the tax deductibility of political donations made on or after 1 July 2008 in line with its election commitment.

The  Government is repealing the specific deduction provisions in Division 30 of the Income Tax Assessment Act 1997, which currently allow deductions for contributions and gifts to political parties and to independent candidates and independent members up to a maximum of $1,500.

In addition, to ensure that a deduction is not available, these amendments also remove general deductions for business taxpayers for contributions and gifts to political parties, members and candidates.

Apology to Australia's Indigenous Peoples

Here is the text of today's apology by Parliament to the Stolen Generation.

Reconciliation Australia has background information.

UPDATE: ABC News video and audio of the Prime Minister's speech in support of the apology.

The text of the speeches made by the Prime Minister and Leader of the Opposition are now available from Parliament:

• Speech by Hon Kevin Rudd MP – Apology to Australia's Indigenous Peoples (pdf)
  

• Speech by Hon Dr Brendan Nelson MP – Apology to Australia's Indigenous Peoples (pdf)

Green marketing and the Trade Practices Act

The Australian Competition and Consumer Commission has issued Green marketing and the Trade Practices Act to provide updated guidance for businesses and industry on the use of environmental claims in marketing. 

The publication aims to educate businesses about their obligations under the Trade Practices Act 1974 and to assist manufacturers, suppliers, advertisers and others to assess the strength of any green claims they make.

Graeme Samuel lunch rescheduled

Graeme Samuel, Chairman ACCC will discuss issues such as amendments to the Trade Practices Act as well as the expanding responsibilities set to be given to the ACCC at an Australia-Israel Chamber of Commerce (Qld) lunch in Brisbane on 3 April. Diarise it now.

Book online.

Proposed 2008 Commonwealth legislation

The Government has released a list of proposed legislation to be introduced in its first sittings in Autumn 2008.

In particular, the list specifies both introduction and passage in the Autumn sittings of the Workplace Relations Amendment (Transition to Forward with Fairness) Bill to introduce transitional arrangements for workplace agreements pending the introduction of a new workplace relations system in 2010 and allow the process of award modernisation to commence.

ACCC draft merger guidelines

The Australian Consumer and Competition Commission has issued Draft Merger Guidelines 2008 for public comment.

The guidelines outline the ACCC's administration and enforcement policy for dealing with mergers under the Trade Practices Act. It includes the factors the ACCC considers relevant including enforceable undertakings.

The closing date for submissions is Friday 28 March 2008.

Chiefs of State and Cabinet Members of Foreign Governments

CIA's World Leaders publication contains an online directory of Chiefs of State and Cabinet Members of Foreign Governments which is updated regularly. The list also includes the head of the central bank for each country and Ambassadors to the United States and Permanent Representatives to the UN, New York.

Product rationalisation in managed funds

Treasury has released some of the submissions it received in reply to its Issues Paper issued last year to serve as the basis for consulting stakeholders about a product rationalisation mechanism in the managed funds sector.

Government to facilitate bank account switching

Following a meeting with the Council of Financial Regulators on 8 February 2008, the Treasurer has announced a package of 4 measures to promote competition in the retail banking market by making it easier for customers to switch accounts between banks.

The measures are:

• A listing and switching service that requires banks to provide their customers with accurate information on all direct debits and credits to take to a new bank for easier transferral, if they switch.  Banks will also be required to assist new customers to re-establish their direct debits and credits;
• One single consumer complaints hotline 1300 300 630 providing a first contact point for all consumer complaints about basic banking products – to be provided and maintained by the Australian Securities and Investments Commission (ASIC);
• Comprehensive consumer education resources , including a detailed and informative web site providing advice on how to switch, and the costs and benefits of doing so, through the www.understandingmoney.gov.au site; and
• An ASIC-led industry review of the fairness of entry, exit and early termination fees that apply to mortgage accounts and providing better information to consumers to inform their switching decisions.

Despite previous denials that it would regulate bank fees, the Government has expressed its desire that the ASIC review would be " shining a light on fees...(and) putting downward pressure on them".

Implementation will begin immediately, and all aspects of the switching package will be finalised by November 2008.

Initially the listing and switching service will be operational in an interim form that involves banks providing written advice and support until IT systems allow full implementation by November 2008.

The Reserve Bank of Australia (RBA) will oversee the Industry initiatives.

Separately  the Australian Payments Clearing Association (APCA) has been reviewing ways to improve the switching of transaction accounts, particularly the movement of standing instructions (direct credits and debits) on accounts (see my November post here and APCA's January Press Release here (pdf)).

Also note section 72(1)(c) of the Consumer Credit Code which allows a Court to review an unconscionable early termination fee under a consumer credit contract.

Franchising Code of Conduct update

Amendments to the Franchising Code become law on 1 March 2008 (provided the Trade Practices (Industry Codes - Franchising) Amendment Regulations 2007 (No. 1) are not disallowed by the Senate).

The ACCC has issued a fact sheet (pdf).

First Home Saver Accounts

The Government has confirmed its intention to establish First Home Saver Accounts from 1 July 2008 to assist Australians to save for their first home.

The account may be opened by individuals aged 18 and over who:

• has not previously purchased or built a first home in Australia to live in;
• does not have or has not previously had an account; and
• makes an initial contribution of at least $1,000.

Individual contributions of up to $10,000 (indexed) may be made into an account each year. These contributions may be made by the account holder or another party, such as an employer, on behalf of the account holder. 

Contributions have to be made from after-tax income. Contributions will not be subject to tax when contributed to an account.

The Government will make an additional contribution which will be paid directly into the account. The contribution level (based on a maximum benefit of $5,000 of individual contributions) will be either 15 per cent, or the account holder's marginal income tax rate less 15 per cent, whichever is greater.

There will be conditions on withdrawals.

The Government is seeking comments and submissions by 7 March 2008 to assist in settling the final administrative and legislative features of First Home Saver Accounts.

Streamlining tax law changes

The Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, the Hon Chris Bowen MP, has announced