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Thursday, 1 March 2012
Page: 2459

Ms GRIERSON (Newcastle) (10:20): I rise to speak in support of the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. I particularly commend the Parliamentary Secretary to the Treasurer for his efforts in developing this legislation, as it is another significant step in our proud Labor tradition of standing up for and protecting the rights of Australian workers. As its namesake, the bird from Greek mythology suggests, the practice of 'phoenixing' in business refers to collapsed and abandoned companies with outstanding debts to creditors and employees, and then these companies later 'rise from the ashes', usually disguised, thinly, under a new trading name.

I have heard many of the opposition speakers oppose this bill. They say that there is no need for this new legislation. That is not true. ASIC was under-resourced under the Howard government. I think it worked out of a broom cupboard—and I say that from my experience on the Public Accounts and Audit Committee. It was starved of resources. What did we see as a result of that? We saw a global financial crisis that unfortunately saw bad practice. We saw many people lose their livelihoods, their savings, their superannuation entitlements and their holiday entitlements. We saw contractors who were never paid. We saw bad business.

I heard the member the Moncrieff say that his party will always stand up for small business. Well, we will always stand up for good business. Good business is what we need in this country—good entrepreneurs. So many times through the GFC we saw good businesses disclose their problems to their workers, their employees and their suppliers and contractors, and work hand in hand to make things work. There is a spirit of goodwill out there in the workplace with business. There are good representative groups and bodies that, when consulted, can offer good advice. We saw many examples of good business making supreme efforts so that workers would not lose everything. We also saw workers give up hours and go to part time to get through those times.

We are talking today about phoenixing companies. Apparently it is not a big problem—there is no evidence. Well, I quote from the Age of 3 January:

According to the Australian Taxation Office, there are about 6000 phoenix companies in Australia …

If that is correct, that is far too many. The practice costs our economy billions of dollars a year, and I believe it must be dealt with firmly. In 2010, our Labor government made the election commitment to provide the Australian Securities and Investments Commission, ASIC, with additional administrative powers to wind up companies that have been abandoned with workers and creditors left high and dry.

This bill is a key element of our government's Protecting Workers' Entitlements 2010 election commitment, and we honour that in this legislation. This legislation is a critical step in assisting the remuneration of employees for work that they have carried out in instances where a company has failed in its duty to make payments. Employees in affected companies have in many cases unfairly lost pay they are entitled to and benefits such as their accrued long service leave, holiday pay and superannuation due to cowboy practices and the abandonment of companies.

The federal government's GEERS is currently only able to assist employees in accessing their entitlements once an abandoned company has been formally placed into liquidation. It is a loophole that has existed for far too long. As the law stands, ASIC is required to undertake lengthy court procedures and incur associated legal costs in order to wind up a company and place it into liquidation. Only then may employees access GEERS.

Through the phoenixing and other measures bill, corporate watchdog ASIC will be given the authority to directly place an abandoned company into liquidation where it is believed that the company has ceased operation or where a company has deregistered but not formally liquidated. Currently, if an abandoned company has deregistered with ASIC, employees seeking their entitlements, or ASIC itself, must first apply through the courts to officially reinstate the company so that then, and only then, can it be placed into liquidation. This is unnecessary and complicated red tape that does little to help the immediate needs of unpaid employees or contractors who simply want what they are entitled to—a fair go and fair payment.

To address this frustrating and costly complication, the legislation will provide ASIC with the additional power to place a company into liquidation in cases where ASIC is currently only able to deregister a company. Not only will it give ASIC the power to reinstate deregistered companies, immediately place them into liquidation and thereby render employees eligible for GEERS; the legislation allows ASIC to place a company into liquidation without the need to provide notice where there is reasonable objective evidence that the company is no longer carrying on business as usual. Such evidence may, for example, be failure to pay a review fee. It is an important step that we amend the Corporations Act. Workers and contractors, but particularly employees, should expect to receive what they are entitled to without a second thought.

Another key aspect of the phoenixing and other measures bill sets down regulations regarding the publication of notices relating to the events before, during and after a company's administration. Currently, throughout the course of administration, there are a range of notices that are required to be published in either print media or the ASICGazette. In complying with these requirements, this publication obligation means substantial costs to external administrators, which is then of course passed on to already out-of-pocket creditors. In addition to this, the creditors also incur the cost associated with monitoring media activity, searching numerous newspapers for notices that may be relevant. Of course, they are often just national newspapers; regional newspapers are often overlooked. There is no set day of the week that those notices would appear. It is a confusing system.

This legislation aims to amend that, with the establishment of one central and publicly available website by ASIC. Being the direct point of publication for notices relating to corporate insolvency, the website will be accessible, searchable and ever-present, removing the need for hard-copy publication. The legislation establishes a coherent and affordable means by which to inform creditors, in a prescribed manner, through the publication of those notices online. This legislation is about ensuring information is easily and readily accessible, particularly for employees. This is a modern and necessary reform of the way in which we protect the entitlements of working people. The website will be established through ASIC by 1 July 2012. This legislation is another measure in harmonising Australia's insolvency industry. Over the coming four years, approximately 53,000 newspaper advertisements will be placed with the website, cutting the red tape, cutting costs for external administrators and reducing the burden on already affected creditors. Over this period, the use of the website will save around $15 million in print media advertising fees. I know the print media may not be pleased about that, but certainly we need to make those savings. This is a positive step our government is taking towards reducing the costs associated with compliance and regulation obligations.

There have been some serious cases locally, in and around my electorate of Newcastle, involving phoenixing activity. In 2006 I raised in the parliamentary committee process the Chinese-backed development and construction company Hightrade with ASIC. At that time, under the Howard government, ASIC had, as I said, very little powers to pursue such companies. The Newcastle Herald's Joanne McCarthy and the CFMEU's Andrew Ferguson went after the elusive Hightrade throughout that time, and I commend them for what was a sustained and consistent effort on their part towards making the company accountable to its creditors and employees through their public campaign. Contractors and suppliers, investors and workers all lost out. At the time, the ATO brought a case against Hightrade before the Federal Court—another very costly exercise. The behaviour of phoenix companies, such as Hightrade and other development and construction companies, has in the past demonstrated a failure to meet superannuation obligations as well. The Joint Committee of Public Accounts and Audit has consistently pursued the behaviour of such companies with the Commissioner of Taxation, something I am very proud of. At the time that the Herald were pursuing these matters, I stated in the Herald that the commissioner had agreed with me that 10 prosecutions of company executives for phoenix-type behaviour since 2000 was not satisfactory, and that this area of corporate behaviour was deserving of further attention from the ATO as well as ASIC.

I am pleased that legislative reform to combat phoenix companies has been considered and that in this parliament we are now seeing practical measures brought forward in legislation to combat phoenix companies and mitigate the negative effect they have on our community. Bad corporate behaviour can never be justified for any reason. I draw attention to the case of the roof contractor and former Australian Wallaby, Michael Martin, who lost hundreds of thousands of dollars when Hightrade company Reica Constructions avoided their tax and creditor debts and was wound up in 2006 during the construction of the Hunter Valley Resort at Pokolbin. As Joanne McCarthy reported in the Herald on 3 November 2009, 'The Tax Office was left the biggest creditor, owed $36 million'. That is us—every taxpayer being taken down by a bad company. There have been far too few powers for authorities to act in a timely and cost-effective manner to benefit those who have lost out due to corporate mischief. I am pleased that this legislation is working towards a better system.

As stated, the Corporations Amendment (Phoenixing and Other Measures) Bill 2012 is a key component of the government's Protecting Workers' Entitlements Package, announced at the last election. Other elements at the core of the government's package are the Fair Entitlements Guarantee, Securing Super, and Strengthening Corporate and Taxation Law, under which this and other legislation fall. Through no fault of their own, workers are losing their entitlements when companies are abandoned or where business behaves badly. Why should workers—people we know—have to worry about being paid an honest salary for an honest day's work? We will continue to pursue these sorts of reforms.

The Fair Entitlements Guarantee, which is currently undergoing a rigorous consultation process with stakeholders before being introduced as legislation, will alter the existing GEERS program so that employee entitlements cannot be abolished or amended easily by employers. In supporting these commitments, changes have already been made to the GEERS scheme prior to the guarantee being enshrined in legislation. Our government has removed the previous 16-week cap on redundancy pay and 'excluded employees', such as company directors, are no longer able to access assistance under GEERS. If an employee is owed money, they should be paid in full—not just 16 weeks and be left out of pocket. This is about fairness and some certainty. It is about cutting the red tape and ensuring quick and easy access to entitlements.

The second core element of the Protecting Workers' Entitlements Package is securing superannuation. Our government is strengthening compliance measures and ensuring that employees receive what they are entitled to. The Australian Taxation Office and the Fair Work Ombudsman have been given greater enforcement powers, ensuring that businesses pay their employees' superannuation guarantee. We also introduced legislation this morning to make it compulsory for employers to show on a payslip the anticipated date that an employee's superannuation contribution will be paid. Previously, it was only required that the amount be known. There have been too many cases of people who, when a company goes into liquidation and closes down, find their superannuation payments have not been made.

Thirdly, we are strengthening corporate and taxation law, giving ASIC more muscle by increasing the penalties against companies that wrong their employees and wrong their creditors. The Corporations Amendment (Phoenixing and Other Measures) Bill is a component of this. Again, in addition to this bill, the Corporations Amendment (Similar Names) Bill will be brought before the House in the near future. Currently out for consultation, the similar names bill will aim to further crack down on practices whereby company directors establish a phoenix company using a similar name to the initial failed company. The bill will fairly and justly impose personal liability upon those directors for the creditor debts of the failed company.

Certainly, under that similar names bill and those penalties for directors, there is nothing wrong with establishing a new business after a business has failed. We understand that. It is fine to have a second chance, as long as creditors and employees have been treated fairly, debts have been dealt with and directors have acted in a responsible fashion. Outlaw directors should be held liable for their exploitative behaviour. Unfortunately, in some cases, there does seem to be very deliberate actions with no intent to ever pay the workers or the creditors.

The suite of bills and action that this government is taking will ensure that directors cannot continue to sink deeper and deeper into debt through phoenixing practice and shirk their obligations. I thank again the Parliamentary Secretary to the Treasurer, the Treasurer and the Assistant Treasurer for their work on this bill and know it will be of immense benefit to working people in my electorate and those small creditors often existing week-by-week around the country. It is legislation that only a Labor government would deliver. Sadly, it was not in place during the GFC when we saw so much burden placed on people, when they chose those sorts of options to get out of debt—options that saw people suffer—rather than take responsible action. It is legislation that is very much needed and, unfortunately, we have had to deliver and we will deliver. It is ultimately about a fair go for working Australians. I commend this bill to the House.