Senator JOYCE (Leader of the Nationals in the Senate) (11:25 AM) —I rise to speak on the Corporations Amendment (Corporate Reporting Reform) Bill 2010. This bill aims to improve Australia’s corporate reporting framework by reducing red tape and regulatory burdens on companies, altering disclosure requirements and implementing a number of other refinements to the framework. Reducing the regulatory burden is something the coalition passionately progressed in government and supports in opposition. It is the coalition’s ideal to make sure that small business, especially, is not encumbered with onerous reporting requirements.

This bill contains four main measures that I will briefly mention. First, it streamlines the reporting requirements imposed on companies limited by guarantee. Companies limited by guarantee will no longer be required to distribute an annual report; instead they will be required to write to members, informing them that an annual report has been prepared and how they can obtain it. Hopefully, this will even have consequences in reducing greenhouse gases. Companies limited by guarantee will also be prohibited from paying dividends, because these companies almost exclusively consist of non-profit organisations. The government wishes to make it clear in the legislation that this type of company structure is not suitable for dividends to be paid. Reflecting industry concerns, the government has supported a coalition proposed amendment to insert a grandfathering clause which will exempt these types of currently operating companies limited by guarantees from being forced to restructure.

Second, this legislation streamlines how parent entities are treated for the purposes of reporting. Third, these measures clarify the treatment of dividends by allowing a company to pay a dividend where the company assets exceed its liabilities immediately before the dividend is declared and where net assets are sufficient for the payment of the dividend. The coalition notes the concerns from company groups such as the Australian Institute of Company Directors, which thinks a profit based test and these amendments today are still too restrictive.

Further, other groups remain concerned that small proprietary companies who currently have no legal obligation to prepare audited accounts will have to apply accounting standards to determine the company’s net asset position prior to the payment of a dividend. The potential application of accounting standards to determine net assets requires the understanding of how to apply a two-inch thick book of accountancy standards of which I am very aware, having made a little bit of money applying them for people. None of those entities operating as small companies in Australia will understand it without paying money to advisers like the good accountants, of which I am a member as a fellow of the Australian CPAs. It will be a tremendous cost burden to the sector. I must note that accountants prefer not to indulge in excessive work for no real purpose but to merely impose new regulatory guidelines on private companies which generally have a limited use for the report and in which the number of people who have access to the report can find out the details by a more direct purpose than total reliance on the report.

While this legislation does allow more flexibility for determining dividend payments, it would be useful for the government to review how the measures operate and, in effect, reassure small proprietary companies that they will not have an additional burden placed on them. Finally, the legislation allows an entity to vary the length of a financial year subsequent to restarting a 12-month reporting requirement. The coalition supports this bill but notes the concerns and its aims to reduce compliance burdens placed on industry. I commend the bill to the Senate.