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Thursday, 2 December 1976

Mr HOWARD (Bennelong) (Minister for Business and Consumer Affairs) - I would be very happy to answer that query. This clause which deals with subsidiaries was put in quite deliberately to cover the situation where the parent company of a group of companies is obliged by reason of its turnover to notify price increases. It is reasonable that small subsidiaries in that group be relieved ofthe like obligation. If the honourable member for Port Adelaide (Mr Young) reads the earlier parts of the legislation, not the amending Bill but the principal Act, he will find defined what constitutes a subsidiary company. A subsidiary company for the purposes of this operation is a related company to a parent company as defined in the Act. It becomes a prescribed company because the parent company is a prescribed company, being over the turnover bench mark.

Obviously the effect of this amendment will be to exclude the subsidiary companies of which the honourable member has spoken. There is no proviso about these companies operating in a separate area. The test of relationship is the test already embodied in the Act. No further definition of relationship is introduced so far as the amending Bill is concerned. If one goes to clause 4 of the amending Bill one finds for the purpose of the legislation what constitutes a holding company and a subsidiary company and the circumstances in which a company is to be regarded as a subsidiary company. It is quite clear from that what the answer to the honourable gentleman's question is. If one goes to the final part of clause 5, which deals with the $5m proviso, one can see the scheme of the legislation.

Mr Young - The point we are raising is in respect of further fragmentation.

Mr HOWARD -I will come to that if the honourable gentleman will be patient for a moment. My information is that the effect of this amendment will be to take out of the notification procedures of the Act about 1000 subsidiary companies.

Mr Young - At the moment.

Mr HOWARD -Yes, at the moment. The honourable member for Port Adelaide says that large companies will further subdivide themselves into subsidiaries to take advantage of the fact that the subsidiaries will not be required to comply with the notification procedures. It is true that this could occur in some cases. It is equally true, though, that it is not a completely costless exercise to embark upon a corporate restructure. If one has a holding company that has large capital assets and it transfers those capital assets to related companies it pays almost confiscatory rates of stamp duty and so forth. It is just not always an attractive economic exercise to do this.

Whilst I can see that in some cases companies will take advantage of this procedure, I just do not accept that the great majority of the large enterprises will go to the bother and expense and be subject to all the managerial problems involved in corporate restructuring just for the purpose of avoiding the notification procedures. I do not deny that it could occur in some cases. That is acknowledged. We go into that with our eyes open. I just do not believe, having in mind the costs and so forth which will be involved in that sort of corporate restructuring, that it will occur in very many cases.

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