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Thursday, 22 June 2017
Page: 7461

Dr LEIGH (Fenner) (11:53): We have just heard an extraordinary contribution from the member for Fairfax, who has said that it is absolutely outrageous that the Senate is currently conducting an inquiry into this bill, the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017, despite the fact that the Senate inquiry is already underway. Submissions close next month. The inquiry will come down in August. Indeed, the inquiry will come down before the government has any intention of bringing this bill to the Senate. So there is no delay as a result of this inquiry. This is the final sitting day before the winter break. The Senate's inquiry is not delaying things.

Then he talked about our second reading amendment, which calls on the government to act on dodgy phoenix directors, who are costing Australia $3 billion, perhaps more. When it comes to dodgy phoenix directors, does the member for Fairfax say that we need to take action now? No, he does not. Does he say that we need what the Australian Institute of Company Directors, the Productivity Commission, the Tax Justice Network, the ACTU and every other sensible independent in the country say we need—a director identification number? No, he does not. He says, 'We've got a task force, we're looking into it and maybe at some stage we'll get around to dealing with dodgy phoenix directors.' We have to be serious about the scourge of dodgy phoenix directors.

I expected the member for Fairfax to take five minutes, but he took his full time, so I had a chance to read his first speech. I know he has a medium-sized business background. He must, deep in his heart of hearts, care about the issue of dodgy phoenix directors, yet he is not willing to support Labor's sensible, carefully calibrated move to tackle phoenixing activity in Australia, and that is deeply disappointing for those of us on this side of the House.

With the member for Gorton and Senator Gallagher, Labor announced in May our package for tackling dodgy phoenix activities in Australia. It addresses the fact that it is currently easier to become a company director than to open a bank account. It addresses the fact that, as tax commissioner Chris Jordan told Senator 'Wacka' Williams in a hearing, the tax commissioner could register Senator Williams as a director and he would not even know about it. It reflects the fact that media reports revealed last year that a member of this House was on the directors register not once but thrice. A member of this House appeared three times on the directors register with different birthdates. I will give the member the benefit of the doubt that this was an inadvertent error, but it does reflect the problems we have without a director identification number. If a member of this House can be three directors then surely it is easy for things to also go wrong.

One expert says that the laws are currently so lax that you could almost register your dog as a director. I have a lovely dog—a keeshond called Texas—but I still would not register him as a company director. According to the experts, the laws are so lax that I almost could. That is why Labor supports a unique director identification number, with a 100-point ID check. This proposal is supported by a plethora of organisations. In addition to those I have already mentioned, there is the Australian Restructuring Insolvency and Turnaround Association, the Senate Economics References Committee and the Productivity Commission.

We have also called on the government to increase penalties associated with phoenix activity, to introduce an objective test for transactions depriving employees of their entitlements, to clarify the availability of compensation orders against accessories, and to consult on targeted integrity measures based on recommendations from the Monash Business School-Melbourne Law School phoenix research team's recommendations. I commend those experts for the work that they have been doing. It is not as though this report has suddenly fallen into the government's lap in the last few days. This phoenix research project has been running for years now, and the government should have acted on dodgy phoenix directors, who are hurting workers, taxpayers and honest small businesses, which, according to the PwC report on the costs of phoenix activities, suffer the greatest harm from phoenix activities.

The Labor Party's determination to crack down on phoenix activity shows again Labor leading the policy debate, as we have done with superannuation taxation concessions, with cigarette excise and with appropriate funding of community legal centres. We saw this week, with the GST low-value imports bill, parliament backing Labor's approach on a one-year delay and a Productivity Commission inquiry.

Labor is again calling on the government to act on dodgy phoenix directors. It is not good enough to set up a task force and to say, 'Maybe sometime in the future we will deal with dodgy phoenix directors.' They are a scourge on the Australian economy, and there is a straightforward way to tackle it now. When the Australian Institute of Company Directors is joining with the Australian Council of Trade Unions, it is probably a sign that you have a sensible measure that enjoys support from across the political spectrum. The government needs to introduce legislation to this House to implement a director identification number.

The government should also act on our other proposals because, in the case of the objective test for transactions depriving employees of their entitlements—that is section 596AB(1), inserted into the Corporations Act in 2001—the Phoenix Research Team noted that that test has never been enforced because, without an objective test of reasonableness, it just is not possible to enforce it against dodgy directors. Clarifying the availability of compensation orders is vital, because it will provide additional tools to tackle dodgy directors. Doubling the base penalty for intentional disregard, doubling the penalty for failure to meet tax organisations, doubling the penalty for failure to withhold—all of these things are critical in making sure that directors do the right thing.

On its face, the bill has some policy merit. It was announced as part of the government's 2015 National Innovation and Science Agenda, with the aim of allowing more opportunities for businesses to be turned around. Providing safe harbour and the new provisions to stop the enforcement of ipso facto clauses may well be the appropriate route to follow.

The operation of ipso facto clauses could potentially destroy the ability of businesses to restructure the value of the business and prevent the sale of the business as a going concern. But it is vital that these changes do not adversely affect taxpayers and employees, and that is why Labor raises the issue of dodgy phoenix activity in our second reading amendment. These are issues which will be properly scrutinised by the Senate committee over the winter break. The reference was made on 15 June. Submissions close on 12 July, and the Senate Economics Legislation Committee will report by 8 August.

The member for Fairfax is misleading the House when he suggests that there will be any delays as a result of the Senate inquiry. The Senate inquiry will only improve the quality of this bill by subjecting it to the proper scrutiny that Australians, who are concerned about dodgy phoenix activity, want but who also want to see viable firms work through a restructure. Balancing those two concerns is absolutely what the Senate inquiry will do; that is why referring this bill in that way is the right approach.

I call on the government once more: come to your senses, tackle dodgy phoenix activity and get on board with Labor's director identification number. It is the right thing to do. Do it now.