12 February 2020

BILLS - Commonwealth Registers Bill 2019, Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, Corporations (Fees) Amendment (Registries Modernisation) Bill 2019, National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Bill 2019 - Second Reading

Mr STEPHEN JONES (Whitlam) (17:47): I'm pleased to be speaking on the Commonwealth Registers Bill 2019 and the second reading amendment that has been circulated in my name, which I now formally move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) congratulates the Government for finally taking action to implement a Director Identification Number and tackle illegal phoenixing, nearly three years after Labor first committed to the policy; and

(2) calls on the Government to accelerate the modernisation of business registers project".

It's good to see this bill return to the House, albeit in a different form. It's a bit like the return of an old friend—once spurned but comes back and is loved by all. It was back in November last year that I introduced amendments to the coalition's creatively titled Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 which would modernise business registers. The bill before the House today has picked up my schedule and introduced it. I don't know whether it was because of intransigence or just downright stubbornness that the Assistant Treasurer, who at that point in time spoke against my bill, has now got the liquid paper out and has moved it again in the government's name. I don't care. What I'm concerned about is ensuring that we take effective action against illegal phoenixing in this country.

If people want to know why I moved that schedule, it was after receiving numerous representations from Labor MPs who had had come to them businesses or creditors who had lost money through the immoral, illegal activity of bad operators—thousands and thousands of dollars. In fact, the explanatory memorandum to this bill tells us that anywhere between $3 billion and $5 billion per annum is being lost to bad operators through illegal phoenixing. But a real motivator came in the form of a woman by the name of Tara Teo, a young mum who attempted to start a family business in my electorate. Tara's story made national headlines last year when A Current Affair told the story of her attempts to start a business. She was one of many, many people who were caught up in the collapse of an organisation known as JUMP! Swim Schools, a franchise system operating throughout the country. I caught up with Tara last week, and I told her that I was going to raise her matter in parliament. I do that today to honour her and the thousands of people like her. But I was very keen to say: I cannot give you hope that you're going to recover the monies that were lost to you. The ACCC is currently pursuing the matter. I've written to the ACCC and asked what plans are afoot to ensure that some of the creditors might benefit from any of the penalties that may be awarded against the business, JUMP! Swim Schools. But I don't want to give false. That's a long and drawn out process. She's lost a lot of money. Thousands of other people have lost a lot of money as well.

Tara entered into an agreement with JUMP! Swim Schools two years ago to purchase a swim school franchise, which she intended to operate in Albion Park, in my electorate. Her initial investment of $150,000—a lot of money!—was to build the facility and get the business started. She wasn't a fool. Often we think about people in these circumstances as being gullible, perhaps, and not reading the fine print. But Tara had done her due diligence. She did the research. She looked into the company at the time. JUMP! Swim Schools had 66 trading sites throughout Australia. She'd invested her money, but a year later nothing had been built. When she chased things up she was shocked to discover that the company had been trading insolvent since March 2016. The company went into liquidation, and Tara lost everything. Meanwhile—and here's the rub—the CEO of the company, a bloke by the name of Ian Campbell, was able to go to the United States and open 11 new franchises in another jurisdiction, and not just in the United States of America; his company has operated franchises in New Zealand, Brazil and Singapore. I take this opportunity to send a message to the regulators in those countries to watch this fellow. He's got form. I hope that there isn't another round of victims in New Zealand, Brazil, Singapore or the United States because of the immoral actions of this bad operator.

I urge other members of the public to listen to people like Tara in their electorates and to hear about the real harm being done by dodgy, phoenixing business. We know it's a big drag on the economy, but the numbers belie the personal costs. There's the cost to the family from the emotional stress they go through when they not only lose their hopes and their livelihoods but are left with a crippling debt—Tara's husband is now working night shift in the steelworks—and no immediate means to repay it.

I am genuinely pleased to see that this bill is before the House. It's about the establishment of a modernised legislative regime for Australia's business registers, which are currently woefully outdated and running on a range of ancient systems. This is a commitment that the government first made back in 2016. It arises out of a recommendation from the Productivity Commission which dates back to September 2015, when they issued their final report, entitled Business set-up, transfer and closure. So it's taken us a long time to get from that Productivity Commission recommendation to this bill being before the House today. One can only imagine—in fact, we don't have to imagine; we can calculate. If PricewaterhouseCoopers are right and the annual cost of illegal phoenixing in this country is somewhere between $3 billion and $5 billion a year, the five years of inaction by this government has cost the economy—those small businesses, those creditors—somewhere close to $25 billion. That is immoral. That is unconscionable.

I'm pleased to see the bill before the House. It's probably worth explaining some of the reasons why this is so important. It might surprise many members of this place, who jumped on a plane to travel down here to Canberra to attend this session of parliament, that you actually have to go through more identity checks to buy a plane ticket than you do to set up a business and become a company director in this country. Let me say that again: you need more identity checks to get on a plane to come to Canberra than you do to establish yourself as a director of a company.

Under the current arrangements, no individual verification of the identity of directors is occurring in a way that can stop the recidivist phoenix operators, the bad operators, doing again and again and again what they've done to people like Tara Teo and her family. This legislation will put in place the machinery to ensure that that loophole is closed down. It is not before time. It was a commitment made as part of the government's so-called National Business Simplification Initiative, which was intended to reduce the time businesses spend interacting with governments so they can get on with the business of keeping the economy moving. We say that that is a worthy goal.

Perhaps the fact that this bill has been delayed for so long since its announcement has been because the government in this area, as in so many other areas, are just incapable of making decisions and then making those decisions operative. In every critical area in our economy we see the same pattern of behaviour: announcements are made, but they are not followed through because of the divisions and incompetence of the governing parties—divided among themselves, unable to make a decision in their party room and then unable to make that decision operative. We have multiple examples of that before the House at the moment.

It is also worth pointing out that the government has assigned $60 million in funding for this project, a project for a major IT upgrade that is going to involve a significant upgrade of a number of outdated IT systems. When we've consulted with industry and others who have some expertise in the rollout and upgrade of systems such as this they say that that is woefully inadequate. So I'd invite the minister responsible, when he comes back to the dispatch box to sum up in the debate, to say what contingency they have put in place to ensure that they have allocated sufficient funds to ensure that this essential project gets up and running, so that the reality matches the rhetoric; so that businesses have the systems in the background to enliven this legislation. If they are unable to satisfactorily answer that question, what we'll have is just another example of the government making a big announcement but, through their own incompetence and inability to follow through on these things, that being insufficiently executed.

I want to say something about director identification numbers. This is an important feature of this bill. It's absolutely critical. Everyone from the Australian Institute of Company Directors to the small business associations and the small business ombudsman have said, 'This is absolutely critical to addressing the issue of phoenixing.' A director identification number will provide a unique identifier for directors of Australian companies, providing traceability over time. Suppose you put your hand up and say, 'I want to register with ASIC as a company director.' ASIC provides you with a unique director identification number. Like your tax file number, that stays with you for life.

What that enables ASIC to do, and what that enables creditors, shareholders and others to do, is track a particular shareholder, particularly if they've been involved in recidivist activity, to ensure that the full force of the law can be brought down upon them if they are barred—that they're not able to re-register, because the systems are in place to stop that. I welcome the fact that the government is putting this legislation into the House as well, called for by business, called for by Labor, committed to by Labor at the last election, an integral part of the bill that we put forward in November last year and picked up by the government, and I welcome that.

We have a serious problem with phoenixing in this country. We do want to ensure that this bill is implemented, that it passes this House and that it passes swiftly in the other place. But we also want to ensure that the money, the funding, is set aside to ensure that the systems can be upgraded and that the work can be underway swiftly, to ensure that the director identification number and the registry upgrades—something this country sorely needs and something that corporate Australia sorely needs—can be put into place. In so many ways, the government has failed.

With those brief comments, I put the minister on notice. When he comes back to sum up, I want him to be able to explain to the House how $60 million is going to be sufficient for this significant IT upgrade, this significant registry upgrade to be completed, and what contingencies the government has put in place to ensure that this critical change, to stamp down on phoenixing in this country, can be delivered. With those comments, I commend the bill to the House.

The DEPUTY SPEAKER ( Ms Claydon ): Can I check that this amendment is seconded?

Mr Giles: Of course it is, but I reserve my right to speak.

The DEPUTY SPEAKER: The original question was that this bill be now read a second time. To this, the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.

Before I invite other speakers, I understand that it is the wish of this House to debate this order of the day concurrently with the four related bills, as they appear on the program. I believe there is no objection. There being no objection, I will now allow that course to be followed. So the question, I repeat now, is that the amendment be agreed to.