Govt again promises to cut back red tape

About 12 years ago, when John Fahey was the member for the federal seat of Macarthur, he and then Minister for Small Business, Jeff Prosser addressed a meeting of the Campbelltown Chamber Of Commerce.

John Fahey said “what makes this government different from any previous government is our total committment to reducing red tape for businesses”

Since that time we have had GST, Superannuation Surcharge, Superannuation Levy, incorporation of foreign accounting and auditing standards into the corporations law, anti-money laundering reporting, personal services income rules, non-commercial loss provisions, Div7A rules for private company loans to its shareholders, reporting of some, but not all, fringe benefits on group certificates, Australian Business Numbers….

This week the Treasurer tried to convince us that he too is committed to reducing red tape. Just like all his predecessors.

CANBERRA, Aug 15 AAP – Treasurer Peter Costello has unveiled a raft of changes he says will sweep away red tape for Australian business.

In a formal response to the government’s red tape task force, Mr Costello said he would be acting on 158 of its 178 recommendations and proposals.

He said one of the key responses would be to make it tougher for new regulations to be introduced by the federal government.

A cost-benefit analysis will be conducted on all new regulations before they can go to cabinet for new decisions. And all regulations across the country will be reviewed every five years to see if they are necessary, and if there are ways to reduce those regulations.

“Regulation is a matter of concern for all Australian businesses,” Mr Costello told reporters. “It is important that governments take steps to reduce the amount of red tape.”

As part of the government’s response, federal and state government will establish a committee to examine the case for the introduction of standardised business reporting. Mr Costello said standardised processes had the potential to reduce business reporting costs significantly.

The committee will be chaired by the Treasury Department, and will consult with government agencies and the business sector. A progress report should be completed by year’s end.

“The aim will be to reduce compliance costs for a wide range of businesses through the establishment of an IT-based system which would allow businesses to report to relevant authorities in a consistent manner,” he said. “This would remove the need for businesses to individually report to various government agencies at the commonwealth, state and local levels.”

The committee will look at how information from business to government can be changed to reduce duplication, as well as aligning terms and reporting periods.

Mr Costello said a similar project in the Netherlands reduced the data collected from business from more than 180,000 items to 4,500. This is thought to have saved Dutch small and medium sized businesses more than 350 million Euro ($A580 million).

Among the other proposals are an effort to harmonise state and territory conveyancing laws, a move towards a single regulator for mine safety and a fringe benefits tax reporting exclusion for pooled vehicles.

The government will also start efforts on simplified accounting methods for small restaurants, cafes and caterers, a review of thresholds for the definition of a large proprietary company and a streamlining of business names through the Australian Business Number system.

Mr Costello said the regulation review office within Treasury would be strengthened and re-focused, becoming the office of best practice regulation. “It will work closely with government agencies as they develop policy proposals in order to prevent the generation of unnecessary new regulation,” he said. “Furthermore, the government is mandating appropriate levels of regulatory analysis, including through the use of the business cost calculator, also available to businesses, to quantify in dollar terms the compliance cost of proposed regulatory options.

“The government will also undertake annual reviews to examine the cumulative stock of regulation and identify an ongoing red tape reduction agenda.”

…..And in ten years time, we will do it all again

ASIC concerned over misleading use of past performance information in ads

ASIC has cautioned investment funds against the misleading use of past performance information in advertising and promotional aterial.

Today’s warning follows concerns by ASIC that an advertisement for an investment product offered by BT Financial Group (BT) included past performance information which was potentially misleading. The advertisement’s headline asked the rhetorical question: ‘Past performance isn’t a reliable indicator of future performance, is it?’ followed by past performance information showing strong returns.

In ASIC’s view, the advertisement was misleading because it encouraged consumers to believe that the past performance of the product was a reliable indicator of future performance.

‘Past performance is not a reliable indicator of future performance. An undue emphasis on past returns can lead to consumers having unrealistic expectations and making poor investment decisions’, ASIC’s Executive Director of Consumer Protection, Mr Greg Tanzer said.

Mr Tanzer said ASIC was particularly concerned that the BT advertisement reflected a flippant approach to guidelines detailed in its Guide on the Use of Past Performance in Promotional Material.

‘ASIC expects that industry will take a responsible approach to its marketing activities. If you’re going to use past performance information in your advertising, you must do it responsibly and without being misleading’, he said.

BT has agreed to stop its existing advertising and refrain from using similar wording in future advertisements. BT is now also implementing measures to improve compliance in its advertising and other communications.

In 2003, ASIC commissioned a review of Australian, UK, and US academic studies into the correlation of past performance with future performance. The review concluded that good past performance is, at best, a weak and unreliable predictor of future good performance over the medium to long term.

From ASIC media release

After 500 years – Family Trusts subject to bankruptcy

Since King Henry VIII’s rule, Family Trusts have been protected from bankruptcy. The general rule is that if something is deemed to be your “property” then the bankruptcy courts can get their hands on it. Beneficiaries of a Family Trust only had a “mere expectancy” of the assets contained in the trust. Therefore, the bankruptcy courts had no power to include trust assets in a bankrupt beneficiary’s assets. However, on 20 April 2006 something terrible happened. On that day, the Federal Court held that interests in a Family Trust could constitute “property”.

The case is Australian Securities and Investment Commission (ASIC) in the matter of Richstar Enterprises Pty Ltd. It relates to Norm Carey. He was required to disclose his assets. Fair enough. But ASIC sought to have these receiver orders extended to the disclosure of property held by third parties as trustees of any trust in which Carey was a beneficiary. Extraordinary.

Now, this is the rub. The Court said that in the case of some of the nominated Family Trusts, Carey’s interests came within the definition of “property” in section 9 of the Corporations Act 2001. When can this ever be the case? The court said that this is the case where Carey effectively controlled the exercise of the trustee’s discretion to distribute. Apart from the Family Court, no court has ever taken this position before.

Obviously, not all of the interests fell into this category of “property”. Some interests in the trusts were something less than property – being mere expectancies. Quite clearly the court is correct in not extending the orders to all property held in trusts where Carey was a mere discretionary beneficiary.

Now at this stage it is just an order for Carey to talk about his assets. They haven’t been lost yet to the receivers. But it does raise the alarm bells for all clients that are in existing Family Trusts.

Thanks to Brett Davies, Law Central for this news.