ASIC hit by Senate criticism over ‘small’ multinationals


THE Senate Standing Committee on Economics heard damning criticisms of the Australian Securities and Investments Commission (ASIC) and Taxpayers Australia is highlighting ASIC’s poor handling of how multinational corporations represent themselves in Australia.

Senator Christine Milne’s probing of ASIC’s ‘check-and-rein’ protocols in October has produced worrying insights, according to Taxpayers Australia, which also submitted to the enquiry “at worst, the government regulator has an ineffectual standing among multinational corporations, who are playing fast and loose with basic compliance and self-determination processes”.

Taxpayers Australia’s head of tax, Mark Chapman said ASIC’s primary misstep — highlighted by Sen. Milne in session — was best summarised as “an inability to regulate Australian subsidiaries operating as part of larger, overseas parent companies”. 

ASIC’s current Class Orders only require large organisations and large Australian-based groups to submit financial statements. 

“The rub is this:  businesses self-determine their size, and thus their eligibility to report to ASIC,” Mr Chapman said. “Self-determination requires an honour-based compliance standard. 

“Therefore less-than-honourable businesses can dodge regulation by determining themselves ‘small’ with little apparent fear of ASIC validation.”

Taxpayers Australia claims Facebook Australia “looks to have done this, being an Australian subsidiary of a larger overseas parent company”.

“Given the size of the Facebook global empire, questions need to be asked about Facebook Australia’s ‘small company’ self-determination,” Mr Chapman said. “Its practices are sobering proof an overhaul is needed.”

In a submission to the Senate Standing Committee on Economics, Taxpayers Australia has sought to tackle the legislative grey area Facebook Australia – and Facebook US, being the parent – may be operating in.

“The fact remains, ASIC has not defined large multinational group disclosure arrangements,” Mr Chapman said. “Taxpayers Australia notes that under current law, ASIC’s existing Class Orders do not require multinational corporations to submit financial statements in respect of their Australian subsidiaries.

“Therein lies the worrying likelihood of ASIC missing out on critical financial information.”

Mr Chapman said Taxpayers Australia advocated it essential that not only ASIC follow the law in relation to self-determination, but that the law was appropriate in the first place.

“And clearly it isn’t,” Mr Chapman said. “We’re not calling for over-regulation but clearly when the parent company of one of the world’s largest corporations is able to legitimately describe itself as small – with all the implications that carries for the amount of scrutiny it will receive by ASIC and later the Tax Office – there is something very wrong with the rules.”
Taxpayers Australia said its understanding was that the Australian Taxation Office (ATO) can request financial statements from relevant subsidiaries of foreign multinationals, but ASIC’s laws do not support any such procedures. 

“The two bodies should work in tandem,” Mr Chapman said. “As it is right now, any financial statements provided independently to the Tax Office would not be legally subject to audits by an independent third party, nor would they be need to be prepared in accordance with Chapter 2M of the Corporations Act 2001 (Cth).”

Taxpayers Australia is calling on the Senate Committee to clarify the extent to which ASIC consults with the ATO and other powers when formulating Class Orders. 

“The partnership of ASIC and the ATO, with respect to multinational compliance, must be seen to deliver clear legislative strength,” Taxpayers Australia said in a statement. “If it does not, the government must act to strengthen the law covering the  verification of self-determination processes.

“Proof the Tax Office is receiving quality information from foreign multinationals to aid ongoing compliance must be given, and ASIC must address glaring holes in Class Orders stipulating company self-determination criteria.”



New pathway for mega wealthy migrants


NEW INVESTMENT attraction for Australia is the impetus behind expansion of schemes to attract wealthy migrants – and their capital – by the Australian Government.

Mullins Lawyers partner and registered migration agent, Tony Hogarth said the Premium Investor Visa (PIV) would be introduced from July 1, 2015. The PIV will allow an applicant to become a permanent resident in just 12 months by investing $15 million into complying investments – and importantly there will be no permanent residency requirement under the scheme.

This is a significant move, as is the increased involvement of Austrade in determining the investment eligibility criteria for both PIVs and Significant Investor Visas (SIVs), Mr Hogarth said.

“In addition to States and Territory governments, Austrade will play a more prominent role in SIVs through the nomination of SIV applicants,” Mr Hogarth said. “For PIV applicants, Austrade will become the sole nominating entity.”

The visa schemes are expected to link back to the Federal Government’s recently released the Industry Innovation and Competitiveness Agenda.

The SIV scheme was released in November 2012 by the previous Labor Government. It required migrants to invest $5 million into complying investments in Australia for a minimum period of four years. With the new provisions, the Coalition Government appeared to be strengthening the program, while dealing with anomalies.

“In order to attract more high net worth individuals, improvements in the exiting SIV will be made by streamlining the processing time, strengthening its integrity measures and further promoting the program globally,” Mr Hogarth said.

“With the implementation of the new PIV, Australia will be able to better compete with other countries and to maintain its position as one of the leading destinations for wealthy migrants.”

Mr Hogarth said the government also proposed to implement changes to the 457 Visa regime to make it easier for employers to engage skilled overseas workers, and specifics were expected to come through in coming months.


Identity crime fighter: iDcare

AUSTRALIA now has its own national identity theft support service, known as iDcare, officially launched this week by Federal Justice Minister, Michael Keenan.

The service has been boosted to meet the rapidly threats to business and society of identity crime.

Mr Keenan said iDcare was “one of a kind”.

“It offers a toll-free national anonymous telephone service that works with members of the community without charge to develop tailored and practical response plans to get people back on track following an event that threatens their personal information,” Mr Keenan said at the launch event attended by members of parliament, business and government leaders.

“It’s a great pleasure to be here today, and to be invited to help officially launch iDcare, the national support centre for victims of identity crime.”

He said iDcare was in a unique position “to understand not only the experiences of victims – but also how well prepared government agencies and businesses are to assist and support victims on the road to recovery”.

“In this way, iDcare is perfectly positioned to play a strong advocacy role in promoting best practice for responding to victims – and raising awareness of the need to maintain strong protections over personal information,” the Minister said.

The managing director of iDcare, David Lacey, said, “To have one provider, that cuts across all levels of government and industries, that works with individuals to build a tailored response to their circumstances is very unique.”

Dr Lacey said iDcare was a not-for-profit established as a joint national public-private sector initiative. It is located on Queensland’s Sunshine Coast. Its case management centre is specifically tailored to deal with minor through to complex identity theft and misuse events. 

“We respond to clients from Cairns to Esperance, of all ages, and respond to all forms of identity theft, online and physical.” Dr Lacey said.

“A measure of our success is the ability to cut down the complexity of how our clients need to respond, to share critical knowledge, and get them feeling back in control.”

The iDcare support line operates from 8am to 6pm (AEDT) Monday to Friday: 1300 432 273 (1300 IDCARE).

Dr Lacey said iDcare does not collect personal details, nor does it charge for its service.



Remove red tape: start with FBT

EXTRA: THE Institute of Public Accountants (IPA) reckons fringe benefits tax is the most burdensome item of compliance in front of Australian small business today.

FBT’s overhaul is both warranted and overdue, according to the IPA – but it was overlooked in the recent Federal Budget. 

“Look no further than FBT if the government wants to make some inroads to its commitment to reducing regulatory red tape,” IPA senior tax advisor, Tony Greco said.

“FBT has the unenviable title of having the highest compliance cost of any tax. It places a significant compliance burden on small business operators.

“The complexity of the FBT system applies to all small business employer groups, including the not-for-profit sector.  We are talking about a lot of entities trying to navigate a quagmire of rules to safely negotiate ways to comply with these tax rules.

“The IPA believes that shifting FBT from employers to employees would provide a more equitable solution to many of the current problems. Taxing fringe benefits at the employee level has the potential to deliver greater neutrality in the treatment of cash and non-cash remuneration while reducing the compliance costs for both employers and employees.

“The Henry Review supports such a proposal to simplify the current rules and provide for more transparency. There are also a number of anomalies in the FBT rules which have been allowed to exist for too long and should be addressed by any responsible government.

“The use of uncapped access to FBT exemptions for restaurant meals and the hire of entertainment facilities for private purposes are highly discriminatory and need to be immediately reined in on equity grounds,” Mr Greco said.

“The exploitation of these uncapped concessions offends the principle of fairness. For example, allowing someone to salary sacrifice a $40,000 wedding from pre-tax income to avoid a significant amount of tax is difficult to justify.

“If the incidence of FBT is transferred to employees, then an alternative mechanism for funding FBT tax concessions will need to be considered. The funding alternatives proposed by the Not-for-Profit Sector Tax Concession Working Group have merit as they offer more transparent incentives for attracting and retaining talent in the not-for-profit sector.

“These alternatives need to be considered in the interests of simplicity, fairness and transparency,” Mr Greco said.

The IPA made this recommendation as part of its pre-Budget submission.



More protection for taxpayers who win against the ATO?

THE TAXPAYERS Australia organisation has called for protection for taxpayers who find themselves embroiled in disputes with the ATO – especially where the ATO position ultimately turns out to be without foundation.

The call comes on the back of Taxpayer’s Australia’s role in assisting Gary Kurzer, the New South Wales man whose story was featured prominently in a recent edition of the Sydney Morning Herald.

Mr Kurzer spent eight years fighting the ATO against claims that he had underpaid tax on the disposal of properties he once owned on the central NSW coast. 

After initially claiming that he owed more than $200,000 in GST and penalties, plus capital gains tax on profits of over $600,000, the ATO was finally forced to concede that Mr Kurzer owed just $8,000.

Mark Chapman, head of tax issues for Taxpayers Australia, said it was only as a result of a dogged campaign by Mr Kurzer that the ATO finally had to concede a trail of basic errors and misjudgements in the handling of his case.

Along the way, the mental stress and monetary cost of fighting the case caused Mr Kurzer to lose his relationship, his health, his business and his house.  In September this year, Mr Kurzer is taking the ATO to the Federal Court alleging negligence, arguing that the ATO owes taxpayers a duty of care.

Mr Chapman said while Mr Kurzer’s case was extreme, Taxpayers Australia encountered many taxpayers who had faced similar battles. 

Mr Chapman warned that unlike most other situations, “it’s a case of guilty until proven innocent when dealing with the ATO” and if the taxpayer actually is innocent, they can face an uphill struggle in getting their case heard.

A recent report from the Inspector-General of Taxation – the Review into the Australian Taxation Office’s administration of penalties on July 8, 2014 – highlighted that the average cost of fighting a tax case before the Administrative Appeals Tribunal is more than $6,000, and that is a sum that has to be paid whether or not the taxpayer wins.

“In other words, if the taxpayer fights the ATO and wins, they have no recourse back to the ATO to claim the costs they have incurred in fighting the case,” Mr Chapman said.

“Nor do they have any mechanism for claiming compensation if the ATO has not behaved in accordance with the law and its own Taxpayers Charter. In many cases, the toll on the taxpayer in terms of stress and fatigue can be just as acute as the direct monetary impact.

“And, of course, if you’re a small business or an individual, the kinds of costs you might be looking at to fight the ATO are simply unaffordable and you might be left with only one option; pay up.”

The Inspector-General’s report highlighting that 35 percent of penalties imposed by the ATO in the three years to 2012-13 were later reversed on objection, typically because of ATO mistakes, this figure rises to 46 percent in the 2012-13 year.

Mr Chapman said Taxpayers Australia believed the ATO did not have a good track record at getting it right.

Of those penalties, he said, 51 percent were imposed on the smallest businesses and only 19 percent on the largest), which he called “clearly disproportionate and suggests that many of these small businesses have neither the will nor the resources to take on the ATO”.

As a result of the Inspector-General’s report, the ATO has agreed to his recommendation that penalties should not be payable until the matters under dispute are resolved, and also that the ATO should pay interest on penalties which are not sustained.

“This is a start, but it isn’t enough,” Mr Chapman said of Taxpayers Australia’s view.

“A legally binding obligation needs to be imposed on the Commissioner of Taxation, backed up by a statutory compensation mechanism, to ensure that the Commissioner follows the tax law and his own administrative policies and procedures and where he doesn’t do so, he should be legally obliged to provide compensation to taxpayers who have suffered as a result,” Mr Chapman said.

“In addition, where taxpayers fight and win a case against the ATO, they should have the opportunity to apply for their reasonable costs to be paid by the ATO, in just the same way as occurs in other legal actions.”


Former Trio-linked investment manager jailed

A FORMER investment manager with links to the failed firm Trio Capital (Trio), was sentenced on June 27 to 25 months jail for making false statements resulting in his business receiving more than $500,000 in payments.

Tony Maher, who changed his name from Paul Gresham, pleaded guilty in October 2013 to making the statements regarding the valuation of investments made by the ARP Growth Fund (ARP) over two years. 

At the time he owned and controlled PST Management Pty Ltd, the company that acted as the investment manager of ARP.

Mr Maher, 60, of Katoomba, was charged with 20 offences (refer to ASIC article: 13-293MR).
Appearing in the District Court of NSW, Mr Maher was sentenced to 25 months jail. He will serve 15 months before being eligible for parole.

ASIC Commissioner John Price said, “Mr Maher’s conduct fell below an acceptable standard. Gatekeepers, like directors, company officers, auditors, investment advisers and financial planners, who think they can flout the law, should think again.”

Since ASIC’s investigation started on October 2, 2009, more than 11 people have either been jailed, banned from providing financial services, disqualified from managing companies or have agreed to remove themselves from the financial services industry for a total of more than 50 years. Two agreed to lifetime bannings.

In February 2012, ASIC accepting an enforceable undertaking (EU) from Mr Maher, preventing him from ever again working in the Australian financial services industry or managing a corporation (refer:12-15MR).

Further enforcement outcomes include:

  • Shawn Richard, former investment manager of the Astarra Strategic Fund (ASF), being sentenced to three years and nine months jail with a minimum of two years and six months (refer: 11-169MR)
  • The permanent banning of Eugene Liu, ASF'’s chief investment strategist, from providing financial services (refer: 13-041MR). In April 2014, Mr Liu’s request for review of his permanent ban from providing financial services was heard. The decision has been reserved.
  • Enforceable undertakings (EU) with five former Trio directors, where they agreed not to be involved in the financial services industry or manage a company for between two and 15 years. The former directors are: Natasha Beck, Keith Finkelde, David O’Bryen, David Andrews and Rex Phillpott (refer: 11-182MR and 11-133MR).
  • An EU with planning firm Kilara Financial Solutions to address compliance issues (refer: 11-122MR).
  • Suspending the licence of financial planners Seagrims, with this licence then being cancelled at the company’s request (refer: 11-134MR).
  • Banning Seagrims directors Peter Seagrim and Anne-Marie Seagrim for three years, with the Administrative Appeals Tribunal subsequently cutting the ban to six months (refer: 11-134MR).
  • An EU with former ASF auditor Timothy Frazer, providing he would not act as a registered company auditor for three years (refer: 12-22MR).





Details of Federal red tape reductions reveal a fair start

THE Federal Government’s ‘big numbers’ of the Federal Budget have been under discussion in great detail, but the smaller details of what is being changed through the ‘red tape reduction’ efforts of the government are just as important operationally for many businesses.

Parliamentary Secretary to the Prime Minister, Josh Frydenberg, said back in March the government introduced legislation and tabled documents to repeal more than 10,000 “unnecessary and counter-productive pieces of legislation and regulations”.

He called the more than 50,000 pages set for repeal “unnecessary and costly legislation and regulations that are a dead weight on Australian businesses, community groups and households” expecting this reduction in red tape across the economy to save “more than $700 million a year, every year”.

“We are committed to cutting red tape costs by $1 billion a year to improve our nation’s competitiveness, help to create more jobs and lower household costs,” Mr Frydenberg said. 

“It will be easier for small businesses to do business with government. There will be a simplified process for tendering for contracts below $200,000, standardised terms and conditions and user-friendly online templates.

“We are making it easier for small businesses to be paid with the introduction of a new policy; credit and debit cards will become the Government’s preferred payment option for purchases under $20,000.”

Mr Frydenberg said the goal was for national businesses to operate under one workers’ compensation scheme right around the nation, rather than have to operate in up to eight.

Other specifics outlined were:

  • Businesses will no longer be required to administer the former government’s paid parental leave scheme.
  • Importers of agricultural chemicals and veterinary medicines, such as pet worm tablets, household weed killers or agricultural fertilisers, will no longer need to re-register well established products over and over, when the products haven’t changed.
  • A reduction in paperwork for Australians seeking to do business in the Asia Pacific  region with a streamlined accreditation process for the APEC Business Travel Card.
  • A new one-stop-shop for offshore petroleum environmental approvals (NOPSEMA) will streamline approval of projects that include offshore petroleum and greenhouse gas activities in Commonwealth waters.
  • Repealing the Carbon Tax and the Mining Tax should not only reduce cost of living pressures and help create jobs, but will also save nearly $100 million in compliance costs.
  • The film industry will be able to make minor modifications to films (for example, turning 2D into 3D, then DVD and Blu-ray) without going through the classification process every time.
  • Job service providers will no longer have to retain cabinets full of paper files and will now be able to keep records electronically.
  • Slow moving machinery – like concrete mixers or ‘wacker packers’ (used to compact soil) will no longer need to be registered as ‘motor vehicles’ under the Personal Property Securities register.
  • Universities will no longer be required to submit extensive (and duplicated) survey data on the size, use, management and maintenance of their lecture theatres, laboratories, offices and other facilities each year.
  • Charities will no longer be subjected to as much duplication with their paperwork.
  • Aged care providers and Disability Employment Service Providers will be spared many thousands of hours of paperwork.

Mr Frydenberg said, “Common sense changes will be made to Labor’s recent Future of Financial Advice laws to reduce the compliance costs for small businesses, financial advisers, and the broader financial services industry, whilst maintaining the quality of advice for consumers.”

That particular pledge has recently come under fire and may yet be modified on its course through the Parliament.

“Cutting red tape is at the heart of this Government’s mission: to build a strong and prosperous economy for a safe and secure Australia,” Mr Frydenberg said.


POSTED MAY 27, 2014

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