The five-member panel at COSBOA’s annual policy agenda conference consisted of:
- John Price, commissioner of the Australian Securities and Investments Commission (ASIC)
- Rod Sims, chair of the Australian Competition and Consumer Commission (ACCC)
- Chris Jordan, commissioner of taxation at the Australian Tax Office (ATO)
- Sandra Parker, the new Fair Work Ombudsman (FWO)
- David Locke, who will head up the new Australian Financial Complaints Authority (AFCA) once it launches on 1 November 2018, consolidating three agencies including the Financial Ombudsman Service (FOS)
During the panel, each regulator discussed the core activities their agencies are working on this year that will impact on, and hopefully benefit, the small and medium businesses.
Some of the issues raised were common to many or all of the bodies, while others were fairly specific.
A breakdown of these key focus areas is listed below:
Making it easier, faster and cheaper to resolve complaints and disputes
As AFCA’s Mr Locke succinctly noted, “delayed justice is no justice at all”.
This, he said, is the core tenet behind his agency from 1 November this year.
Mr Locke told the summit his agency is anticipating in the vicinity of 50,000 disputes in the first 12 months of operation, and that resolving these quickly will be its focus to reduce the drag they create for business.
The service will be free to use – and is funded by financial services industry – and decisions will be binding on the financial services provider. But consumers and SMEs will have the choice of whether to accept or appeal its verdict.
Dispute resolution is also a core focus for the Tax Office.
Mr Jordan suggested that many complaints are not even disputes at all, but simple misunderstandings – meaning that better education to reduce misunderstandings from the outset will lead to a reduction in the number of complaints arising at all.
“Yes we are the tax collector, but we are also there to help facilitate people through a very complex system,” he said.
“There’s been a lot of focus on disputes and resolution, but in fact there’s not a lot of disputes on technical matters.
“We’re trying to get more upstream and have facilitators that aren’t technical people. And in small business, the word ‘dispute’ is often interchanged with ‘misunderstanding’: a third of all these disputes were fixed in a one call with a facilitator – 30 per cent in one phone call because it was a misunderstanding.”
He also responded to the federal opposition’s plan to introduce a new tax commissioner responsible for dispute resolution, suggesting that the ATO believes its processes are more than adequate, but if this feeling is not mutual externally, then this function should be moved elsewhere.
ASIC’s Mr Price added that it is working to boost and strengthen, both internally and externally, dispute resolution procedures, including through the placement of ASIC compliance staff within large financial organisations.
Once AFCA begins operating, it will not only intervene in individual disputes, but where systemic problems begin to emerge, these will be reported on to ASIC and other relevant agencies to pursue meaningful change at the source.
Removal of unfair contract terms
My Business has covered the issue of unfair contract terms quite extensively, which has been a core focus of the ACCC since the law changed last year.
And as previously outlined, the ACCC has serious concerns that the current law is ineffective and needs serious reform to deliver tangible benefits to SMEs.
“The unfair contract laws are just incredibly important… many problems facing small businesses can be traced back to unfair contract terms,” Mr Sims explained.
But he said the current rules are “deeply, deeply flawed”, as they do not make it illegal to incorporate unfair terms into a contract, and there are also no penalties to act as a deterrence against doing so.
According to Mr Sims, many companies approached by the ACCC on the issue tell them to “go jump”, and it’s only on the steps of court that they take the matter seriously and move to amend their contracts.
Another problem is that there are gaps in which SMEs are and are not covered, and what is defined as a standard form contract – noting that car dealers and dairy farmers are among those impacted under the current provisions.
ASIC too has a strong focus on this in the financial services space, having forced the big four banks to remove unfair terms from their contracts.
Mr Price noted that it will be actively monitoring compliance, but will expand this focus to other financial services providers, including the fintech sector.
But the government has unveiled plans for a review of the laws to begin late in 2018, in which the ACCC said it will push for a much more black and white approach.
“We want a simple formula – there is the law, if you break it, we’ll whack you,” Mr Sims said.
Stamping out illegal phoenix activity
This issue is something that is being jointly attacked by ASIC, the ATO and the Fair Work Ombudsman.
“The unfair competitive advantage that operators can get by engaging in illegal phoenix activity has a significant impact on our economy. It means that businesses that are intentionally avoiding paying debts… can charge a lower rate for their services compared to their honest competitors,” ASIC’s Mr Price said.
“It is a serious problem in Australia. In fact, according to a report by PWC recently, illegal phoenix activity is estimated to have cost our economy between $2.85 and $5.13 billion a year, and the cost to business is up to about $3.1 billion a year.”
For its part, Mr Price said that ASIC has prosecuted 382 individuals for 734 offences for failed recordkeeping – “often a classic example of phoenix activity”.
He said that as well as a dedicated ATO taskforce and the Serious Financial Crime Taskforce within the Federal Police, ASIC has and continues to work with around 30 other federal, state and territory agencies to investigate and prosecute phoenix activities.
According to Mr Price, ASIC this year added detail advice on its website aimed to arm business leaders with practical measures on avoiding falling victim to such criminal behaviour.
Mr Price also welcomed the recent moves by the federal government to add two new criminal offences, and said ASIC “strongly supports” the introduction of a new Director Identification Number (DIN).
Greater emphasis on education and deterrence
The ACCC’s Mr Sims admitted that enforcing consumer law in particular is a difficult task, given that it does not have the resources to prosecute each and every offence.
As such, he said the approach of the ACCC is to identify systemic conduct and take action – usually against large businesses – as a means of punishing this activity and simultaneously issuing a deterrence to other businesses.
Enforcement of workplace laws is also another common point of contention for SMEs. And FWO’s Ms Parker admitted that the vast majority of cases of improper pay and conditions being provided to employees is caused by misunderstandings of the rules, as opposed to deliberate misconduct.
As such, Ms Parker said the FWO is committed to continuing and increasing the amount of education it conducts directly with employers in a bid to break down these barriers and remove problems before they arise.
Restoring trust and confidence in regulators and large organisations
“I think, frankly, our community has an all-time low trust and confidence in large institutions – I’m not just talking about the Tax Office, I’m talking across the board,” Mr Jordan said in a very open admission.
“So this is a big deal for us, and it’s a big deal for a lot of other people.”
It follows the banking and financial services royal commission, some major fines against large companies for misconduct as well as allegations against the ATO itself for bullying SMEs and improper decision-making and appeals processes.
Mr Jordan said achieving that from the ATO’s perspective involves making compliance much easier to achieve by being more transparent about what is required and more readily available to address business concerns as and when they arise.
“Our vision… is to contribute to the economic and social wellbeing of Australians by fostering willing participation in the tax administration system,” he said.
“A lot of studies internationally show it is driven by two things: one, the easier you make it for people to comply, the more likely they are to do so. So we’ve done a whole lot of measures to make it easier, particularly for small business.
“[For example,] I thought it was odd when I came in [to the ATO in 2013], the only way you could interact with us was to ring between nine to five or write a letter, so we did things like after-hours call back services, virtual assistants.”
Mr Jordan said the second aspect of driving trust amounts to “confidence that other people are paying their right amount of tax”.
“In other words, if you think other people are paying, you’re more likely to do so yourself,” he said.
This involved an initial hardline stance against multinational tax avoidance, and then expanding that to the rest of the business sector.
But more than this, Mr Jordan said trust needs to be a two-way street, which is why the ATO has reformed its SME consultation processes to be more streamlined and effective in receiving and addressing concerns from the business community.
“When I came in, there was 68 consultation groups across the Tax Office – 68 committees with 1,494 external participants holding around 250 meetings a year. It was an industry [but] I don’t think anyone listened to anyone [else],” he said, among the minutes and notes that were being generated.
“So we collapsed those into eight, one of which of course is the small business stewardship group.”
“I don’t want an industry – I want actual listening and action and a forum where it’s safe to raise issues and problems.”