Explanatory Memorandum
(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP)Chapter 5: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Treasury Laws Amendment (2023 Measures No. 3) Bill 2023
Schedule 1 - Avoidance of certain product intervention orders
Overview
5.1 Schedule 1 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
5.2 Schedule 1 to the Bill introduces new rules that prohibit schemes designed to avoid the application of a product intervention order (in relation to a credit facility) made under Part 7.9A of the Corporations Act.
5.3 The amendments ensure that:
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- where there is a product intervention order made in relation to a financial product that is a credit facility;
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- a person (alone or with others) must not engage in activity in the avoidance of that product intervention order.
5.4 This is intended to ensure that a person cannot respond to a product intervention order by engaging in activity that is not covered by the order but results in similar detriment to consumers. As with general integrity provisions, the intended effect of the product intervention order is a relevant consideration in the operation of these amendments.
5.5 The general prohibition provides that a person (alone or with others) must not enter into a scheme, begin to carry out a scheme, or carry out a scheme if, having regard to any matters prescribed by the regulations, it would be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was to avoid the application of a credit product intervention order.
Human rights implications
5.6 Schedule 1 to the Bill engages with the right to a fair trial and fair hearing rights under Articles 14 and 15 of the ICCPR.
Assessment of civil penalties
5.7 Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR regardless of the distinction between criminal and civil penalties in domestic law. This is because the word 'criminal' has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.
5.8 The civil penalty provisions are intended to deter people from non-compliance with the obligations, however, none of the civil penalty provisions carry a penalty of imprisonment, and there is no sanction of imprisonment for non-payment of any penalty. Additionally, the larger penalty amounts imposed by the Schedule apply solely to body corporates and not to individuals.
5.9 These provisions are consistent with similar deterrence regimes previously introduced by the Financial Sector Reform Act 2022.
5.10 Therefore, the civil penalty provisions introduced by Schedule 1 should not be considered 'criminal' for the purposes of Articles 14 and 15 of the ICCPR.
Presumption of avoidance for certain schemes in civil cases
5.11 New section 1023T introduces a presumption that a person entered into or carried out a scheme for an avoidance purpose if the scheme is a scheme prescribed by the regulations or determined by ASIC in a legislative instrument.
5.12 However, the presumption does not apply if the person proves that it would not be reasonable to conclude that the purpose was to avoid a credit product intervention order, having regard to any matters prescribed by the regulations.
5.13 The Guide to Framing Commonwealth Offences outlines that a matter should only be included in an offence-specific defence if the information is peculiarly within the knowledge of the defendant. Accordingly, where a person enters into a scheme, it is peculiarly within the knowledge of that person as to the purpose for which they entered into or carried out the Scheme. For example, if the scheme in question does have a legitimate (non-avoidance) purpose, that matter would be peculiarly within the knowledge of the person. Conversely, it would be difficult for ASIC to actively prove that the scheme was not entered into for any purpose other than avoidance.
5.14 Further, the presumption applies only in civil cases (not in criminal proceedings), and any regulations or legislative instrument made to prescribe or determine schemes that are presumed to have the avoidance purpose will be subject to parliamentary scrutiny and disallowance.
5.15 As such, the amendments appropriately engage with Articles 14 and 15 of the ICCPR.
Conclusion
5.16 Schedule 1 to the Bill is compatible with human rights.
Schedule 2 - Recognising experience in the financial advice industry
Overview
5.17 Schedule 2 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
5.18 Schedule 2 amends the Corporations Act to deliver the Government's election commitment to better recognise the experience of existing financial advisers. This Schedule also addresses some technical limitations in the current legislative framework for financial advisers.
5.19 These amendments resolve unintended consequences introduced through the Professional Standards of Financial Advisers Act and the Better Advice Act, while continuing to support the professionalisation of the financial advice sector:
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- Existing financial advisers with extensive industry experience and a clean disciplinary record are leaving the industry.
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- Potential new entrants are unable to meet the qualifications standard for technical reasons, despite meeting the substance of that requirement.
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- For financial advisers who are also qualified tax agents, there is unnecessary duplication of qualification requirements to provide tax (financial) advice services.
Human rights implications
5.20 Schedule 2 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
5.21 Schedule 2 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 3 - Competition in the clearing and settlement of cash equities
Overview
5.22 Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
5.23 This Schedule amends the Corporations Act, the Competition and Consumer Act and ASIC Act to facilitate competitive outcomes in the provision of CS services for Australia's financial markets. The amendments provide ASIC with powers to:
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- implement and enforce requirements for a monopoly provider of CS services to operate in a way that achieves competitive outcomes; and
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- ensure safe and effective competition in clearing and/or settlement should a competitor emerge.
5.24 The amendments also provide the ACCC with the power to conduct binding arbitration to resolve disputes regarding access to CS services covered by a declaration made by the Minister.
Human rights implications
5.25 Schedule 3 to the Bill engages the following human rights:
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- the right to a fair trial and fair hearing rights under Articles 14 and 15 of the ICCPR; and
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- the right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR.
Right to a fair trial and fair hearing
5.26 The Bill does not adversely engage the right to a fair trial in Article 14 of the ICCPR despite some contraventions of the new Part XICB subject to the imposition of a civil penalty.
5.27 The civil penalty provisions contained in the new Part XICB are not criminal penalties. While a criminal penalty is a deterrent or punitive, these provisions are regulatory and disciplinary as they aim to encourage compliance with an entity's obligations under the Part.
5.28 The provisions also only target entities that are bodies corporate. They do not apply to the general public, but to a class of entities who should reasonably be aware of their obligations under the amendments.
5.29 Imposing these civil penalties will enable an effective response to non-compliance. The maximum civil penalty amounts that can be imposed are intentionally significant and are in line with penalties for like provisions in the law.
5.30 The judiciary continues to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. Courts are experienced in making civil penalty orders at appropriate levels having regards to the maximum penalty amount, considering a range of factors including the nature of the contravention, conduct and size of the entity.
5.31 A relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance.
5.32 Civil penalties carry no sanction of imprisonment for non-payment of the penalty.
5.33 Based on the above factors, the nature and severity of the civil penalties in the amendments in the Schedule are not criminal for the purposes of human rights law.
Protection from arbitrary or unlawful interference with privacy
5.34 The arbitration regime introduced in the Schedule required the ACCC to maintain a public register to record final determinations. This register will include information specifying the names of the parties, the service it relates to and the date of the determination.
5.35 The information published on the register engages Article 17 of the ICCPR, however, this engagement with the right to privacy is necessary and proportionate to the provision of relevant information to the general public. The names and services requiring access are published to benefit the public in identifying which CS services have been the subject of arbitration.
5.36 The ACCC is subject to the Australian Privacy Principles (APPs) under the Privacy Act 1988, which regulate how information is collected, disclosed and stored. Personal information used by the ACCC is only to be for the purpose in which it was given, or for purposes directly related to one of its function under the Act, such as maintaining a register under section 153ZFD of the CCA.
5.37 Under the arbitration regime, parties may ask each other for information, including personal information, but only as permitted by the Privacy Act 1988. These parties must consent to providing the information and use of the information is restricted to negotiations or arbitration. Any information received from other parties cannot be used outside of negotiations or arbitrations.
5.38 These elements of the arbitration regime do not interfere with Article 17 of the ICCPR because they do not require or authorise any additional use or disclosure of information than what is already regulated under the Privacy Act 1988. The amendments do not change the privacy protections for personal information already in place under Australian law. To the extent that the amendments impinge on individuals right to privacy, those limitations are reasonable, necessary and proportionate to the outcome.
Conclusion
5.39 Schedule 3 to the Bill is compatible with human rights.
Schedule 4 - Improving the flexibility of the First Home Super Saver Scheme
Overview
5.40 Schedule 4 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
5.41 Schedule 4 to the Bill amends the Taxation Administration Act 1953 and Income Tax Assessment Act 1997 to make technical changes to the First Home Super Saver (FHSS) Scheme.
5.42 The amendments increase the discretion of the Commissioner of Taxation to amend and revoke applications to have funds released under the FHSS Scheme.
5.43 They also allow individuals to amend and revoke an application to have funds released under the FHSS Scheme, without those individuals being prevented from re-applying in the future.
5.44 The Schedule includes special transitional provisions which extend the flexibility provided by the amendments to users who have previously applied to have funds released under the FHSS Scheme and have since started holding a relevant interest in real property or land.
5.45 These changes will improve the operation of the FHSS Scheme by affording the Commissioner of Taxation and users of the FHSS Scheme greater flexibility.
Human rights implications
5.46 Schedule 4 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
5.47 Schedule 4 to the Bill is compatible with human rights as it does not raise any human rights issues.