House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Competition, Charities and Treasury, the Hon Dr Andrew Leigh MP)

Glossary

This Explanatory Memorandum uses the following abbreviations and acronyms.

General outline and financial impact

Schedule 1 - Amendments relating to the cessation of registries modernisation program

Outline

Schedule 1 to the Bill facilitates the return of responsibility and resources for administering Commonwealth business registers from the Australian Taxation Office (ATO) to the Australian Securities and Investments Commission (ASIC), in winding up the Modernising Business Registers (MBR) Program. The amendments ensure that Public Service Act employees transferred to ASIC as part of this, and any future, Machinery of Government (MoG) change are subject to the same legislative framework under the ASIC Act, and therefore have the same functions and protections as existing ASIC staff employed under section 120 of the ASIC Act. The amendments also adjust provisions relating to registry records of corporate collective investment vehicles.

Date of effect

Part 1 of Schedule 1 to the Bill commences on the day after Royal Assent.

Division 1 of Part 2 of Schedule 1 to the Bill commences on 31 December 2024.

Division 2 of Part 2 of Schedule 1 to the Bill commences on the day after Royal Assent.

Proposal announced

Schedule 1 to the Bill partially implements the 'Ceasing the Modernising Business Registers Program' measure in the 2023-2024 MYEFO.

Financial impact

Schedule 1 to the Bill is not estimated to have any additional financial impact, with government having already provided $28.037 million for the MoG change as part of the decision to stop the MBR program in 2023.

All figures in this table represent amounts in $m.

Impact Analysis

No impact analysis was required for the measure to cease the MBR program (OIA23-05335).

Human rights implications

Schedule 1 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 7.

Compliance cost impact

There are no compliance costs impacts associated with this measure.

Schedule 2 - Regulation of safety standards and information standards

Outline

Schedule 2 to the Bill amends the Competition and Consumer Act 2010 (CCA) (including the Australian Consumer Law (ACL)) to improve the flexibility and enforceability of safety standards and information standards by:

•

replacing the Commonwealth Minister's ability to 'declare' certain standards as safety standards and information standards with an expanded ability to 'make' safety standards and information standards;

•

allowing safety standards and information standards to incorporate matters in instruments and other writings as they exist from time to time, including international standards;

•

updating requirements relating to the nomination of alternative methods of compliance with safety standards, including through the addition of civil penalty provisions; and

•

allowing the regulator to request certain information and documents in relation to compliance with safety standards and information standards and inserting a civil penalty provision for failure to comply.

Date of effect

Part 1 of Schedule 2 to the Bill commences the day after Royal Assent.

Item 28 of Schedule 2 to the Bill commences at the same time as Part 1 of Schedule 2 to the Bill. However, the provisions do not commence at all if Part 1 of Schedule 6 to the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Act 2024 commences at or before that time.

Item 29 of Schedule 2 to the Bill commences immediately after the commencement of Part 1 of Schedule 6 to the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Act 2024. However, the provisions do not commence at all if that Part commences before the commencement of Part 1 of Schedule 2 to the Bill.

Proposal announced

Schedule 2 to the Bill was released for public consultation from 11 October 2024 to 25 October 2024.

Financial impact

Nil

Impact Analysis

The Impact Analysis relating to the amendments in Schedule 2 to the Bill is included at Attachment 1.

Human rights implications

Schedule 2 to the Bill raises human rights issues. See Statement of Compatibility with Human Rights - Chapter 7.

Compliance cost impact

Following the amendments in Schedule 2 to the Bill, international standards are expected to be incorporated into safety standards and information standards following a review by the Australian Competition and Consumer Commission (ACCC). When fully implemented, the reforms are expected to save businesses $5 billion over 10 years in administrative, testing, and compliance costs where a good or service already conforms with a relevant international standard.

Schedule 3 - Increasing the cap on the Housing Australia Special Account

Outline

Schedule 3 to the Bill amends the Housing Australia Act to increase the cap on the balance of the Housing Australia Special Account from $1 billion to $4 billion. The Schedule recognises the importance of ensuring that the cap does not constrain the ability to provide additional credits to the Housing Australia Special Account.

Date of effect

Schedule 3 to the Bill commences and applies from the day after Royal Assent.

Proposal announced

Schedule 3 to the Bill partially implements the 'Housing Support' measure in the 2024-2025 Budget.

Financial impacts

Schedule 3 to the Bill is estimated to have nil or minimal financial impact.

Human rights implications

Schedule 3 to the Bill raises human rights issues. See Statement of Compatibility with Human Rights - Chapter 7.

Compliance cost impact

Nil.

Schedule 4 - Industry codes

Outline

Schedule 4 to the Bill amends Part IVB of the CCA to:

•

increase the penalty to be specified in an infringement notice issued in relation to an alleged contravention of a civil penalty provision of an industry code;

•

increase the maximum penalty for contravention of a civil penalty provision that may be prescribed in an industry code relating to the industry of food and groceries, and

•

clarify the functions and powers that may be conferred on persons under industry codes.

Date of effect

Schedule 4 to the Bill commences on the later of 1 April 2025 and the day after Royal Assent.

Proposal announced

Schedule 4 to the Bill implements aspects of the Government response to the Independent Review of the Franchising Code of Conduct released in May 2024, and aspects of the Government response to the Independent Review of the Food and Grocery Code of Conduct released in June 2024.

Schedule 4 to the Bill also implements aspects of the Government announcement in October 2024 that it will introduce substantial penalties for supermarkets that do the wrong thing and breach the Unit Pricing Code.

Financial impact

Schedule 4 to the Bill is estimated to have a small positive impact on the underlying cash balance over the forward estimates period ($m):

.. not zero, but rounded to zero

Schedule 4 to the Bill permits an industry code relating to the industry of food and groceries to prescribe a higher maximum penalty for a contravention of a civil penalty provision. As the Food and Grocery Code and the Unit Pricing Code do not currently contain civil penalty provisions, this would not have a financial impact until the Government's decision to introduce civil penalty provisions in the new Food and Grocery Code and the Unit Pricing Code is given effect.

Schedule 4 to the Bill would also increase infringement notice penalties for alleged contraventions of civil penalty provisions of an industry code. This would enable the ACCC to impose higher penalties for alleged contraventions of industry codes that contain civil penalty provisions, including the new Franchising Code, the Competition and Consumer (Industry Codes-Dairy) Regulations 2019, the Competition and Consumer (Industry Codes-Horticulture) Regulations 2017 and the Competition and Consumer (Industry Code-Electricity Retail) Regulations 2019. This is expected to result in a direct and ongoing minor positive impact to the underlying cash balance.

Impact Analysis

The Independent Review of the Food and Grocery Code of Conduct Final Report (relating to aspects of the amendments in Schedule 4 to the Bill) was certified by the Office of Impact Analysis as equivalent to a Policy Impact Analysis.^[1]

On 10 January 2024, the Prime Minister, the Treasurer, the Minister for Agriculture, Fisheries and Forestry, and the Assistant Minister for Competition, Charities and Treasury, announced the appointment of the Hon Dr Craig Emerson to lead the Food and Grocery Code Review.

The Food and Grocery Code Review and its timing were informed by section 5 of the Food and Grocery Code.

As required by the Terms of Reference, the Food and Grocery Code Review:

•

assessed the effectiveness of provisions of the Food and Grocery Code in achieving the purpose of the Code to improve the commercial relationship between retailers, wholesalers and suppliers in the grocery sector; and

•

considered the need for the Food and Grocery Code, including whether it should be remade, amended or repealed.

The central recommendation of the Independent Review of the Food and Grocery Code of Conduct Final Report was that the new Food and Grocery Code be made mandatory with heavy penalties for breaches. This was considered necessary to ensure it is effective in addressing the heavy imbalance in market power between supermarkets and their suppliers, especially their smaller suppliers.

Human rights implications

Schedule 4 to the Bill raises human rights issues. See Statement of Compatibility with Human Rights - Chapter 7.

Compliance cost impact

Schedule 4 to the Bill will have a negligible compliance cost.

Schedule 5 - Deductible gift recipients

Outline

Schedule 5 to the Bill amends the ITAA 1997 to list Skip Foundation Ltd as a deductible gift recipient. The Schedule also amends the ITAA 1997 to remove eight deductible gift recipients.

Date of effect

Schedule 5 to the Bill commences on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Bill receives Royal Assent.

Proposal announced

Schedule 5 to the Bill partially implements the Philanthropy - updates to the list of specifically listed deductible gift recipients measure in the 2024-25 Budget.

Financial impact

Schedule 5 to the Bill is estimated to have a negligible impact on receipts.

All figures in this table represent amounts in $m.

.. not zero but rounded to zero.

Human rights implications

Schedule 5 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 7.

Compliance cost impact

The measure has a low compliance cost impact.

Schedule 6 - Minor and technical amendments

Outline

Schedule 6 to the Bill makes miscellaneous and technical amendments to Treasury portfolio legislation. The amendments demonstrate the Government's ongoing commitment to the care and maintenance of Treasury portfolio legislation.

The amendments update legislative references, simplify provisions and reduce red tape.

Date of effect

Part 1 of Schedule 6 to the Bill commences on the day after Royal Assent.

Part 2 of Schedule 6 to the Bill commences on the first day of the next quarter after Royal Assent.

Part 3 of Schedule 6 to the Bill commences on the day after the end of the period of 14 days beginning on the day after Royal Assent

Financial impact

Schedule 6 to the Bill is estimated to have nil or minimal financial impact.

Human rights implications

Schedule 6 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 7.

Compliance cost impact

This measure is estimated to have minor impact on compliance costs.

Chapter 1: Amendments relating to the cessation of registries modernisation program

Outline of chapter

1.1 This legislation facilitates the return of responsibility and resources for administering Commonwealth business registers from the ATO to ASIC, in winding up the MBR Program. The amendments ensure that Public Service Act employees transferred to ASIC as part of this, and any future, MoG change are subject to the same legislative framework as existing ASIC staff employed under section 120 of the ASIC Act. The legislation also adjusts provisions relating to registry records of CCIVs.

Context of amendments

1.2 The MBR Program was established in 2018-19 to transform Commonwealth business registry services. The Australian Business Register and 31 business registers administered by ASIC were to be consolidated onto a centralised platform administered by a newly established Registrar within the ATO. Legislative amendments were passed to transfer ASIC's registry functions and powers to the Registrar, and ASIC registry employees were transferred to the ATO as part of a MoG change in 2021.

1.3 In August 2023, following an independent review, the Government announced it would cease the MBR Program and pursue its modernisation objectives through other means. This legislation is part of a series of amendments to give effect to the Government's decision to unwind the MBR Program.

1.4 The frameworks for transfer of employees and when relevant, transfer of business, between Australian Government departments and agencies in a MoG change are set by the Public Service Act and the Fair Work Act. In this case, the APS Commissioner is expected to make a written determination under paragraph 72(1)(b) of the Public Service Act to transfer ATO registry employees to ASIC.

1.5 The ASIC Act provides for the functions and powers of ASIC. Since 2019, when ASIC stopped employing staff under the Public Service Act, the ASIC Act also provides the framework for ASIC employment.

1.6 The amendments in Schedule 1 to the Bill ensure that persons transferred to ASIC as part of this MoG change (and any other similar MoG changes that may occur in the future) are subject to the same legislative framework, and therefore the same duties, requirements, delegations and protections as staff employed by the ASIC Chairperson under section 120 of the ASIC Act.

1.7 Requirements of the Public Service Act and the Fair Work Act relating to the employment terms and conditions of staff transferred as a result of MoG changes are maintained.

1.8 The CCIVs Act contains provisions which amend the ITAA 1997, which are contingent upon commencement of the MBR Program. As that program is to cease, minor and technical amendments are made to those provisions to allow them to be considered and adjusted as part of the broader unwind of the MBR Program.

1.9 Relevant Commonwealth agencies were consulted in developing the amendments in Schedule 1 of the Bill, including from 5 August to 11 October 2024 on drafts of the amendments, and their input accommodated to ensure the amendments interact effectively with the existing legislative framework.

Comparison of key features of new law and current law

Table 1.1 Comparison of new law and current law

Detailed explanation of new law

Transfer of registry staff

1.10 To give effect to the business registers MoG change, the APS Commissioner is expected to make a written determination under paragraph 72(1)(b) of the Public Service Act that ATO registry staff will cease to be APS employees and become non-APS employees at ASIC. Amendments are needed to the ASIC Act, however, to ensure employees transferred to ASIC under this mechanism are taken to be employed under a written agreement by the ASIC Chairperson, on behalf of ASIC, and are therefore subject to the same legislative framework as existing ASIC staff members.

1.11 Pursuant to subsection 120(1) of the ASIC Act, the ASIC Chairperson may employ, on behalf of ASIC, any permanent, temporary or casual staff under written agreements as the Chairperson considers necessary for the performance of any of ASIC's functions or powers. Under these amendments, a person covered by a written determination under paragraph 72(1)(b) of the Public Service Act (that is, transferred staff) is taken to be employed by the ASIC Chairperson by way of a written agreement under subsection 120(1) of the ASIC Act. Transferred staff are taken to be employed under subsection 120(1) when the determination that they are non-APS employees comes into effect.

[Schedule 1, item 1, subsection 120(3) of the ASIC Act]

1.12 As a result, transferred staff constitute a 'staff member' defined in subsection 5(1) of the ASIC Act, and are subject to the same functions, responsibilities and protections as other (existing) ASIC staff employed by a written agreement made under section 120 of that Act. For example, transferred staff are:

•

officials of ASIC for the purposes of the finance law (within the meaning of the Public Governance, Performance and Accountability Act 2013), per subparagraph 9A(c)(iii) of the ASIC Act.

•

able to be delegated functions and powers under paragraph 102(2)(b) of the ASIC Act.

•

subject to the ASIC Code of Conduct and must uphold ASIC Values, under subsections 126B(2) and 126C(3) of the ASIC Act.

•

not liable to an action or other proceeding for damages in relation to an act done in good faith in the performance of any functions, or in the exercise of any power, that is conferred by relevant legislation, per paragraph 246(1)(g) of the ASIC Act.

1.13 As transferred staff are taken to be employed by way of a written agreement under subsection 120(1), the ASIC Chairperson is able to determine their terms and conditions of employment (including remuneration) under subsection 120(2) of the ASIC Act.

1.14 The terms and conditions of employment of transferred staff which are determined by the ASIC Chairperson must be consistent with subsection 72(3) of the Public Service Act. Therefore, in determining the terms and conditions of employment of each transferred staff member, the ASIC Chairperson must ensure the remuneration and other conditions of employment are not less favourable than what that person was entitled to immediately before the MoG change, in accordance with subsection 72(3) of the Public Service Act. This provision is intended to clarify the framework for MoG changes set by the Public Service Act applies.

[Schedule 1, item 1, subsection 120(4) of the ASIC Act]

1.15 As indicated by the explanatory note beneath new subsection 120(4) of the ASIC Act, subsection 72(3) of the Public Service Act would no longer apply to transferred staff at ASIC when a 'relevant change' occurs under subsection 72(4) of the same Act. This includes a change that results from making, varying, or terminating an enterprise agreement that applies to the transferred staff. As discussed above, these amendments do not intend to alter how this provision currently operates, including to end the period during which subsection 72(3) of the Public Service Act applies to persons covered by a determination made pursuant to subsection 72(1)(b) of the same Act.

1.16 The ASIC Act contains certain references to former subsections 120(3) and (4), which have since been repealed. These references are clarified to be to the former provisions - not to the new subsections 120(3) and (4) introduced by these amendments.

[Schedule 1, items 2 and 3, subsection 249(4) and section 310 of the ASIC Act]

Collective corporate investment vehicles

1.17 The CCIVs Act creates a new type of company, a CCIV. Part 3 of Schedule 5 to the CCIVs Act contains amendments to the ITAA 1997 which are consequential on the enactment of provisions establishing the MBR Program. These amendments require the Registrar to make a record of additional information in relation to CCIVs, with the intention to require the Registrar to publish this information on the new consolidated platform as part of the MBR Program. These amendments were due to commence on 1 January 2025, as part of the progressive implementation of the MBR Program on or by 1 July 2026.

1.18 In light of the cessation of the MBR Program, the amendments in Part 3 of Schedule 5 to the CCIVs Act will now automatically commence by or on 1 July 2026 to ensure the broader work to unwind the MBR Program can appropriately address any legislative amendments that may be required in relation to CCIVs.

[Schedule 1, item 5, table item 5 of the table in subsection 2(1) of the CCIVs Act]

1.19 The amendments also validate any actions taken by the ATO as if this delay had not occurred and the relevant CCIVs Act provisions commenced on 1 January 2025. This provision will apply to ATO actions taken between the original 1 January 2025 commencement date and when the current Bill commences (i.e., the day after this Bill receives Royal Assent). This approach ensures that, should ATO receive a request to disclose CCIVs information, disclosure of this information would be valid pursuant to the CCIVs Act, should the delaying provision in this Bill not commence before 1 January 2025.

[Schedule 1, item 6, item 20 in Schedule 5 to the CCIVs Act]

Commencement, application, and transitional provisions

1.20 Part 1 of Schedule 1 to the Bill commences the day after Royal Assent. The amendments in Part 1 apply to employees transferred to ASIC, under the Public Service Act, on and after the commencement date.

[Schedule 1, item 4, section 347 of the ASIC Act]

1.21 Division 1 of Part 2 of Schedule 1 to the Bill commences on 31 December 2024. The amendments apply on 31 December 2024.

1.22 Division 2 of Part 2 of Schedule 1 to the Bill commences the day after Royal Assent.

Chapter 2: Regulation of safety standards and information standards

Outline of chapter

2.1 Schedule 2 to the Bill amends the CCA (including the ACL) to improve the flexibility and enforceability of safety standards and information standards by:

•

replacing the Commonwealth Minister's ability to 'declare' certain standards as safety standards and information standards with an expanded ability to 'make' safety standards and information standards;

•

allowing safety standards and information standards to incorporate matters in instruments and other writings as they exist from time to time, including international standards;

•

updating requirements relating to the nomination of alternative methods of compliance with safety standards, including through the addition of civil penalty provisions; and

•

allowing the regulator to request certain information and documents in relation to compliance with safety standards and information standards and inserting a civil penalty provision for failure to comply.

2.2 All references in this Chapter are to the ACL unless otherwise stated.

2.3 References to the regulator means the ACCC for the purposes of the application of Schedule 2 to the Bill as a law of the Commonwealth. For the purposes of the application of Schedule 2 to the Bill as a law of a State or a Territory, regulator has the meaning given by the application law of the State or Territory.

Context of amendments

2.4 The Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 established the national regulatory regime for safety standards and information standards in the ACL, allowing the Commonwealth Minister to make or declare safety standards for consumer goods and product related services, and information standards for goods and services.

2.5 Safety standards specify safety features that a consumer good or product related service must meet before it is supplied to consumers. They are important in preventing or reducing the risk of injury to a person from consumer goods and product related services and ensuring that consumers are able to purchase consumer goods and product related services that meet their safety expectations. Safety standards complement the ability to identify and remove unsafe consumer goods and product related services from the market through recalls and bans and public warnings under the ACL.

2.6 Information standards require suppliers to provide certain information or present information in a certain manner, when supplying goods and services. Information standards may also give certain specific meanings to information. For example, the Country of Origin Food Labelling Information Standard 2016 gives specific meaning to the term "Grown in Australia." Information standards are typically used where the Government considers the characteristics of a good or service are such that the mandated provision of information will assist consumers to make informed purchasing decisions.

2.7 Standards (that is, standards that are not safety standards or information standards under the ACL) may be prepared in Australia by industry or non-governmental bodies, such as Standards Australia Limited. International associations or bodies, such as the International Organization for Standardization may also develop standards, and these standards may be approved by Australian standards setting bodies. However, prior to the amendments in Schedule 2 to the Bill, the Commonwealth Minister could not declare standards that were not prepared or approved by Standards Australia Limited to be safety standards or information standards unless the relevant association was prescribed in regulations. In addition, safety standards and information standards could not incorporate standards as they existed from time to time and could quickly become out-of-date.

2.8 Consultation on the proposed reforms occurred from 1 December 2021 to 21 January 2022. Treasury received 59 submissions from a broad range of stakeholders, including industry representatives, government, consumer groups, test laboratories, standards setting bodies, safety experts, and suppliers.

2.9 There was strong support across the board for improving the regulatory framework to allow easier recognition of international standards in safety standards and information standards. There was also strong support for improvements to the regulatory framework to more easily allow safety standards and information standards to reference voluntary standards as they exist from time to time.

2.10 Schedule 2 to the Bill makes it easier to recognise international standards in Australia, whilst also improving the flexibility and enforceability of safety standards and information standards.

Summary of new law

2.11 Schedule 2 to the Bill improves the flexibility and enforceability of Australian safety standards and information standards by:

•

replacing the Commonwealth Minister's ability to declare certain standards as safety standards and information standards with an expanded ability to make safety standards and information standards;

•

allowing safety standards and information standards to incorporate matters in instruments and other writings as they exist from time to time, including international standards;

•

updating requirements relating to the nomination of alternative methods of compliance under safety standards, including through the addition of civil penalty provisions; and

•

allowing the regulator to request certain information and documents in relation to compliance with safety standards and information standards, and inserting a civil penalty provision for failure to comply.

Comparison of key features of new law and current law

Table 2.1 Comparison of new law and current law

Detailed explanation of new law

Scope of safety standards and information standards

Ability to make safety standards and information standards

2.12 Prior to the amendments in Schedule 2 to the Bill, the Commonwealth Minister could make or declare safety standards that set out requirements for consumer goods and product related services, and information standards that set out requirements for goods and services.

2.13 The Commonwealth Minister was able to declare a standard (or part of a standard, with any additions or variations) that had been prepared or approved by Standards Australia Limited or an association prescribed by the regulations, to be a safety standard or information standard. This process was lengthy and delayed the timely incorporation of standards, including standards made by international standards bodies such as the International Organization for Standardization, European Committee for Standardization or ASTM International.

2.14 The amendments replace the Commonwealth Minister's ability to declare a standard to be a safety standard or information standard, with an updated, broader ability to make a safety standard or information standard, as set out below.

2.15 First, the amendments repeal the Commonwealth Minister's ability to declare a standard to be a safety standard under section 105 and to declare a standard to be an information standard under section 135. The ability to declare a standard is largely redundant due to the expanded ability for the Commonwealth Minister to:

•

make safety standards under subsection 104(1) and information standards under subsection 134(1); and

•

incorporate matters in an instrument or writing (including a standard prepared or approved by Standards Australia Limited or an international standards body) as they exist from time to time or at a particular time into a safety standard or information standard (see paragraphs 2.31 to 2.37).

2.16 Second, the amendments make it clear that the purpose of a safety standard is to prevent or reduce the risk of injury to a person. Prior to the amendments, subsection 104(1) (the enabling provision for safety standards) allowed the Commonwealth Minister to make a safety standard for consumer goods or product related services of a particular kind. Subsections 104(2) and (3) provided that a safety standard may consist of requirements about certain listed matters, as are reasonably necessary to prevent or reduce the risk of injury to any person in relation to consumer goods or product related services respectively. Such matters include the form and content of markings, warnings or instructions to accompany consumer good.

2.17 Amendments to subsection 104(1) clarify that a safety standard may be made for the purposes of preventing or reducing the risk of injury to any person (this is moved from subsections 104(2) and (3)). Amendments to subsections 104(2) and (3) clarify that the matters listed under those provisions do not limit the kinds of requirements that can be prescribed in a safety standard pursuant to subsection 104(1), but rather provide a non-exhaustive list.

2.18 Third, amendments to subsection 134(1) (the enabling provision for information standards) clarify that an information standard may be made in relation to the provision of information for a good of a particular kind or services of a particular kind.

2.19 Fourth, amendments to subsection 134(2) clarify that the kind of matters that may be prescribed in an information standard include record keeping requirements and the provision of information to any person (including the regulator).

2.20 Fifth, the amendments insert a civil penalty provision for breach of a requirement in an information standard in certain circumstances. A person will breach this civil penalty provision if:

•

an information standard for goods or services of a particular kind is in force; and

•

the person, in trade or commerce, has supplied, or offered for supply, goods or services of that kind; and

•

the person is subject to a requirement under a provision of the standard (that is, a requirement prescribed pursuant to the enabling provision for information standards in subsection 134(1)) that states that section 137AA applies; and

•

the person engages in conduct in relation to the supply or offer; and

•

the conduct contravenes the requirement.

2.21 The maximum pecuniary penalty that a court may order for breach of this civil penalty provision is $50,000 for a body corporate and $10,000 for a person that is not a body corporate. The Court has discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The maximum penalties align with other minor civil penalties under the ACL.

2.22 The new penalties are in dollar amounts rather than penalty units, consistent with the current approach in the ACL. This is intended to achieve a uniform maximum across jurisdictions implementing the ACL as nationally uniform legislation, which may have differences in the value of a penalty unit.

2.23 A provision of an information standard must state that new section 137AA applies for the civil penalty under section 137AA to apply in relation to that provision. As the maximum penalty is low, the use of section 137AA is intended to be limited to minor contraventions, such as requirements relating to record keeping.

2.24 Prior to the amendments, sections 136 and 137 prescribed significant civil penalties for breach of an information standard. This will remain. However, pursuant to new subsections 136(1A) and 137(1A), if a provision of an information standard states that section 137AA applies, the civil penalties under subsections 136(1) and 137(1) respectively will not apply if the person only failed to comply with a provision that states that section 137AA applies. This, in effect, excludes the application of the civil penalties in subsection 136(1) and subsection 137(1) when section 137AA applies, to ensure that the lower civil penalty in section 137AA is appropriately attached to more minor contraventions, such as contraventions of record keeping requirements. However, the majority of requirements are intended to remain subject to the serious civil penalties for breach of an information standard under sections 136 and 137.

2.25 In addition, the evidential burden rests on the person who wishes to rely on subsections 136(1A) or 137(1A) in proceedings. That is, a defendant who wishes to rely on the exception to subsection 136(1) in subsection 136(1A) or the exception to subsection 137(1) in 137(1A) that the person only failed to comply with a provision of an information standard that states that s 137AA applies, bears an evidential burden in relation to that matter. This is appropriate on the basis that knowledge of the matter would be peculiar to that person.

2.26 Consistent with the principles in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, imposing an evidential burden is appropriate in these circumstances as the person seeking to rely on the provisions is best placed to adduce or point to evidence in relation to their minor contraventions, such as requirements relating to record keeping and information gathering. In contrast, it would be significantly more difficult and costly for the prosecution to disprove as they may not have visibility of the relevant information.

2.27 New section 137B prescribes a civil penalty for failure to comply with a request for information or documents from the regulator (see paragraphs 2.47 to 2.55). In the case of any overlap between a provision prescribed for the purposes of new section 137AA and section 137B, existing subsection 224(4) continues to apply. That is, in circumstances where a single act or omission contravenes both a provision prescribed under section 137AA and a provision prescribed under section 137B, pecuniary penalty proceedings may be brought in relation to any one of those provisions, but a person is liable to pay only one pecuniary penalty. Both provisions have the same civil penalty.

2.28 New section 137AA only applies to goods that are intended to be used outside Australia. The amendments ensure that subsections 136(6) and (7) apply for the purposes of new section 137AA in the same way those subsections apply for the purposes of section 136. Subsection 136(6) provides that there is a presumption that a good is intended to be used outside of Australia if a statement has been applied to the good indicating either that the good is for export only, or that the good is intended to be used outside of Australia. Subsection 136(7) provides that the ways in which a statement can be applied to a good include the statement being woven, impressed, worked into, affixed or annexed to the good, or being applied to the covering, label, reel or thing which accompanies the good.

2.29 Sixth, the amendments ensure that safety standards may deal with matters incidental or related to preventing or reducing the risk of injury to any person, and information standards may deal with matters incidental or related to the provision of information for goods or services of a particular kind.

2.30 Seventh, the requirement to publish an information standard or safety standard on the internet is removed. This is redundant as safety standards and information standards are legislative instruments (see section 131E of the CCA) and subject to requirements under the Legislation Act 2003, such as the requirement to be published on the Federal Register of Legislation.

[Schedule 2, items 6, 7, 8, 9, 10, 12, 13, 14, 15, 16, 17, 18, 19, 23 and 25, sections 105, 135 and 137AA, subsections 104(1), 104(2), 104(3), 104(4), 134(1), 134(2), 134(3), 136(1A), 136(1B), 137(1A), 137(1B) and 224(3), subparagraph 224(1)(a)(ix)]

Incorporation of instruments

2.31 Prior to the amendments in Schedule 2 to the Bill, standards that were incorporated into safety standards and information standards were frozen at the point in time in which they were incorporated in accordance with section 14 of the Legislation Act 2003. This often resulted in long delays from when a standard was updated (that is, when a new version of a standard was made) to when a safety standard or information standard was amended to incorporate the updated standard.

2.32 This presented challenges that in some cases led to poorer safety outcomes for businesses and consumers. For example, if businesses moved to an updated standard they may have been in breach of a safety standard or information standard that referred to a superseded version of that standard, even when the updated standard has improved safety requirements that reflect changes in corporate practice, technology or science.

2.33 The amendments empower the Commonwealth Minister to make safety standards and information standards that make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in any other instrument or writing (an incorporated instrument) as in force or existing at a particular time or from time to time. This provides a contrary intention to subsection 14(2) of the Legislation Act 2003. Information standards and safety standards may also make provision in relation to any matter dealt with in an incorporated instrument if the instrument is prepared by an Australian or international standards body.

2.34 The amendments provide the framework for safety standards and information standards to incorporate matters in instruments and writings as they exist from time to time and make provision for matters dealt with in such instruments. Safety standards and information standards themselves need to be amended (or made) to implement this. An expedited and detailed review of safety standards and information standards will be undertaken by the ACCC to facilitate this. It is expected that safety standards and information standards which adopt time to time updates will set out guidance to assist entities to understand how the transition to complying with newer versions of an incorporated instrument will work in practice. Suitable transition periods are anticipated to be informed through consultation processes.

2.35 Safety standards and information standards will primarily incorporate Australian standards or international standards as in force or existing from time to time. The amendments are intended to ensure that Australian regulation keeps pace with standards development both in Australia and overseas. In relation to safety standards, this is also intended to ensure that businesses are able to use the latest and safest version of an Australian or international standard immediately. Beyond such standards, other matters may be incorporated as in force or existing from time to time to, for example, increase flexibility and improve safety or consumer outcomes.

2.36 Where practical, safety standards and information standards will only incorporate instruments and writing that are readily accessible for free to the public. However, in some cases, standards may need to incorporate extrinsic technical standards over which certain bodies have copyright. In those cases, the explanatory statement for the standard will set out where the incorporated material can be purchased for access.

2.37 Australian standards are generally accessible at no cost to Australian consumers for non-commercial, personal domestic or household use. The ACCC can make a copy of the incorporated material available for viewing at one of its offices, subject to licensing conditions.

[Schedule 2, items 3, 9 and 15, subsection 131E(4) of the CCA and subsections 104(5), 104(6), 134(4) and 134(5)]

Nominating alternative methods of compliance under safety standards

2.38 Prior to the amendments in Schedule 2 to the Bill, if a safety standard specified alternative methods of compliance and the regulator gave the relevant supplier a written request to nominate which set of requirements they intended to comply with, the supplier was required to give the regulator written notice (within the period specified in the regulator's request) specifying the requirements the supplier intended to comply with, pursuant to section 108 of the ACL.

2.39 The amendments repeal section 108 and replace it with a new section 108 which expands on the original requirement in a number of ways.

2.40 First, the amendments allow the regulator to give a request to nominate a set of requirements in relation to product related services, in addition to consumer goods. This corrects a technical error, given the explanatory memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 indicated that section 108 was intended to apply to product related services, rather than just consumer goods.

2.41 Second, the amendments allow the regulator to give a request to nominate a set of requirements to a person that has supplied or offered for supply, is supplying or offering for supply, or intends to supply or offer for supply consumer goods or product related services, rather than just a supplier that intends to supply consumer goods. These categories include a person that is a manufacturer. For example, a person supplying or offering to supply will include a manufacturer supplying or offering to supply. Further, a person may be required to nominate the set of requirements that the person has complied with, is complying with or intends to comply with, rather than just the set requirements they intend to comply with. With these updates, a person may be required to nominate the relevant set of alternative requirements in relation to past, current or future compliance.

2.42 Third, a civil penalty provision applies for breach of the requirement to nominate an alternative set of requirements under new subsection 108(2). The maximum pecuniary penalty that a court may order for breach of this civil penalty provision is $50,000 for a body corporate and $10,000 for a person that is not a body corporate. The Court has discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances The maximum penalties align with other minor civil penalties under the ACL.

2.43 The civil penalty provision offers an alternative to the existing criminal offence for failure to nominate an alternative set of requirements under section 196 (which remains). However, the maximum pecuniary penalties for the civil penalty provision are set at a level that is higher than the maximum fine available for the criminal offence to ensure that the penalty will act as a deterrent, particularly for corporations, and recognises that being found liable to pay a civil penalty does not attract imprisonment or a criminal conviction.

2.44 Fourth, a civil penalty provision applies if a person nominates a set of requirements by written notice (as described above) or other means (this may include a requirement in a safety standard to nominate the chosen set of requirements on the consumer good itself, for example), and the person, in trade or commerce, has supplied, is supplying, offered for supply or offering for supply consumer goods or product related services and those goods or services did not or do not comply with that set of requirements. The maximum pecuniary penalty that a court may order for breach of this civil penalty provision is $250,000 for a body corporate and $50,000 for a person that is not a body corporate.

2.45 The new penalties are in dollar amounts rather than penalty units, consistent with the current approach in the ACL. This is intended to achieve a uniform maximum across jurisdictions implementing the ACL as nationally uniform legislation, which may have differences in the value of a penalty unit.

2.46 Consistent with the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, the objective of imposing this civil penalty is deterrence. Imposing a civil penalty for such circumstances also provides the ACCC with an enforcement tool to assist in encouraging compliance. The maximum penalties are amounts are significantly lower than the maximum civil penalty for breach of sections 106 and 107. This reflects the fact that the new penalty applies to non-compliance with a nominated set of requirements as opposed to non-compliance with the safety standard as a whole. The Court also has discretion to consider the seriousness of the contravention and impose a penalty, within the maximum penalty, that is appropriate in the circumstances.

[Schedule 2, items 11, 22, 24, subsections 108(1), 108(2), 108(3) and 224(3) and subparagraph 224(1)(a)(viii)]

Requirement to provide information or documents

2.47 The amendments in Schedule 2 to the Bill allow the regulator to request in writing, information or documents to determine whether a person has complied, is complying, or will comply with a safety standard that is in force for consumer goods or product related services of a particular kind or an information standard that is in force for goods or services of a particular kind.

2.48 This request can only be given to a person who has, in trade or commerce, supplied or offered for supply, is supplying or offering for supply, or intends to supply or offer for supply particular consumer goods or product related services in the case of safety standards, or goods or services in the case of information standards. A request can also only be given to a person in relation to their own compliance.

2.49 The person must, within the period specified in the request, give the regulator the requested information or documents.

2.50 A civil penalty provision applies if a person does not give the regulator the requested information and documents within the time period specified in the request. The maximum pecuniary penalty that a court may order for breach of this civil penalty provision is $50,000 for a body corporate and $10,000 for a person that is not a body corporate. The Court has discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The maximum penalties align with other minor civil penalties under the ACL.

2.51 The new penalties are in dollar amounts rather than penalty units, consistent with the current approach in the ACL. This is intended to achieve a uniform maximum across jurisdictions implementing the ACL as nationally uniform legislation, which may have differences in the value of a penalty unit.

[Schedule 2, items 11, 20, 22, 23, 24 and 25, sections 137B and 108A, subsection 224(3) and subparagraphs 224(1)(a)(viii) and (ix)]

2.52 These amendments are intended to work in a complementary manner to the existing ability for the Commonwealth Minister or an inspector to give a disclosure notice to a person to provide information or documents in relation to the supply or possible supply of consumer goods or product related services that may cause injury (see section 133D of the CCA).

2.53 The key differences are that a disclosure notice:

•

may only be given by the Commonwealth Minister or an inspector (as opposed to the regulator);

•

cannot be given in relation to information standards and is limited in scope in relation to safety standards, and

•

non-compliance with a disclosure notice is a strict liability offence (as opposed to a civil penalty for breach of the new requirement to provide information or documents).

2.54 The new power to request information or documents is intended to enable the regulator to determine compliance with safety standards and information standards more broadly than a disclosure notice. It will be clear when a person is given a disclosure notice under section 133D as opposed to a request for information or documents.

2.55 New section 137AA allows the Commonwealth Minister to prescribe a civil penalty for breach of a requirement in an information standard in certain circumstances. In the case of any overlap between a provision prescribed for the purposes of new section 137AA and section 137B, existing subsection 224(4) continues to apply. That is, in circumstances where a single act or omission contravenes both a provision prescribed under section 137B and a provision prescribed under section 137AA, pecuniary penalty proceedings may be brought in relation to any one of those provisions, but a person is liable to pay only one pecuniary penalty. Both provisions have the same civil penalty.

Consequential amendments

2.56 A number of consequential amendments are made to:

•

remove references to subsections 105(1) and 135(1), which provide the power for the Commonwealth Minister to 'declare' standards as safety standards and information standards respectively;

•

ensure the existing offence provision relating to section 108 under subsection 196(1) is not expanded; and

•

correct some existing technical errors.

[Schedule 2, items 1, 2, 4, 5, 21 and 26, subsection 224(3A), paragraphs 131E(1)(b) and (i) of the CCA and subsections 2(1) (definition of information standard and safety standard) and 196(1)]

Commencement, application, and transitional provisions

2.57 Part 1 of Schedule 2 to the Bill commences the day after Royal Assent.

2.58 Item 28 of Schedule 2 to the Bill commences at the same time as Part 1 of this Schedule. However, the provisions do not commence at all if Part 1 of Schedule 6 to the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Act 2024 commences at or before that time.

2.59 Item 29 of Schedule 2 to the Bill commences immediately after the commencement of Part 1 of Schedule 6 to the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Act 2024. However, the provisions do not commence at all if that Part commences before the commencement of Part 1 of Schedule 2 to the Bill.

2.60 Items 28 and 29 of Schedule 2 to the Bill include contingent amendments in the event that the Bill commences before the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Act 2024 commences. The amendments made by Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Act 2024 will repeal the matter under paragraph 104(2)(c) dealing with 'the form and content of markings, warnings, or instructions to accompany consumer goods of that kind' and substitute it with:

•

the form and content of markings to accompany consumer goods of that kind, and

•

the form and content of warnings, instructions or other information about consumer goods of that kind.

[Schedule 2, Part 2]

2.61 Despite the repeal of section 108 (dealing with requirements to nominate and comply with a safety standard) by Schedule 2 to the Bill, that section continues to apply in relation to requests given by the regulator before the commencement of Part 1 of Schedule 2 to the Bill, as if that repeal had not happened. Section 108, as inserted by Schedule 2 to the Bill, applies in relation to safety standards made before, on or after commencement of Part 1 of Schedule 2 to the Bill.

[Schedule 2, item 27, section 308]

2.62 The amendments ensure a declared safety standard continues in force despite the repeal of the enabling provisions.

2.63 Specifically, a safety standard that was declared under section 105 and was in force immediately before the commencement of Part 1 of Schedule 2 to the Bill, continues in force (and may be dealt with) on and after the commencement of Part 1 of Schedule 2 to the Bill as if it were made for the purposes of section 104 (that is, the enabling provision for the Commonwealth Minister to make a safety standard) as amended by Schedule 2 to the Bill.

2.64 No saving provisions are prescribed for declared information standards under section 135, as none are in force.

[Schedule 2, item 27, section 307]

2.65 Sections 108A and 137B (dealing with the requirement to give information or documents), as inserted by Schedule 2 to the Bill, apply in relation to safety standards and information standards made before, on or after commencement of Part 1 of Schedule 2 to the Bill.

[Schedule 2, item 27, section 309]

2.66 Schedule 2 to the Bill is defined as the amending Schedule , to facilitate the application and savings provisions.

[Schedule 2, item 27, section 306]

Chapter 3: Increasing the cap on the Housing Australia Special Account

Outline of chapter

3.1 Schedule 3 to the Bill amends the Housing Australia Act to increase the cap on the balance of the Housing Australia Special Account from $1 billion to $4 billion. The Schedule recognises the importance of ensuring that the cap does not constrain the ability to provide additional credits to the Housing Australia Special Account.

Context of amendments

3.2 The Housing Australia Special Account was established by section 47A of the Housing Australia Act.

3.3 Amounts are credited to the Housing Australia Special Account in accordance with section 47B of the Housing Australia Act, under Part 4 of the Housing Australia Future Fund Act 2023, and from other appropriations.

3.4 The Housing Australia Special Account may be debited for the purpose of making certain loans and payments to Housing Australia under section 47C of the Housing Australia Act. The Housing Australia Special Account is used to support the delivery of key activities by Housing Australia that fund the provision of social, affordable, and acute housing in Australia. These activities include the AHBA, the HAFFF and the NHAF.

3.5 The AHBA operates by Housing Australia making loans to registered community housing providers, using money borrowed from the Commonwealth and by raising finance by the issue of bonds on the commercial market. The Housing Australia Special Account is used to provide loans to Housing Australia to on-lend to community housing providers through the AHBA reserve, and for liquidity management of AHBA bonds, through a line of credit.

3.6 The HAFFF provides finance for eligible projects that increase the supply of social housing, affordable housing and housing that address acute housing needs across Australia while the NHAF provides finance for eligible projects that increase the supply of affordable housing across Australia. The Housing Australia Special Account is used to provide funds to Housing Australia to make loans and grants to eligible project projects for the HAFFF and the NHAF.

3.7 The cap on the balance of the Housing Australia Special Account is provided by subsection 47D(1) of the Housing Australia Act.

3.8 Where any amount credited to the Housing Australia Special Account result in the cap being exceeded, subsection 47D(1) of the Housing Australia Act requires any excess amount to be deducted into the general Consolidated Revenue Fund. As a result, any funds in excess of the cap credited to the Housing Australia Special Account will not be available to support Housing Australia's activities.

3.9 Prior to this amendment, the cap on the balance of the Housing Australia Special Account was $1 billion. This amount reflected the original size of the AHBA reserve and the line of credit. The cap has not been changed since Housing Australia was established in 2018.

3.10 In the 2024-25 Budget, the line of credit was increased by $3 billion to a total of $4 billion. Funding for this increase was appropriated in the Appropriation Act (No. 2) 2024-25.

3.11 In July 2024, the AHBA reserve was increased from $1 billion to $4 billion via an amendment to the Housing Australia Investment Mandate Direction 2018 to reflect the additional $3 billion being made available to Housing Australia under the line of credit.

3.12 The Government is increasing the cap on the balance of the Housing Australia Special Account in line with the increased line of credit and AHBA reserve. The increased cap assists with the careful coordination of additional credits to the Housing Australia Special Account to ensure the balance does not exceed the cap. These credits may be for activities including the AHBA, the HAFFF and the NHAF.

Detailed explanation of new law

3.13 The Housing Australia Act is amended to increase the cap on the balance of the Housing Australia Special Account to $4 billion.

[Schedule 3, item 1, subsection 47D(1) of the Housing Australia Act]

3.14 The intent of the increased cap on the balance of the Housing Australia Special Account is to strengthen Housing Australia's ability to improve housing outcomes. The increased cap facilitates the additional $3 billion being made available to Housing Australia through a line of credit supporting the AHBA. The increased cap recognises that the previous size of the cap constrained Housing Australia's ability to deliver key activities that fund the provision of social housing, affordable housing and housing that addresses acute housing needs.

3.15 The increased cap acknowledges the importance of ensuring that the cap does not constrain the ability to provide additional credits to the Housing Australia Special Account. It assists with the careful coordination of additional credits to the Housing Australia Special Account to ensure the balance does not exceed the cap. These credits may be for activities including the AHBA, the HAFFF and the NHAF.

Commencement, application, and transitional provisions

3.16 Schedule 3 to the Bill commences and applies from the day after Royal Assent.

[Section 2 of the Bill]

Chapter 4: Industry codes

Outline of chapter

4.1 Schedule 4 to the Bill amends Part IVB of the CCA to:

•

increase the penalty to be specified in infringement notices issued in relation to an alleged contravention of a civil penalty provision:

-

of an industry code that relates to the industry of food and groceries (and that states that the relevant enabling provision applies)-to 600 penalty units for a body corporate and 12 penalty units otherwise, and

-

of any other industry code-to 60 penalty units for a body corporate and 12 penalty units otherwise;

•

increase the maximum penalty for contravention of a civil penalty provision that may be prescribed in an industry code relating to the industry of food and groceries, and

•

clarify the functions and powers that may be conferred on persons under industry codes.

4.2 All legislative references in this Chapter are to the CCA unless otherwise stated.

Context of amendments

4.3 Part IVB establishes the statutory framework for the operation of industry codes. Industry codes, prescribed in regulations, regulate the conduct of participants in an industry towards other participants or consumers in the industry and generally adder ss imbalances in market power.

Food and Grocery Code

4.4 The Food and Grocery Code was made in 2015 to improve standards of business behaviour in the food and grocery sector. It is a voluntary industry code, so participants (retailers and wholesalers) must agree to be bound. The Food and Grocery Code has no civil penalty provisions and as a result, infringement notices cannot be issued.

4.5 The Food and Grocery Code is due to sunset on 1 April 2025 in accordance with the Legislation Act 2003. In January 2024, the Government announced the appointment of Dr Craig Emerson to lead the Food and Grocery Code Review. The Food and Grocery Code Review examined whether the Food and Grocery Code was effective, how it could address the imbalance in market power between supermarkets and their suppliers and how it could better serve Australian families and farmers.

4.6 A consultation paper was released on 5 February 2024, with 51 submissions received. The Independent Review of the Food and Grocery Code of Conduct Interim Report was published on 8 April 2024, and made several recommendations including making the Food and Grocery Code mandatory with higher penalties. Thirty-seven submissions were received for this consultation.

4.7 The Independent Review of the Food and Grocery Code of Conduct Final Report found that compliance with the Food and Grocery Code is vital for the sustainability of suppliers' businesses and therefore the welfare of Australian consumers, and that the Food and Grocery Code should be remade as a mandatory industry code regulating wholesalers and retailers that meet a $5 billion annual turnover threshold. The Independent Review of the Food and Grocery Code of Conduct Final Report also relevantly recommended that:

•

the maximum penalties for more harmful breaches of the Food and Grocery Code should be the greater of $10 million, 3 times the benefit gained from the contravening conduct or, where the benefit cannot be determined, then 10 percent of turnover in the preceding 12 months. Maximum penalties for other breaches should be 3,200 penalty units, and

•

the penalty amount for infringement notices for contraventions of the Food and Grocery Code should be 600 penalty units, an increase from 50 penalty units that otherwise applies for industry codes.

4.8 The Government agreed to both recommendations in the Government Response to the Independent Review of the Food and Grocery Code of Conduct, released in June 2024.

4.9 Schedule 4 to the Bill is intended to ensure that the maximum civil penalties that may be prescribed in the new Food and Grocery Code are proportional to the size and turnover of the retailers or wholesalers that are proposed to be regulated, and sufficient to provide a meaningful deterrent to unlawful behaviour, not just seen as a cost of doing business. The new maximum penalties for more harmful breaches also align with existing maximum penalties under the CCA for an industry code that relates to the industry of franchising (as increased in 2021 under the Treasury Laws Amendment (2021 Measures No. 6) Act 2021).

4.10 The proposed penalty for an infringement notice of 600 penalty units will be restricted to a person that is a body corporate, and is necessary given the size and turnover of the retailers and wholesalers that are proposed to be regulated under the new Food and Grocery Code.

Franchising Code

4.11 The Franchising Code is a mandatory industry code that aims to promote confidence in the Australian Franchising Sector and improve the relationship between franchisees and franchisors. Similarly to the Food and Grocery Code, the Franchising Code is due to sunset on 1 April 2025 in accordance with the Legislation Act 2003.

4.12 In August 2023, the Government announced the Franchising Code Review, which included consideration of whether the sunsetting Franchising Code was fit for purpose. The Franchising Code Review involved broad consultation. A public consultation paper was released on 22 August 2023, which received 95 responses, and involved more than 40 stakeholder roundtables and meetings, and 2 online surveys.

4.13 The Independent Review of the Franchising Code of Conduct, released in December 2023, found that the Franchising Code should be remade subject to a number of recommendations to improve its operation. This relevantly included that the infringement notice regime in Part IVB should be increased. The Independent Review of the Franchising Code of Conduct further suggested that infringement notices should impose a penalty equivalent to the upper limit of infringement notices issued under the ACL (60 penalty units for a body corporate). In response to the Franchising Code Review, the Government agreed (in the Government response to the Independent Review of the Franchising Code of Conduct, released May 2024) to consider the suitability of increasing the amount of penalty units to 60 penalty units for infringement notices issued under the CCA for a breach of the Franchising Code. Schedule 4 to the Bill implements this increase.

4.14 In 2014, the Competition and Consumer Amendment (Industry Code Penalties) Act 2014 amended Part IVB to allow the ACCC issue an infringement notice for an alleged contravention of an industry code, in the amount of 50 penalty units for a body corporate and 10 penalty units for a person that is not a body corporate.

4.15 This is lower than the prescribed penalty under an infringement notice issued to a body corporate (other than a listed corporation) in relation to most alleged contraventions of the ACL. In addition to implementing the recommendation in the Independent Review of the Franchising Code of Conduct, Schedule 4 to the Bill increases the penalty for an infringement notice issued under all industry codes (excluding an industry code that relates to the industry of food and groceries as detailed above) to 60 penalty units for a body corporate and 12 penalty units for a person that is not a body corporate. This is intended to ensure consistency while strengthening the enforcement regime across industry codes to deter non-compliant behaviour.

Unit Pricing Code

4.16 The purpose of the Unit Pricing Code is to require certain grocery retailers to use unit pricing when selling particular grocery items to consumers. On 2 October 2024, the Government announced it would introduce substantial penalties for supermarkets that do the wrong thing and breach the Unit Pricing Code. This is intended to fight shrinkflation by making it easier for Australians to make accurate and timely price comparisons. Schedule 4 to the Bill provides the framework for substantial penalties to be prescribed in the Unit Pricing Code. Amendments to the Unit Pricing Code to prescribe such penalties will be progressed separately.

Consultation

4.17 Consultation on an exposure draft of Schedule 4 to the Bill occurred from 23 September 2024 to 4 October 2024. Six submissions were received from stakeholders, including one confidential submission, from representatives of suppliers and supermarkets.

Comparison of key features of new law and current law

Table 4.1 Comparison of new law and current law

Detailed explanation of new law

4.18 Schedule 4 to the Bill amends Part IVB to:

•

increase the penalty to be specified in infringement notices issued in relation to an alleged contravention of a civil penalty provision:

-

of an industry code that relates to the industry of food and groceries (and that states that the relevant enabling provision applies)-to 600 penalty units for a body corporate and 12 penalty units otherwise, and

-

of any other industry code-to 60 penalty units for a body corporate and 12 penalty units otherwise;

•

increase the maximum penalty for contravention of a civil penalty provision that may be prescribed in an industry code relating to the industry of food and groceries, and

•

clarify the functions and powers that may be conferred on persons under industry codes.

4.19 The new penalty regime will deter non-compliant conduct and reduce the financial benefits and incentives for businesses to engage in conduct in breach of the law.

Penalty to be specified in an infringement notice

4.20 Division 2A of Part IVB allows the ACCC to issue an infringement notice to a person where the ACCC has reasonable grounds to believe that a person has contravened a civil penalty provision of an industry code.

4.21 An infringement notice is a notice served on a person by the ACCC, alleging a contravention of a civil penalty provision of an industry code. The notice gives the recipient the option of paying the penalty amount specified in the notice to avoid further action by the ACCC in relation to that particular alleged contravention. Infringement notices are designed to provide a timely, cost-effective enforcement alternative to commencing court proceedings in relation to a contravention of an industry code.

4.22 Prior to Schedule 4 to the Bill commencing, the penalty to be specified in an infringement notice issued to a person in relation to an alleged contravention of a civil penalty provision of an industry code was 50 penalty units for a body corporate, and 10 penalty units otherwise.

4.23 The amendments split the penalties to be specified in infringement notices into two categories-industry codes which relate to the industry of food and groceries, and all other industry codes.

Food and Grocery Code

4.24 For an industry code that both relates to the industry of food and groceries and states that subsection 51ACF(2) applies, the new penalty to be specified in an infringement notice issued to a person in relation to an alleged contravention of a civil penalty provision is 600 penalty units for a body corporate, and 12 penalty units otherwise.

4.25 This implements the Government response (in the Government response to the Independent Review of the Food and Grocery Code of Conduct, released June 2024) to recommendation 10 of the Independent Review of the Food and Grocery Code of Conduct Final Report, which provided that the penalty amount for infringement notices for contraventions of the Food and Grocery Code should be 600 penalty units.

4.26 The Food and Grocery Code is a voluntary industry code which is due to sunset on 1 April 2025. It does not include civil penalty provisions or enable the ACCC to issue infringement notices.

4.27 The Food and Grocery Code is proposed to be remade as a mandatory industry code that includes civil penalty provisions, which will allow the ACCC to issue infringement notices in relation to an alleged contravention of such civil penalty provisions, pursuant to section 51ACD.

4.28 The new Food and Grocery Code is proposed to regulate wholesalers and retailers that meet a $5 billion annual turnover threshold. While the new penalty for an infringement notice for a body corporate is higher than those recommended in the Guide, the Guide provides that if the amount payable under an infringement notice is too low, it will be an inadequate deterrent and may simply be paid by the guilty and innocent alike as a cost of doing business. The significant penalty for an infringement notice for a body corporate is necessary to act as a meaningful deterrent to poor behaviour given the size and turnover of retailers and wholesalers that are proposed to be regulated under the new Food and Grocery Code. The penalty amount for an infringement notice issued to a person other than a body corporate is 12 penalty units, consistent with the approach taken for other industry codes.

4.29 The infringement notice penalties of 600 penalty units for a person that is a body corporate and 12 penalty units otherwise only applies to an industry code that both:

•

relates to the industry of food and groceries, and

•

provides that subsection 51ACF(2) applies.

4.30 The new penalty can only be prescribed in industry codes that relate to the industry of food and groceries, such as the new Food and Grocery Code and Unit Pricing Code; it is not intended to be prescribed in industry codes that may relate to the industry of food and groceries industry tangentially, such as the Competition and Consumer (Industry Codes-Dairy) Regulations 2019. If an industry code relates to the industry of food and groceries and does not provide that subsection 51ACF applies, the infringement notice penalty is 60 penalty units for a person that is a body corporate and 12 penalty units otherwise, consistent with other industry codes (see below).

Other Industry Codes

4.31 For industry codes that do not relate to the industry of food and groceries (or industry codes that relate to the industry of food and groceries that do not provide that subsection 51ACF(2) applies), the new penalty to be specified in an infringement notice issued to a person in relation to an alleged contravention of a civil penalty provision is 60 penalty units for a body corporate, and 12 penalty units otherwise.

4.32 This implements the Government's response (in the Government response to the Independent Review of the Franchising Code of Conduct, released May 2024) to recommendation 22 of the Independent Review of the Franchising Code of Conduct, which provided that the infringement notice regime in Part IVB should be increased. The Independent Review of the Franchising Code of Conduct further suggested that infringement notices should impose a penalty equivalent to the upper limit of infringement notices issued under the ACL (60 penalty units for a body corporate).

4.33 Beyond the changes outlined in the Government response to the Independent Review of the Franchising Code of Conduct, the amendments increase the penalty to be specified in an infringement notice issued to a person in relation to an alleged contravention of a civil penalty provision of an industry code generally (excluding an industry code that relates to the industry of food and groceries, as detailed above) to ensure consistency while strengthening the enforcement regime across industry codes to deter non-compliant behaviour.

4.34 The new penalties for infringement notices are within the maximum recommended amount payable for an infringement notice in the Guide and align with the penalty for an infringement notice issued in relation to an alleged contravention of certain provisions of the ACL, such as Division 2 of Part 3-2 of the ACL (other than section 85 of the ACL).

[Schedule 4, item 1, section 51ACF]

Maximum penalty for breach of civil penalty provision-industry of food and groceries

4.35 Item 4 to the table in subsection 76(1A) provides that the maximum pecuniary penalty payable for a civil penalty provision of an industry code is:

•

if the person is a body corporate, the amount set out in the civil penalty provision of the industry code, and

•

if the person is not a body corporate, the amount set out in the civil penalty provision of the industry code.

4.36 Subsection 51AE(2) provides that if regulations prescribe an industry code (other than a code that relates to the industry of franchising), the industry code may prescribe a pecuniary penalty not exceeding 600 penalty units for a contravention of a civil penalty provision of the code.

4.37 The amendments exclude an industry code that relates to the industry of food and groceries from the maximum pecuniary penalty of 600 penalty units, in addition to the existing exclusion for an industry code that relates to the industry of franchising.

[Schedule 4, item 2, subsection 51AE(2)]

4.38 Subsection 51AE(2A) sets out a two-tier civil penalty system for an industry code that relates to franchising, whereby the higher tier maximum penalty may be prescribed, or a penalty up to the maximum lower tier penalty.

4.39 The amendments provide for a similar two-tier civil penalty system for an industry code that relates to the industry of food and groceries. This is intended to allow for the introduction of substantial penalties in the new Food and Grocery Code in accordance with recommendation 9 of the Independent Review of the Food and Grocery Code of Conduct Final Report. The amendments also allow for the introduction of substantial penalties for breach of the Unit Pricing Code, which requires certain grocery retailers to use unit pricing when selling particular grocery items to consumers.

4.40 The higher tier civil penalty that may be prescribed in an industry code that relates to the industry of food and groceries is the same as for an industry code that relates to the industry of franchising. That is, if regulations prescribe an industry code that relates to the industry of food and groceries, the code may prescribe a pecuniary penalty for a contravention of a civil penalty provision of the code by a body corporate that is the greater of the following:

•

$10 million;

•

if the Court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is attributable to the act or omission-3 times the value of that benefit, and

•

if the Court cannot determine the value of that benefit-10 percent of the body corporate's adjusted turnover during the 12-month period ending at the end of the month in which the act or omission occurred or started to occur.

4.41 If the higher tier penalty is not prescribed, an industry code that relates to the industry of food and groceries may prescribe a pecuniary penalty for contravention of a civil penalty provision by a body corporate of up to 3,200 penalty units.

4.42 The higher tier penalty for breach of a civil penalty provision in an industry code that relates to the industry of food or groceries by a person that is not a body corporate is $500,000.

4.43 If the higher tier penalty is not prescribed, an industry code that relates to the industry of food and groceries may prescribe a pecuniary penalty for contravention of a civil penalty provision of the code by a person that is not a body corporate of up to 640 penalty units.

4.44 The new penalty regime can only be prescribed in an industry code that relates to the industry of food and groceries such as the new Food and Grocery Code and the Unit Pricing Code; it is not intended to be prescribed in industry codes that may relate to the industry of food and groceries industry tangentially, such as the Competition and Consumer (Industry Codes-Dairy) Regulations 2019.

4.45 The new Food and Grocery Code is proposed to regulate wholesalers and retailers that meet a $5 billion annual turnover threshold. The existing penalties for contravention of an industry code under subsection 51AE(2) would not provide an effective deterrent. This is because it is open to retailers and wholesalers to weigh the potential benefit of breaching the law against the possible size of the financial penalty, and to knowingly take action in breach of the industry code.

4.46 The amendments allow for the imposition of large maximum penalties for breach of an industry code that relates to the industry of food and groceries to provide a strong deterrent against breach of the law. This is proportional to the size and turnover of the wholesalers and retailers that are proposed to be regulated under the new Food and Grocery Code and is intended to provide a meaningful deterrent to poor behaviour that is not just seen as a cost of doing business.

4.47 As per the Guide, serious pecuniary penalties are most appropriately placed in primary Acts of Parliament rather than subordinate legislation. The penalties in industry codes are prescribed in regulations, however, the maximum penalty that can be given as a penalty to a breach of an industry code that relates to the industry of food and groceries has been placed in primary law. As such, the amendments implement the recommendations of the Independent Review of the Food and Grocery Code of Conduct Final Report (to prescribe high maximum penalties for more harmful breaches in relation to the new Food and Grocery Code to ensure a meaningful deterrent), while also meeting the principles set out in the Guide.

4.48 The higher tier maximum penalties are only intended to apply in the most egregious instances of non-compliance; therefore, they are only intended to be prescribed for the most harmful breaches of the new Grocery Code. Courts have the discretion to determine the appropriate penalty amount, up to the maximum set out under the law.

[Schedule 4, items 3-4, subsection 51AE(2A)]

Conferral of functions and powers on persons

4.49 Subsections 51AE(1A) and (1B) deal with the conferral of functions and powers on persons and bodies under regulations that prescribe industry codes.

4.50 The amendments update the drafting of subsection 51AE(1B) to clarify the kind of person or body on whom an industry code may confer functions and powers.

[Schedule 4, item 7, subsection 51AE(1B)]

Consequential amendments

4.51 Consequential amendments are made to ensure the infringement notice scheme under Part IVBA continues unchanged.

[Schedule 4, item 5, subsection 52ZZG(2)]

Commencement and application provisions

4.52 Schedule 4 to the Bill commences on the later of 1 April 2025 and the day after the Bill receives Royal Assent. 1 April 2025 is the date the Food and Grocery Code and Franchising Code sunset. Both the Food and Grocery Code and Franchising Code are proposed to be remade.

4.53 Schedule 4 to the Bill applies from commencement. The amendments to section 51ACF and 51AE made by Part 1 of Schedule 4 to the Bill apply in relation to contraventions which happen, or are alleged to happen, on or after the day the Schedule commences.

[Schedule 4, item 6]

Chapter 5: Deductible gift recipients

Outline of chapter

5.1 Schedule 5 to the Bill amends the ITAA 1997 to list Skip Foundation Ltd as a deductible gift recipient. The Schedule also amends the ITAA 1997 to remove eight deductible gift recipients.

5.2 Schedule 5 to the Bill amends the ITAA 1997 to remove as deductible gift recipients:

•

Don Chipp Foundation Ltd;

•

The Ian Clunies Ross Memorial Foundation;

•

Ian Thorpe's Fountain for Youth Limited;

•

Layne Beachley - Aim for The Stars Foundation Limited;

•

National Congress of Australia's First Peoples Limited;

•

Sir William Tyree Foundation;

•

SouthCare Helicopter Fund; and

•

Lingiari Policy Centre.

Context of amendments

5.3 The income tax law allows income tax deductions for taxpayers who make gifts of $2 or more to deductible gift recipients. To be a deductible gift recipient, an organisation must fall within one of the general categories set out in Division 30 of the ITAA 1997 or be listed by name in that Division. Unless otherwise stated, all references to legislation in this Chapter are to the ITAA 1997.

5.4 Deductible gift recipient status helps eligible organisations attract public financial support for their activities.

5.5 Skip Foundation Ltd (ABN 44 673 342 455) is a charity that aims to promote equality of opportunity, advancing health, protecting and restoring the natural environment and stimulating and promoting philanthropy to charities and for charitable purposes.

Summary of new law

5.6 Schedule 5 to the Bill amends the ITAA 1997 to list Skip Foundation Ltd as a deductible gift recipient under the income tax law. Schedule X to the Bill also amends the ITAA 1997 to remove eight entities as deductible gift recipients under the income tax law.

Detailed explanation of new law

5.7 Taxpayers may no longer claim an income tax deduction for gifts made to Don Chipp Foundation Ltd (ABN 60 008 618 488). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 3, table item 3.2.9 in subsection 30-40(2)]

5.8 Taxpayers may no longer claim an income tax deduction for gifts made to the Ian Clunies Ross Memorial Foundation (ABN 85 004 450 686). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 3, table item 3.2.2 in subsection 30-40(2)]

5.9 Taxpayers may no longer claim an income tax deduction for gifts made to Ian Thorpe's Fountain for Youth Limited (ABN 87 094 955 290). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 4, table item 4.2.40 in subsection 30-45(2)]

5.10 Taxpayers may no longer claim an income tax deduction for gifts made to Layne Beachley - Aim for the Stars Foundation Limited (ABN 72 101 890 340). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 5, table item 13.2.4 in subsection 30-105(2)]

5.11 Taxpayers may no longer claim an income tax deduction for gifts made to National Congress of Australia's First Peoples Limited (ABN 47 143 207 587). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 4, table item 4.2.42 in subsection 30-45(2)]

5.12 Taxpayers may no longer claim an income tax deduction for gifts made to Sir William Tyree Foundation (ABN 55 067 867 510). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 2, table item 2.2.18 in subsection 30-25(2)]

5.13 Taxpayers may no longer claim an income tax deduction for gifts made to SouthCare Helicopter Fund (ABN 68 084 155 895). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 1, table item 1.2.14 in subsection 30-20(2)]

5.14 Taxpayers may no longer claim an income tax deduction for gifts made to Lingiari Policy Centre (ABN 55 114 489 020). This amendment removes the deductible gift recipient status of the entity.

[Schedule 5, item 3, table item 3.2.10 in subsection 30-40(2)]

5.15 Taxpayers may claim an income tax deduction for gifts made to Skip Foundation Ltd (ABN 44 673 342 455) provided the gift complies with the existing requirements of the income tax law. The gift must be made after 1 July 2024 and on or before 30 June 2029. This amendment ensures that Skip Foundation Ltd receives public financial support for its activities.

[Schedule X, item 6, table item 13.2.47 in subsection 30-105(2)]

Consequential amendments

5.16 Schedule 5 to the Bill also amends the index in Subdivision 30-G of the ITAA 1997 to reflect the amendments.

[Schedule 5, items 7, 8 and 9, table items 45AAA, 60, 65AA, 67A, 73B, 111AA and 111B in section 30-315]

Commencement

5.17 Schedule 5 to the Bill commences the first day of the first quarterly period following Royal Assent.

[Clause 2]

Application

5.18 The amendments apply to gifts made after 30 June 2024 and before 1 July 2029 to the Skip Foundation Ltd.

[Schedule 5, item 6, table item 13.2.47 in subsection 30-105(2)]

5.19 The amendment to list Skip Foundation Ltd as a deductible gift recipient applies retrospectively. This ensures that if gifts are made to Skip Foundation Ltd prior to the commencement of this Schedule but after the application of the amendments, they qualify for a tax deduction for income tax purposes, provided they comply with other requirements of the income tax law.

5.20 Despite the retrospective application of deductible gift recipient status to Skip Foundation Ltd, there is no adverse impact on affected parties or the entity as the amendment is wholly beneficial. This is because the amendments assist entities to obtain support from the public and allow parties that provide gifts to obtain an income tax deduction if eligibility requirements are met.

Chapter 6: Miscellaneous and technical amendments

Outline of chapter

6.1 Schedule 6 to the Bill makes miscellaneous and technical amendments to Treasury portfolio legislation. The amendments demonstrate the Government's ongoing commitment to the care and maintenance of Treasury portfolio legislation.

6.2 The amendments update legislative references, simplify provisions and reduce red tape.

Context of amendments

6.3 Miscellaneous and technical amendments are periodically made to Treasury portfolio legislation to correct errors and unintended outcomes, make technical changes and improve the quality of Treasury portfolio legislation. The process was first supported by a recommendation of the 2008 Tax Design Review Panel, which considered ways to improve the quality of tax legislation. It has since been expanded to all Treasury legislation.

Summary of new law

6.4 Divisions 1 and 2 of Part 1 of Schedule 6 to the Bill amend the corporations legislation, Division 3 of Part 1 amends the FATA, Division 4 of Part 1 amends the PRRTA Act; Part 2 amends the taxation laws; and Part 3 amends the corporations legislation. The miscellaneous and technical amendments maintain and improve the quality of Treasury legislation by:

•

enhancing readability and administrative efficiency;

•

reducing unnecessary red tape; and

•

making other technical changes.

Detailed explanation of new law

Part 1 - Amendments commencing day after Royal Assent

Division 1 - Australian Securities and Investments Commission Act 2001

6.5 Division 1 of Part 1 of Schedule 6 to the Bill repeals provisions in the ASIC Act which require the Minister to consent to certain proceedings. The amendments are intended to reduce red tape.

6.6 Subsections 12AC(2) to 12AC(4) of the ASIC Act provide that a proceeding involving conduct outside of Australia may only proceed with the consent of the Minister. The repeal of these provisions mirrors the repeal of former subsections 5(3), (4) and (5) in the CCA.

6.7 The analogous provisions in the CCA were repealed in 2017 following recommendations made by the Harper Review, which found the requirement for Ministerial consent represented unnecessary red tape to private litigants.

6.8 The amendments repeal subsections 12AC(2) to 12AC(4), aligning the ASIC Act with the CCA to reduce the burden on litigants seeking redress under the ASIC Act.

[Schedule 6, items 1 and 2, subsection 12AC(1) and subsections 12AC(2) to (4) of the ASIC Act]

Division 2 - Contents of annual financial reports

6.9 Division 2 of Part 1 of Schedule 6 to the Bill amends reporting requirements for public companies in the Corporations Act.

6.10 Subsection 295(3A) of the Corporations Act improves tax transparency by ensuring public companies disclose the tax residency of their subsidiaries in their consolidated entity disclosure statement as part of their annual financial reports. This statement is provided by public companies in relation to a consolidated entity and includes information such as the entity's status as a body corporate, partnership or trust, and Australian or foreign residency. Hence, the provisions align these disclosures with income tax return disclosures, to improve multinational tax transparency.

6.11 The amendments clarify the tax residency disclosures required under subsection 295(3A) for subsidiaries in the annual financial report. A reporting entity must disclose whether each of its subsidiaries were an Australian tax resident and each foreign jurisdiction of which each of its subsidiaries were a tax resident (if any).

[Schedule 6, item 3, subparagraphs 295(3A)(a)(vi) and (vii) of the Corporations Act]

6.12 For a subsidiary that was a tax resident of both Australia and of one or more foreign jurisdictions, reporting entities are required to disclose that the subsidiaries were both an Australian resident under Australian tax law and a foreign resident under the law relating to foreign income tax of each relevant foreign jurisdiction.

6.13 Further, the amendments clarify the conditions for when an entity is an Australian resident for the purposes of subsection 295(3A) of the Corporations Act. The term 'Australian resident', as defined in subsection 995-1(1) of the ITAA 1997, means a person who is a resident of Australia for the purposes of the ITAA 1936. The definition of 'resident' or 'resident of Australia' in subsection 6(1) of the ITAA 1936 applies to individuals and companies but does not extend to partnerships and trusts.

6.14 Accordingly, paragraphs 295(3B)(b) and (c) of the Corporations Act clarify that subsidiary partnerships and trusts are covered by the disclosure requirements. They do this by confirming that a partnership and a trust will be an 'Australian resident' for the purposes of subsection 295(3A) of the Corporations Act in the following circumstances:

•

For a partnership: at least one member of the partnership is an Australian resident (within the meaning of the ITAA 1997) at that time; and

•

For a trust: the trust is a resident trust estate (within the meaning of Division 6 of Part III of the ITAA 1936) in relation to the year of income that corresponds to the financial year.

[Schedule 6, item 4, subsection 295(3B) of the Corporations Act]

6.15 The definitions in paragraphs 295(3B)(b) and (c) of the Corporations Act refer to tax residency definitions in the ITAA 1997 and the ITAA 1936, allowing reporting entities to rely on their existing income tax reporting obligations to complete these disclosures.

6.16 Corporate Limited Partnerships, as defined in section 94D of the ITAA 1936, should be reported as Australian residents under paragraph 295(3B)(a) where they are a resident of Australia under section 94T of the ITAA 1936, consistent with income tax return disclosures. Corporate Limited Partnerships are generally referred to as 'companies' in the income tax law under section 94J of the ITAA 1936, and are not included in the definition in paragraph 295(3B)(b) of the Corporations Act. The residency status of other partnerships is to be determined under paragraph 295(3B)(b) of the Corporations Act.

6.17 In some circumstances, the concept of tax residency may not apply to a reporting entity's subsidiary - for example, where the subsidiary is not an Australian resident and there is no corporate tax system in the foreign jurisdiction in which the subsidiary is established and operates. An example is where the subsidiary is not an Australian resident, and is established and operated in the Cayman Islands. In these circumstances, the reporting entity should state that the subsidiary is not an Australian resident under subsection 295(3B) of the Corporations Act, and also not list the relevant foreign jurisdiction for the purposes of subparagraphs 295(3A)(a)(vi) and (vii) of the Corporations Act.

6.18 The amendments apply in relation to annual financial reports for financial years commencing on or after 1 July 2024. This ensures that this amendment will have no retrospective impact, as the first annual report affected will be after 30 June 2025.

[Schedule 6, item 5, section 1709 of the Corporations Act]

6.19 These amendments clarify the technical operation of the existing law, which supports the policy intention of increased scrutiny on Australian public companies and how they structure their subsidiaries in different jurisdictions (including for tax purposes). This amendment aligns with the Government's multinational tax integrity commitments.

Division 3 - Foreign Acquisitions and Takeovers Act 1975

6.20 Division 3 of Part 1 of Schedule 6 to the Bill amends the FATA to clarify the calculation of penalties for contraventions of subsection 95(4) of the FATA.

6.21 Subsection 95(1) of the FATA prohibits temporary residents from holding interests in more than one established dwelling at a time. Subsection 95(4) prohibits foreign residents from acquiring interests in established dwellings. Subsection 95(6) provides that a person who contravenes either of these prohibitions is liable to a civil penalty.

6.22 Subsection 95(7) of the FATA provides that the maximum civil penalty is the greatest of:

•

double the amount of the capital gain that was made or would be made on the disposal of an interest selected by subsection 95(8);

•

50% of the consideration for the acquisition of that interest; or

•

50% of the market value of that interest.

6.23 Subsection 95(8) of the FATA selects the interest to be used as reference when calculating the maximum civil penalty applicable for a breach of subsections 95(1) and 95(4) of the FATA.

6.24 The amendments clarify the selection of the relevant interest with respect to the calculation of civil penalties, to give effect to the intended policy and better align with the contravention provision, being the prohibition of foreign residents from acquiring interests in established dwellings in subsection 95(4) of the FATA. As the contravention is based on the acquisition of an interest, the civil penalty will be calculated by reference to the interest which was acquired in that contravention.

[Schedule 6, item 8, subsection 95(9) of the FATA]

6.25 The penalties for contraventions of subsection 95(4) of the FATA are appropriate given the potential benefits and profits that may be derived from non-compliance with the foreign investment framework and the need to create a sufficient deterrent to protect the national interest. The penalty amounts in the existing section are unchanged and appropriate to deter engaging in such behaviour to effectively diminish the commercial incentives for misconduct.

6.26 To avoid doubt, there are no substantive changes to the selection of the interest with respect to breaches of subsection 95(1) of the FATA.

6.27 The amendments to subsections 95(7) and 95(8) of the FATA are consequential amendments which clarify that subsection 95(8) applies with respect to breaches of subsection 95(1) of the FATA.

[Schedule 6, items 6 and 7, subsections 95(7) and 95(8) of the FATA]

6.28 The amendments apply with respect to contraventions of subsection 95(4) of the FATA that occur on or after the day after Royal Assent.

[Schedule 6, item 9]

Division 4 - Assessable petroleum receipts worked out according to regulations

6.29 Division 4 of Part 1 of Schedule 6 to the Bill amends section 26 of the PRRTA Act to remove the reference to paragraph 24(1)(e) of the PRRTA Act.

[Schedule 6, item 10, section 26 of the PRRTA Act]

6.30 Paragraph 24(1)(e) of the PRRTA Act provides that the amount of assessable petroleum receipts derived by a person is worked out in accordance with the regulations in relation to a petroleum project where:

•

the regulations apply to any sales gas produced from the project petroleum; and

•

that sales gas becomes an excluded commodity otherwise than by virtue of being sold, or certain other things.

6.31 Section 24 of the PRRTA Regulations then sets out how that person works out the amount of assessable receipts they derived in relation to a petroleum project.

6.32 Broadly, section 26 of the PRRTA Act provides an apportionment mechanism for cases where an amount is notionally derived and that amount is taken to be derived by two or more persons. The apportionment mechanism provides how much of that amount is taken to be derived by each person. Prior to the amendment, section 26 did this where paragraph 24(1)(c), 24(1)(e) or 25(c) of the PRRTA Act applied. As paragraph 24(1)(e) of the PRRTA Act provides the amount of assessable petroleum receipts derived by a person in relation to a petroleum project in certain cases, the amendment is made to clarify that no apportionment of that amount is required under section 26 of the PRRTA Act. Accordingly, the reference to paragraph 24(1)(e) in section 26 of the PRRTA Act is removed.

6.33 Section 26 of the PRRTA Act continues to apply in relation to paragraphs 24(1)(c) and 25(c) of the PRRTA Act, as those paragraphs continue to rely on the apportionment mechanism provided by section 26.

6.34 The amendments apply in relation to a year of tax beginning on or after 1 July 2024.

[Schedule 6, item 11]

Part 2 - Amendments commencing first day of the next quarter

Division 1 - General class investors

6.35 Division 1 of Part 2 of Schedule 6 to the Bill amends the ITAA 1997 to ensure the thin capitalisation rules in Division 820 of that Act operate as intended.

6.36 Schedule 2 to the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share-Integrity and Transparency) Act 2024 made several reforms to the thin capitalisation rules in Division 820 of the ITAA 1997. The amendments in Schedule 2 to that Act generally apply in relation to assessments for income years starting on or after 1 July 2023.

6.37 As part of the reforms, changes were made to how some entities are categorised under the thin capitalisation rules. However, certain consequential amendments to ensure these entities are correctly categorised were not made. These amendments make these consequential amendments.

6.38 The amendments ensure that associate entities of general class investors are correctly categorised for thin capitalisation purposes. Depending on the case, the amendments ensure that such entities are correctly categorised as either:

•

a general class investor;

•

an outward investing financial entity (non-ADI); or

•

an outward investing entity (ADI).

[Schedule 6, items 12, 13 and 14, subsection 820-85(2BA), subparagraph 820-300(2)(c)(ii) of the ITAA 1997]

6.39 Correctly categorising entities ensures they are subject to the appropriate and intended thin capitalisation rules for their category.

6.40 The amendments apply in relation to income years starting on or after 1 July 2023. Retrospective application of the amendments is consistent with the application of the relevant reforms and ensures that the thin capitalisation rules operate as intended.

[Schedule 6, item 15]

6.41 For completeness, the intended re-categorisation of entities under the recent reforms is set out in the below table.

Table 5.1 Comparison of categorisations

Division 2 - Deductible gift recipients

6.42 Division 2 of Part 2 of Schedule 6 to the Bill updates outdated names of organisations listed on the DGR register.

6.43 The income tax law allows taxpayers who make gifts of $2 or more to DGRs to claim a deduction. To be a DGR, an organisation must fall within one of the general categories set out in Division 30 of the ITAA 1997 or be listed by name in that Division.

6.44 Three organisations are currently listed as DGRs under outdated names. The amendments make the following changes to address this issue:

•

'The Royal Society for the Prevention of Cruelty to Animals (South Australia) Incorporated', updated to 'Royal Society for the Prevention of Cruelty to Animals (South Australia) Limited';

•

'Alcohol Education and Rehabilitation Foundation Limited', updated to 'Foundation for Alcohol Research and Education Limited'; and

•

'The Prince's Trust Australia Limited', updated to 'The King's Trust Australia Limited'.

[Schedule 6, items 16, 17 and 18, table items 4.2.9 and 4.2.26 of the table under subsection 30-45(2), and table item 13.2.20 of the table under subsection 30-105(2) of the ITAA 1997]

6.45 Consequential editorial amendments are also made to the index in Division 30 of the ITAA 1997 for these DGRs.

[Schedule 6, items 19, 20 and 21, items 49E and 64B of the table under section 30-315 of the ITAA 1997]

Part 3 - Amendments with other commencements

Division 1 - Declaration of relevant relationships

6.46 Division 1 of Part 1 of Schedule 6 to the Bill amends the Corporations Act to align the requirements placed on the liquidator of a CCIV under the Corporations Act with those of liquidators of companies.

6.47 Under subsection 60(2) of the Corporations Act, liquidators must make a declaration of relevant relationships. However, the effect of the translation rules (in Chapter 8B of the Corporations Act) relating to CCIVs mean that a liquidator appointed to a sub-fund of a CCIV is not required to make such a declaration if they have previously been appointed to another sub-fund of the same CCIV, despite these relationships carrying the same risk of a conflict of interest.

6.48 To correct this, the amendments insert section 1237KA which provides that, for liquidators appointed to sub-funds of CCIVs, the declaration of relevant relationships extends to relationships with other sub-funds of the same CCIV, and relevant entities with relationships with other sub-funds of the same CCIV.

[Schedule 6, item 22, section 1237KA of the Corporations Act]

6.49 This requirement applies to declarations of relevant relationships made on or after the commencement of section 1710 of the Corporations Act (which is 14 days after Royal Assent). Further, a liquidator of a sub-fund of a CCIV will be required to amend their declaration of relevant relationships upon commencement of section 1710 of the Corporations Act. The delay in commencement provides for a transitional period for liquidators of sub-funds and gives sufficient notice of the date that their declarations need to be updated.

[Schedule 6, item 23 of Division 1 of Part 3, section 1710 of the Corporations Act]

Commencement, application, and transitional provisions

6.50 Part 1 of Schedule 6 to the Bill commences on the day after Royal Assent.

6.51 Part 2 of Schedule 6 to the Bill commences on the first day of the next quarter after Royal Assent.

6.52 Part 3 of Schedule 6 to the Bill commences on the day after the end of the period of 14 days beginning on the day after Royal Assent.

Chapter 7: Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Treasury Laws Amendment (Fairer for Families and Farmers and Other Measures) Bill 2024

Schedule 1 - Amendments relating to the cessation of registries modernisation program

Overview

7.1 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.

7.2 Schedule 1 to the Bill facilitates the return of responsibility and resources for administering Commonwealth business registers from the ATO to ASIC, in winding up the MBR Program. The amendments ensure that Public Service Act employees transferred to ASIC as part of this, and any future, MoG change are subject to the same legislative framework as existing ASIC staff employed under section 120 of the ASIC Act. The legislation also adjusts provisions relating to registry records of CCIVs.

Human rights implications

7.3 Part 1 of Schedule 1 to the Bill engages the right to the enjoyment of just and favourable conditions of work, under Article 7 of in the International Covenant on Economic, Social and Cultural Rights.

7.4 The right to just and favourable conditions of work in Article 7 encompasses elements including fair wages and equal remuneration for work of equal value, safe and healthy working conditions, reasonable limitation of working hours and periodic holidays. In accordance with Article 4, this right can only be subject to limitations that are determined by law, and proportional.

7.5 The amendments in Part 1 of Schedule 1 leverage existing legislative frameworks for the transfer and rights of employees of Australian Government departments and agencies. In particular, frameworks for the transfer of employees and when relevant, transfer of business, between Australian Government departments and agencies in a MoG change are set by the Public Service Act and the Fair Work Act. The ASIC Act provides for the functions and powers of ASIC, and well as for employment of ASIC staff.

7.6 Part 1 of Schedule 1 amends the ASIC Act, so that Public Service employees transferred to ASIC under a MoG change are subject to the same legislative framework as existing ASIC staff employed under section 120 of that Act. This ensures transferred employees have consistent working entitlements, duties and protections as other ASIC staff. The operation of provisions in legislation which protect employment conditions, including remuneration, of employees transferred under a MoG change is expressly upheld.

[Schedule 1, item 1, subsections 120 (3) and (4) of the ASIC Act]

7.7 As such, the amendments engage but do not limit the right to the enjoyment of just and favourable conditions of work in Article 7, which are substantively provided for in the existing legislative frameworks.

Conclusion

7.8 Schedule 1 to the Bill is compatible with human rights as it does not raise any human rights issues.

Schedule 2 - Regulation of safety standards and information standards

Overview

7.9 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.

7.10 Schedule 2 to the Bill amends the Competition and Consumer Act 2010 (CCA) (including the Australian Consumer Law (ACL)) to improve the flexibility and enforceability of safety standards and information standards by:

•

replacing the Commonwealth Minister's ability to 'declare' certain standards as safety standards and information standards with an expanded ability to 'make' safety standards and information standards;

•

allowing safety standards and information standards to incorporate matters in instruments and other writings as they exist from time to time, including international standards;

•

updating requirements relating to the nomination of alternative methods of compliance with safety standards, including through the addition of civil penalty provision; and

•

allowing the regulator to request certain information and documents in relation to compliance with safety standards and information standards and inserting a civil penalty provision for failure to comply.

Human rights implications

7.11 Schedule 2 to the Bill engages the following rights:

•

the right to a fair trial and public hearing (Article 14); and

•

the right to privacy (Article 17).

Right to a fair trial and public hearing

7.12 Schedule 2 to the Bill engages the right to a fair trial in Article 14 of the International Covenant on Civil and Political Rights (ICCPR) through the introduction of civil penalty provisions.

7.13 Article 14 applies only in relation to the rights of natural persons, not legal persons, such as companies.

7.14 The following table sets out the new civil penalty provisions introduced by the Bill:

Table 6.1

7.15 The maximum pecuniary penalty that a court may order for breach of each of the above civil penalty provisions, apart from a breach of subsection 108(3), is $50,000 for a body corporate and $10,000 for a person that is not a body corporate.

7.16 The maximum pecuniary penalty that a court may order for breach of subsection 108(3) is $250,000 for a body corporate and $50,000 for a person that is not a body corporate.

7.17 The civil penalty provisions contained in Schedule 2 to the Bill are not 'criminal' for the purposes of human rights law. While the civil penalty provisions included in Schedule 2 to the Bill are intended to deter people from not complying with safety standards and information standards, these provisions are regulatory and disciplinary in nature.

7.18 Further, the provisions do not apply to the general public, but to a class of businesses that should reasonably be aware of their obligations under the ACL. The imposition of civil penalties will enable the regulator to respond effectively to non-compliance.

7.19 Further, the judiciary continues to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The civil courts are experienced in making appropriate civil penalty orders with due regard to the maximum penalty amount, the nature of the contravening conduct and the size of the organisation involved.

7.20 Therefore, a relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance with the Schedule 2 to the Bill.

7.21 Finally, there is no sanction of imprisonment for non-payment of these civil penalties.

7.22 Based on the above factors, the cumulative effect and the nature and severity of the civil penalties in Schedule 2 to the Bill are not 'criminal' for the purposes of human rights law.

7.23 To the extent Schedule 2 to the Bill engages Article 14 of the ICCPR, it does so appropriately and is consistent with the Bill's objectives to encourage compliance with safety standards and information standards. Compliance with safety standards and information standards enable consumers access to a greater range of safer products. Penalties are required to adequately incentivise compliance. In forming this view, consideration has been specifically given to the document 'A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers', which was published by the Attorney-General's Department on 24 May 2024.

Right to privacy

7.24 Schedule 2 to the Bill engages the right to protection from unlawful or arbitrary interference with privacy under Article 17 of the ICCPR.

7.25 The right to protection from unlawful or arbitrary interference with privacy under Article 17 of the ICCPR may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. In order for an interference with the right to privacy to be permissible, the interference must be authorised by law, be for a reason consistent with the ICCPR and be reasonable in the particular circumstances. The UN Human Rights Committee has interpreted the requirement of 'reasonableness' to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances of any given case.

7.26 New section 108A and section 137B of the ACL engage the right to privacy where the regulator gives a request, in writing, to a person requiring information or documents be provided. The purpose of this request is to determine whether a person has complied, is complying, or will comply with a safety standard that is in force for consumer goods or product related services of a particular kind or an information standard that is in force for goods or services of a particular kind. In some circumstances, the requested information or documents may include personal information.

7.27 This information ultimately supports the objects of the CCA to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection, by ensuring that the regulator can request information from suppliers which demonstrates that they are complying or will comply with their chosen safety standard alternative or an information standard. This only applies to a person, in trade or commerce, that has supplied or offered for supply, is supplying or offering for supply, or intends to supply or offer for supply the particular consumer goods or product related services in the case of safety standards, or goods or services in the case of information standards.

7.28 Upon receipt of requested documents or information, the regulator handles the information and keeps the documents in accordance with relevant legislation, including the Privacy Act 1998. The CCA also contains provisions, such as section 155AAA, which requires the regulator to keep certain protected information confidential, except in limited circumstances. Taken together, this legislation contains provisions aimed to protect confidentiality and limit the circumstances in which personal information may be disclosed.

7.29 Based on the above factors, the potential for interference with the right to privacy is permissible as it is considered to be reasonable, proportionate and necessary to achieve the legitimate objective of maintaining consumer confidence in the industry. Therefore, to the extent that Schedule 2 engages the right to privacy, it is consistent with Article 17 of the ICCPR as any limitations on that right are authorised by law and are not arbitrary.

Conclusion

7.30 Schedule 2 to the Bill is compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary, and proportionate.

Schedule 3 - Increasing the cap on the Housing Australia Special Account

Overview

7.31 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.

7.32 Schedule 3 to the Bill amends the Housing Australia Act to increase the cap on the balance on the Housing Australia Special Account from $1 billion to $4 billion.

7.33 The Housing Australia Special Account is used to support the delivery of key activities by Housing Australia that fund the provision of social, affordable, and acute housing in Australia. These activities include the Affordable Housing Bond Aggregator, the Housing Australia Future Fund Facility, and the National Housing Accord Facility.

Human rights implications

7.34 Of the human rights and freedoms recognised or declared in the international instruments listed in the definition of human rights in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, Schedule 3 of the Bill engages the right to an adequate standard of living, including housing, as referred to in Article 11.1 of the International Covenant on Economic, Social and Cultural Rights.

7.35 Article 11.1 of the International Covenant on Economic, Social and Cultural Rights states that everyone has the right to an adequate standard of living for themselves and their family, including adequate food, clothing and housing, and to the continuous improvement of living conditions and that 'appropriate steps' be taken to 'ensure the realization of this right'.

7.36 Schedule 3 to the Bill amends the Housing Australia Act to increase the cap on the balance of the Housing Australia Special Account from $1 billion to $4 billion.

7.37 Schedule 3 to the Bill seeks to promote the right to an adequate standard of living, including housing, by increasing the cap to strengthen Housing Australia's ability to improve housing outcomes for Australians and to support Housing Australia's ability to deliver key activities that fund the provision of social housing, affordable housing and housing that addresses acute housing needs. The increased cap facilitates the additional $3 billion being made available to Housing Australia through a line of credit supporting the Affordable Housing Bond Aggregator. The increased cap recognises that the previous size of the cap constrained Housing Australia's ability to deliver key activities that fund the provision of social housing, affordable housing and housing that addresses acute housing needs.

7.38 Schedule 3 to the Bill recognises the importance of ensuring that the cap does not constrain the ability to provide additional credits to the Housing Australia Special Account. It assists with the careful coordination of additional credits to the Housing Australia Special Account to ensure the balance does not exceed the cap. These credits may be for activities including the Affordable Housing Bond Aggregator, the Housing Australia Future Fund Facility and the National Housing Accord Facility.

Conclusion

7.39 Schedule 3 to the Bill is compatible with human rights as it supports the right to an adequate standard of living. Compliance cost impact

7.40 Schedule 3 to the Bill does not raise any other human rights issues.

Schedule 4 - Industry codes

Overview

7.41 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.

7.42 Schedule 4 to the Bill amends Part IVB of the Competition and Consumer Act 2010 (CCA) to:

•

increase the penalty to be specified in infringement notices issued in relation to an alleged contravention of a civil penalty provision:

-

of an industry code that relates to the industry of food and groceries (and that states that the relevant enabling provision applies)-to 600 penalty units for a body corporate and 12 penalty units otherwise, and

-

of any other industry code-to 60 penalty units for a body corporate and 12 penalty units otherwise;

•

increase the maximum penalty for contravention of a civil penalty provision that may be prescribed in an industry code relating to the industry of food and groceries, and

•

clarify the functions and powers that may be conferred on persons under industry codes.

7.43 Relevantly, Schedule 4 to the Bill increases the maximum civil penalty that may be prescribed in industry codes that relate to the industry of food and groceries; it does not impose any new civil penalties. This is intended to provide the framework to reduce the financial benefits and incentives for persons that engage in conduct that breaches industry codes regulating the industry of food and groceries.

Human rights implications

7.44 Schedule 4 to the Bill engages the right to a fair trial, as well as the presumption of innocence in Articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR). Article 14(2) of the ICCPR recognises that all people have the right to be presumed innocent until proven guilty according to the law. Articles 14 and 15 apply only in relation to the rights of natural persons, not legal persons, such as companies.

7.45 Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR. Although there is a domestic law distinction between criminal and civil penalties, 'criminal' is separately defined in international human rights law. Therefore, when a provision imposes a civil penalty, it is necessary to determine whether or not the penalty amounts to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.

7.46 Schedule 4 to the Bill provides that an industry code relating to the industry of food and groceries may prescribe a pecuniary penalty of $500,000 for contravention of a civil penalty provision by a person that is not a body corporate. If the $500,000 'higher tier' penalty is not prescribed, the maximum penalty that may be prescribed for contravention of a civil penalty provision by a person that is not a body corporate is 640 penalty units.

7.47 While Schedule 4 to the Bill does not impose any new civil penalties, it permits higher civil penalties to be prescribed in industry codes. The higher tier civil penalty may be viewed as 'criminal' for the purposes of human rights law. This view may be formed as such provisions are deterrent in nature and proceedings would be instituted by a public authority with statutory powers of enforcement. While this may be the case, the civil penalty provisions do not amend or seek to limit any rights of an individual or an applicable legal process.

7.48 Further, the provisions do not apply to the general public, but to a sector or class of people in the industry of food and groceries who should reasonably be aware of their obligations under the CCA. Therefore, imposing these civil penalties will enable an effective disciplinary response to non-compliance.

7.49 While the higher tier civil penalty is large, it is appropriate in size. The Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers outlines that larger penalties are more appropriate for bigger entities, as they provide an adequate deterrent.

7.50 Further, the judiciary continues to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The civil courts are experienced in making civil penalty orders at appropriate levels having regard to the maximum penalty amount, taking into account a range of factors including the nature of the contravening conduct and the size of the organisation involved.

7.51 Therefore, a relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance with the CCA.

7.52 The higher tier civil penalty that can be prescribed in an industry code relating to the industry of food and groceries in accordance with Schedule 4 to the Bill is intentionally significant and is in line with the penalties that may be prescribed in an industry code relating to the industry of franchising under Part IVB of the CCA.

7.53 Finally, there is no sanction of imprisonment for non-payment of these civil penalties.

Conclusion

7.54 Schedule 4 to the Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

7.55 To the extent that these amendments limit the rights under Article 14 and 15 of the ICCPR, they are compatible with human rights as:

•

the increased penalty amounts are aimed at deterring non-compliance with the CCA, and not punitive in nature;

•

the maximum penalty amount will only be used in the most egregious instances; and

•

the civil penalties are applicable to people who should reasonably be aware of their obligations.

Schedule 5 - Deductible gift recipients

Overview

7.56 Schedule 5 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.

7.57 Schedule 5 to the Bill amends the ITAA 1997 to list Skip Foundation Ltd as a deductible gift recipient.

7.58 Schedule 5 to the Bill amends the ITAA 1997 to remove the following entities as deductible gift recipients:

•

Don Chipp Foundation Ltd;

•

The Ian Clunies Ross Memorial Foundation;

•

Ian Thorpe's Fountain for Youth Limited;

•

Layne Beachley - Aim for the Stars Foundation Limited;

•

National Congress of Australia's First Peoples Limited;

•

Sir William Tyree Foundation;

•

SouthCare Helicopter Fund; and

•

Lingiari Policy Centre.

Human rights implications

7.59 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

7.60 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 6 Minor and technical amendments

Overview

7.61 Schedule 6 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

7.62 Schedule 6 to the Bill makes a number of miscellaneous and technical amendments to Treasury portfolio legislation. Miscellaneous and technical amendments are periodically made to Treasury portfolio legislation to correct errors and unintended outcomes, make technical changes and improve the quality of Treasury portfolio legislation. The process was first supported by a recommendation of the 2008 Tax Design Review Panel, which considered ways to improve the quality of tax legislation. It has since been expanded to all Treasury legislation.

7.63 Divisions 1 and 2 of Part 1 of Schedule 6 to the Bill amend the corporations legislation, Division 3 of Part 1 amends the FATA, Division 4 of Part 1 amends the PRRTA Act; Part 2 amends the taxation laws; and Part 3 amends the corporations legislation. The miscellaneous and technical amendments maintain and improve the quality of Treasury legislation by:

•

enhancing readability and administrative efficiency;

•

reducing unnecessary red tape; and

•

making other technical changes.

7.64 These changes facilitate a more adaptive, efficient and navigable legislative framework and ensure that the legislative intention is met.

Human rights implications

7.65 Schedule 6 to the Bill does not engage any of the applicable rights or freedoms.

Conclusion

7.66 Schedule 6 to the Bill is compatible with human rights as it does not raise any human rights issues.

Attachment 1: Impact Analysis - Regulation of Safety Standards and Information Standards

Executive Summary

On 4 June 2021, the former Government announced that it would consult on amendments to the Australian Consumer Law (ACL) to make it easier to recognise overseas product safety standards in Australia, provided they offer at least an equivalent level of consumer protection.

Mandatory product safety standards and information standards set out requirements for consumer goods and product related services supplied in Australia. There are 48 mandatory standards regulating a range of product categories including infant and nursery products, children's toys, recreational equipment, and household goods. A full list is provided in Appendix B.

On 1 December 2021, Treasury released a
Consultation Regulation Impact Statement (Consultation RIS) seeking views on options for reform. The following broad policy options were presented for consideration:

•

Option 1 - Status quo

•

Option 2 - Amend the ACL to allow the Commonwealth Minister to more easily declare trusted overseas standards

•

Option 3 - Amend the ACL to more easily allow businesses to comply with the latest versions of voluntary Australian and overseas standards

The consultation period ran from 1 December 2021 to 21 January 2022. Treasury received 59 submissions from a broad range of stakeholders, including industry representatives, government, consumer groups, test laboratories, standards setting bodies, safety experts, and suppliers. There was strong support across the board for improving the regulatory framework to allow easier recognition of overseas standards in Australian mandatory safety standards, provided they offered an equivalent level of safety to an existing mandatory standard where one exists. Importantly, stakeholders indicated this should only occur following assessment and recommendation by the ACCC. There was also strong support for improvements to the regulatory framework to more easily allow mandatory standards to reference voluntary standards as they are updated from time-to-time. There was little support for maintaining the status quo.

This Decision Regulation Impact Statement (Decision RIS) proposes amendments to the ACL to allow the Commonwealth Minister to recognise overseas product safety standards alongside Australian safety standards when creating a new or updating an existing mandatory safety or information standard. This proposal is a variation of Option 2 under the Consultation RIS which will allow the Minister to declare a standard from any standards making association upon recommendation from the ACCC, and not be restricted to a select set of standards making associations as considered under Option 2(a). This is the preferred approach as it is non-discriminatory from an international trade perspective and allows the Minister to declare standards through long established consultation and review procedures.

This option would make it easier for the Commonwealth Minister to declare an existing overseas standard (in addition to Australian standards) which is used, accepted and understood by industry, as a safety benchmark through its incorporation into Australian law. This is likely to make mandatory standards more accessible, transparent and make it easier for business to achieve compliance. Businesses will benefit from this policy approach as they will be able to more easily import products which already comply with applicable overseas standards, from a broader range of international markets. This will significantly reduce the cost, time and confusion involved when importing certain goods, and therefore support businesses while maintaining consumer safety. Consumers will also benefit from a potentially greater range of safer and cheaper products resulting from reduced barriers to entry and lower cost due to greater competition from broader international markets, whilst still maintaining a robust product safety framework.

At the same time, this Decision RIS proposes amendments to the ACL to more easily allow businesses to comply with the latest Australian and overseas standards as they are updated from time-to-time. This proposal would ensure that Australian mandatory standards do not become outdated and prevent businesses from using the latest and safest Australian or overseas standards that are available.

This option would provide certainty for businesses in complying with any changes made to the voluntary Australian and overseas standards referenced by a mandatory standard and allow businesses to keep in step with the latest developments in international markets. The benefits will include reduced confusion about which version of an Australian or overseas standard a product must comply with, and reduced compliance costs for businesses by not having to test products to outdated requirements. Reduced barriers to entry that result from permitting businesses to comply with the latest standards will also result in a greater choice of products for consumers and at a lower cost due to decreased compliance costs for businesses. Consumers can be confident that the products they are purchasing comply with the latest safety and best practice industry developments from Australian and overseas standards and not be confined to purchasing a product based on outdated standards.

Additionally, this Decision RIS proposes subsequent amendments to the ACL to extend the obligation of nominating standards to manufacturers, in conjunction with suppliers, and to ensure that the regulator can obtain documentation from either party to substantiate compliance with the nominated standard.

When they are fully implemented, which may take some time in relation to all 48 standards, these reforms are estimated to save Australian businesses a minimum of $136 million per year. These savings are expected to benefit consumers through reduced product prices and extended product lines while improving consumer safety through the introduction of safer products to the market sooner.

The two most recent reviews conducted by the ACCC indicate the benefits to business will likely be much greater than previously estimated, with the potential savings for bicycle helmets and care labelling estimated at up to $14 million and $30 million respectively. If an estimated benefit to business of $10 million per mandatory standard is applied, the total benefit would equate to $500 million per year across all 50 standards, or 5 billion over the next 10 years.

Impacts on consumers are likely to vary with product type and the nature of the change, however, in aggregate, consumers are likely to benefit from a potentially greater range of products due to reduced barriers to entry, lower costs due to greater competition from international markets, and flow on cost savings from reduced compliance costs.

About this Decision Regulation Impact Statement

What is the objective of this Decision RIS?

This Decision Regulation Impact Statement (Decision RIS) has been published by the Australian Government to outline the preferred policy options following extensive stakeholder consultation and feedback from the Consultation RIS process. An underlying objective of this Decision RIS is to improve the regulatory framework around Australian mandatory safety and information standards, which will in turn provide a greater choice of products to consumers at lower prices while ensuring consumer safety is maintained. It will also support businesses and reduce their regulatory burden in complying with their obligations under the ACL.

The Australian Government proposes amending the ACL to allow the Commonwealth Minister to more easily recognise international and overseas standards in Australian mandatory standards. The Australian Government also proposes amending the ACL to more easily allow business to comply with the latest Australian, international and overseas standards as they are updated from time-to-time.

What is the scope of this Decision RIS?

On 1 December 2021, Treasury released a Consultation RIS on Supporting business through improvements to mandatory standards regulation under the Australian Consumer Law. The Consultation RIS sought stakeholder feedback on a set of proposed policy options to determine the relative impact of those options as well as the cost and benefit to Australian businesses and consumers. The consultation period was open until 21 January 2022 and 59 submissions were received from a broad range of stakeholders including industry representatives, government, consumer groups, test laboratories, standards setting bodies, safety experts, and suppliers. Treasury also met with a number of stakeholders who expressed a desire to do so including the Australian Competition and Consumer Commission (ACCC), the Australian Industry Group (Ai Group), the Australian Retailers Association (ARA), the Department of Foreign Affairs and Trade (DFAT), the Department of Industry, Science, Energy and Resources (DISER), the Department of the Prime Minister and Cabinet (PM&C), the Office of International Law (OIL) and Standards Australia.

The Consultation RIS provided an overview of how mandatory standards are developed under the ACL, identified issues for business and inefficiencies within the current regulatory framework, and provided a preliminary impact analysis of the policy options available. Policy assessment and public consultation has been undertaken by the Commonwealth on behalf of the states and territories. Amending the ACL will require agreement from the states and territories in accordance with the Intergovernmental Agreement for the ACL.^[2]

The purpose of this Decision RIS is to identify the options that yield the greatest net benefit for Australian consumers and businesses. The results of the Consultation RIS and the stakeholder consultation process have shaped the preferred policy approach and how it will be implemented, monitored and reviewed.

What is the identified problem?

On 4 June 2021, the former Australian Government announced that in consultation with all state and territory Consumer Ministers, it would look to develop amendments to the ACL to make it easier to recognise overseas standards in Australian mandatory safety standards, providing they offer at least an equivalent level of consumer protection. Additionally, the former Government also announced it would look to develop amendments to the ACL to more easily allow businesses to comply with the latest versions of voluntary Australian and overseas standards.

Businesses have indicated that complex layers of regulation and a product safety framework that is slow to respond to changing international consumer markets can contribute to unnecessary costs and confusion about their obligations when supplying goods that are regulated by mandatory Australian standards under the ACL. The most common problems that have arisen through consultation include:

•

increased compliance costs for business and barriers to trade through duplicative testing and compliance measures where a product has been manufactured to the requirements of an equivalent overseas standard; and

•

inefficient capturing of updates to voluntary Australian and overseas standards recognised under Australian law, which has prevented businesses from quickly moving to the latest manufacturing processes, therefore slowing the supply of safer and cheaper products to market.

Barriers to compliance with overseas standards

Consumer goods are often manufactured and tested to the specifications of the most current product safety standards for major markets like the United States and the European Union. When these products are imported and supplied in Australia, business may need to meet duplicative compliance requirements such as retesting or require relabelling to demonstrate compliance with the relevant mandatory Australian standard, which can technically differ from other overseas standards in relatively minor aspects. However, this is dependent on the product and there are some exceptions to this rule. This adds unnecessary compliance costs for businesses, as well as likely increasing the costs of products for consumers, slowing the speed to the Australian market, and decreasing the range of products available, while arguably having no impact on product safety. The Consultation RIS provided an example of this problem as it applies to bicycle helmets (see Example A).

The current architecture of the ACL does not easily allow for overseas standards that provide at least an equivalent level of safety to be recognised alongside Australian standards, or to be incorporated quickly and efficiently into Australian law. For a comparable overseas standard to be recognised in Australia, the ACCC is generally required to conduct extensive reviews and analysis to satisfy ACL consultation and regulatory impact analysis requirements associated with making a mandatory standard, which takes a minimum of 18 months. The current ACL framework and the limited number of overseas standards which have been incorporated in mandatory standards to date have contributed to unnecessarily increasing the regulatory burden for businesses where equivalent manufacturing and safety requirements are not recognised in Australia. This is despite being widely accepted in other major economies and, as a result, duplicative testing or relabelling is required to demonstrate compliance.

Inefficient regulatory architecture for updating mandatory standards

When mandatory safety and information standards are developed, any Australian or overseas standard referenced in the mandatory standard is frozen at a particular point in time. Subsequent changes made to a voluntary Australian or overseas standard are not automatically incorporated into a mandatory standard or captured under Australian law. As a result, mandatory standards can become quickly outdated and not align with the latest voluntary standards or current industry practice.

There is also no 'safe harbour' for businesses that manufacture and test products according to the latest voluntary standards. Accordingly, when businesses move to the latest voluntary standards they may contravene a mandatory standard that refers to a superseded voluntary standard, even if the up-to-date voluntary standard has improved safety requirements that reflect changes in corporate practice, technology or science. Businesses have reported this to be a limitation on their willingness or ability to innovate and supply the latest and safest products to Australian consumers as they take on additional legal risks.

To update a mandatory standard to align with current industry practice, the ACCC conducts extensive stakeholder consultation and a preliminary regulatory impact assessment at a minimum, consistent with the Australian Government Guide to Regulatory Impact Analysis. This creates an environment of regulatory stability, where businesses can plan ahead with a degree of certainty as to the rules they must comply with, but also means that the Australian consumer market may lag behind the latest trends and developments in global markets. The lag between when a voluntary standard is updated and when the update is reflected in a mandatory standard can be costly to business, with some mandatory standards being 10-20 years behind updated voluntary standards. The Consultation RIS provided an example of this problem as it applies to projectile toys (see Example B).

Barriers to trade are also created where products manufactured according to the latest overseas standards are not able to be legally supplied in Australia until the applicable mandatory standard is updated. Examples of this occurring include bicycle helmets and portable pools. In respect of the latter, a scenario has arisen where, despite correct warning information being displayed on the portable pool, not including a warning alert symbol as well meant that pools were technically non-compliant and had to be removed from sale in Australia and destroyed.

Further, the ability of consumers to purchase the latest and safest products available and at a competitive price is constrained. The reason for this lag is that the process to review and update a mandatory standard under the existing architecture is lengthy, requiring a number of administrative and legislative processes to be followed.

1. Policy Context

The Australian Consumer Law

The ACL is part of the Competition and Consumer Act 2010 (CCA)^[7] and aims to protect Australian consumers and encourage fair trade and competition. The ACL is a national law administered jointly by Commonwealth, state and territory consumer protection agencies. The ACL includes product safety provisions to prevent or mitigate safety risks and hazards from consumer goods and product related services^[8] including through mandatory standards.

Amending the Australian Consumer Law

As a law administered jointly by jurisdictions, certain processes must be followed to amend the ACL, set out in the Intergovernmental Agreement for the ACL.^[9] The ACL can only be amended with the agreement of the Commonwealth and four other states or territories (including at least three states) following a period of formal consultation. If carried, a bill to amend the ACL is prepared and publicly consulted on prior to being introduced into the Commonwealth Parliament.

Mandatory standards

Under the ACL, the responsible Commonwealth Minister can make or declare a mandatory safety standard or a mandatory information standard. Mandatory standards set out requirements which must be complied with to supply products in Australia, including requirements relating to performance, composition, methods of manufacture or processing, design, construction, finish, packaging or labelling. Key provisions include powers to:

•

Make a safety standard to prevent or reduce the risk of injury (s 104) or an information standard (s 134); and

•

Declare all or part of a standard developed or approved by Standards Australia, or an association prescribed by regulation, as a safety standard (s 105) or an information standard (s 135).

Where a mandatory safety or information standard allows two or more alternatives for compliance, the regulator may request that a supplier nominate which alternative they intend to comply with (s 108).

The process for making a safety or information standard is resource intensive and typically takes at least 18-36 months. A regulation impact statement may be required and public consultation is undertaken on a proposal to make a mandatory standard which is followed by ministerial decision, and the creation and registration of a legislative instrument if approved.

The Commonwealth Minister may also declare all or part of a voluntary standard as a mandatory safety or information standard. While the ACCC still undertakes stakeholder consultation and any required regulatory impact analysis before recommending declaration, the process is more direct than making a standard. Importantly, declaring an existing standard can be done more quickly than making a standard, as the rigorous processes and expertise which forms part of the voluntary standards development process can be recognised and does not need to be replicated.

The threshold test for declaring (s 105) a mandatory safety standard is also different, with the Commonwealth Minister not required to specifically consider matters that are 'reasonably necessary to prevent or reduce risk of injury to any person' when declaring a safety standard, which potentially allows a more responsive approach to broader safety issues. However, the utility of section 105 is greatly limited because there are no overseas standards-making organisations prescribed in the regulations. This restricts the utility of sections 105 and 135, and means only standards developed or approved by Standards Australia may currently be declared by the Commonwealth Minister.

Voluntary standards

Voluntary standards are published documents setting out specifications and procedures designed to ensure products, services and systems are safe, reliable and consistently perform as intended. A voluntary standard often exists where experts have already identified ways to address the safety problem. In these instances, the Federal Government may make all or part of the voluntary standard mandatory.

Voluntary standards are developed by standards associations with input from a range of stakeholders and can be 'referenced' in a mandatory standard. Referencing is the approach used by the ACCC, in consultation with state and territory co-regulators, for incorporating the technical aspects of voluntary standards into mandatory standards under the ACL. Often a mandatory standard will refer to relevant provisions of a voluntary standard without having to specify the full text of the voluntary standard.

Mandatory standards made under the ACL often draw on voluntary standards made by Standards Australia. Standards Australia is recognised by the Commonwealth as Australia's peak non-government standards body and representative to international bodies such as the International Organization for Standardization (ISO) and International Electrotechnical Committee (IEC).^[10] Standards may also be developed by other overseas standards making associations such as ASTM International or the European Committee for Standardization (CEN). The term overseas standards includes both international standards and standards developed by overseas standards making associations. Overseas standards may be referenced in a mandatory standard made under the ACL.

When mandatory safety and information standards are made or declared, they are frozen at the point in time that they are made or declared, including with respect to the version of any voluntary Australian or overseas standard referenced within. This means that mandatory standards often reference a voluntary Australian or overseas standard which has been superseded and no longer aligns with current industry practice or developments. To update existing mandatory standards to align with up-to-date voluntary standards, the ACCC is generally required to undertake a review involving extensive stakeholder consultation and a preliminary impact assessment at a minimum. The incorporation of existing overseas voluntary standards to a mandatory standard made under the ACL can only occur by making a new mandatory standard or varying an existing standard, processes which are resource intensive and typically take at least 18 months or more.

2. Policy Objectives

The objective of the proposed reforms is to make it easier to recognise overseas standards and to recognise updates to voluntary Australian and overseas standards which have been referenced in mandatory standards. This will:

•

provide benefits for Australian consumers and for the Australian market by increasing product availability, consumer choice and speed to market, thereby decreasing the cost of consumer goods, while maintaining consumer safety;

•

reduce the regulatory burden for suppliers and make it easier for them to comply with mandatory safety standards for high-risk products regulated under the ACL;

•

reduce compliance costs for business and barriers to trade by removing duplicative testing and compliance measures where a product has been manufactured to the requirements of an equivalent overseas standard; and

•

increase consumer safety through improved recognition of developments in technical expertise from Australian and overseas standards.

The ACCC will maintain administration of its regulatory role for mandatory standards including providing relevant advice to the Commonwealth Minister on the development of new mandatory standards and review of existing mandatory standards. The ACCC will also continue to monitor existing mandatory standards to ensure they remain appropriate for the Australian market.

The preferred policy options outlined in this Decision RIS have also been informed by the Australian Government's obligations under the WTO's 'Agreement on Technical Barriers to Trade'^[11] (TBT) which aims to provide global harmonisation through mutual recognition of technical standards.

3. Policy Options, Stakeholder Views and Impact Analysis

Options 2 and 3 above explored a range of alternatives in achieving their outcome.

Alternatives considered under Option 2 included:

•

prescribing a list of standards making associations in the regulations, to complete the existing intention of section 105 and permit the Commonwealth Minister to declare a standard developed or published by overseas associations in addition to Standards Australia, this included:

-

an 'opt-in' approach where specific standards from overseas standards associations are recognised under the ACL following a review process, or

-

an 'opt-out' approach that automatically incorporates relevant standards from equivalent international and overseas standards associations, without a review by the regulator, unless it is demonstrated to be unsafe for Australia.

•

using a principles-based approach for declaring overseas standards.

Alternatives considered under Option 3 included:

•

allowing Australian and overseas standards that are referenced in mandatory standards, to apply as they exist from time-to-time

•

providing safe harbour provisions to allow compliance with later versions of recognised Australian and overseas standards.

Treasury received 59 submissions from a broad range of stakeholders including consumer advocates, industry associations, suppliers, standards associations and test agencies, academics and safety experts. Following the receipt of written submissions, Treasury met with a number of key stakeholders who expressed a desire to do so.

Stakeholders expressed support for:

•

recognising overseas standards, provided they are assessed as suitable by the regulator prior to being introduced;

•

prescribing a list of standards associations and using a principles-based approach for recognising overseas standards; and

•

adopting time-to-time updates to Australian and overseas standards as they become available as long as suitable safeguards and transition periods are provided.

Stakeholders did not express support for:

•

maintaining the status quo for mandatory standards regulation; and

•

introducing an 'opt-out' model to automatically adopt overseas standards.

3.1. Option 1 - Status Quo

Description

Option 1 was the only non-regulatory option presented in the Consultation RIS. Under this option, there would be no change to the current regulatory framework for mandatory standards under the ACL. The Commonwealth Minister would continue to make new safety standards (s 104) or information standards (s 134) and to declare new safety standards (s 105) or information standards (s 135). The Minister would only be able to declare safety or information standards developed by Standards Australia and would not be able to declare standards developed by any other standards making association even though this is the intention of section 105. Mandatory standards would continue to be frozen at the point in time they are made or varied, including any voluntary standard referenced in them.

Under this option, there would be no increased efficiencies for businesses that operate or supply relevant consumer goods in Australia. The regulatory burden of Australian businesses in relation to mandatory standards would remain the same. The inefficient and costly process of re-testing products to an Australian standard where they have already been tested to an equivalent overseas standard would continue. Business would be unable to move to the latest and safest standards in real time.

A continuation of the status quo is likely to prevent increased product choice for consumers. The potential cost savings from a reduction of duplicative testing to an Australian standard would not be passed on to consumers and they would not benefit from safer products. This is because the existing legislative framework will remain restrictive and slow to respond to industry developments.

Context

The current product safety framework, including the regulatory framework for developing mandatory standards, has been in place for over 10 years. Under this framework, unsafe and high-risk consumer goods can be regulated through mandatory standards to prevent or reduce the risk of harm to Australian consumers. Incorporating overseas standards can be permitted through referencing approved overseas standards in mandatory standards following requisite consultation and regulatory impact analysis to examine the costs, benefits and impacts under the mandatory standards-making provisions of the ACL.

The ACCC has published criteria which it uses to assess the suitability of overseas standards to consider whether they are appropriate to be incorporated into a mandatory standard under the ACL framework.^[12] In 2015, an extensive consultation process received widespread support for both the proposed criteria and, more generally, the appropriateness of using and referencing equivalent overseas standards in Australia.^[13]

Option 1 - Stakeholder Views

There was little support for maintaining the status quo (option 1) with only 8 of 59 stakeholders indicating a preference for not changing the current regulatory environment. Stakeholders in support of Option 1 expressed concern that allowing mandatory standards to reference overseas standards could weaken effective regulatory practice and industry consultation processes. Stakeholders who supported this option were in a minority. The majority of stakeholders, including the ACCC, CHOICE, the Business Council of Australia and the National Retail Association expressed dissatisfaction with the status quo.

Those who supported Option 1 viewed other policy options as a threat to consumer safety suggesting this could undermine standards that are developed to meet unique Australian conditions. For example, stakeholders mentioned that Australia's high-UVR environment has resulted in more stringent sun protection standards when compared with overseas standards, to reduce the likelihood of sun-related skin disease. Stakeholders who supported the status quo also mentioned that Australian standards should be preferred unless there was no existing voluntary Australian standard. In such cases it would then be appropriate to defer to overseas standards developed by a select number of overseas bodies.

Some stakeholders who supported the status quo, including Standards Australia, claimed that the other policy options would weaken good regulatory practice, reduce accountability and transparency by removing consultation from the mandatory standard setting process, and allow overseas players to influence consumer protection in Australia at the expense of Australian industry and consumers.^[14] Other stakeholders echoed similar concerns, such as Kidsafe and the Consumers' Federation of Australia, arguing that the regulator must maintain control and oversight of mandatory standards to ensure product safety, ensure that standards be developed through a consultation process with experts in government, industry and the community, and that consumers be involved in the development of standards to ensure consumer safety is not compromised.^[15]

These concerns have been acknowledged noting that the Consultation RIS explored a wide range of policy options to gauge stakeholder views, including the opt-out model which had the potential to automatically adopt overseas standards from a select number of overseas standards making associations without undergoing a review. This option received opposition because it prevented the regulator from first reviewing the suitability of a standard and undertaking consultation before it could become part of Australian law through incorporation in a mandatory standard. From a safety perspective, this was considered to provide insufficient protection for consumers. For these reasons, this policy option as presented in the Consultation RIS is not supported. Importantly, the proposed policy reform in this Decision RIS would not reduce the current level of safety in Australia. International and overseas standards would only be declared by the Commonwealth Minister where they provide an acceptable level of safety. The proposals set out in this Decision RIS intend to respect and maintain safety objectives related to standards designed specifically for the Australian environment.

Stakeholders were supportive of policy options other than maintaining the current regulatory environment. Government stakeholders such as the ACCC, considered that the current regulatory settings involve unnecessary costs and confusion for businesses which acts as a barrier to compliance.^[16] These costs include further testing and labelling of products to meet Australian requirements, even where the product has already been tested and found to comply with an overseas standard that offers an equivalent or better level of consumer protection. The ACCC also noted:^[17]

'[the] inability of mandatory standards to efficiently capture updates to standards leads to increased regulatory costs for businesses. In the ACCC's six recent reviews of mandatory standards under the ACL, the average conservative estimated benefit to business from updating out of date references in the mandatory standards is $2,842,000 per annum.'

This sentiment was echoed by stakeholders in the business community, such as the Business Council of Australia, who expressed that Australia's product safety framework is critically important, but current processes of reviewing and updating this framework are slow, cumbersome, and result in unnecessary costs and complexity.^[18] In supporting Australia's commercial and trading interests, Amazon stated that implementing any of the outlined options beyond the status quo will have the greatest impact to businesses and consumers.^[19] Amazon stated that a key blocker for business partners selling into Australia, as well as other countries, is the need to complete additional testing specifically for Australia, even where products have been confirmed to meet similar, and sometimes identical, required safety standards in other countries.^[20] These unnecessary compliance costs and delays for businesses importing and supplying products in Australia was echoed by the NSW Productivity Commissioner.^[21]

From a legal perspective, the Law Council of Australia expressed that it should be a primary policy objective to permit compliance with overseas standards for the removal of duplicative testing and compliance measures.^[22] An important case study for achieving this can be drawn from the regulatory experiences of the Australian Communications and Media Authority (AMCA) who provided a submission. ACMA was supportive of streamlining requirements to allow appropriate overseas standards to be incorporated as mandatory standards in Australia, which is currently their approach to standards setting in a similar legislative framework under the Radiocommunications Act 1992 (Cth) and Telecommunications Act 1997 (Cth). This framework recognises appropriate overseas standards as an alternative to domestic standards wherever possible, consistent with Australia's obligations under the TBT and other free trade agreements. In ACMA's view, international standards reflect the globalisation of products and should be an available option for importers to Australia, except in the rare event that they do not adequately address Australian circumstances.^[23]

Consumer advocacy groups such as CHOICE emphasised the importance of addressing the most frustrating aspects of the current product safety standards making process. Given the nature of the risks to consumers from unsafe products - physical harm or death - CHOICE considered it is appropriate for the ACCC to assess if overseas standards offer appropriate safety protections for consumers rather than to continue under the current framework.^[24] This was echoed by the business community, including the National Retail Association, which stated that adopting the most current version of Australian or overseas standards can improve the reduction of injuries, as these take the latest product developments and consumer behaviour insights into account. The National Retail Association's Technical Standards Committee noted that current policy settings present significant business costs for additional testing, delays to market and confusion across the whole supply chain. Overall, the National Retail Association emphasised that allowing the system to remain unchanged would not address the existing problems and would compound the difficulties experienced across the consumer market.

In summary, this option will not be pursued for the purposes of this Decision RIS.

Option 1 - Impact Analysis

Option 1 would not have any net regulatory impact as the current framework for making and updating mandatory standards would be maintained, as per the preliminary analysis set out below.

Potential Benefits

The current regulatory framework for mandatory standards in Australia has been in operation for some time. There would be no additional costs to businesses in complying with the regulatory framework beyond what they already incur. There would also be no additional cost to government beyond those already incurred in administering the regulatory framework for mandatory standards.

Maintaining the status quo would continue to ensure only standards which meet the unique requirements of the Australian market and conditions are mandated. Consumers would continue to be protected by mandatory standards which regulate high-risk products to minimise the risk of injury or death, although the current time lag in updating mandatory standards means they may not keep pace with the latest safety developments.

Potential Costs

Businesses will continue to face a duplication in testing and compliance costs to ensure the products they supply which have already been tested against an overseas standard are tested again to an Australian standard. This will continue to be required even if the overseas standard provides an equivalent or better level of safety compared to the Australian standard.

Outdated Australian and overseas standards referenced in the mandatory standards will also continue to increase costs for business as they will not be able to transition efficiently to the latest and safest industry standards. This may again mean duplication of testing to the old and new standard to ensure compliance with mandatory standards.

Consumers would potentially not have access to a range of products currently regarded by other overseas jurisdictions as safe, unless these products also meet the requirements of the current mandatory Australian standard. Products supplied to the Australian market may be available at a higher cost when compared to other markets due to the additional compliance and administrative costs on businesses which are passed on to consumers.

Mandatory standards that reference voluntary Australian standards and overseas standards will continue to become out of date because they are frozen at the point in time they are made, and they do not have an efficient process to recognise updates to standards they reference, no matter how minor they are. This will continue to increase compliance costs for business in comparison with complying with the most current version of referenced standards. It may also become increasingly difficult for suppliers to arrange testing to outdated voluntary Australian and overseas standards in circumstances where a test house does not continue to test to these standards.

3.2. Option 2 - Amend the ACL to allow the Commonwealth Minister to more easily declare equivalent international and overseas standards in Australia

Description

Option 2 would amend the ACL to allow the Commonwealth Minister to declare both Australian and overseas standards as either mandatory safety standards or mandatory information standards under sections 105 and 135 of the ACL. This option would give businesses the flexibility to supply relevant consumer products which comply with either an Australian or overseas standard deemed suitable to be recognised under the ACL.

At present, only standards prepared or approved by Standards Australia may be declared by the Commonwealth Minister. The current ACL architecture allows standards developed by other standards making associations to also be declared, but only where the standard making association is prescribed in the ACL regulations.

This option considers two alternatives which would allow the Commonwealth Minister to more easily declare overseas standards under the ACL:

1. prescribing a list of overseas standards making associations in the regulations; and/or

2. a principles-based approach to determine when the Minister may declare an overseas standard.

Context

Sections 105 and 135 of the ACL allow the Commonwealth Minister to declare (recognise) Australian and overseas standards under the ACL, but only where a standard is developed by Standards Australia or a standards making association listed in the ACL regulations. However, at present there are no standards making associations listed in the regulations. The intention of section 105 is to provide 'a mechanism for the Minister to draw on approaches to setting standards that may develop over time through other expert organisations'.^[25] Separately, the Minister may make a mandatory standard under section 104 of the ACL where a standard has not been developed by Standards Australia or an association listed in the regulations, setting requirements that 'are reasonably necessary to prevent or reduce risk of injury to any person'.

In 2016, the ACCC commenced a program to review all of the 48 mandatory standards it currently administers to assess their effectiveness and to consider whether they can be harmonised with overseas standards. Following extensive review processes which includes a period of public consultation, the ACCC has so far recommended 14 of the 48 existing mandatory standards be updated to reference a limited number of overseas standards (typically one or two). In this review, we have noted that the current process for the Minister to make a mandatory standard under section 104 is inefficient and indirect in comparison with potentially declaring overseas standards under section 105.

Declaring standards from overseas standards making associations would allow the Commonwealth Minister to consider a wider range of standards that may be appropriate for the Australian context, particularly where no Australian standard is available. This would enable well considered and appropriate voluntary standards made through rigorous processes with multi-sectoral input to be more efficiently recognised in Australia. As a result, it is expected to give greater flexibility for businesses by allowing them to comply with suitable overseas safety standards declared in a mandatory standard under the ACL.

Option 2(a) - Prescribing a list of overseas standards making associations

Prescribing a list of overseas standards making associations in the regulations would provide certainty to business as to what organisations may be considered relevant for the Australian context. However, if the selection of standards associations is not based on transparent criteria and assessments, their selection may also be perceived as 'picking winners' which could have potential implications for Australian trade relationships. The principles-based approach (described below) may address this issue, if criteria can also be applied to determine whether an overseas standards making association is deemed to be appropriate.

Where a list of overseas standards making associations is set, a mechanism would then be needed to select which overseas standards are suitable to apply in Australia. This mechanism could either take an:

•

'opt-in' approach where specific standards from overseas standards associations are incorporated into a mandatory standard under the ACL following a review process, or

•

'opt-out' approach that automatically incorporates relevant standards from overseas standards making associations, unless they are demonstrated to be unsafe for Australia. Under this approach when a specific product standard is considered potentially unsafe, a review would be undertaken. Following the review, Australia could opt-out of the specific standard if the expected costs outweighed the benefits.

The 'opt-out' approach would generate benefits for businesses by streamlining the acceptance of standards from prescribed overseas standards organisations alongside Australian standards. This approach would improve transparency and focus government resources on why safety standards in Australia need to differ from approaches adopted by other overseas standards associations.

Option 2(a) - Stakeholder Views

Stakeholders indicated that prescribing a list of standards making associations in the regulations would provide certainty as to what organisations may be considered relevant for the Australian context. It was commonly mentioned that this option would allow mandatory standards to keep pace with updates to overseas standards and reduce significant compliance costs, delays and barriers to trade associated with out-of-date standards.

Government stakeholders such as the ACCC indicated that overseas product safety requirements could be more efficiently included in Australian mandatory standards under this option. The ACCC expressed this option would increase competition, provide consumers with greater product choice and decrease business compliance costs where products already meet existing overseas standards.^[26] Additionally, support was expressed for the 'opt-in' approach, in which specific standards from overseas standards associations are incorporated into a mandatory standard under the ACL following a review process. The 'opt-in' approach enables the ACCC to assess every standard considered for incorporation into law and consider whether it has been suitably developed and provides an appropriate level of safety for Australian consumers.

This was echoed by the Australian Automotive Dealer Association who fully supported the efficiency improvements that would flow from harmonising selected Australian standards with those of appropriate overseas jurisdictions.^[27] IKEA also supported making it easier to recognise voluntary overseas standards, where they offer at least an equivalent level of safety as Australian standards in order to reduce compliance costs for businesses and facilitate trade.^[28]

Standards-making associations like ASTM International have encouraged the Australian Government to implement policies which can enable the regulator to recognise international voluntary standards.^[29] They noted that the alignment of mandatory government regulations with international voluntary standards developed by consensus can provide a range of benefits to regulators, businesses, industries and consumers.^[30] Importantly, ASTM International stated that their standards are consistently reviewed and revised as necessary by governing technical committees to keep pace with changing technologies and market needs with updates being made at least every five years, if not earlier.^[31]

The Ai Group recommended that any Australian or overseas standard referenced in the ACL should be recognised in its entirety.^[32] They consider that standards are 'developed with very broad and deep contexts and this is not always understood by regulators' which leads to a 'cut and paste' method through the existing ACL framework.^[33] This was further iterated in the following excerpt:^[34]

'The current approach makes it difficult for suppliers to understand the compliance requirements for their product, as they need to read both the mandatory standard and the product standard together - this is difficult for seasoned compliance professionals and would be a barrier to trade for smaller companies. The best outcome possible from this RIS would be for the ACCC [^[35]] to cease making standards and focus instead on declaring standards...'

Conversely, some stakeholders commented that prescribing a set list of standards making associations in the regulations could be seen as picking winners, suggesting there may be other associations that could be added to the list, either now or in the future.

In considering the introduction of an 'opt-out' approach, stakeholders such as the NSW Productivity Commissioner were supportive of its adoption with standards developed by appropriate international standards organisations used as a default position, unless it is demonstrated to be unsafe for Australian conditions through a cost-benefit analysis.^[36] This was echoed by Accord who considered the opt-out approach as likely to be the most efficient model because Australia should align its standards with its international trading partners unless there is a good reason not to as required by Australia's international trade obligations.^[37] However, Accord noted that this should be predicated on the continuation of a rigorous Regulation Impact Analysis process and that all equivalent overseas standards are accepted as providing equivalent levels of safety.^[38]

On the other hand, some stakeholders such as Standards Australia expressed concerns that the 'opt-out' approach presented in the Consultation RIS and the proposal to incorporate changes to referenced overseas standards removes proper consultation with Australian industry and risks the safety of Australian consumers.^[39] Ultimately, their position was that all proposals for updating recognised standards present significant risks for Australian business and consumers.^[40] Other opponents to the 'opt-out' approach presented in the Consultation RIS included Waterview Bay Consulting who stated in their submission:^[41]

'...devolving responsibility to an overseas standards-making body for providing designated safety standards to be used in Australia, and to take those standards at face value, without further examination, we would be taking a rather large leap into the dark, based on the false assumption that these bodies always operate in an identical manner to Standards Australia.'

However, Waterview Bay Consulting considered that the same concerns would not apply to an 'opt-in' approach where proper review processes for each designated standard were made on a case-by-case basis.^[42]

Academics such as Dr Catherine Niven held doubts about the operation of the 'opt-out' approach in practice, and the threshold required to prompt a review.^[43] Dr Niven stated this approach could be viewed as reactive.^[44]

This Decision RIS acknowledges the opposition to the 'opt-out' approach as presented in the Consultation RIS and considers this approach would significantly alter the existing processes used to create Australian mandatory standards. This would be inconsistent with the policy intention of the mandatory standards framework under the ACL. The 'opt-out' approach also has the potential to increase the risk of unsafe products entering the Australian market as under this approach any overseas standards they are manufactured to would not have first been assessed for suitability in the Australian context by the ACCC. The proposed 'opt-out' approach will not be pursued for the purposes of this Decision RIS.

As noted above, ACMA supports streamlining requirements to allow equivalent international and overseas standards to be recognised and incorporated as mandatory standards in Australia as they oversee a similar standards framework under the Telecommunications Act 1997 (Cth).^[45] The preferred approach of ACMA is to permit compliance to be demonstrated through adherence to international standards as an alternative to domestic standards wherever possible, consistent with Australia's obligations under the TBT.^[46] Their view is that international standards reflect the globalisation of products and should be an available option for importers to Australia, except in the rare event that they do not adequately address Australian circumstances.^[47]

In 2016, the ACCC consulted on a proposed list of nine overseas standards making associations to be prescribed in the ACL regulations.^[48] In the Consultation RIS, a further five standards making associations were identified as potentially suitable, for a total of 14 potentially suitable associations. During the ACCC's 2016 consultation, stakeholders expressed concern that establishing a list would allow overseas standards to be introduced without appropriate consideration of safety and the Australian context. Concern was also expressed that prescribing a list of standards making associations could be viewed as 'picking winners' which could have potential trade implications.

As a result, Option 2(a) will not be pursued for the purposes of this Decision RIS.

The preferred policy approach is to amend sections 105 and 135 of the ACL to allow the Commonwealth Minister to declare suitable standards from any Australian or overseas standards making association, rather than being limited to a pre-determined list of associations that would require regular updating. In taking this approach the suitability of overseas standards would be based on whether an overseas standard provides an appropriate level of safety in the Australian context.

This policy approach enables the Commonwealth Minister, under sections 105 and 135 of the ACL to consider standards from any standards-making association without the need for a prescriptive list. In addition to this, declared standards may also be recognised in their entirety, thereby reducing regulatory burden for businesses.

Importantly, this would be achieved through existing review and consultative processes conducted by the ACCC. This policy approach does not seek to implement the 'opt-out' approach as presented in the Consultation RIS to automatically adopt overseas standards by default and without review.

Nominating standards under section 108

In addition to these proposed amendments, submissions to the Consultation RIS also indicated that subsequent changes to section 108 of the ACL should be considered to provide clarity around suppliers nominating which standard they intend to comply with, where more than one option is available to them. Currently under section 108, the regulator may only require a 'supplier' to nominate which standard they intend to comply with when more than option is available to them, but this obligation does not extend to 'manufacturers'. In addition to this, section 108 does not provide a mechanism for the regulator to require a supplier to provide information such as test reports to substantiate a claim of compliance with the nominated standard.

In their submission, Waterview Bay Consulting mentioned that when multiple standards are deemed to be acceptable, there must also be a requirement that the Australian supplier nominates which of those standards their product is claimed to meet.^[49] Additionally, Product Safety Solutions argued it is necessary that suppliers be legally accountable to comply with a nominated standard, particularly if multiple standard options are available to meet declared mandatory ACL standards - otherwise they consider the regulator's ability to demonstrate non-compliance with the mandatory standard could be significantly compromised.^[50] The Australian Toy Association was also supportive of ensuring goods comply with one standard in their entirety, and that a level of risk is posed in allowing compliance with a mixture of the standards options provided.^[51]

The ACCC considered there may be scope to include further complementary amendments to section 108:^[52]

'This provision presents challenges in practice as it is a point-in-time requirement and does not set out a timeframe for the period of compliance, or a clear mechanism for businesses to advise a regulator of an intention to change the safety requirements they intend to comply with. Amendments to section 108 to clarify these issues would provide greater certainty to assist businesses in meeting their obligations. Such changes would be consistent with the broader policy objectives of the CRIS.'

The proposed changes to section 108 would include manufacturers, along with suppliers, in the requirement to nominate the standard they are currently complying with or intend to comply with. The changes would allow the regulator to require information such as test reports from a supplier or manufacturer to substantiate which standard they intend to comply with. In addition, the regulator would only be required to test to the standard nominated by the supplier or manufacturer to verify compliance or non-compliance with the nominated standard.

Option 2(b) - Using a principles-based approach for declaring overseas standards

As mentioned above, prescribing a list of overseas standards making associations could potentially reduce the ability to recognise overseas standards that may be relevant for Australia. This is because the list of standards making associations would sit within the regulations and would require updating before an association not listed could be drawn on. An alternative approach would be to amend the ACL to allow the Commonwealth Minister to declare overseas standards using a principles-based approach provided the standard meets certain criteria. This is distinct from specifically prescribing certain standards making associations in regulation. The criteria could apply equally to declaring voluntary Australian standards prepared by Standards Australia.

Each standard would need to be reviewed, including with a regulatory impact analysis if appropriate, against set criteria. These criteria could include:

•

the standard is available in English;

•

the standard is widely used and accepted by manufacturers;

•

there is no evidence that the standard is inappropriate to the Australian context;

•

the standard offers at least an equivalent level of safety to an existing Australian mandatory standard (where one exists); and

•

the standard is made by an appropriate or competent association.

In practical terms, this approach could be achieved by reframing sections 105 and 135 to remove the requirement to prescribe associations in the regulations. This would include removing reference to Standards Australia and instead making reference to criteria that must be considered by the Commonwealth Minister when declaring a standard. The principles-based criteria would be established in legislation to provide the Commonwealth Minister flexibility in declaring appropriate standards from a range of standards making associations.

Option 2(b) - Stakeholder Views

Stakeholders indicated a principles-based approach would have the potential to provide a more targeted regulatory environment as regulators can pick and choose standards that are suitable for the Australian context. Simply identifying that a standard comes from a reputable standards organisation was not seen as enough.

For similar reasons, stakeholders who focused on consumer safety felt that a principles-based approach provided a better standard of consumer protection as regulation could be tailored to Australian conditions. Sun protective clothing, hats, sunscreen and sunglasses were commonly raised as examples of standards which are tailored to the Australian environment.

Stakeholders such as the Australian Toy Association expressed that a principles-based approach for declaring overseas standards is most appropriate for developing and updating mandatory standards in Australia.^[53] They further stated that one of the principles should be that there is a comparable Australian standard and that the overseas standard is closely comparable to that Australian standard.^[54] This was echoed by Ai Group who expressed that a predetermined list of selection criteria should be developed in conjunction with consumers and industry with the most important criterion being safety equivalence with the applicable Australian standard.^[55] The Law Council of Australia also supported this option but went further to state:^[56]

'A principles-based approach to declaring overseas standards should focus on whether a comparative Australian standard is available, whether the overseas standard provides an improvement on the Australian standard and whether there is any feature unique to Australia which means that the standard is inappropriate. Overseas standards should only be mandated where there is no appropriate Australian standard. A manufacturer should be able to identify and obtain a declaration of "equivalency" for an alternative standard with which it complies for the same goods sold in other western countries.'

An important distinction which also arose amongst stakeholders who supported the principles-based approach, such as Kidsafe, was that standards should be declared from any source using a principles-based approach provided that the standard meets certain criteria as described in the proposal and is reviewed through a regulatory impact analysis and through proper public consultation and engagement processes.^[57] This was echoed by Standards Australia who expressed support for this option 'provided that the principles are enhanced to include a requirement that the standard is reviewed through proper public consultation and engagement processes'.^[58]

Opponents to this policy option included the ACCC who indicated it had the potential to exacerbate the problem rather than to improve the current framework.^[59] In addition to this, the ACCC stated a principles-based approach would reduce flexibility and increase inefficiencies for government to reference standards developed by overseas standards associations:^[60]

'...[the] current limited scope of the option to declare a standard under the ACL means a more time consuming and inefficient approach must be adopted when making recommendations to the Minister on any overseas standards to be referenced within an Australian mandatory standard to protect Australian consumers.'

This Decision RIS acknowledges both the support and opposition from stakeholders in relation to the principles-based approach. However, on balance we consider this approach has the potential to create a less efficient regulatory framework and increase the Australian Government's regulatory burden in circumstances where the principles-based criteria are established in legislation. This may further exacerbate current barriers and delays to declaring standards and facilitating appropriate updates to them. As a result, this policy option will be not pursued for the purposes of this Decision RIS.

Option 2 - Stakeholder Findings

Following the consultation process, stakeholders expressed support for option 2 generally to more easily recognise acceptable overseas standards under the ACL. The most common benefits identified by stakeholders in allowing overseas standards included efficiency improvements from harmonising Australian and overseas standards to allow for new products to hit the Australian market sooner, a reduction in testing and compliance costs for business leading to an increased range of products and lower prices for consumers, simplifying the regulatory environment to help businesses in complying with their safety obligations, and improvements in product safety as newer and safer standards are adopted in shorter timeframes.

Option 2 - Impact Analysis

Option 2 would not have any immediate net regulatory impact or benefit to business or consumers solely through amending the ACL. Rather, the alternatives canvassed under this option would provide benefits to businesses, consumers and regulators in circumstances where a new mandatory standard is declared or an existing mandatory standard is updated to recognise suitable overseas standards. This would follow a review by the ACCC with a subsequent recommendation to the Commonwealth Minister. The regulatory impact would be considered on a case-by-case basis depending on the nature of the products to be regulated as currently occurs when the Commonwealth Minister makes or updates a mandatory standard.

On balance, it is expected that allowing the Commonwealth Minister to declare acceptable overseas standards as mandatory Australian standards would have a positive impact on businesses through reduced compliance costs, particularly for the large number of businesses which import, or rely on the importation of, products manufactured for markets such as the United States and the European Union. It is also likely to have a net positive impact on consumers through increased product choice and decreased product cost. These impacts are difficult to quantify in aggregate as it would require examination of the impacts from individual mandatory standards due to the differing number and type of products and market size regulated by each mandatory standard.

Potential Benefits

The legislative amendments under Option 2 will have no immediate or direct impact on business, either as a benefit or cost, in and of themselves. However, allowing the Commonwealth Minister to declare overseas standards will give a wider choice in policy settings. It is at the point when the Commonwealth Minister declares an overseas standard that the benefits will be realised. This option would allow the Commonwealth Minister to more easily declare an existing overseas standard which is used, accepted and understood by industry, as a safety benchmark through its incorporation into Australian law. This is likely to make mandatory standards more accessible, transparent and make it easier for business to achieve compliance.

Amending the ACL so that the Commonwealth Minister may more easily declare overseas standards, either by prescribing a list of standard-making associations or using a principles-based approach, would go some way to addressing the current inefficiencies. The proposed amendments would better allow the Commonwealth Minister to consider any evidence in support of an overseas standard when making a decision as to the appropriateness of declaring a standard in Australia and thus provide a more direct and efficient pathway for standards development. Declaring voluntary Australian and overseas standards also recognises the technical competence and expertise of the standards making process, which is publicly accessible and has wide membership, and acknowledges that they can be relied upon to include technical specifications in standards that are likely to work and are likely to be accepted by businesses.

Providing greater access to overseas standards would also allow the Australian product safety regulatory framework to better keep pace with changes in technology and in emerging product areas. For example, in new and emerging areas where no relevant voluntary Australian standard exists, these changes would allow the Commonwealth Minister to more easily declare a suitable overseas standard as a mandatory Australian standard. The increased agility and ability to respond to emerging product areas and risks through the declaration of overseas standards, would allow Australian businesses and consumers access to emerging products, while providing robust regulatory coverage and product safety protections. A potential emerging area where this could be particularly relevant is interconnected and smart devices where relevant standards which define security and safety measures in connected devices are an emerging issue internationally.^[61]

Businesses will benefit from this policy approach as they will be able to more easily import products which already comply with applicable overseas standards, from a broader range of international markets. Products that comply with the equivalent overseas standards will no longer need to be tested against both the overseas standard and any mandated Australian standard; compliance with the overseas standard will be sufficient. This will significantly reduce the cost, time and confusion involved when importing certain goods, and therefore support businesses while maintaining consumer safety.

Consumers will also benefit from a greater range of potentially safer and cheaper products due to reduced barriers to entry, lower cost due to greater competition from broader international markets and reduced regulatory burdens, whilst still maintaining a robust product safety framework. Consumers can also be confident that any overseas standard declared by the Commonwealth Minister has been through rigorous review and consultation, ensuring consumer safety is maintained or improved.

Under this option, the ACCC would continue to periodically review and update existing mandatory standards to consider updates and incorporate equivalent overseas standards where applicable and repeat the process when the mandatory standards inevitably become out of date. The important role of Standards Australia would be maintained, to ensure where appropriate, mandatory standards continue to reference voluntary Australian standards developed by Standards Australia which are tailored to the domestic context. This approach would make it easier for standards that are not developed by Standards Australia to be recognised under sections 105 and 135 of the ACL.

Potential Costs

The legislative amendments as proposed in Option 2 will have no direct impact on businesses, either as a benefit or cost, in and of themselves, and will only trigger a regulatory impact at the point at which declaration of an overseas standard occurs.

Businesses are likely to incur administrative costs navigating any change to the mandatory standards regulatory framework. This may be a particular burden to smaller businesses with limited resources. The administrative cost component would be mitigated by continuing to allow businesses to choose whichever voluntary standard (Australian or overseas) in a mandatory standard they wish to comply with, retaining familiarity with the current framework. On balance, this option would reduce compliance costs for businesses relative to the status quo.

There is likely to be an administrative burden on the ACCC in reviewing an increased number of available equivalent overseas standards that can be potentially declared by the Commonwealth Minister and an administrative burden on ACL co-regulators in interpreting and enforcing a wider range of standards. Additionally, there is a risk that prescribing a list of standards making associations in regulation could be viewed as 'picking winners' which could have potential trade implications or could allow the introduction of standards without appropriate consideration of safety and the Australian context. Further, it risks providing greater influence over Australian mandatory standards to international business and overseas players, potentially at the expense of Australian industry and consumers. However, the safety risk to consumers is likely to be minimised by only declaring overseas standards that provide at least an equivalent or suitable level of safety and having the ACCC continue to review and consult on overseas standards when they are first declared or referenced. Together these safeguards are likely to improve or at least maintain the current levels of consumer safety.

As per Option 1, there will continue to be a cost resulting from out-of-date mandatory standards that reference voluntary Australian standards and overseas standards frozen at a point in time without an efficient process for capturing updates. The costs to businesses associated with accessing a referenced standard, whether it is a voluntary Australian or overseas standard, is likely to be similar. In some cases, the cost of accessing equivalent overseas standards may be cheaper than the cost of accessing the relevant voluntary Australian standard.

Offering greater choice in complying with overseas standards may have downstream impacts on Australian conformance and testing authorities. This is more likely to be the case where business models are based on the current regulatory framework for developing mandatory standards, which does not easily allow for recognition of overseas standards even when they provide an equivalent level of safety. While suppliers would be free to choose which standard to comply with and which testing authority to use, it is expected suppliers that currently have their products tested overseas and must duplicate testing in Australia would no longer need to do so if this requirement was removed. Testing products with overseas testing authorities may provide cost savings to businesses. Overall, it could be expected that a supplier would use an overseas testing authority if there are cost savings associated with doing so.

3.3. Option 3 - Amend the ACL to more easily allow businesses to comply with the latest versions of voluntary Australian and overseas standards

Description

This option considers appropriate amendments to the ACL to ensure businesses are not penalised or restricted from manufacturing or supplying products that comply with the most up-to-date versions of voluntary Australian and overseas standards where the updates have not yet been incorporated into a mandatory standard. This option focuses on legislative amendments as a means of achieving the Australian Government's policy objectives to make it easier to recognise equivalent international and overseas standards in Australian mandatory safety standards, consistent with the announcement on 4 June 2021.

The current ACL architecture does not permit mandatory standards, whether made or declared, to capture updates as they occur from time-to-time to any voluntary Australian or overseas standards that are incorporated into a mandatory standard. In order to update a mandatory standard to align with current industry practice, the ACCC follows the requirements set out under the Intergovernmental Agreement for the ACL and conducts extensive stakeholder consultation and a preliminary regulatory impact assessment at a minimum consistent with the Australian Government Guide to Regulatory Impact Analysis. To address the inefficiencies in the ACL architecture, two alternatives requiring legislative amendments have been considered:

•

Permitting voluntary and overseas standards that are referenced in, or declared as, mandatory standards to apply as they exist from time-to-time.

•

Providing a safe harbour provision for businesses that want to comply with the most up-to-date versions of voluntary Australian and overseas standards not yet incorporated into a mandatory standard.

Context

Amending the ACL to more easily allow businesses to comply with the latest versions of voluntary Australian and overseas standards will allow businesses to innovate and improve their products according to real time industry practices, instead of waiting for a regulatory review to update a particular standard as per the existing requirements for developing standards under the ACL.

For example, bunk beds currently imported to Australia must comply with a mandatory standard made in 2003.^[62] The bunk beds mandatory standard currently references a voluntary Australian standard from 1994. The voluntary Australian standard was updated in 2010 but this update has not yet been captured in the mandatory Australian standard due to the current architecture of the ACL not efficiently allowing for updates. This means businesses that supply bunk beds in Australia that have been manufactured according to the specifications in the 2010 voluntary Australian standard could technically be in non-compliance with the mandatory Australian standard where technical specifications differ from those detailed in the 1994 voluntary Australian standard. This could potentially lead to businesses being penalised for non-compliance even if the difference in technical specifications in the updated voluntary Australian standard result in better safety outcomes for consumers.

By amending the ACL to permit standards to apply as they exist from time-to-time (capturing updates as they occur) or providing a safe harbour provision, Australian businesses could import products that meet the latest voluntary Australian standard and/or the latest equivalent overseas standards without the risk of non-compliance and potential penalties.

If the manufacturer is permitted to produce products that comply with the latest equivalent overseas standards, this would increase the variety of bunk beds available to consumers and allow Australian companies who manufacture bunk beds to sell their products more easily to an overseas market if the manufacturer is permitted to produce products that comply with the latest equivalent overseas standards. Given the rapid innovation and technological advancements in many consumer goods, including in relation to design, materials used and construction, it would ensure products made in Australia and those supplied to Australian consumers reflect the most up-to-date safety requirements and practices.

Option 3(a) - Allowing updated standards to apply from time-to-time

This option would allow mandatory standards, whether made or declared, to incorporate any changes to referenced standards (voluntary Australian or overseas) when they are updated. This would allow Australia to keep pace with the latest developments for consumer goods in the international market.

Permitting voluntary standards to be referenced as they exist from time-to-time under the ACL would remove the need for the ACCC to periodically review and update existing mandatory standards once a voluntary standard had been referenced in or declared as a mandatory standard. It would not preclude the ACCC from reviewing existing standards to incorporate any additional voluntary Australian or overseas standards that were not considered earlier.

This option would provide the legislative mechanism (once implemented in a mandatory standard) to allow suppliers to comply with the voluntary Australian or overseas standards referenced within a mandatory standard, or any later editions of the referenced standards, subject to a suitable transition period. This is consistent with the current practice for reviewing and updating standards. During the transition period, suppliers could choose between complying with the mandatory standard as established at the point in time it was made or declared, or complying with the latest voluntary or overseas standards with suppliers to nominate which standard they are complying with, consistent with the current requirements under the ACL.

The Consultation RIS proposed that amendments to the ACL to permit updates to standards to apply as they exist from time-to-time would not trigger the need for consultation and regulatory impact analysis each time a mandatory standard is updated, as is currently required when updating mandatory standards made or declared under the ACL even when updates are very minor.

Existing safeguards could be drawn on to ensure that any substantial updates to standards are appropriate, including ACCC consultation with industry and regulatory impact analysis where required. This review process could be triggered where updates: significantly differ to the requirements in the mandatory standards, or where the standard is considered to have the potential to be unsuitable or unsafe. Where updates to standards are found to be unsuitable, the Minister is empowered to amend or repeal the mandatory standard as required.

These existing safeguards would protect against the lowering of safety standards for consumers in circumstances where Australia imposes more stringent safety requirements on certain products due to unique Australian conditions. One example is the higher threshold for UV protection in the mandatory standard for sunglasses (Consumer Goods (Sunglasses and Fashion Spectacles) Safety Standard 2017). Proposed safeguards would be used by exception, where differing Australian safety requirements are considered reasonably necessary. There would not be a requirement to assess each and every individual update. This option would provide greater flexibility for businesses to comply with updated voluntary Australian or overseas standards until such time as the mandatory standard is reviewed to reflect this.

There are a number of existing regulatory frameworks that permit regulations, such as mandatory standards, to apply as they exist from time-to-time. For example, recent amendments to the CCA in relation to the 'Motor Vehicle Service and Repair Information Sharing Scheme'^[63] provides reference to certain motor vehicle standards 'as in force from time-to-time'. By way of a case study, ACMA stated they have successfully overseen a similar legislative framework where time-to-time updates to Australian and overseas standards are adopted under the Telecommunications Act 1997 (Cth). Direct comparisons were drawn from Option 3(a) to the ACMA framework which involves incorporating industry standards that are in force at the time of the relevant legislative instrument, and then permits the incorporation of amendments or a single replacement of the industry standard. The second replacement of a particular standard is not automatically incorporated and will require an amendment to the legislative instrument if it is to be incorporated. It was noted that ACMA participates as an observer in various Standards Committees and working groups for standards development and monitors automatic updates to mandatory standards.

Including such mechanisms in regulatory frameworks has the practical effect of providing greater flexibility for legislative instruments that reference certain documents or standards to be updated as they come into force at any given point in time. As a result, businesses are provided certainty that they can alter their practices to comply with the most up-to-date voluntary Australian and overseas standards as referenced in, or declared as, a mandatory standard, as appropriate.

Option 3(a) - Stakeholder Views

Many stakeholders supported the option of allowing businesses to comply with the latest voluntary standard as soon as it comes into effect but should not be required to do so immediately. A common theme raised was that suitable transition arrangements or safeguards must form part of any reform in this area.

Stakeholders noted significant detriments to both businesses and consumers when a voluntary standard is updated, leaving the mandatory standard based on a superseded voluntary standard. The most common benefit expressed by stakeholders was that this option would allow Australia to keep pace with international developments, providing consistency and lower compliance costs and allowing businesses to adopt newer, safer standards that maintain and support consumer protection.

There was broad support for allowing compliance with voluntary standards as they are updated from 'time to time'. However, there was minimal opposition by stakeholders to the implementation of a time-to-time provision.

Overwhelmingly, stakeholders reported that this option must provide adequate transition periods to allow suppliers to sell through existing stock and move to updated standards, while also providing an opportunity for the regulator to prevent any updates that were considered inappropriate or unsafe. A transition period of 18 months was most commonly suggested.

Stakeholders such as the Law Council of Australia considered that permitting standards to apply as they exist from time-to-time would not pose additional safety risks to consumers.^[64] This was echoed by Dr Andrew McIntosh who expressed that mandatory standards, whether made or declared, should be able to capture updates as they occur from time-to-time to any voluntary Australian or international standards that are incorporated into a mandatory standard.^[65]

In contrast to other stakeholders, Standards Australia considers that permitting standards to apply as they exist from time-to-time would pose additional safety risks to consumers. They argue that automatically updating standards without consultation on whether the updated standard still meets the consumer safety policy intent and is still relevant to the Australian context holds risks for Australian consumers.^[66]

Some stakeholders, such as Dr Catherine Niven, stated that while there are potential benefits to all stakeholders by incorporating changes to referenced standards when they are updated from time-to-time, it will be essential to ensure safeguards are in place to ensure that any updates do not lower safety requirements.^[67]

Stakeholders such as Ai Group emphasised that whenever changes to legislation, regulation and mandatory standards are made it is important that government allows manufacturers time to change product design with a reasonable transition period.^[68] However, Decathlon stated that businesses should be allowed to comply with the latest voluntary standard as soon as it comes into effect but should not be immediately required to do so.^[69] They added there also needs to be a sufficient transition period to enable businesses to have adequate time to make any changes required to comply with the latest version compared to the existing mandatory standard at that time - opining that a transition period should be at least 18 months as shorter transition periods have not always allowed enough time to make required changes or sell through existing stock.^[70]

The standards setting responsibilities of ACMA under the Telecommunications Act 1997 (Cth) generally provide a transition period for manufacturers to continue using the previous version of the standard for up to two years, to reasonably adapt production and supply processes and replace stock on hand.

This Decision RIS acknowledges these concerns about time-to-time updates. However, under this policy option the ACCC would maintain administrative responsibility of all mandatory standards including responsibility to ensure time-to-time updates to referenced Australian and overseas standards are suitable for the Australian context. The ACCC would monitor the effect of updates to Australian and overseas standards, so that action could be taken by the Minister to stop any unsuitable update being incorporated into a mandatory standard if required (such as amending or repealing that mandatory standard).

The benefits of this proposal are wide-ranging as demonstrated by the ACMA approach which provides flexibility for minor or machinery updates, removes unnecessary and obsolete requirements, allows manufacturers to immediately achieve operational efficiencies, utilise new technology and improve processes in accordance with the updated standards.

Ultimately, the potential benefits of this option significantly outweigh the potential costs, if implemented within the parameters of existing review and consultative processes. As a result, the policy option of adopting time-to-time updates to declared mandatory standards will be pursued for the purposes of this Decision RIS.

Option 3(b) - Safe harbour provision

Safe harbour provisions are included in laws and regulations to offer a legal defence for parties that have undertaken a specified conduct or action. They are typically used where it can be demonstrated that efforts to comply with a law or regulation have been made and where it can be demonstrated that technical non-compliance with a law or regulation would lead to a better outcome consistent with the intent of the law or regulation. Safe harbour provisions are used in financial frameworks where liability is assigned to individuals. The ACL includes a safe harbour provision at section 137A to give egg producers a legal defence in relation to the use of 'free range' when promoting or selling eggs, provided egg producers can demonstrate they comply with the free-range eggs standard.

With respect to mandatory standards under the ACL, a safe harbour provision could be included for both mandatory safety and information standards such that businesses would not be penalised for complying with the most up-to-date versions of a voluntary Australian or overseas standard incorporated into a mandatory standard where the update has not yet been recognised under Australian law. This would provide a legal defence for businesses who want to comply with the latest standards and provide certainty they will not be penalised for doing so. The inclusion of a safe harbour provision would not impact businesses that do not want to comply with the latest voluntary Australian and overseas standards and instead want to comply with the requirements of a mandatory standard as currently made or declared, until such time it is reviewed and updated as per the existing process administered by the ACCC.

Option 3(b) - Stakeholder Views

There was support for a 'safe harbour' provision designed not to penalise businesses who comply with the latest voluntary standard, where that standard has not yet been referenced in a mandatory safety standard.

The ACCC stated in their submission they do not support the option of a safe harbour provision as a stand-alone option but recognise it could be included with time-to-time updates under option 3(a).^[71] They consider a safe harbour provision may provide greater certainty to businesses that they are not in breach of a mandatory standard when they comply with the latest version of an Australian or overseas standard referenced within a mandatory standard.^[72] However, the ACCC considers that option 3(b) will not address the underlying inefficient regulatory architecture for updating mandatory standards and is likely to increase regulatory confusion for businesses.^[73] Additionally, there may be an unintended consequence of creating a compliance divide where some businesses comply with updated standards and some with the superseded version.^[74]

These views were echoed by Ai Group who support the inclusion of a safe harbour provision in the ACL to give businesses a defence if they are using the latest voluntary standards that may not yet be mandated.^[75] They argue this should apply to both Australian standards and equivalent international standards where prior versions have been mandated. In their submission they stated:^[76]

'...the safe-harbour proposal would likely give business more scope to make judgement calls on compliance with up-to-date standards. Particularly where an international business has global compliance teams who are both familiar with global standards improvements, and are in frequent contact with testing laboratories, and would be in a position to make these judgement calls.'

The Consumer Electronics Suppliers Association also supported inclusion of a safe harbour provision, which they argue will enable businesses to comply with either outdated or the most updated versions of the same Australian or overseas standards.^[77] This was echoed by the Communications Alliance who commented that the implementation of a safe harbour provision is the most practical approach, allowing for flexibility and responsiveness to changing market demands and product designs.^[78] Importantly, they argue suppliers should not be permitted to mix and match different clauses between different Standards or editions when claiming compliance - simply that suppliers must comply with one standard by itself.^[79]

The implementation of a safe harbour provision is unnecessary as it would be the intention of time-to-time updates to provide sufficient transition periods for businesses to adapt as a general policy objective within any relevant legislative instruments. As a result, this policy option will not be pursued for the purposes of this Decision RIS.

Option 3 - Impact Analysis

We have assessed that Option 3 would not have any immediate net regulatory impact or benefit to business or consumers solely through amending the ACL. Rather, the alternatives canvassed under this option would provide benefits to business and consumers in circumstances where a mandatory standard is updated to recognise referenced standards as they are updated from time-to-time. This would follow a review by the ACCC with a subsequent recommendation to the Commonwealth Minister. The regulatory impact would be considered on a case-by-case basis depending on the nature of the products to be regulated by the standard, as currently occurs when the ACCC makes or updates a mandatory standard.

Given the variety of consumer goods subject to mandatory safety standards and the businesses that supply them, the significance of the impact is likely to vary widely. For example, some product categories see regular innovation with respective standards being updated frequently whereas others product categories are much more stable and standards are updated infrequently.

As with Option 2, the impacts are difficult to quantify and will occur on a case-by-case basis depending on the mandatory standard and product category.

Potential Benefits

This option would provide certainty for businesses in complying with any changes made to the voluntary Australian and overseas standards referenced by a mandatory standard and allow businesses to keep in step with the latest regulatory developments in international markets. There would be no immediate benefits once amendments to the ACL are implemented under this option. Rather, the benefits would be realised after time-to-time referencing is incorporated into mandatory standards on a case-by-case basis. When this occurs businesses will benefit from being able to supply products which have been manufactured according to the latest Australian and overseas standards without having to wait, sometimes years, for that standard to be incorporated into a mandatory standard. The benefits will include reduced confusion about which version of an Australian or overseas standard a product must comply with, and reduced compliance costs for businesses by not having to test products to outdated requirements.

Reduced barriers to entry that result from permitting businesses to comply with the latest standards will also result in a greater choice of products for consumers and at a lower cost due to decreased compliance costs for businesses. Consumers can be confident that the products they are purchasing comply with the latest Australian and overseas standards and not be confined to purchasing a product based on mandatory Australian standards that may be out of date.

Permitting the update of voluntary Australian and overseas standards referenced in mandatory standards to apply as they exist from time-to-time will also benefit government by increasing efficiencies and reducing the time it takes to update existing mandatory standards. As each mandatory standard is updated over time, benefits will be realised and these will continue to flow when there are subsequent updates to referenced voluntary standards until all 48 mandatory standards have been updated.

Several stakeholders also provided information confirming other regulatory models in Australia have already incorporated updates of voluntary standards into their legislation, and that this approach has not resulted in any adverse effects.

Potential Costs

There is likely to be some impact to Australian businesses that have built their business model on the current framework for making and updating mandatory standards which is slow and creates a situation where mandatory Australian standards impose unique requirements compared with other overseas standards by virtue of being out of date. By permitting compliance with the updates to any overseas standards referenced in an Australian mandatory standard, through a more efficient updating process or a safe harbour provision, it is also likely that cheaper products will enter the Australian marketplace more quickly. This could make it difficult for some businesses to compete on price where they have been 'protected' by virtue of out-of-date mandatory standards imposing unique testing and compliance requirements on businesses supplying to Australia.

These costs could be mitigated to some extent by providing reasonable transition periods for businesses that comply with out-of-date standards to clear stock and adjust their business model, as currently happens when the ACCC updates a mandatory standard. By allowing businesses a reasonable time period during which they have the choice of continuing to comply with standards set at a point in time or the latest updates, it would ensure no business is disadvantaged by the amendments, but still allow other businesses to innovate and comply with the latest versions of standards if they choose.

Allowing businesses to comply with latest voluntary Australian and overseas standards may potentially lead to a lowering of safety standards for consumers in limited circumstances if appropriate safeguards are not in place. For example, Australia legitimately imposes more stringent safety standards on certain products due to unique Australian conditions such as a higher threshold for UV protection in the mandatory standard for sunglasses (Consumer Goods (Sunglasses and Fashion Spectacles) Safety Standard 2017). This could be addressed at the time that the Commonwealth Minister gives effect to proposed changes by updating a mandatory standard to ensure that any standards referenced therein are consistent with Australian safety requirements, as is current practice. From that point on, referenced standards would be permitted to apply as they exist from time-to-time on an 'if not, why not' basis, with the capacity to determine (in rare circumstances) that particular updates should not be permitted as it would result in an unacceptable safety outcome for Australian consumers.

As per Option 2, permitting standards to apply as they exist from time-to-time is also likely to have downstream impacts on Australian conformity and testing authorities, especially where business models are based on the current regulatory framework which does not efficiently capture updates to standards and creates a system where mandatory standards may lag behind industry trends.

4. Preferred Policy Approach

Recommended policy options

Option 1 - Status quo

Option 1 is not recommended to be pursued for the purposes of this Decision RIS.

The proposed amendments identified in this Decision RIS would not remove the ACCC's existing administrative and regulatory processes, including its public consultation and regulatory impact assessment requirements, prior to the Commonwealth Minister exercising an authority to make or declare a new mandatory standard or updating an existing mandatory standard under the ACL. International and overseas standards would only be declared by the Commonwealth Minister where they provide at least an equivalent level of safety to an existing mandatory standard, where one exists. The proposals set out in this Decision RIS intend to respect and maintain safety objectives related to standards designed specifically for the Australian environment.

Option 2(a) - Prescribing a list of overseas standards making associations

Option 2(a) is not recommended to be pursued for the purposes of this Decision RIS.

This policy option would limit the ability of the Australian Government to recognise suitable overseas standards as mandatory safety standards in Australia. Prescribing a list of standards making associations could be considered as picking winners and could have implications under the TBT and other free trade agreements. Prescribing a list of standards making associations means the Australian Government would need to periodically review and update the list as required to either add new associations to it or remove unwanted associations from it.

Opposition to the 'opt-out' approach as presented in the Consultation RIS has been acknowledged as it would significantly alter the existing review and consultative processes which will be inconsistent with the policy intention of the mandatory standards framework under the ACL. The 'opt-out' approach as presented in the Consultation RIS would also increase the risk of unsafe products entering the market as the overseas standards they are manufactured to have not been assessed by the ACCC. Following extensive consultation with stakeholders, the 'opt-out' approach is not recommended to be pursued for the purposes of this Decision RIS.

Option 2(b) - Using a principles-based approach for declaring overseas standards

Option 2(b) is not recommended to be pursued for the purposes of this Decision RIS.

This Decision RIS acknowledges both the support and opposition from stakeholders in relation to the principles-based approach. However, on balance we consider this approach has the potential to create a less efficient regulatory framework and increase the Australian Government's regulatory burden in circumstances where the principles-based criteria are established in legislation. This may further exacerbate current barriers and delays to declaring standards and facilitating appropriate updates to them.

Option 3(a) - Allowing updated standards to apply from time-to-time

Option 3(a) is recommended for the purposes of this Decision RIS.

This Decision RIS acknowledges concerns raised by stakeholders in relation to allowing mandatory standards to update in line with incorporated voluntary standards as they are amended from time-to-time. However, under this policy option the ACCC would maintain administrative responsibility for reviewing all mandatory standards to ensure that any time-to-time updates to referenced Australian and overseas standards are suitable for the Australian context. The ACCC would continue to monitor potential updates to Australian and overseas standards, so that action could be taken to stop any unsuitable update being incorporated into a mandatory standard.

The benefits of this proposal are wide-ranging as demonstrated by the ACMA approach which provides flexibility for minor or machinery updates, removes unnecessary and obsolete requirements, allows manufacturers to immediately achieve operational efficiencies, utilise new technology, and improve processes in accordance with the updated standards.

This Decision RIS acknowledges the benefits of this policy option significantly outweighs the potential costs, if implemented within the parameters of existing review and consultative processes including ensuring appropriate transition periods are provided.

Option 3(b) - Safe harbour provision

Option 3(b) is not recommended to be pursued for the purposes of this Decision RIS.

The implementation of a safe harbour provision has been assessed as unnecessary as it would be the intention of time-to-time updates (option 3(a)) to provide sufficient transition periods for businesses to adapt to changes as a general policy objective within any legislative instruments. A safe harbour provision would also only be a defence against potential liability for non-compliance with the latest version of a voluntary standard and does not resolve the problem that mandatory standards do not keep pace with developments in industry practices as prescribed in voluntary standards both in Australia and overseas.

Preferred policy approach

The recommended policy approach is three-pronged, noting these proposals are independent of each other and can be implemented separately.

(1) Implement variation of Option 2

Amend sections 105 and 135 of the ACL to allow the Commonwealth Minster to declare standards from any Australian or overseas standards making association.

This proposal removes the need to prescribe and subsequently maintain, a specific list of standards making associations in the regulations, including Standards Australia. It also removes any assertion of favouritism or preference which may result where a select group of associations are prescribed, thereby ensuring Australia's compliance with international trade law obligations under the TBT and other free trade agreements.

The list of identified principles under Option 2(b) would not be drafted into legislation, rather the ACCC would maintain administrative responsibility for the mandatory standards framework under the ACL. In providing advice to the Minister, the ACCC would consider any matters relevant to it, including whether an overseas standard provides a suitable level of safety, before making a recommendation to the Minister to declare an Australian or overseas standard as a mandatory standard.

(2) Implement time-to-time update provision under Option 3(a)

Amend sections 104, 105, 134 and 135 of the ACL, to allow referenced Australian and overseas standards to be incorporated as they are updated from time-to-time.

This proposal would have no immediate net regulatory impact or benefit to business or consumers solely through amending the ACL. Rather, this option would provide benefits to business and consumers in circumstances where a new mandatory standard is created, or where an existing mandatory standard is updated, to recognise referenced standards as they are updated from time-to-time.

For existing mandatory standards, time-to-time updates could be introduced after each standard has been assessed by the ACCC and implemented via legislative amendment by the Minister. The regulatory impact would be considered on a case-by-case basis depending on the nature of the products being regulated, as currently occurs when the ACCC reviews existing mandatory standards.

The proposal to permit updates to standards to apply as they exist from time-to-time would not trigger the need for consultation and regulatory impact analysis each time a voluntary standard which is incorporated into a mandatory standard is updated.

Appropriate measures currently exist and would be further developed by the ACCC to ensure that updates to referenced standards are monitored and reviewed as required to safeguard against updates that may be inappropriate for the Australian context. Where the ACCC identifies that a referenced standard is unsuitable, the Commonwealth Minister would use existing authorities to repeal, rescind, revoke, amend or vary the mandatory standard as required to ensure the safety of Australian consumers.

Permitting time-to-time updates would be more efficient and provide greater flexibility over a safe harbour provision. It would increase efficiencies for government and business, and any remaining confusion for businesses about the standard they need to comply with would be eliminated. When fully implemented, these amendments would permit the use of Australian and overseas standards that are recognised at that time, as well as subsequent updates to those standards.

The ACCC would review and update all existing mandatory standards to incorporate time-to-time updates where appropriate, in doing so the ACCC would also provide appropriate transition periods for businesses to move to the latest standards.

(3) Implement amendments to section 108 of the ACL

Amend section 108 of the ACL to extend the requirement to nominate a safety or information standard to both suppliers and manufacturers, and to require these parties to provide documentation to substantiate their compliance with the nominated standard if requested by a regulator. This is a compliance tool by the regulator to assist a supplier or manufacturer in selecting and meeting safety obligations under a mandatory standard where there is more than one standard which may be complied with.

Currently under section 108, a regulator may only require a 'supplier' to nominate which standard they intend to comply with when more than one option is available to them, but this obligation does not extend to 'manufacturers'. Additionally, section 108 does not provide a mechanism for the regulator to require a supplier to provide information such as test reports to substantiate their claim as to which standard they chose to comply with.

This proposal will amend section 108 to include manufacturers, in addition to suppliers, in the requirement to nominate a standard they chose to comply with. The changes would also include allowing the regulator to require information such as test reports from a supplier or manufacturer, to substantiate which standard they chose to comply with.

Key benefits of preferred policy approach

A number of key benefits can be achieved through the preferred policy approach (following the implementation of the changes to existing mandatory standards), which includes:

•

allowing a broader range of overseas standards to be referenced in an Australian mandatory standard, and not limiting that range to only a standard published by Standards Australia or an association on a prescribed list;

•

not requiring a mechanism to periodically update a prescribed list (where one was to be made);

•

alleviating concerns raised by some stakeholders that making a list is seen as picking winners; and

•

removing the potential to be in breach of Australia's international trade obligations by not limiting the standards associations whose standards could be referenced in a mandatory standard.

The Department of Foreign Affairs and Trade were consulted in relation to the Australian Government's international trade obligations to promote global harmonisation through mutual recognition of technical standards. These interactions have assisted in developing the preferred policy options outlined in this Decision RIS.

Estimated regulatory burden

There would be no additional regulatory burden for the Australian Government as the ACCC would continue their current review program and provide recommendations to the Commonwealth Minister under existing regulatory processes.

5. Implementation and Evaluation

Implementation

Option 3(a) will be fully implemented to allow incorporation of time-to-time updates (where suitable) into mandatory standards that have been made or declared by the Commonwealth Minister.^[80] A nuanced approach to option 2(a) will also be implemented, this will ensure that the scope of standards available for the Commonwealth Minister to declare in a mandatory standard is not limited by association or the country from which the standard originates. Rather, it would be the responsibility of the ACCC through internal review processes to ensure any overseas standard is suitable to be referenced in a mandatory standard, is consulted on prior to incorporation, and provides at least an equivalent level of safety to the current Australian level of safety (where it exists).

Subsequent minor amendments will also be implemented to require suppliers and manufacturers to nominate which standard they intend to comply with where more than one option is available, and to provide supporting documents if requested to do so by the relevant ACL regulator.

Under the Intergovernmental Agreement for the ACL, the proposed amendments will require the agreement of the states and territories before they can be implemented, and a voting process will need to be undertaken prior to the introduction of any bill to amend the ACL.

The ACCC, in conjunction with state and territory consumer protection agencies, will continue to enforce product safety protections, oversee compliance and support the operational objectives of the Intergovernmental Agreement for the ACL to: ensure consumers are sufficiently well informed to benefit from and stimulate effective competition; ensure goods and services are safe and fit for the purposes for which they were sold; prevent practices that are unfair; meet the needs of those consumers who are most vulnerable or are at the greatest disadvantage; provide accessible and timely redress where consumer detriment has occurred; and to promote proportionate, risk-based approaches to updating and enforcing mandatory standards.

These proposed amendments intend to support the role of regulators in addressing marketplace misconduct, employing the most effective means of addressing consumer harm through cooperative and complementary enforcement action, avoiding unnecessary duplication of effort in the effective administration of the ACL, and ensuring, wherever appropriate, a consistent approach to dispute resolution and enforcement action.

Review

These amendments will improve the mandatory standards framework under the ACL, however, they will not have any immediate effect on individual mandatory standards. Rather the effect of these amendments will only be realised when a new mandatory standard is created or where an existing mandatory standard is reviewed and updated to incorporate relevant overseas standards and time-to-time referencing. As noted earlier, this may take several years to complete in relation to all affected mandatory standards.

It is expected that where an existing mandatory standard is updated to incorporate these amendments, a reasonable transition period would be provided to support business to move to the new requirements. The ACCC will continue to monitor and evaluate existing mandatory standards to ensure they remain fit for purpose as it will maintain administrative responsibility for this framework.

Appendix A - List of stakeholders who provided a public submission

Below is a list of stakeholders who provided a written submission to the Consultation RIS - Supporting business through improvements to mandatory standards regulation under the Australian Consumer Law. This list does not include stakeholders who marked their submission as 'confidential'.

Appendix B - Current mandatory standards under the ACL considered in this Decision RIS

• Excludes the tobacco health warnings standards