Second Reading SpeechMr Dutton (Minister for Revenue and Assistant Treasurer)
That this bill be now read a second time.
This bill bill will facilitate the adoption of a non-operating holding company as the ultimate holding company of a financial group in Australia.
This bill will provide greater flexibility for financial groups in choosing a corporate structure to manage their risk exposures and comply with prudential requirements. The bill will also provide financial groups with the opportunity to improve their business efficiency and international competitiveness. As a result, the bill further enhances prudential regulation of the financial sector in Australia to the benefit of both consumers and business.
Adopting a non-operating holding company at the head of a financial group can allow the group to more efficiently and effectively meet prudential requirements. This is because it enables the appropriate allocation of risk between prudentially and non-prudentially regulated businesses of a financial group through organising different types of activities into separate business lines. This can aid in partially quarantining risks in the various parts of a financial group, for example, through separating entrepreneurial investment activities from a group's banking operations.
Since the government's reforms to the Banking Act in 1998, banking groups headed by a company which is an authorised deposit-taking institution have had the option of substituting a non-operating holding company at the top of the group. However, financial sector transfer, income tax and some corporate laws have acted as a disincentive to restructuring because they do not treat the restructuring as merely an internal rearrangement which, in economic substance, it is.
The bill amends the Financial Sector (Transfers of Business) Act 1999 by introducing a new part dealing with restructures.
An authorised deposit-taking institution, general insurer or life insurance company will be able to apply to the minister for approval to restructure a group headed by one of these prudentially regulated entities. The bill will provide the minister with the power to approve and grant consequent relief from specific statutory restrictions in the Corporations Act which currently impede the adoption of a non-operating holding company structure. The relief will be set out in a restructure instrument issued by the minister.
The minister will also be provided with the power to approve the transfer of assets and liabilities between two bodies of a financial group to allow for the reorganisation of different types of activities into separate business lines. For example, such a reorganisation could allow a group to separate its banking and non-banking businesses.
Any relief allowed by the bill will be limited to nominated specific restrictions in the Corporations Act and does not in any way relieve an entity from meeting its general obligations under that act and other relevant legislation.
The bill also makes consequential amendments to the consolidation membership rules, the franking rules and the capital gains tax regime in the income tax law. These amendments remove tax impediments that would otherwise discourage restructuring.
Full details of the measures in this bill are outlined in the explanatory memorandum.
Debate (on motion by Ms Plibersek) adjourned.