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Belinda Ryan

ASIC announces a change in its regulatory focus during the Covid 19 emergency

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The announcement by ASIC on Monday 23 March 2020 that it is recalibrating its regulatory priorities to focus on COVID-19 challenges is a welcome relief to the finance industry in these challenging times.

ASIC states that it will now afford priority to matters where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters.

ASIC announced that it has:

“immediately suspended a number of near-term activities which are not time-critical. These include consultation, regulatory reports and reviews, such as the ASIC report on executive remuneration, updated internal dispute resolution guidance and a consultation paper on managed discretionary accounts”

Stakeholders will be shortly be notified of the deferrals and new arrangements.

ASIC also announced that it will:

  • suspend its enhanced on-site supervisory work such as the Close and Continuous Monitoring Program;
  • be mindful of the difficulties encountered by firms in complying with their regulatory obligations due to the impact of COVID-19 and work constructively and pragmatically with those firms, and
  • provide relief or waivers from regulatory requirements where warranted.

While ASIC will continue with its enforcement activities, it will focus on action necessary to prevent immediate consumer harm, “egregious” illegal conduct and other time critical matters. The expression “egregious” means “outstandingly bad – shocking”

Only time will tell whether ASIC actually “walks the talk”

Government releases raft of draft legislation to implement further recommendations of the Banking, Superannuation & Financial Services Royal Commission

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A raft of draft legislation to implement a further 22 of the recommendations of the Banking, Superannuation & Financial Services Royal Commission (Royal Commission) was announced by the Treasurer, the Hon Josh Frydenberg MP on 31 January.

The consultation period on the exposure drafts ended on 28 February 2020.

These measures will directly affect the finance sector.

Most changes are proposed to take effect on 1 July 2020, indicating the urgency on the part of the Government to get these changes across the line quickly. A couple of the changes take effect later, while others do not yet have a definite start date.

The exposure drafts released are:

1.    Breach Reporting and remediation by Credit Licensees

The Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020: FSRC rec 1.6, 2.7, 2.8, 2.9 and 7.2 (Reference checking and information sharing, breach reporting and remediation) which will:

  1. strengthen breach reporting requirements for financial services licensees and introduce them for credit licensees
  2. establish a compulsory scheme for checking references for prospective financial advisers and mortgage brokers.
  3. give ASIC power to make legislative instruments setting out the detail of the reference checking and information sharing obligation.
  4. require licensees to notify clients of suspected misconduct, conduct investigations into suspected misconduct, and remediate affected clients
  5. licensees are required to maintain records to demonstrate compliance with the requirement to notify, investigate and remediate misconduct.

These changes will have a major effect on the credit industry and will bring this sector generally into line with the financial advice sector. More immediate involvement of ASIC in situations where a breach has occurred is certain.

Licensees must report designated breaches to ASIC within 30 days of discovery of breach, and outcomes of investigation need to be reported within 10 days.

Treasury is currently consulting with industry on how this change will operate in practice. The requirement for Licensees to remediate consumers is a significant change.

Credit Licensees must also report serious concerns about mortgage brokers to ASIC.

Proposed commencement date: 1 July 2020

 

2.    Codes of Conduct – ASIC may declare certain provisions of Codes to be enforceable

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: FSRC rec 1.15 (enforceable code provisions) which will strengthen the existing code of conduct framework in the financial services sector, by specifically:

  1. enabling ASIC to identify one or more provisions of the code as enforceable code provisions if ASIC considers that it satisfies specific criteria
  2. providing that if ASIC identifies one or more provisions of a code to be an enforceable code provision, that provision becomes enforceable under statute
  3. providing that a court may impose a penalty if a declaration has been made that an enforceable code provision has been breached (up to 300 penalty units).
  4. empowering AISC to issue infringement notices for breaches of enforceable provisions of Codes.
  5. requiring Codes to be independently reviewed every 5 years.

Proposed commencement date: 1 July 2020

3.    Financial Advisers – requirement to periodically renew fee arrangements with clients

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: FSRC rec 2.1 (ongoing fee arrangements) and the associated Regulations, which will require:

  1. fee recipients to seek renewal of ongoing fee arrangements by clients annually (currently every 2 years, except for fee arrangements first entered into prior to 1 July 2013 where currently they are not required to be renewed).
  2. fee disclosure statements going forward to not only state what fees were in the preceding year, but also what fees will be in the current year (currently disclosure is only required for prior year)
  3. written consent must be obtained prior to fees being deducted under an ongoing fee arrangement and consent generally cannot be obtained for a period of more than 12 months (currently there is no ongoing requirement to seek new consent after the initial consent has been given)
  4. fee recipients to obtain written consent to continue an ongoing fee arrangement annually
  5. new record keeping requirements

Proposed commencement date: 1 July 2020

4.    Financial Advisers – required to disclose any lack of independence

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: FSRC Rec 2.2 (disclosure of lack of independence) which will requires financial services licensees and authorised representatives are required to:

  1.  give a written disclosure of lack of independence (in a form prescribed by ASIC) where they are unable to validly claim that they are   “independent”, “impartial” and “unbiased”.
  2. include a statement to that effect in their financial service guide.

Proposed commencement date: 1 July 2020

5.    Trustees of Registrable Superannuation Entities (RSEs) must hold no other duties or office

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: RSE licence condition—no other duty (FSRC rec 3.1) – will impose a new licence condition on RSEs prohibiting them from having a duty to act in the interests of another person.

Proposed commencement date: 1 July 2020

6.    Restricting the ability of Trustees of Super Funds to charge advice fees on Choice funds without the informed consent by member.

The Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020: fees (FSRC Recs 3.2 & 3.3) will provide that superannuation members in choice funds must not be charged advice fees by Trustees unless they have first given informed consent.

Proposed commencement date: 1 July 2020

 

7.    Trustees of Super Funds must not charge advice fees to members on My Super products.

The Financial Regulator Reform (no. 2) Bill 2019: Fees (FSRC Recs 3.2 & 3.3: Advice Fees for Mysuper and Choice Products) will implement this change.

Proposed commencement date: 1 July 2020

8.    Ban the unsolicited sale of Financial Products

The Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020: Hawking of financial products will ban the “hawking” of financial products, subject to some limited exceptions. The legislation also defines more precisely the meaning of the expression “unsolicited contact” and strengthens the provisions dealing with “right of return and refund”

Proposed commencement date: 1 July 2020

9.    Clarify roles of APRA and ASIC in relation to regulation of Superannuation.

The Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2020 Measures)) Bill 2020: ASIC regulation of superannuation makes it clear that:

  1. APRA is generally responsible for prudential regulation and member outcomes. It is also generally responsible for licensing and supervision of RSE licensees.
  2. ASIC is generally responsible for protecting consumers from harm, market integrity, disclosure and record keeping.
  3. The Commissioner of Taxation is generally responsible for self-managed superannuation funds, data and payment standards, tax file numbers and the compassionate release of superannuation amounts.

ASICs role and powers are beefed up under the amended legislation.

Proposed commencement date: 1 July 2020

10.    Restrict use of the expressions “Insurance” and “Insurer” to prevent consumers from being misled.

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: Use of terms “insurance” and “insurer will make it a strict liability offence for a business to describe:

  1. a product or service they offer as insurance, if the product or service is not insurance, in circumstances where it is likely that the product or service could mistakenly be believed to be insurance.
  2. itself as an insurer if the business could mistakenly be believed to offer insurance, and either the product is not insurance or the person is not appropriately registered or authorised under applicable insurance legislation.

The offences do not apply to government entities, State insurance, or products or services prescribed by the regulations, or entities exempted by ASIC.

Proposed commencement date: 1 July 2020

11.    Implement a “deferred sales model” for the sale of add-on insurance products.

This change is implemented by The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: Deferred Sales Model For Add-On Insurance

Currently, only the Banking Code of Practice contains provisions dealing with deferred sales model.

These changes will make the sale of add on insurance products difficult, if not impossible.

Proposed commencement date: 12 months after the date the enabling legislation receives Royal Assent.

12.    Introduce a cap on commissions that can be paid for sale of add on insurance in connection with the sale or leasing of motor vehicles.

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020: Caps on commissions implements these changes and will:

  1. place a cap on the amount of commissions that may be paid in relation to add-on risk products such as tyre and rim insurance, mechanical breakdown insurance and consumer credit insurance (for the credit facility) supplied in connection with the sale or long-term lease of a motor vehicle.
  2. provide ASIC with the power, by legislative instrument, to set caps on the amount of commissions that may be paid in relation to certain add-on risk products sold in connection with the sale or long-term lease of a motor vehicle.
  3. make it a criminal offence, civil penalty and offence of strict liability for a person to pay or receive a commission in relation to an add-on risk product that exceeds the cap determined by ASIC for that product.
  4. give consumers the right to recover commissions paid in excess of the cap.

Proposed commencement date: the day after the enabling legislation receives Royal Assent.

13.    When taking out life insurance, replace the existing duty of disclosure imposed on the consumers with a duty to take “reasonable care” to not make a misrepresentation.

These changes are implemented by the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020: FSRC Rec 4.5 (Duty of Disclosure To Insurer) and will bring life insurance more into line with the existing regime that currently applies to motor vehicle insurance, home buildings insurance, home contents insurance, sickness and accident insurance and travel insurance.

Under the current law, an insured is required to disclose matters known to the insured that are relevant to the insurer’s decision of whether or not to accept the risk and, if so, on what terms. The current duty was considered to have placed too greater a burden on insureds.

Proposed commencement date: 1 July 2020

14.    An insurer may only avoid a contract of life insurance on the basis of non-disclosure or misrepresentation if it can show that it would not have entered into a contract on any terms

This change is implemented by the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020: Avoidance of Life Insurance Contracts (FSRC Rec 4.6) .

Proposed commencement date: the day after the enabling legislation receives Royal Assent.

15.    Establish the Financial Regulator Assessment Authority to oversee ASIC and APRA.

This is implemented by the Financial Regulator Assessment Authority Bill 2020 and the Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2020 Measures)) Bill 2020 . In summary, the Authority:

  1. will assess APRA’s and ASIC’s effectiveness;
  2. reports to the relevant Minister;
  3. undertakes capability reviews of APRA and ASIC when requested by the Minister;
  4. consists of the Chair, a Departmental member and 2 other members assisted by APS employees’ and
  5. may request information from APRA and ASIC

Proposed commencement date: 1 July 2020

16.    ASIC given new powers to issue directions to licensees to prevent or address suspected breaches of financial services law or credit legislation.

This change is implemented by the Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2020 Measures)) Bill 2020: FSRC Rec 7.2 (ASIC Directions)

Proposed commencement date: the day after the enabling legislation receives Royal Assent.

Introduction of Comprehensive Credit Reporting – it is progressing

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Legislation to implement mandatory comprehensive credit reporting (MCCR) is progressing in the Senate, having already been passed by the House of Representatives.

the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and other Measures) Bill 2019 introduces the MCCR. The previous 2017 bill to introduce MCCR lapsed at the end of the last Parliament, on 1 July 2019. The new Bill is slightly different to the earlier bill, in particular with regard to the setting up of a new scheme for reporting of financial hardship information in the credit reporting system.

The MCCR is being introduced because there was minimal take up of voluntary CCR introduced back in 2014. The Bills Digest No.83,2019-20 noted that in September 2017 the figure for voluntary participation in the CCR framework was less than 1%.

In essence MCCR will require large authorised deposit-taking institutions (“Large ADIs”):

  • to supply 50% cent of its consumer credit information within 90 days of 1 April 2020 to all credit reporting bodies (CRB) with whom they had an existing agreement with on 2 November 2017;
  • to supply credit information on their remaining accounts to the same CRBs within 90 days of 1 April 2021;
  • to ensure that the information supplied is kept up to date;
  • from 1 April 2021, to supply any financial hardship information about an individual if the ADI is disclosing repayment history information about the individual to a CRB as part of its credit reporting obligations.

The legislation also requires the Government to complete an independent review of the new MCCR regime and its provisions by 1 October 2023.

The expression “Large ADI” is defined in a determination made under the Banking Act 1959 (Cth).

The MCCR regime will be introduced progressively for other lenders and credit providers in due course. This will be done by way of regulation – declaring the entity to be an “eligible licensee”.

The Bill incorporates the results of a review by the Attorney General into the treatment of financial hardship information and facilitates the sharing of this information.  If the changes had not been made, then credit default information reported under the new regime would have merely recorded a default had occurred, but without the necessary clarification that there was a financial hardship arrangement in place.

Federal Treasury has also recently released an exposure draft of the National Consumer Credit Protection Amendment (Mandatory Credit Reporting) Regulations 2020 for consultation along with a draft explanatory memorandum. The draft explanatory memorandum explains that the Regulations will support MCCR by setting out:

  • additional circumstances when a bank subject to the regime must update or supply new credit information to a credit reporting body;
  • restrictions on a credit reporting body disclosing the information it has received through the mandated regime or derived from this information;
  • the types of information that must be included in statements provided to the Treasurer by credit providers and credit reporting bodies following the initial bulk supplies of credit information; and
  • an additional circumstance when the Australian Securities and Investments Commission (ASIC) could issue an infringement notice for a civil penalty.

The implementation of the new comprehensive credit regime has been a long time in the making and as a consequence it cannot be predicted with certainty that 1 April 2020 will be the effective start date, given prior delays.

 

What is a dumping continuation inquiry and why will it have a big impact on importers of aluminium extrusions?

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Dumping duties payable on the importation of aluminium extrusions continues to be a key focus of the Australian Border Force.  This is not surprising given that inadvertent non-compliance remains high and the relevant duty rates exceed 100%.  An unexpected dumping duty bill can be a business ending event and a key part of managing this risk is closely monitoring developments affecting what dumping duties are imposed.

There are at least 3 key events in a life of a dumping duty – the initial investigation that results in the duties being imposed, a review of the rates that will apply and an inquiry every 5 years into whether the dumping duties should continue.  The last of these, a continuation inquiry, was commenced in mid-February into Chinese exports of aluminium extrusions.

What is a dumping duty continuation inquiry?

Dumping duties automatically expire after 5 years unless a continuation inquiry is held.  A continuation inquiry in conducted by the Anti-Dumping Commission (ADC) and involves an examination of the following questions:

  1. should the dumping duties continue unaltered;
  2. should the dumping duties be permitted to expire;
  3. should the dumping duties cease to apply to particular exporters or particular types of goods;
  4. should the rates of dumping duties change.

Does this mean the dumping duties may end?

Where dumping is unlikely to continue or the local industry will no longer suffer injury, it makes sense that dumping duties should end.  After all, these are protectionist, and not revenue raising, duties.  Unfortunately, the continuation inquiry into aluminium extrusions is unlikely to bring about an end of the dumping duties.  The level of exports from China has not decreased and the most recent review (concluded in May 2019) found high levels of dumping.

Could the rates change? Yes, especially is the ADC follows the recent WTO ruling

The level of dumping duties should be the big focus area.  While not all continuation inquiries involve a review of the rates, this inquiry is likely to.  This is because the last aluminium extrusion rate review was based on exports during the 17/18 financial year.  This data is already 20-26 months old.  The ADC is likely to exercise its discretion to update the rates.  As a result, the inquiry needs to be treated in the same way as a review.  The result of this will be the resetting of:

  • specific dumping duty rates for the major exporters,
  • the rate that applies to cooperating exporters; and
  • the rate that applies to all other exporters (including those that did not participate in the inquiry).

The last time a review was conducted there was a dramatic change in each of the above 3 types of rates.  This is due to changes in factors such as the differential between Chinese aluminium prices and global prices, profits on Chinese domestic sales and export prices.

However, what makes this review especially interesting is that the WTO has recently found that the ADC method of calculating certain dumping margins was not in accordance with WTO requirements.  While the WTO was reviewing a decision regarding Indonesia A4 copy paper, the offending practice has been adopted by the ADC in relation to aluminium extrusions exported from China.

Traditionally, the ADC has disregarded actual Chinese domestic selling prices due to alleged Chinese Government influence in the market for materials used to produce aluminium extrusions.  This practice always leads to large dumping margins.  However, following the WTO ruling, the ADC will first have to ask whether the Government Influence has prevented Chinese domestic prices and exports from being comparable.  Chinese manufacturers used the same inputs to produce domestic goods as they do exports.  As such, the starting point should be that the Government influence equally impacts the price of both categories of goods and those prices remain comparable.

Exporters need to be involved now

The last thing a Chinese exporter needs on top of the Coronavirus is an investigation by the ADC.  However, the continuation inquiry has strict timeframes.  Those exporters selected for specific in depth review need to lodge their exporter questionnaire by 23 March 2020.  Other exporters that wish to obtain the residual exporter rate need to complete the ADC’s information request and associated spreadsheet by 23 March 2020.

No doubt the Coronavirus will impact the ability of some exporters to meet the 23 March deadline.  Those affected need to seek an extension from the ADC prior to 23 March.

All exporters and importers should consider whether they wish to make a submission to the ADC regarding the inquiry.  Submissions can cover any topic including the primary issue of whether the dumping duties should continue or more specifically, how dumping duties rates should be calculated.

The outcome of this inquiry will greatly impact the viability of Chinese aluminium extrusion supply chains.  Please contact us if you would like assistance responding to the inquiry.

Variations to the Credit Reporting Code (CRC)

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A variation to the Privacy (Credit Reporting) Code 2014 (the “CR Code”) has been approved by  the Australian Information Commissioner (“OAIC”)  commencing 14 February 2020.

The OAIC has given a summary of the changes:

  • Writs and summons will no longer be considered publicly available information, and can no longer be listed on credit reports
  • Credit reporting bodies (CRBs) will no longer be able to use pre-ticked direct marketing consents
  • When requested by an individual, CRBs are obliged to notify other CRBs of that individual’s ban period request
  • A Repayment History information (RHI) code ‘X’ will be introduced, intended to more accurately indicate when a payment is 180 days or more overdue.

In fact, there are more changes to the CR Code than indicated. While none of the changes are major, both credit providers (CPs) and credit reporting bodies (CRBs) need to be across them, because they will impact on day to day operations.

1. Clarification of what is meant by the expression “publicly available information”

Writs, summons and judgments unrelated to credit will no longer be considered “publicly available information”. That means they will no longer be listed on credit reports (Clause 11.2 CR Code).

The amendments are precise:

11.2 For the avoidance of doubt publicly available information does not include:
a) originating process issued by a Court or Tribunal; or
b) any judgment or proceedings where the individual’s rights have been subrogated to an insurer; or
c) any judgment or proceedings that is otherwise unrelated to credit;
because this information does not relate to the individual’s creditworthiness.

2. Territorial nexus on information that may be collected by CRBs

CRBs may only collect publicly available information about individuals if the information relates to activities conducted by that individual in Australia or its external territories (Clause 11.1 CR Code).

3. Additional obligations imposed on CRBs where individual is a victim of fraud and requests a “ban Period”

If an individual believes they are a victim of fraud (including identity fraud) they may request a CRB include a notation on their credit file. The CRB must explain to the individual that the notation may adversely affect their ability to obtain credit during the “ban period”

Going forward, the CRB receiving the request must also tell the individual that they may request other CRBs notate a ban period. If the individual wants other CRBs to notate a “ban period”, the first CRB must notify all the other CRBs nominated (Clause 17.1 CR Code).

Similar provisions apply where an individual seeks to extend the initial “ban period” ( section 17.4 CR Code).

Given that many requests for implementation of banning periods are communicated by individuals to credit providers, it will be interesting to observe how this new procedure will work in practice.

4. Interpretive Materials

Clause 8 CR Code has been inserted to clarify that the CR Code is to be read in conjunction with applicable laws and guidance by the Office of the Information Commissioner.

5. Consumer credit liability Information – clarification of “when consumer credit is entered into”

CRBs may collect and disclose “consumer credit liability information” from credit providers.. There are seven types of consumer credit liability information, one of which is:

“the day on which the consumer credit is entered into”

For consumer credit liability information disclosed from 14 February 2020, the expression “the day on which the consumer credit is entered into” will mean:

the day that, the consumer credit is unconditionally approved by the credit provider, and the credit provider has generated the consumer credit account within its credit management system;

This makes it easier for credit providers to precisely identify this date. All credit providers now need to do is to identify the date on which the credit account is opened. (Clause 6.2 CR Code).

6. Repayment History Information

One matter reported by credit providers to CRBs as part of comprehensive credit reporting is how long a repayment has been overdue. The categories used are numbered 1 to 7 – number 7 indicates that a payment is overdue at least 180 days.

Credit providers have tended to mark a “X” instead of using the number “7”.This change brings the CR Code into line with industry practice.

7. Correction of information – Introduction of specific timelines

Currently, clause 20.2 of the CR Code provides that a CRB or CP consulted by another CRB or CP about a correction request must take reasonable steps to respond to as soon as practicable.

This clause has been rewritten to introduce specific timeframes and a clearer mechanism for dealing with requests to correct information.

The amendments are designed to ensure that the consulted CRB or CP responds promptly to the request so that the first responder, (either a CP or CRB) can meet their 30-day correction timeframe to the consumer. Specifically:

  • The first responder CRB or CP must take reasonable steps to provide the consultation request to the consulted CRB or CP within a time period of five business days of the correction request being made by the individual;
  • The first responder must notify the consulted CRB or CP as to when the 30 day response period to resolve the individual’s correction request ends (the correction period);
  • The consulted CRB or CP must respond to the first responder at least five (5) days before the end of the correction period or if they cannot do so they must explain why and provide and timeframe for response.

8. Correction of information – Clarification as to who makes the decision about the correction request

Clause 20.4 of the CR Code makes it clear that the consulted CRB or CP is the person who decides whether the credit-related personal information of the individual needs to be corrected. And they must do so as soon as practicable.

If the consulted CRB or CP decides that the requested correction is justified, they must make the correction within five business days and otherwise as soon as practicable.

9. Individuals must Opt In before CRBs are permitted to market to them.

This change applies solely to CRBs.

Individuals may obtain “free” credit reports in certain circumstances (Clause 19.3 CR Code). Where individuals obtained free credit reports, the individual had to “opt out” of receiving direct marketing material from the CRB.

The CR Code has now been amended so that CRBs may only provide the individuals with direct marketing communications where the individual has opted in to receive this communication. Specifically, it is stated that a pre-ticked consent box does not constitute opting in (Clause 19.4 CR Code).

Modern Slavery Act – the implications for businesses in Australia

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When we think of slavery, we don’t think of Australian businesses. However, more than half of our imported goods come from Asia and the Pacific, an area that accounts for 62% of the global estimate of people in modern slavery.[1] This represents a real risk that modern slavery is part of Australian supply chains and has led to the Federal Government enacting the Modern Slavery Act 2018 (Act).

What’s the deal?

The “Modern Slavery Reporting Requirement” introduced by the Act will require certain entities to submit annual Modern Slavery Statements (Statement) to the Australian Border Force (ABF) as soon as 20 September 2020. Failing to comply with a reporting obligation under the Act could lead to reputational harm and flow-on consequences for your business.

What is a Modern Slavery Statement?

While there isn’t a template for Statements, in substance the report must address 7 mandatory criteria.

Very generally speaking, the content of a Statement will:

  • describe your business operations and its supply chain, as well as those of other businesses it controls;
  • identify modern slavery risks in those supply chains and operations, and steps taken to address those risks; and
  • explain how your business engages with and consults businesses it controls to work together to address the risk of modern slavery.

Statements will be submitted to the ABF, and published online via a public register.

Does my business need to submit a Statement?

Quite possibly! The reporting obligation is mandatory for those businesses that, within their 12 month reporting period (i.e. their financial year, or other accounting period used by that business):

  • carry on business in Australia; and
  • have a consolidated revenue of AU$100 million.

“Carrying on business in Australia” captures both:

  • Australian entities – i.e. those resident in Australia for tax purposes, or incorporated in Australian, or centrally managed and controlled in Australia; and
  • a foreign entity doing business in Australia.

Your business’ consolidated revenue will need to be calculated using Australian Accounting Standards (even if your business isn’t usually subject to these standards). While your consolidated revenue will not include the revenue of your parent company, it will include the revenue of any subsidiaries of your business. This is the case even if those subsidiaries carry on business outside Australia.

Voluntary reporting is also encouraged under the Act.

But my business doesn’t engage in “Modern Slavery”! 

It may be difficult to accept, but modern slavery does happen in Australia, and it does occur in Australian supply chains. There is a very high risk that it could be present in your supply chain, without your knowledge – Government estimates indicate that there were 1,567 victims of modern slavery in Australia alone between 2015 and 2017.

The concept of “modern slavery” may seem a world apart from your business, but practically, it can present in varying forms, such as:

  • deducting from employee wages the amount of “debts” to their employers, such as the cost of transport, accommodation, or meals;
  • misleading workers as to work conditions, their minimum wage, and workplace rights; and
  • trading with suppliers that engage in these practices.

Preparing Statements gives businesses the opportunity to identify and address risks of modern slavery in their supply chains. The end goal is for businesses to be responsible and transparent, so that the business community can work together to reduce the incidence of modern slavery.

When do I need to submit a Statement?

Your business’ 12-month reporting period will determine when your Statement is due:

Your annual reporting period First reporting period under the Act Statement Due Date
1 July – 30 June

(Australian Financial Year)

 1 July 2019 – 30 June 2020 No later than 31 December 2020
1 January – 31 December

(Calendar Year)

 1 January 2020 – 31 December 2020 No later than 30 June 2021
1 April – 31 March

(Foreign Financial

Year  – including United

Kingdom and Japan)

 1 April 2019 – 31 March 2020 No later than 30 September 2020

And if I don’t comply?

The Act gives the Government power to name-and-shame entities that do not comply with their reporting obligations. The impact of this could flow on to matters that harm your business, such as reputational harm, loss of business opportunities and trading partnerships, and the reduction in the perceived value of your business.

Also turn your mind to each contract you sign under which you have warranted that you will comply with all applicable laws. These warranties should be taken seriously, as often a breach of warranty entitles the other party to a contractual right to terminate.

How can I prepare my business for reporting?

Ensure that your business has adequate reporting, monitoring due diligence and reviewing  mechanisms in place now, in anticipating of filing your Statement.

My parent company submitted a Modern Slavery statement in the UK. Can I just submit that to the ABF?

UK statements may be helpful guides to businesses preparing their Statements to submit to the ABF – but they won’t necessarily meet all requirements of the Act. You should seek legal advice prior to submitting your UK statement to the ABF to ensure that your business is complying with its reporting obligations in doing so.

If you’re unsure about your business’ obligations under the Act, Hunt & Hunt can provide advice in relation to whether you will need to submit a Statement, and assist in the preparation of your Statement to ensure that it meets the requirements of the Act.

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[1] 2018 Global Slavery Index