Year in Review - Australia Law in 2016

Multinational anti-avoidance law (MAAL): From 1 January, a new MAAL (broadly based on the first limb of the United Kingdom's Diverted Profits Tax) applies to 'significant global entities' to ensure that multinationals pay their fair share of tax on profits earned in Australia. The MAAL is directed at, among others, ecommerce and technology companies operating web-based platforms. Read more…

Arbitration: In February, the Victorian Court of Appeal provided another example of when Australian courts may find that enforcement of an arbital award would be in breach of public policy under the International Arbitration Act. Read more…

Insurance: In February, the High Court (HC) held that a third party claimant can join an insolvent defendant's insurer to proceedings to seek a declaration that the insurer is liable to indemnify the defendant. Read more…

Foreign Investment: In February, the Federal Government announced that the 'national interest' test for foreign investment applications will require investors to satisfy a series of taxation conditions relating to the tax implications of the proposed investment. Read more…

Class actions: In March, the Federal Court (FC) refused to approve proposed settlement terms that were not 'fair and reasonable'. In April, the Full FC held that class action evidence may not be gathered under compulsory foreign court procedures without the court's endorsement. In July, the HC confimed (by majority) that credit card late payment fees were not penalties and not 'unfair' under relevant legislation. In August, the Victorian Supreme Court held that class action lawyers can claim privilege over advice given to potential funders and documents created in preparation for a class action before any prospective client has instructed them. Also, the Queensland Government announced the introduction of its class action regime. Court refuses to approve settlement, Court blocks US depositions, Privilege during class action investigations, Penalties: the final word

Insolvency: In April, the Federal Government released a proposals paper outlining three areas of reform to strengthen Australia's 'start-up' culture: providing a 'safe harbour' to protect directors from insolvent trading claims during business restructures; reducing the default bankruptcy period from three years to one year; and, making 'ipso facto' insolvency clauses generally unenforceable. Read more

East coast gas inquiry: In April, the Australian Competition and Consumer Commission (ACCC) released its east coast gas market inquiry report. The recommendations, some of which were adopted by the Australian Energy Market Commission, will potentially drive significant change for regulation of and competition in the east coast gas market. Read more

Cyber security strategy (CSS): In April, the Federal Government released its CSS and will invest $230 million over four years in cyber security. The CSS includes establishment of threat-sharing centres to encourage information sharing with the private sector and cyber 'health checks' for ASX100 companies. Read more

Foreign government investors: In May, the Foreign Investment Review Board (FIRB) confirmed that the Federal Government will not impose fines or pursue unintentional breaches of the legislation where foreign government investors are unaware of the existence and extent of holdings of other foreign government investors from the same country. Read more

Patentable subject matter: In May, the HC confirmed that an abstract idea or business method is not patentable subject matter. Interestingly, earlier in May, the Productivity Commission's draft report on Australian Intellectual Property arrangements recommended that the Patents Act be amended to explicitly exclude business methods and software from being patentable. Read more…

Bank Bill Swap (BBSW): In May, in response to rate-fixing prosecutions, the Australian Financial Markets Association announced changes to calculation of the BBSW and, in December, it confirmed that the Australian Securities Exchange (ASX) will administer the BBSW benchmark rate from 1 January 2017. Read more

Derivatives charging rules for superannuation trustees: In May, to facilitate better access to international derivatives markets, the law was changed to allow superannuation funds to charge fund assets to enter into a broad range of exchange-traded and over-the-counter derivative transactions. Read more

Startup tax incentives: In May, the Federal Government introduced tax incentives aimed at encouraging investment in innovative Australian early-stage companies. Read more…

Foreign purchaser duty surcharge: From 21 June, a stamp duty surcharge of 4 per cent for direct and indirect acquisitions of residential land by foreign purchasers will apply in New South Wales. From 31 December, a land tax surcharge of 0.75 per cent will also be imposed on residential land owned by foreign persons. Read more…

Withholding tax on residential property sales by foreign residents: From 1 July, purchasers of certain 'taxable Australian property' from foreign residents are required to pay 10 per cent of the total consideration for the transaction to the Australian Tax Office (ATO) in the form of a non-final withholding tax. Read more

Changes to the managed investment trusts (MIT) regime: From 1 July, qualifying MITs can elect to apply an 'attribution model' to determine the tax liability of the MIT and its beneficiaries. Read more

Cartel laws: In July, the Director of Public Prosecutions commenced the first criminal prosecution for cartel conduct in relation to the shipping industry. A second shipping industry criminal prosecution has since commenced. Read more

Verification of identity (VOI): From 1 August, VOI requirements came into effect in New South Wales which require lawyers and licensed conveyancers to take 'reasonable steps' to verify the identity of their clients entering into conveyancing transactions. Read more

Native title compensation: In August, the FC addressed how native title compensation is calculated. The decision has been appealed, with the outcome likely to set a precedent for future claims. Read more

Transfer pricing: In August, the ATO released a draft practical compliance guideline on how the ATO proposes to treat transfer pricing issues related to offshore hubs. It outlines when hub arrangements pose a transfer pricing risk and disclosure obligations of offshore hubs. Read more…

Media reform: In September, the Federal Government introduced a bill to implement media reforms, including abolishing the '75% audience reach rule' and the 'two-out-of-three cross media control rule'. Read more…

Competition legislative review: In September, the Federal Government released draft legislation to implement some of the key Harper Review reforms and, in December, introduced a bill to broaden the misuse of market power provision. Read more

Blockchain standards: In September, the International Organisation of Standardisation announced support for Standards Australia's proposal to develop international standards on blockchain, which will address privacy, security, industry terminology, and interoperability between blockchain systems. Read more…

Innovation and Science Australia (ISA): In October, the Federal Parliament passed legislation to establish the ISA, which is charged with assisting the government to deliver initiatives worth $1.1 billion over four years under the Federal Government's national innovation and science agenda. Read more

Data breach notification: In October, the Federal Government introduced a bill to require certain entities to notify the Australian Information Commissioner and affected individuals about data breaches. Read more

Crowd-sourced funding: In November, the Federal Government introduced a bill to enable unlisted public companies with less than $25 million in assets and annual turnover to raise up to $5 million in any 12 month period through crowdfunding platforms. Read more

Australian Securities and Investments Commission (ASIC) prospectus guidance: In November, ASIC updated its guidance on including historical financial information disclosure in prospectuses. Read more

Infrastructure: In November, the Federal Government released a discussion paper on making better use of 'value capture' to help fund major transport infrastructure in Australia and Infrastructure Partnerships Australia reported on high levels of global interest in Australian infrastructure investment. Value capture and IPA report

Paris agreement: In November, Australia ratified the Paris Agreement on climate change. Read more

Takeovers Panel guidance: In December, the Panel released updated policy guidance on frustrating action by a target entity. Read more

Western Australia (WA) construction law reform: With effect from 15 December, significant amendments to WA construction contracts legislation are likely to result in an increase in the number of construction-related payment disputes adjudicated in WA. Also, due to the narrowing of the 'mineral processing exclusion', more of the mining, oil and gas industries will be captured by the legislation. Read more…

Year to come - Australian Law in 2017

Productivity Commission report on Australian intellectual property arrangements: The Productivity Commission submitted its final report to the Federal Government in September 2016. The report will be publically available once it has been tabled in Parliament in 2017. Read more

Climate change: In December 2016, the Federal Government announced a review of its climate change policies to ensure they remain effective in achieving Australia's 2030 target and Paris Agreement commitments. The review will commence in February 2017 and conclude by the end of 2017. Read more…

Data re-identification: In November 2016, the Federal Government's bill giving effect to controversial reforms to create civil and criminal penalties for re-identifying personal information made available to the public through deidentified government datasets was referred to a Senate Committee, which will report in February 2017. Read more

Review of the financial system external dispute resolution (EDR) framework: In 2016, the Federal Government announced a review of the financial system’s EDR and complaints framework to ensure that it meets the needs of users of the financial system. The final report is due by 31 March 2017. Read more

ASIC clarifies record-keeping obligations for financial services licensees: In October 2016, ASIC 'clarified' (through a class order) the record-keeping obligations of Australian financial services licensees and authorised representative advisers when giving personal advice. Read more

ASIC releases its market supervision regulatory priorities letter for 2016-17: In July 2016, ASIC formally outlined its key regulatory priorities for 2016–17: cyber resilience and technology disruption; firm culture and conduct; and, handling of confidential information and managing conflicts of interest in research and corporate advisory. Read more

Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF): In October 2016, the Federal Government released a draft plan to implement recommendations arising from a recent review of Australia's AML/CTF regime. The proposed reforms will impact reporting entities and may also subject other persons and entities (including lawyers, accountants, real estate agents and trust company servicer providers) to potentially onerous AML/CTF requirements. There are also plans to establish a National AML/CTF Committee to oversee the reform of the AML/CTF regime, supported by a coordinating committee and consultation groups, with changes to the regime likely to take shape in 2017. Read more

Review of the Personal Property Securities Act (PPSA): In April 2014, the Federal Government announced a review into the PPSA to consider the operation and effects of the PPSA. The government released the final report on 18 March 2015, which broadly recommends that the PPSA should be significantly simplified. The government has not yet released its response but developments are expected in 2017. Read more…

Australian Prudential Regulation Authority (APRA) releases final revised securitisation standard: In November 2016, APRA released its final revised prudential standard (and a draft of the accompanying prudential practice guide) on securitisation. The standard reflects APRA's implementation of the Basel III securitisation framework. The standard will take effect from 1 January 2018. APRA will separately consult on revised reporting requirements for securitisation which will take effect at the same time. Read more…

APRA revises requirements for margining and risk mitigation for non-centrally cleared derivatives: In October 2016, APRA released its final revised prudential standard requiring APRA-regulated entities to have appropriate margining activities in relation to non-centrally cleared derivatives. The margining requirements will commence on 1 March 2017 (with a six-month transition period) and the risk mitigation requirements will take effect from 1 March 2018. Read more…

APRA consults on net stable funding ratio (NSFR) and liquid assets requirement (LAR) for foreign banks: In response to the Basel Committee's proposed new measures for banking stability, APRA released in September 2016 a draft prudential standard and practice guide. APRA plans to implement NSFR requirements in Australia to encourage authorised deposit-taking institutions (ADIs) to fund their activities from more stable sources. It also proposes to alter the current LARs for foreign ADIs. The changes are to take effect from 1 January 2018, in line with the internationally-agreed timetable. Read more

Excessive payment surcharges: In September 2016, a new ban commenced limiting the amount a large business may charge customers for use of certain payment methods, such as (most) credit and debit cards. The excessive payment surcharge ban will apply to all businesses from 1 September 2017. Read more

Privatisation: The ACCC has vigorously opposed the privatisation of public assets where the successful private owner acquires a monopoly without adequate regulation to constrain the monopoly. In 2017, bidders, owners and financiers of assets that exhibit monopoly characteristics should be prepared for increased regulation postprivatisation and increased scrutiny by the ACCC in relation to the suitability of potential buyers. Read more

Competition legislative changes: The Federal Government is expected to implement reforms identified by the Harper Review by enacting the Competition and Consumer Amendment (Competition Policy Review) Bill, which includes a new prohibition on concerted practices between competitors. Read more

Judicial clarification on the scope of competition laws: Decisions are expected by the HC on the application of Australia's cartel laws to principal/agency and other distribution arrangements as well as the circumstances in which a market will be found to be a 'market in Australia', thereby triggering the extraterritorial application of Australia's cartel laws. A decision is also expected by the Full FC concerning the application of the misuse of market power provisions to conduct engaged in by a patent holder in the lead up to patent expiry.

New ASX admission requirements: On 19 December 2016, new rules for admission to the ASX official list came into force, aimed at ensuring that the ASX market continues to be a market of quality and integrity, and remains internationally competitive given the continuing trend in cross-border international listings. Read more

Review of Australia's four major banks: In November 2016, the Parliamentary Economics Committee released its first report on Australia's four major banks. It made 10 recommendations, including: establishment of a single banking and financial services tribunal; financial services licensees to publicly report significant breaches; a review of ADI licensing requirements; six-monthly reviews into banking sector competition; open access to customer data; and, an independent review of the banks' risk management frameworks. Read more…

Electronic conveyancing: It is expected that the number of practitioners using electronic contracts, signatures and settlements will rise in 2017. From 1 March 2017, it will be mandatory for stand-alone discharges of mortgage and stand-alone residential mortgages to be lodged electronically in New South Wales.

Alignment of electronic and paper conveyancing requirements: State land registries are moving to align electronic and paper conveyancing processes, including to: require legal practitioners to obtain authorisation to act as the client’s agent and sign transactions on the client's behalf; require legal practitioners to take reasonable steps to verify their client's identity and the signatories of documents lodged for registration; phase out paper certificates of title; and, intorduce priority notices.

Diverted Profits Tax (DPT): Following the enactment of the MAAL (in January 2016, see above), the Federal Government announced another DPT measure (broadly modelled on the second limb of the United Kingdom's DPT) to combat multinational tax avoidance. The draft bill released in late 2016 lacks sufficient detail to provide an understanding of how the DPT will operate in practice, but further draft legislation and administrative guidance are expected in 2017. It is anticpated that the ATO will tax certain cross-border transactions between related entities at a penalty rate of 40% from 1 July 2017. The DPT will apply to multinational groups with annual global income of at least $1 billion and annual Australian turnover of at least $25 million. Read more…

Hybrid mismatch rules: As part of the base erosion and profit shifting project, the Organisation for Economic Co-operation and Development (OECD) has developed hybrid mismatch rules to counter financing arrangements that have the potential to result in double non-taxation or the long term deferral of tax. Following the Australian Board of Taxation's report in March 2016, the Federal Government announced that it will implement the hybrid mismatch rules (taking into account the Board's recommendations), including that Australia should adopt the OECD's Action 2 recommendations (with some modifications) and that the hybrid mismatch rules should generally commence for payments made on or after 1 January 2018. Read more…

Goods and servces tax (GST) reform: From 1 July 2017, the so-called 'Netflix tax' will see GST applied to the supply of services and other 'intangibles' by non-residents to Australian consumers. If the relevant intangible is supplied through an electronic distribution platform, the GST liability may shift to the platform operator in certain circumstances. Also, draft legislation has been released proposing to extend Australia's GST to include low value goods imported by consumers from 1 July 2017 using a vendor collection model. Read more…