House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. Josh Frydenberg MP)

Chapter 3 Guarantee of lending to small and medium enterprises

Outline and context of chapter

3.1 Schedule 3 to this Bill makes technical amendments to the Guarantee of Lending Act. The amendments ensure that certain categories of smaller non-ADI lenders will fall within the definition of financial institution in that Act.

3.2 The Guarantee of Lending Act gives effect to the Government's commitment to enter into risk-sharing agreements with financial institutions to ensure that credit continues to flow to SMEs so that SMEs can continue to meet their immediate financing needs during uncertain economic conditions caused by the Coronavirus. The Guarantee of Lending Act commenced on 25 March 2020.

Summary of new law

3.3 The amendments made by Schedule 3 to this Bill provide that exclusions in the Financial Sector (Collection of Data) Act 2001 of certain corporations from the meaning of registrable corporation, which are relevant in determining who is a non-ADI lender, are disregarded for the purposes of the definition of financial institution in the Guarantee of Lending Act.

Comparison of key features of new law and current law

Detailed explanation of new law

3.4 Schedule 3 to this Bill makes amendments to the Guarantee of Lending Act to clarify that paragraphs 7(2)(i), 7(2)(ia) and 7(2)(j) of the Financial Sector (Collection of Data) Act 2001 are disregarded for the purposes of paragraph (b) of the definition of financial institution in section 4 of the Guarantee of Lending Act. [Schedule 3, item 1, section 4A of the Guarantee of Lending Act]

3.5 The amendments allow corporations that are excluded from the definition of registrable corporation by paragraphs 7(2)(i), 7(2)(ia) and 7(2)(j) of the Financial Sector (Collection of Data) Act 2001 to be eligible for a guarantee under the Guarantee of Lending Act. These include corporations that:

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do not meet the monetary thresholds in subsection 7(2A) of the Financial Sector (Collection of Data) Act 2001;

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are covered by paragraph 7(2)(ia) of that Act - that is, corporations that are specified in a determination under subsection (2F), or is in a class of corporations specified in a determination under subsection (2F); or

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are covered by paragraph 7(2)(j) of that Act - that is, corporations that are covered by an order given by the Australian Prudential Regulation Authority.

Application and transitional provisions

3.6 Schedule 3 to this Bill will commence on the day after the day on which this Bill receives Royal Assent.