Explanatory Memorandum
(Circulated by authority of the Minister for Housing and Assistant Treasurer, the Hon Michael Sukkar MP)Chapter 4 Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Testamentary Trusts
4.1 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.
Overview
4.2 Schedule 1 to the Bill amends the ITAA 1936 to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).
Human rights implications
4.3 Schedule 1 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
4.4 Schedule 1 to the Bill is compatible with human rights as it does not raise any human rights issues.
Deferring education and training standards for existing financial advisers
4.5 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.
Overview
4.6 Schedule 2 to the Bill amends the Corporations Act to defer the transitional timeframes for existing providers of personal advice to retail clients in relation to relevant financial products to comply with certain education and training standards. These are the standards requiring completion of an approved degree or equivalent qualification and requiring the passing of an approved exam.
4.7 The transitional timeframe for the approved degree or equivalent qualification will be deferred by two years to 1 January 2026. The transitional timeframe for the approved exam will be deferred by one year to 1 January 2022.
Human rights implications
4.8 Schedule 2 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
4.9 Schedule 2 to the Bill is compatible with human rights as it does not raise any human rights issues.
Miscellaneous amendments
4.10 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.
Overview
4.11 Schedule 3 to the Bill makes a number of minor and technical amendments to laws relating to taxation, superannuation, corporations and consumer credit. These amendments are part of the Government's ongoing commitment to the care and maintenance of Treasury portfolio legislation.
4.12 The minor and technical amendments correct typographical and numbering errors, bring provisions in line with modern drafting conventions, repeal inoperative provisions, remove administrative inefficiencies and unintended consequences, update references and ensure that the law gives effect to the original policy intention.
Human rights implications
4.13 Schedule 3 to the Bill engages the following human rights and freedoms:
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- the prohibition on unlawful or arbitrary interference with a person's privacy, family, home and correspondence; and
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- the prohibition on retrospectively making an existing offence subject to a heavier penalties.
Prohibition on unlawful inference with a person's privacy, family, home and correspondence
4.14 Two of the amendments engage the right to privacy in Article 17 of the International Covenant on Civil and Political Rights. Article 17 prohibits unlawful or arbitrary interferences with a person's privacy, family, home and correspondence.
4.15 The first amendment corrects a section reference to paragraph 151(d) of the National Consumer Credit Protection Act 2009. This correction ensures that a licensee must make the reasonable inquiries in section 153 when assessing the suitability of a consumer lease for the consumer. The reasonable inquiries in that section include inquiries about the consumer's requirement and objectives in relation to the consumer lease and the consumer's financial situation.
4.16 The interference with the right to privacy caused by the amendment is in pursuit of a legitimate objective. One of the established principles in the National Consumer Credit Protection Act 2009 is that the licensee has an obligation to ensure that they only offer consumer leases that are not unsuitable for the consumer. This is an important mechanism that is used to prevent consumers from becoming trapped in a debt cycle or suffering undue financial hardship.
4.17 There is a rational connection between the amendment and the legitimate objective of ensuring that consumer leases are not unsuitable for the particular consumer. The amendment requires the licensee to make reasonable inquiries about certain facts that are highly relevant to whether a lease is not unsuitable for the consumer. If the licensee did not ask for this basic financial information, the licensee would not be able properly discharge their duty to the consumer.
4.18 Further, the limitation on the right to privacy is reasonable, necessary and sufficiently precise. The amendment does not impose an obligation on the person to provide the information. Rather, it places the obligation on the licensee to make the inquiries. There are also mechanisms in place to ensure that any personal information collected by the licensee is used appropriately (see, eg, subsection 154(4) and the Australian Privacy Principles).
4.19 The second amendment that engages the right to privacy is an amendment to section 127 of the Australian Securities and Investments Commission Act 2001 to allow ASIC to disclose information about 'relevant providers' (certain financial advisers) to the relevant providers' monitoring bodies. Under the Corporations Act 2001, monitoring bodies are currently required to monitor relevant providers' compliance with the Code of Ethics and impose soft sanctions for any breaches.
4.20 The amendment to allow ASIC to share information with the relevant provider's monitoring body is in pursuit of a legitimate objective, namely, to ensure that there are effective mechanisms in place for monitoring compliance with the Code of Ethics. Further there is a rational connection to this legitimate objective as the information that ASIC is empowered to disclose could alert the monitoring body to potential breaches of the Code of Ethics.
4.21 Finally, the limitation on the right to privacy is reasonable, necessary and sufficiently precise. The power to disclose information is limited to information that is relevant to the monitoring body discharging its supervisory function and powers. Further the monitoring body is required to comply with the Australian Privacy Principles.
4.22 Therefore, the amendments to both paragraph 151(d) of the National Consumer Credit Protection Act 2009 and section 127 of the Australian Securities and Investments Commission Act 2001 impose a permissible limitation on the protection against interference with the right to privacy.
Prohibition on making an existing offence subject to higher penalties
4.23 The amendments to section 12GBCA of the Australian Securities and Investments Commission Act 2001 engage the prohibition on retrospective application in Article 15 of the International Covenant on Civil and Political Rights. Article 15 prohibits retrospectively making any act or omission a criminal offence or making an existing offence retrospectively subject to a heavier penalty.
4.24 The amendments to section 12GBCA of the Australian Securities and Investments Commission Act 2001 ensure that the maximum pecuniary penalty for the contravention of a civil penalty provision is 5,000 penalty units for an individual and 50,000 penalty units for a body corporate. The amendments apply from the day Schedule 2 to that Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 commenced.
4.25 The retrospective application of the amendments has a rational connection to a legitimate objective. It corrects a technical error as a result of amendments made by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019. The amendments apply retrospectively to ensure that a period does not exist where parties could avoid all penalties for contravening civil penalty provisions.
4.26 Significantly, the public expects contraventions of civil penalty provisions to attract a penalty, and that civil penalty frameworks are fit for purpose. In proposing the amendments made in the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019, the Government intended to expand the methods by which a civil penalty could be calculated, rather than substitute different methods. The Government consulted with stakeholders to this end.
4.27 It should also be noted that the amendments apply only to civil penalty provisions. They do not alter the penalties that apply to criminal offences or retrospectively apply any criminal offences.
4.28 Therefore, the amendments to section 12GBCA of the Australian Securities and Investments Commission Act 2001 impose a permissible limitation on the protection against retrospectively applying higher penalties.
Conclusion
4.29 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.