Australia: What happened in 2018 and significant events in 2019

Australian Law: Year in Review 2018 and Year to Come 2019 summarises some of the major developments across Australia last year, and a selection of key changes that we anticipate over the coming year. There are links to further reading, where available.

There has been a wide range of changes including the Notifiable Data Breach Scheme that came into effect requiring notification to the Office of the Australian Information Commissioner and affected individuals if certain data breaches occur.

Explore our overview of key developments below.

Updates in

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key areas in 2018 and 2019

Significant legal and regulatory events in 2018

Explore the tabs below to review the key developments you need to be aware of from 2018

Corporate

Schemes of arrangement: The Federal Court in Re Billabong International Limited  took a pragmatic approach to the question of whether, in a takeover bid effected by a scheme of arrangement, the bidder can make a last-minute increase in the scheme consideration without having to adjourn the scheme meeting and provide supplementary disclosure to target shareholders.

Read our Last minute increase to scheme consideration – a more flexible approach?

Banking

Authorised deposit-taking institutions (ADI): The Australian Prudential Regulation Authority (APRA) introduced the restricted ADI licensing scheme, providing a new pathway for small financial entities to enter the banking industry. The scheme provides for two-year licences for a limited range of banking activities with reduced prudential and reporting standards.

Changes to the Banking Act: Amendments to the Banking Act 1959 (Cth) mean that ADIs may use "bank", "banker" and "banking" without APRA's prior approval. "Credit union", "credit society", "credit co-operative" and ‘"building society" continue to be restricted terms.

Financial benchmarks: In 2018, laws were enacted to strengthen the Australian Securities and Investments Commission's (ASIC) regulation of financial benchmarks. The legislative scheme introduces a "benchmark administrator" licensing regime and imposes civil and criminal penalties on financial institutions, including foreign entities, that manipulate financial benchmarks. ASIC also published rules and guidance to complement the new regulatory regime.

Read ASIC's significant financial benchmarks

Financial services regulation

Overhauling the licensing regime for foreign financial service providers: ASIC released a consultation paper on a proposed new licensing regime for foreign financial services providers that will be broadly in line with the regime for Australian financial services providers, but with relief from some Corporations Act provisions and the imposition of certain additional tailored licence conditions.

Read our update ASIC overhauls AFS licensing relief for foreign financial services providers

Digital currency: As of 11 April, all Digital Currency Exchange providers operating in Australia are required to register with the Australian Transaction Reports and Analysis Centre and comply with "know your customer" and anti-money laundering and counter-terrorism financing requirements. The new laws cover for the first time regulation of service providers of cryptocurrencies, including bitcoin.

Read New Australian laws to regulate cryptocurrency providers

Funds management

Asia Region Funds Passport: With the enactment of the Corporations Amendment (Asia Region Funds Passport) Act 2018 (Cth), Australian fund managers can now offer interests in qualifying funds to investors across multiple participating economies in Asia, with limited additional regulatory requirements. ASIC subsequently released updated guidance for the funds management industry to help improve industry access to funds from participating economies throughout the Asia region.

Read more on ASIC's guidance for the funds management industry

Corporate collective investment vehicles (CCIV): The Federal Government released for consultation the third tranche of proposed legislation, and accompanying explanatory materials, to address some of the remaining gaps in the proposed CCIV framework.

Read our client update Third tranche of draft CCIV legislation released

Data governance

From 22 February, all agencies and organisations with existing personal information security obligations under the Privacy Act 1988 (Cth) must, under the new Notifiable Data Breaches Scheme, notify the Office of the Australian Information Commissioner and affected individuals if certain data breaches occur.

Read our cyber security publication

Tax

Goods and Services Tax (GST) withholding on new residential premises sales: From 1 July, purchasers of new residential properties or new potential residential land are required to pay the GST directly to the Australian Tax Office (ATO) on settlement.

ATO guidance on the diverted profits tax (DPT): The ATO released its much-anticipated guidance on the operation of the DPT, which came into effect on 1 July 2017 and imposes a 40% tax. The DPT aims to ensure that the tax paid by "significant global entities" properly reflects the economic substance of their Australian activities, and aims to prevent the diversion of profits offshore through arrangements involving related parties.

Read the ATO's summary

Real Estate

Foreign land and agribusiness acquisitions: The Foreign Investment Review Board released revised guidance on the application of the 'open and transparent sale process' requirements for foreign persons acquiring agricultural land, narrowing the categories of land to which the policy applies and clarifying what constitutes an acceptable form of sale process and the foreign persons subject to the policy.

Read our update Changes to open and transparent sale process requirement for foreign persons acquiring agricultural land

International business obligations

In a rare appellate court decision in this area of law, the Full Federal Court clarified that the Anti-Dumping Commission must conform strictly with the legislated methods for calculating normal value in relation to dumping duties.

Read Federal Court homes in on anti-dumping commission's calculation of duties on Chinese steel imports

The Modern Slavery Bill was introduced into Federal Parliament. If passed, affected Australian entities, or entities carrying on business in Australia, will be required to submit a statement on modern slavery risks in their operations and supply chains.

Read our client update Modern Slavery Bill introduced – how will this impact Australian business?

In September, the Foreign Influence Transparency Scheme Act 2018 (Cth) established a new regulatory scheme requiring persons who undertake activities on behalf of a foreign government or political organisation to register with the Attorney General's Department if those activities are intended to influence Australian governmental or political decision-making.

Read our client update The foreign influence transparency scheme – from bill to law

Intellectual Property

New legislation implementing recommendations from the Productivity Commission's inquiry into Australia’s intellectual property arrangements commenced in August. Key changes include: clarifying the scope of the parallel importation laws; repealing some of the requirements applying to filing of pharmaceutical patents; and, introducing additional damages for unjustified threats of infringement proceedings.

Read our Changes to Australia's IP laws take effect

Competition and Consumer Law

Cartels: In May, the Full Federal Court allowed an appeal by the Australian Competition and Consumer Commission (ACCC) and imposed a $46 million penalty for cartel conduct on a Japanese corporation, the highest penalty ever imposed under the Competition and Consumer Act 2010 (Cth) (CCA).

Read our Federal Court imposes highest penalty to date

In July, in a first, the ACCC brought proceedings against an entity for "gun jumping" in relation to a merger, highlighting that until completion of corporate transactions, the prohibition on cartels in the CCA continues to apply.

Read our ACCC cartel action against Cryosite is a strong reminder of rules prohibiting "gun jumping"

Consumer Law: New legislation to increase the maximum financial penalties for breaches of the Consumer Law was enacted in August. In October, further legislation was passed that included extending the unconscionable conduct protections to publicly listed companies, and enabling the ACCC and ASIC to investigate possible unfair contract terms.

Read more here

Franchising: In March, the Parliamentary Joint Committee on Corporations and Financial Services announced an inquiry into the Franchising Code of Conduct. The reporting date was extended to 6 December 2018. Meanwhile, the ACCC recommitted to focusing on Franchising Code issues and business-to-business unfair contract terms.

Read our Franchising in the spotlight

Insolvency

Statutory priority: In February, the Victorian Court of Appeal confirmed that the statutory order of priority applies to trust creditors, so that trust assets should be applied first in paying employees and other statutory preferred creditors. In March, the Full Federal Court came to the same conclusion but for varied reasons, meaning confusion remains.

Read more here and here

Ipso facto laws: Australia's new ipso facto regime applies to contracts entered into on or after 1 July 2018. It imposes a stay on the exercise of certain contractual rights in some insolvency regimes (administration and some receiverships and schemes of arrangement, but not liquidation). There are many exemptions from the regime, including some that are relevant to project finance.

Read How ipso facto provisions (and exemptions) affect project finance – both good and bad news

Class actions

Class actions: The Federal Court stayed two competing class actions against GetSwift Limited and allowed a third class action to proceed, suggesting an increasingly "hands on" approach by the Federal Court to case management. The Australian Law Reform Commission supported this approach.

Subsequently, the Full Federal Court ordered the transfer of four class actions against AMP to the New South Wales Supreme Court, where a fifth class action is pending.

Read more here, here, here and here

The Victorian Law Reform Commission completed a class action regime review, calling for national litigation funding regulation, lifting the ban on contingency fees (generally and in relation to class actions) subject to appropriate regulatory measures and a greater supervisory role for the Victorian Supreme Court.

Read our VLRC takes first cut at class action reform

Infrastructure and Projects

Infrastructure: The Federal Parliament legislated to protect Australia's infrastructure in the electricity, water, ports and gas sectors from security risks.

Read our update

From 11 July, Australian infrastructure owners and operators must provide information about "critical infrastructure" for inclusion on the Register of Critical Infrastructure Assets.

Read our client update New reporting requirements for critical infrastructure

Security of payment laws: The Federal Government released a report of the outcome of the Murray Review into Australian security of payment regimes, with extensive recommendations aimed at achieving legislative best practice (including that security of payment is best dealt with at a national level) and balancing the often competing interests of stakeholders.

Read our Extensive recommendations on security of payment released

"In 2018, the key areas on which Australian law makers and regulators focused were the protection of personal information, foreign investment regulation and taxation, infrastructure and corporate accountability in relation to business obligations, competition and banking conduct. There will be an ongoing focus on these areas in 2019, but the pace of change and priority will be shaped by the outcome of the federal election, which will occur in the first half of the year."

Leighton O'Brien, Linklaters Relationship Partner

Leighton O'Brien

Significant legal and regulatory events in 2019

Explore the tabs below to review the key developments we expect to see in 2019

Federal Government

The requirement to hold a federal election by 18 May 2019 may see some proposed areas of law reform delayed or abandoned, depending on which party wins and the composition of the Senate (upper house).

Banking

Banking Royal Commission: In 2018, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry conducted hearings into consumer lending, financial advice, loans to small and medium sized enterprises, financial service entities in regional and remote communities, superannuation, insurance and general policy questions. The interim report was tabled in September 2018, with the final report expected by 1 February 2019.

Read more

Authorised deposit-taking institutions (ADI): In August 2018, the Australian Prudential Regulation Authority (APRA) sought feedback on proposals to promote increased transparency of ADI capital ratios and their comparability with other domestic and international markers. APRA will consult on draft revised prudential standards in 2019. Also, APRA has altered reporting standards for counterparty credit risk and adopted a simplified approach for measuring counterparty credit risk exposures for ADIs with immaterial levels of counterparty credit risk. The new prudential and reporting standards commence on 1 July 2019.

Ownership limit for banks: In October 2018, the Federal Parliament introduced a Bill that, if enacted, will increase the current maximum shareholding limit for ADIs and other financial sector entities from 15% to 20%. It also introduces a streamlined approval process for new financial sector companies.

Read more

Financial regulation

Corporate and financial sector misconduct: In September 2018, the Federal Government released draft legislation that, if enacted, will implement many of the recommendations of the ASIC Enforcement Review Taskforce to strengthen the penalty regime for corporate and financial sector misconduct, following the Taskforce's finding that the current penalty regime is "inadequate" for addressing the "severity of misconduct" or acting as a "credible deterrent".

Read our Treasury proposes tougher penalties for corporate and financial sector misconduct

Data protection and technology

Decryption law: In August 2018, the Federal Government released draft legislation requiring tech companies with end-to-end encrypted messaging services to cooperate with law enforcement agencies. Industry and rights groups, who opposed the proposed law, are waiting for the Government's response.

Read our Australian Government releases draft encryption legislation

Digital platforms: A final report into the Digital Platforms Inquiry, charged with looking at the effect that digital search engines, social media platforms and other digital content aggregation platforms have on competition in media and advertising services markets, is due by 3 June 2019.

Consumer data right (CDR) rules: The first phase of the CDR, allowing consumers to access particular data, including transaction, usage, and product data, in a useful digital format, commences on 1 July 2019. The rules will begin in the banking, energy and telecommunications sectors, and will be rolled out to other sectors over time. The Office of the Australian Information Commissioner and the Australian Competition and Consumer Commission will have separate but complementary enforcement roles.

Read our The ACCC's Consumer Data Right Rules Framework

Improved conveyancing technology: Technology is increasingly being used in conveyancing practice, enabling integration between searches and enquiries functions, conveyancing matter management and electronic conveyancing. Reliance on, and ongoing development of, technology-based practices is expected to increase in 2019. Further, in 2019, it is anticipated that Sympli, a new Electronic Lodgement Network Operator (ELNO), will commence operating. Currently, the sole Australian ELNO is Property Exchange Australia (PEXA). The aim is for all ELNOs to share information to facilitate electronic settlements even though parties may be using different platforms. 

Tax

Multinational anti-avoidance compliance activity: It is likely the ATO will continue to focus on tax avoidance by multinational enterprises operating in Australia during 2019. In particular, the ATO can be expected to continue applying the enhanced transfer pricing rules, the multinational anti-avoidance law (directed at significant global entities where a foreign entity makes sales directly to Australian customers without attribution of that income to an Australian permanent establishment), and the diverted profits tax.

Stapled structures: On 20 September 2018, the Federal Government introduced a Bill to give effect to various integrity measures aimed at foreign investors. The changes, which are subject to transitional rules, include the imposition of a 30% managed investment trust withholding tax rate on: distributions of some income from cross-staple arrangements (subject to various exceptions); distributions attributable to trading income derived through other trusts; and, income and capital gains from agricultural land and residential premises. The sovereign immunity and superannuation fund withholding tax exemptions are restricted to payments by entities in which the non-resident has a less than 10% interest.

Read our Long-awaited integrity package on taxation of stapled structures released

Hybrid mismatch rules: As part of the base erosion and profit shifting project, the Organisation for Economic Cooperation and Development developed hybrid mismatch rules aimed at preventing multinational companies from gaining an unfair competitive advantage by avoiding income tax or obtaining double tax benefits through hybrid mismatch arrangements. These arrangements exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions. Subject to some exceptions, the rules apply to affected payments after 1 January 2019, and to income years commencing on or after 1 January 2019.

Read our Exposure draft legislation for Australian "hybrid mismatch rules" released

Tax

New and impending laws, such as the Foreign Influence Transparency Scheme Act 2018 (Cth) and the Modern Slavery Bill 2018 (Cth), 2019 will be implemented in 2019, and there is interest in how courts will interpret the requirements, if tested. Also, the ASX Corporate Governance Council is expected to release the fourth edition of the Corporate Governance Principles and Recommendations. The draft released in May 2018 retained the same eight core principles contained in the third edition, although the Council has proposed significant changes to principle 3 (a listed entity should act ethically and responsibly) to address issues of corporate values and culture, social licence to operate with stronger reference to stakeholders beyond shareholders, and specific recommendations on whistleblowing and anti-bribery and corruption.

Read out Corporate governance beyond shareholder interests

Intellectual Property

IP Australia released exposure draft legislation to implement the second part of the Federal Government's response to the Productivity Commission's final report on its inquiry into Australia's IP arrangements. Changes include amending inventive step requirements and provisions for compulsory licencing for patents, as well as abolishing the innovation patent system. A Bill is expected in late 2018 or early 2019. The Copyright Amendment (Online Infringement) Bill 2018 (Cth) passed the lower House in October 2018 and was referred to a Senate Committee for review, with the Senate's report due in late November 2018. The Bill aims to allow copyright owners to enforce their rights in the online sphere, expanding the threshold test to catch more online locations that are deliberately infringing copyright.

Read more here and here

Competition and Consumer Law

Foreign exchange inquiry: Following a World Bank report that found Australia was the third most expensive G20 country for consumers and small businesses to transmit money, the ACCC will examine the supply of foreign currency conversion services. The final report into the inquiry is due May 2019.

Litigation

Class actions: With inquiries by the Victorian Law Reform Commission and the Australian Law Reform Commission into Australia's class action regime in 2018, there is likely to be pressure for reform in 2019, particularly in relation to litigation funding and the management of class actions. However, progress may be delayed by the impending federal election.

Infrastructure and Projects

Infrastructure: Further development of major construction projects will occur in the Australian infrastructure market in 2019, including North East Link, Melbourne Airport Rail Link, Sydney Metro West and the Victorian Outer Suburban Arterial Roads project.

Security of payment laws: The New South Wales Government has proposed changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) that are consistent with the recommendations in the Murray Review, though not primarily created specifically to give effect to that review. The Bill seeks to facilitate greater confidence within the industry about the Act’s ability to facilitate cash flow along the construction chain.

Energy

The Australian Capital Territory, the first Australian jurisdiction to join the UN-backed Powering Past Coal Alliance, has announced a renewable energy target (RET) of 100% and net zero emissions by 2045. Also, the NSW Government has launched the NSW Emerging Energy Program, aiming to scale back coal and transition to renewable energy by 2040. By maintaining the current rate of solar PV and wind deployment, Australia is forecast to comfortably exceed the 2020 RET of 33,000 GWh, achieve 26% emissions reduction by 2020/21 and meet its Paris greenhouse emissions target in 2024/25. The ACCC will continue its measures to improve transparency across the gas market supply chain, including its trial measures of publishing the LNG netback price on its website. The ACCC will also continue to push for implementation of its electricity recommendations arising from the Retail Electricity Pricing Inquiry Final Report.

Read more

Key contacts for Australia
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