Australia: What happened in 2020 and significant events in 2021

Australian Law: Year in Review 2020 and Year to Come 2021 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.

Explore our overview of key developments below.

Updates in

51

key areas in 2020 and 2021

Significant legal and regulatory events in 2020

Covid-19 necessitated measured responses from governments and regulators to help businesses, consumers and others navigate the uncertainty of 2020. Some legislative and policy initiatives were delayed, replaced by financial relief, tax concessions and legal protections. However, where appropriate, policy initiatives and laws proceeded.

Corporate

ASIC updates fees and costs disclosure regime: In September, ASIC released revised fee and cost disclosure requirements for superannuation and managed investment scheme product disclosure statements and periodic statements.

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Company 'officer', even without the official title: In June, the High Court's consideration of the meaning and scope of the term 'officer', as defined in s9 of the Corporations Act 2001 (Cth), contains important (non-binding) observations on how the term may catch bankers and other third parties.

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Executive remuneration practices: In June 2020, ASIC issued practical guidance for boards on oversight and discretion in relation to variable executive remuneration practices.

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Offshore oil and gas decommissioning inquiry: Proposed changes to the framework for decommissioning infrastructure in Commonwealth offshore waters should be released in late 2020.

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Rights issues and compulsory acquisition rights: In April, the Takeovers Panel released reasons for its decision in Strategic Minerals Corporation NL 06, reaffirming that a company should carefully consider any proposed rights issue if that issue is likely to lead to a compulsory acquisition of the company's shares.

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Report on directors' liability: The Australian Institute of Company Directors asked Allens to prepare a comparative report on director criminal and civil liability in Australia and other key jurisdictions. It concludes that the frameworks are similar in imposing direct, accessorial and deemed liability, but there are also some key differences.

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Banking

Debt capital market transactions review: In September, ASIC released the findings of its surveillance of debt capital markets transactions practices. Its 'better practice' guidelines include that Australian financial services licensees employ stronger controls on information management and conflicts of interest.

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Providing financial services 'fairly': In February, a Federal Court decision clarified the meaning of 'fairly' in the context of providing financial services 'efficiently, honestly and fairly'.

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Financial product intervention powers: In June, the Australian Securities and Investments Commission (ASIC) published guidance on its approach to using its product intervention powers.

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Report on alternative investment funds: In June, the European Commission published its report on the Alternative Investment Fund Managers Directive (AIFMD), which reviews the impact of the AIFMD on alternative investment fund managers, funds and investors, and analyses how the AIFMD's key features have worked and the market effect.

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Review of security over financial products regime: In September, the Federal Government released a consultation paper on proposed reform of the regime for taking security over financial assets under the Personal Property Securities Act 2009 (Cth).

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Competition and consumer credit

Regulation of anti-competitive conduct: In October, the ACCC commenced its first cartel contravention proceeding in 2020 (with the goal of prosecuting two new cartel cases this year). It has also hardened its merger review stance, following court approval for the Vodafone Hutchinson Australia/TPG Telcom Limited merger and the ACCC's unsuccessful appeal against the Pacific National/Aurizon decision. Further, it has increased its focus on data accumulation and the effect on digital platform market power (e.g. Google's proposed acquisition of Fitbit and Facebook's acquisition of Giphy – both are still under review). Following the Digital Platforms Inquiry final report, the Federal Government has asked the ACCC to conduct inquiries into Digital Advertising Services and Digital Platforms Services.

Read more... here, here and here

Taxation

ATO alerts on high risk tax issues: The Australian Taxation Office (ATO) has issued alerts about new and emerging higher risk tax arrangements that are currently under review, including: structures used by foreign investors to invest directly into Australian businesses with features that are inconsistent with vanilla debt or equity interests and/or provide the investor with direct exposure to the economic return from a particular business or assets; and pre-sale restructuring involving steps unnecessary to achieve the commercial objective of divesting the underlying assets.

Foreign resident beneficiaries taxable on capital gains: This year, two Federal Court decisions have indicated that foreign residents may be subject to capital gains tax (CGT) when receiving the distribution of a capital gain on any asset (i.e. even if it is not taxable Australian property under CGT rules) as a foreign resident beneficiary of an Australian discretionary trust. These decisions should not impact foreign resident beneficiaries of Australian 'fixed' trusts (e.g. 'attribution managed investment trusts'), which should include investments in trusts by foreign institutional investors.

Draft guidance on related party interest-free loans: In August, the ATO released draft guidance on its approach to outbound interest-free loans between cross-border related parties.

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Energy, resources and environment

Increased funding available for hydrogen projects: Various Australian development finance facilities have announced increased funding for hydrogen-related investments, with Australia being positioned as a major player in the hydrogen industry by 2030.

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Waste export regulation and stronger product stewardship regime: In August, a bill was introduced into the Federal Parliament which prohibits the export of 'regulated waste material' unless prescribed export conditions are met. It also sets out a framework to encourage more responsibility for the environmental impacts of products.

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Real estate

Build-to-rent project relief for approved projects: New South Wales is proposing a 50% land tax discount and a foreign investor surcharge exemption until 2040.

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Data, Privacy and Cybersecurity

Covid-19 policy legislative measures: In April, the Federal Government launched its voluntary digital contact tracing app 'COVIDSafe' to support the pandemic response, and legislated for handling of the app data by health authorities. The Office of the Australian Information Commissioner (OAIC) developed guidance to manage privacy risks.

Read more... here, here and here

Data portability reform: In July, the Computer Data Right (CDR) regime, jointly enforced by the ACCC and the OAIC, commenced for the banking sector.

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Insolvency, litigation and dispute resolution

Class action developments: In April, the Federal Court refused to order disclosure of the respondent's insurance policies to the applicant, holding that the court's case management powers and the overarching purpose of the legislation (which have previously been successfully relied on) did not empower the court to make that order. In May, the Federal Government announced that litigation funders operating in Australia must hold an Australian financial services licence and comply with the managed investment scheme regime. The Government also announced temporary easing of the Corporations Act continuous disclosure rules until late November. In August, the Parliamentary Joint Committee on Corporations and Financial Services completed its inquiry into litigation funding and regulation of the class action industry. The final report is expected in December.

Read more... here, here, here and here

Insolvency relief extension and reforms for small business: In September, the Federal Government extended (until 31 December) temporary insolvency and bankruptcy protections for businesses affected by Covid-19. The protections include relief for directors from personal liability for insolvent trading and an increase in the monetary threshold for creditors issuing statutory demands. The Government also announced proposed reforms to streamline.

Arbitration: In May, the New South Wales Court of Appeal, reinforcing the need for precise drafting of arbitration clauses, held that a dispute was improperly referred to arbitration because the claim for unliquidated damages was outside the scope of the arbitration agreement.

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Construction and infrastructure

More safeguards for apartment building owners: In June, New South Wales enacted legislation to provide greater protections to high-rise residential apartment owners, including: a duty of care imposed on developers and some building industry participants to current and future owners to avoid economic loss caused by building defects; increased licensing requirements for some designers, engineers and builders; and more power for regulatory authorities to proactively investigate projects and issue orders stopping works.

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Intellectual property

Intellectual property developments and reform: In February, legislation to amend the Crown-use provisions for patents and designs, phase out the innovation patent system and amend the compulsory licence provisions for patents received Royal Assent. In May, the Office of the Chief Economist of IP Australia published the Australian Intellectual Property Report 2020, identifying key trends that will assist businesses in understanding current themes in IP filings in Australia.

Read more... here and here

Significant legal and regulatory events in 2021

There are a number of areas in which law reform and regulatory intervention are anticipated, particularly where issues stalled in 2020 because of Covid-19. Consumer credit, banking and financial services, data protection, privacy and cybersecurity reform are expected to feature in 2021

Corporate

ASIC's corporate plan 2020-2024: In August 2020, ASIC published its Corporate Plan, setting out its strategic priorities and proposed actions for the next four years.

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Virtual meetings and electronic execution: The Federal Government has announced proposed amendments to the Corporations Act to allow companies to hold meetings virtually and to execute documents and send meeting-related materials electronically. These reforms were temporarily introduced in response to the Covid-19 crisis but will now be expanded and made permanent.

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Franchising: In October 2020, the Federal Government released its response to the 2019 Fairness in Franchising Report. Increased and new penalties, more disclosure requirements and additional dispute resolution options are anticipated and expected to be in place in mid-2021.

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Major proposed changes to Australia's foreign investment regime: In June 2020, the Federal Government announced proposed changes to the foreign investment review regime to address national security risks and ensure greater compliance with Foreign Investment Review Board approval conditions. The proposed changes, if passed, will be the most comprehensive reforms to Australia’s foreign investment review framework in more than 20 years. The changes, expected to take effect on 1 January 2021, include protecting Australia’s national security; stronger penalties, compliance and enforcement powers; and more co-ordinated information gathering and sharing.

Read more... here, here and here

Banking and financial services

New foreign financial services provider framework: From 1 April 2022, a new framework for foreign financial services providers will commence, with limited licensing relief for foreign financial services providers that provide 'funds management financial services' to some professional investors in Australia.

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Product design and distribution obligations: A new 'design and distribution' regime commencing in October 2021 means that product issuers (including insurers, banks and superannuation trustees) must make and review a 'target market determination' for each product the regime covers. Product issuers and distributors must also comply with conduct, notification and record keeping obligations. ASIC will be providing regulatory guidance.

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Transition from London Interbank Offered Rate: In October 2020, following the UK Financial Conduct Authority's announcement that it would not support the London Interbank Offered Rate (LIBOR) beyond 2021, the International Swaps and Derivatives Association (ISDA) released the 2020 IBOR Fallbacks Protocol and associated Supplement to the 2006 ISDA Definitions. Australian regulators have urged all impacted Australian institutions to adhere in LIBOR-referenced derivatives contracts to the new ISDA Protocol and Supplement by its effective date of 25 January 2021.

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Superannuation, funds and insurance regulatory reform: In January 2020, the Federal Government released an extensive draft legislative package to implement recommended reform measures from the Hayne Banking Royal Commission, including measures dealing with enforceability of financial services industry codes (including a framework to establish mandatory codes) and strengthening of ASIC breach reporting requirements. It is expected that these reforms will become law in 2021.

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Replacement of clearing and settlement system: The Australian Securities Exchange is expected to replace the Clearing House Electronic Subregister System (CHESS), the current system for the Australian cash equity market. ASIC and the Reserve Bank have outlined their expectations for the replacement system – a need for a contemporary clearing and settlement infrastructure that is efficient, reliable and scalable to meet existing and future needs of the market.

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Competition and consumer credit

'Winding back' responsible lending obligations: The Federal Government has announced a simplification of Australia's consumer credit regulatory regime to help accelerate Australia's post-Covid economic recovery. This initiative is regarded as a 'winding back' or 'axing' of the consumer credit responsible lending obligations.

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Competition regulatory agenda: Consistent with global trends, big tech and distressed mergers and acquisitions will continue to attract ACCC attention and intervention. Digital platforms will be an ongoing focus area with the ad tech inquiry final report due, as is a new report into app marketplaces as part of the Digital Platform Services Inquiry. Implementation and enforcement of a mandatory news media bargaining code addressing power imbalances between Australian news media businesses and digital platforms (initially Google and Facebook) is also expected. Investigations and inquiries will likely continue to be part of the ACCC's enforcement toolkit, with several inquiries due to commence in 2021 (e.g. perishable agricultural goods) and others to continue (e.g. ad tech, domestic airlines, digital platform services). The ACCC will continue to rely on litigation as an enforcement tool, with more ACCC-initiated market power misuse and criminal cartel court proceedings expected.

Taxation

Corporate residency taxation test: The Federal Government is proposing to amend the corporate residency test used to determine if an offshore company is liable for income tax or eligible for tax concessions in Australia. The new test would treat an offshore incorporated company as an Australian tax resident if it has a ‘significant economic connection to Australia’ and its central management and control is in Australia. While the change will have effect after enabling legislation receives Royal Assent, taxpayers may elect to apply the new law from 15 March 2017.

Updated list of exchange information jurisdictions: The Federal Government has announced that it will update the current list of 122 jurisdictions with which it shares tax information, adding Hong Kong, Kuwait, Dominican Republic, Ecuador, El Salvador, Jamaica, Morocco, North Macedonia and Serbia, and removing Kenya. Residents of listed jurisdictions may access a 15% withholding tax rate on some income (instead of the corporate tax rate of 30%).

Transfer pricing appeal decision pending: Judgment is pending in the ATO's Full Federal Court appeal against a taxpayer's successful challenge in a case involving Australia's transfer pricing laws. In the case at first instance, the taxpayer succeeded in upholding the tax outcomes under the actual transaction, which the ATO sought to adjust, involving the sale of a commodity produced at an Australian mine by the Australian seller to its foreign parent.

Energy, resources and environment

Electricity market reforms needed for clean energy: In 2020, the Federal Government released its first Low Emissions Technology Statement confirming its focus on public investment in clean hydrogen, energy storage, low carbon materials, carbon capture storage and soil carbon. However, with existing networks struggling to keep up with, and adapt to, rapid changes and opportunities from renewable energy, digitalisation and new technologies, significant policy changes and proper network planning and investment will be needed to implement the Government's agenda.

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Data, privacy and cybersecurity

Privacy reform: The Federal Government has flagged a privacy regime review, including changes to legislative definitions (including 'personal information') and proposed legislation to amend remedies/penalties to align with the Competition and Consumer Act 2010 (Cth).

Landmark case against Facebook: The OAIC is seeking civil pecuniary penalties against Facebook for breaches of the Australian Privacy Principles. The case will set a precedent for determining the amount of future penalties under, and the extra-territorial application of, Australia's privacy laws.

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Cybersecurity reforms: The Federal Government's Cyber Security Strategy 2020 Report has signalled an expansion of mandatory cybersecurity requirements and legislative reform, including: expansion of the critical infrastructure legislation; consultation on new directors' duties; new voluntary codes; and a standing 'Industry Advisory Committee'.

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ACCC response to privacy issues: The ACCC made far-reaching recommendations in its final report in the Digital Platforms Inquiry, including proposed significant changes to the Australian privacy regulatory regime. Increasingly, the ACCC appears to consider privacy issues to be part of its consumer protection role (e.g. two ongoing court cases brought by the ACCC against Google for misleading consumers about data collection).

Read more... here and here

Continued CDR rollout of the Consumer Data Right: The Australian Government will focus on the expansion of the CDR regime's coverage to key sectors of the economy as it continues to undertake further consultations and inquiries into the future directions of the regime. In 2021, the OAIC will collaborate with the ACCC to develop a privacy framework to support the CDR rollout to the energy sector.

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Insolvency, litigation and dispute resolution

Class actions: Covid-19 is likely to continue to play a role in new class action filings during 2021.

Construction and infrastructure

Refocusing Australia's infrastructure pipeline: The Federal Government is expected to continue promoting an infrastructure-led recovery from Covid-19. In October 2020, the Government's Infrastructure Australia Priority List focused on transport initiatives and projects, with many pre-dating Covid-19. With the pandemic changing how Australians work and interact, 2021 may also see more focus on social infrastructure, renewable energy, affordable housing and community infrastructure initiatives.

Read more…

Intellectual property

Proposed design amendments: The Federal Government has released draft amendments to the Designs Act 2003 (Cth). Key proposals include a 12-month grace period for filing a design after disclosure, and a corresponding 'prior use' provision to protect third parties who commence use of a design before its priority date.

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Upcoming review of Australia’s patents system: The Federal Government has launched a review of the accessibility of patents for small/medium-sized enterprises (following phasing out of the innovation patent system), with a final report due by May 2021.

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