This chapter details the committee's conclusions and recommendations in the following areas: technology enablers during the COVID-19 pandemic; regulation; tax settings; access to capital; culture and skills.
COVID-19 recovery measures (Chapter 2)
The committee heard that the economic impacts of the COVID-19 pandemic have created serious difficulties for the FinTech and RegTech sectors in Australia. The committee also notes the significant support that has been provided to the sector through the JobKeeper program, as well as funding initiatives aimed at supporting non-bank lenders and regulatory relief offered by Australia’s financial regulators.
The committee took a range of evidence on technology enablers which have supported businesses and other entities to continue to operate through the crisis period. The committee considers that a number of temporary changes made during the crisis should be made permanent in order to lock in technology gains.
Technology neutral corporations law
The committee received evidence that the temporary changes to allow companies to convene annual general meetings (AGMs) and other meetings prescribed under the Corporations Act 2001 (Corporations Act) online were broadly supported and should continue. The committee commends the Treasurer’s recent decision to extend the temporary changes for a further six months beyond the initial November 2020 expiry date.
The committee notes evidence that virtual company meetings can provide new avenues for engagement, with analysis of virtual AGMs during April and May 2020 indicating that overall attendance increased by 36 per cent relative to the same period in 2019. The committee supports enabling companies to decide on the best format for their meetings while ensuring that shareholders are not disenfranchised.
In particular, in the case of virtual meetings (where shareholders are not physically present), there should be requirements for the transparent recording and publishing of questions submitted by shareholders and answers given by directors, management and the auditor so that the dynamic of public accountability which occurs through an open question and answer session in a physical meeting is replicated in a virtual meeting.
In addition to enabling hybrid or virtual company meetings, the committee heard that broader changes are required to make the Corporations Act technology neutral, in order to: enable efficiency in company operations; ensure that technology changes are adopted as widely as possible; and future proof the Act as technology evolves. This includes amendments to enable companies to communicate electronically with shareholders by default, with shareholders retaining the right to request paper-based communications if they wish to do so. This measure would improve efficiency and address paper wastage.
Given that the Treasurer’s temporary determination will now be in place until mid-2021, this time should be used to prepare permanent changes to the Corporations Act for implementation.
The committee recommends that the Corporations Act 2001 be amended to allow companies to decide the best format for holding their annual general meetings and other prescribed meetings (whether through virtual meetings, in-person meetings or hybrid meetings), while ensuring the needs of shareholders are taken into account.
The committee recommends that the Corporations Act 2001 be amended to enable companies to communicate with shareholders electronically by default, with shareholders retaining the right to request paper-based communications on an opt-in basis.
Digital signatures and videoconferencing for legal purposes
The committee notes that evidence supported the temporary measures to assist persons and companies to meet their obligations under the Corporations Act by executing company documents electronically. A number of states and territories also put temporary regulations in place aimed at enabling electronic execution and witnessing of legal documents, with mixed results in terms of efficacy and certainty.
The committee considers that changes to enable electronic execution and witnessing of legal documents should be made permanent, and consistent across Australian jurisdictions. This can be done while maintaining similar levels of security as ‘wet signatures’, and would provide significant efficiencies in both time and cost. It will also assist in future scenarios such as during natural disasters, as well as assisting those in regional and remote areas.
The committee urges the Australian Government to work with states and territories to amend relevant regulations across jurisdictions to achieve consistency in this area.
The committee recommends that the Corporations Act 2001 and other relevant legislation and regulations be amended in order to allow for the electronic signature and execution of legal documents.
The committee recommends that relevant regulations be amended in order to enable the witnessing of official documents via videoconferencing or other secure technological means.
Telehealth and e-Prescriptions
The committee received overwhelming support for the expansion of the availability of telehealth services by general practitioners and other medical specialists during COVID-19, hearing that it has been transformational to the health system both in responding to the pandemic and for the future. The committee notes that telehealth has been embraced by patients and doctors alike. The benefits extend beyond cost savings to improving patient outcomes and ensuring access in non-metropolitan areas.
The committee emphasises in particular that access to telehealth services has been critically important to Australians in rural, regional and remote areas during the pandemic. It is vital that the needs of rural Australians continue to be addressed through the use of appropriate telehealth services into the future.
The committee is recommending that telehealth items become a permanent feature of the Australian healthcare system as a means of increasing patient choice and control over their health services. It is important that any permanent changes in this area do not result in a diminishing of the availability of face-to-face GP services; patients who wish to access health services in person should be enabled to do so wherever possible.
The committee recommends that Medicare telehealth items introduced during the pandemic be made a permanent feature of the Australian healthcare system, with ongoing refinement and review as appropriate.
The committee commends the temporary solutions for digital prescriptions implemented during the COVID-19 period. The committee notes the government plan to fast-track the implementation of electronic prescriptions, with ePrescription functionality to be rolled out progressively from mid-2020. The committee considers that this implementation should continue to be rolled out as quickly as possible. The government should also ensure that the system implemented creates an open and accessible market for ePrescription services in Australia.
As with telehealth services, it is important that the rollout of ePrescriptions is an enabler of patient choice and convenience, and does not result in reduced services available in-person at pharmacies; the community’s ability to consult a pharmacist face to face when necessary must be fully maintained.
The committee recommends that work on implementing ePrescriptions in Australia continue as quickly as possible, and that the Australian Government ensure an open and accessible market for ePrescription services.
Progress of Digital ID reforms
The committee notes the significant progress made since 2015 towards establishing a national framework for the operation of a federated digital identity ecosystem.
The Digital Transformation Agency (DTA) told the committee that its current work program for this initiative includes: continuing to expand the range of federal government services accessible under the myGovID digital identity; and developing legislation that will enable a truly national, economy-wide set of rules to be established within which digital identity providers will operate, including state and territory government agencies and private sector providers.
The committee considers that continuing and accelerating this program of work is of great importance as Australia emerges from the COVID-19 crisis. These reforms will deliver significant time and cost savings to individuals and businesses, as well as creating opportunities for innovative FinTechs and others working in the digital identity space.
The committee notes that the intention of a federated digital identity ecosystem would not be to create a single digital identity solution for individuals or businesses to use; rather, it would develop a common set of ground rules for both government agencies and private sector organisations to be able to develop tailored digital identity management products and solutions. This can enable innovation and competition among providers to occur, while ensuring that consumers retain control over which (if any) digital identity providers they choose to engage with.
The committee urges that legislative work being developed by DTA be brought forward as quickly as possible by government, in consultation with states and territories through the Digital Economy and Technology Ministers forum.
Any proposal brought forward by the government must ensure that the digital identity solutions created under the framework are accessible on an opt-in basis only (rather than being mandated); and should be available in addition to the other forms of identity verification currently in use, rather than replacing those alternatives.
The committee recommends that the Digital Identity reforms led by the Digital Transformation Agency be accelerated in order to deliver a national, economy-wide framework for the operation of a federated digital identity ecosystem as soon as possible.
Use of RegTech to simplify compliance with industrial awards
The committee supports any initiatives that would help small business to comply with industrial awards and protect the interests of employees, and considers that RegTech solutions can be of significant assistance in this area. The committee heard several proposals on these issues.
The Australian Small Business and Family Enterprise Ombudsman proposed that the Fair Work Ombudsman (FWO) should be empowered to accredit RegTech solutions to be used by Small and Medium Enterprises in complying with industrial award requirements, and that where an accredited RegTech solution has been used appropriately, a business should be provided safe harbour from prosecution for non-compliance (while still having to make good on any underpayments).
Tanda suggested that, rather than a formal accreditation system for these RegTech products, government should develop a rating system to measure and report on the extent to which off-the-shelf payroll calculation technology provides a compliant solution when used properly.
The committee considers that there is enormous potential for RegTech products to provide practical benefit to both businesses and employees, however the committee does not have a clear view at this stage on the best way forward in balancing the various interests at stake. Further work is required to develop a system in which RegTech solutions in this area can be used with confidence by businesses, while ensuring that employees are appropriately protected. The government, in conjunction with the FWO and other relevant stakeholders, should explore options to create a workable solution in this area.
The committee recommends that the Australian Government explore options to promote the use of RegTech solutions in assisting small and medium-sized enterprises to comply with their obligations under industrial awards.
Tax issues (Chapter 3)
R&D Tax Incentive
The committee notes evidence from witnesses that the process of applying for the R&D Tax Incentive (R&DTI) is long, difficult and resource intensive, making it especially challenging for early stage FinTechs which are time and resource poor.
A consistent theme in evidence to the committee was the call for greater clarity and certainty in relation to the operation of the R&DTI for software. While the committee acknowledges that in February 2019 the government published new software guidance, this does not appear to have addressed the concerns. While the incentive appears to support the early phase of experimentation and development of a product, the committee believes there needs to be greater clarity around the point at which software is seen as innovation and the point at which it is not. The committee considers this additional clarification is required to clarify when and how the R&DTI is applied to software development in relation to FinTech businesses to ensure genuine software creation by Australian startups is reliably supported.
The committee also heard significant concerns around the retrospective action taken against R&DTI claimants, with rebates being clawed back in some cases several years after initial payment. The committee considers that this creates an unacceptable level of uncertainty for participants in the scheme. The government needs to provide clearer guidance on this issue and limitations on the ability for payments to be clawed back retrospectively.
The committee recommends that the Australian Government provide further clarity around eligibility for the Research & Development Tax Incentive to ensure genuine software creation by Australian startups is reliably supported.
The committee recommends that the Australian Government provide increased certainty around claiming the Research & Development Tax Incentive through issuing guidance in conjunction with the Australian Tax Office. In particular, clear limitations should be placed on the ability for payments to be clawed back retrospectively.
The committee notes the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 [Provisions] has been referred to the Senate Economics Legislation Committee which is due to report on 12 October 2020.
The committee notes that although payroll tax is a state imposed tax, it was raised as a significant issue by some submitters and witnesses, due to the different platforms and requirements between jurisdictions. It was also suggested that early to mid-stage startups should be supported through payroll tax concessions. Noting the action taken by the Government of South Australia to reduce the payroll tax burden for small businesses, and other payroll tax measures introduced by several jurisdictions during the COVID-19 pandemic, the committee recommends that the Council for Federal Financial Relations work to drive simplification of payroll taxes across Australian jurisdictions to assist ease of compliance.
The committee recommends that the Australian Government, through the Council for Federal Financial Relations, simplify payroll taxes across Australian jurisdictions.
The committee also sees value in state governments investigating RegTech solutions to provide a single payroll tax platform to simplify compliance processes.
Employee share schemes
The committee understands the highly competitive nature of the skills market in the technology sector and the need to offer non-salary based incentives to attract and retain scarce talent. The use of employee share schemes (ESS) was raised in this context. The committee notes evidence that while the tax treatment of ESS has improved in recent years, current capital gains tax implications decrease the effectiveness ESS as a means of attracting and retaining talent, and there has been confusion as to the operation of these schemes.
The committee notes that the Treasury completed a consultation process in relation to ESS, with a consultation paper released in April 2019 and submissions received by Treasury; however no final report from this consultation is evident. The committee also notes that the House of Representatives Standing Committee on Tax and Revenue is currently conducting an inquiry into the Tax Treatment of Employee Share Schemes, which commenced on 6 February 2020.
Initial Coin Offerings
The committee notes the potential of blockchain and the National Blockchain Roadmap released by the Department of Industry, Science, Energy and Resources in February 2020. In the context of raising capital, the tax treatment of Initial Coin Offerings (ICOs) was raised with the committee, in particular that the issuance of an ICO is currently taxed as income.
The committee notes that the Treasury conducted a consultation process into ICOs with an issues paper released in January 2019 and submissions received. A final report does not appear to be available.
The committee recommends that the Australian Government release the final Treasury report on Initial Coin Offerings when it is completed.
Regulation issues (Chapter 4)
Competition mandate for financial regulators
The committee recognises the critical importance of promoting competition in the financial services sector for Australia's future prosperity. As such, ensuring financial regulators and policymakers are sufficiently focused on this outcome is key.
The committee notes that the ability of the Australian Securities and Investment Commission (ASIC) to consider competition issues has increased since legislated changes to its mandate in 2018, and that the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA) both can engage with competition issues in their decision making.
Despite this, feedback from submitters and witnesses indicates that it is still unclear who is running competition in the financial services sector. Too many issues are falling between the cracks due to the multiple agency approach currently in place. The committee considers that a more holistic focus on competition issues would be helpful, backed up by regular public reporting.
Rather than making further changes to the individual mandates of the various financial regulators, the committee considers that the most efficient mechanism for elevating consideration of competition issues at the regulatory level would be to arm the Council of Financial Regulators (CFR) with a competition mandate, backed up by regular reporting to deal with this issue. This will require the Australian Competition and Consumer Commission (ACCC) to provide more regular input to the CFR than it does currently.
The committee recommends that the Australian Government provide the Council of Financial Regulators (CFR) with a competition mandate as advice to the government and that the CFR regularly report on competitive dynamics in the Australian financial services market.
International competitiveness framework
The committee considers it is vital that Australia is regularly assessing its global competitiveness in financial services broadly, and in FinTech and technology adoption specifically. The global nature of FinTech businesses means that there is significant upside potential if Australia can create the right settings to attract talent and capital into our financial services sector; conversely, the downside risk if we fall behind global trends is also substantial.
Other jurisdictions are moving ahead in this area. It is worth noting, for example, that the United Kingdom, which is already an established FinTech leader, recently launched a further review of its policy settings to support growth and competitiveness in the sector and extend government funding initiatives. Australia risks being left behind if it does not continue to proactively consider its global position and take measures to maintain its competitiveness.
The committee notes Austrade's evidence that it is involved in compiling research on Australia's global position in FinTech. To ensure that Australia's key financial regulators and policymakers are giving Australia's international competitive position the focus it requires, the committee considers that the Council of Financial Regulators is best placed to take up the function of regularly considering and reporting on this issue.
The committee recommends that the Australian Government establish a framework for the Council of Financial Regulators, supported by Austrade, to regularly consider and report on Australia's external competitive position in financial services, including measuring technology adoption and innovation.
Supporting a pro-innovation regulatory culture
The committee heard that more needs to be done to ensure Australia’s financial regulators are actively driving a pro-innovation culture in financial services. The committee considers that ASIC’s enhanced regulatory sandbox framework, coming into effect from 1 September 2020, will go some way to assisting on this issue. More broadly, however, regulators such as ASIC, APRA and the RBA need clearer measures of accountability when it comes to supporting innovation.
To give one example, measuring ASIC’s performance in relation to competition and innovation needs to go beyond measuring how many organisations engage with ASIC’s Innovation Hub; rather, a market basis is required for determining success (for example, reporting on the number of new businesses established, people employed and innovative products deployed to market as a result of the Innovation Hub).
The committee considers that ASIC and APRA need to have clear Key Performance Indicators established relating to their support for competition and innovation in the market. Examining the model used in the United Kingdom to measure regulator performance may be helpful in this regard.
The committee recommends that the Australian Government establish a market basis for determining the success of Australia’s financial regulators in supporting a pro-innovation and pro-competition culture in financial services.
The committee considers that in many instances, industry self-regulation can be an efficient way for innovative products in the financial services sector to emerge, while ensuring adequate protections for consumers. The Australian Banking Association’s Banking Code of Practice, approved by ASIC in 2018, shows that a co-regulatory approach between industry and regulators can be effective in enhancing consumer outcomes.
The development of an industry code of practice in the Buy Now Pay Later (BNPL) sector is an example of where industry is working constructively to respond to stakeholder concerns and seek to achieve appropriate regulation that benefits consumers. The committee notes evidence from the Australian Finance Industry Association that even at the peak of financial hardship requests from consumers in March and April 2020, across the BNPL industry the percentage of customers approved for hardship was less than 1 per cent.
The committee considers that the Australian Government should support initiatives where self-regulation can be utilised appropriately in financial services. Although it is appropriate that ASIC and the RBA undertake reviews into various regulatory issues, the policy in this space must be set by the Parliament.
It is therefore appropriate that the regulatory landscape for innovative products like BNPL be set out by a clear policy statement from the elected Parliament.
Because innovation like BNPL often occurs on the fringes of regulation, it is inappropriate to force each innovation into a one size fits all approach. Industry self-regulation provides an initial framework to protect innovation which can later be backed up by a policy statement or a form of co-regulation (collaboration between industry and government).
The committee recommends that the Australian Government establish a culture of innovation and competition in financial services by supporting self-regulation where innovative products emerge, whilst ensuring strong consumer protection.
Access regime for the NPP
The committee believes that the New Payments Platform (NPP) is a vital piece of market infrastructure that will underpin improvements in the payments system and across financial services in Australia in the years to come.
The committee has noted the strong concerns raised by some submitters and witnesses around access arrangements and functionality offered by the NPP.
The committee notes that the RBA's Payments Systems Board is monitoring these issues closely and will undertake a further formal review of NPP functionality and access issues commencing no later than July 2021, or earlier if it deems necessary.
There are a range of options available in the case that further measures are required to ensure fair and equitable access to the NPP for FinTechs and smaller market participants, including a regulated access regime or support for NPP access costs and transaction fees.
While not recommending any of these measures be taken up directly at this time, the committee considers that more regular public reporting of the progress of NPP capability upgrades (including the implementation status of these upgrades by each direct NPP participant) will enhance transparency and drive wider access to the platform. NPP Australia could deliver this reporting requirement quarterly to give full visibility as to the progress of the NPP as it matures.
The committee recommends that New Payments Platform Australia regularly report on implementation progress of the NPP roadmap in order to drive wider access to the platform.
Property and Blockchain
Noting the potential of blockchain in the property sector and the developing infrastructure around blockchain the committee sees value in the property sector working with the states and territories to investigate the development of a blockchain based set of government property data.
Foreign exchange transparency
The need for transparency in the area of foreign exchange fees appears self‑evident to the committee. The committee agrees that consumers should be empowered to know how much they are paying in foreign exchange fees, and that this transparency would lead to increased competition.
The committee notes that the ACCC has published best practice guidance documents for businesses on the transparent pricing of foreign currency conversion services, and on the disclosure of international transaction fees. The committee notes further that the ACCC will be monitoring industry implementation of this guidance and reporting back to government by September 2020, and that a cross-agency working party has been established to look at foreign exchange issues. The committee is of the view that a mandatory code of best practice for industry participants should be strongly considered as part of these developments.
The committee recommends that, if the ACCC finds poor industry adherence to its best practice guidance for foreign currency conversion services and international transaction fees, the development of a market code of best practice to promote integrity and transparency within the foreign exchange market should be considered.
Refine and expand the Consumer Data Right (Chapter 5)
The Consumer Data Right (CDR) is a complex and ground-breaking reform that will, over time, deliver increased competition and significant benefits to consumers across the Australian economy.
Submitters and witnesses raised a wide variety of issues, relating to the initial CDR rollout in the banking sector as well the CDR's subsequent expansion into other sectors.
The committee notes concern that oversight of the CDR is unnecessarily fragmented and regulatory arrangements need to be consolidated. More broadly, the committee heard that great benefits could be achieved by consolidating national data policy under a single agency. The committee agrees that it is time for a clear, effective and accountable regulatory structure for all aspects of data management and privacy in the digital economy.
As this broad goal may take some time to achieve, as a starting point the committee is recommending that a new national body be established to take on regulatory and operational responsibility for the Consumer Data Right. Over time, other functions relating to data policy could also be consolidated under this new body.
The committee recommends that the Australian Government establish a new national body to consolidate regulatory responsibilities in relation to the implementation of the Consumer Data Right.
Accreditation of third party intermediaries to access CDR data
The committee heard significant concerns that the current, single accreditation level of 'unrestricted data recipient' is not a viable proposition for many FinTechs due to the costs and rigour associated with becoming accredited at this level. As such, an appropriate accreditation regime for third parties and intermediaries will be critical if Open Banking is to achieve its intended purpose of increasing competition and providing greater choice for consumers.
The committee notes the ACCC is currently undertaking a consultation process on draft rules relating to third party intermediary access to Open Banking data. It is critical that this framework enables access by a wide range of intermediary organisations, and that intermediary organisations can commence getting accredited as soon as possible.
The committee recommends that the Australian Competition and Consumer Commission, or the new proposed national Consumer Data Right (CDR) body, finalise the rules for intermediary and third party access to CDR banking data by late 2020, and enable intermediaries to enter the CDR ecosystem as soon as possible thereafter.
Consumer education and awareness
The committee concurs with FinTechs and other submitters who argued that consumer awareness of the CDR and the impending rollout of Open Banking is currently low. It is vital that consumers themselves are educated about the benefits and opportunities of the CDR in order for these benefits to be realised.
The committee notes that the ACCC and Treasury are coordinating a CDR communication and education strategy targeted to both consumers and industry, with initial funding of $350,000 in FY2019-20. The committee considers it is vital that the banking industry itself is involved in promoting the transition to Open Banking and in engaging customers with the new ways they can utilise their data.
The ACCC should require, at a minimum, that the major banks provide agreed messaging to their customers in order to promote the CDR, as well as considering advertising campaigns specific to Open Banking (as opposed to the broader, economy-wide CDR initiative). The Australian Banking Association may be well placed to help facilitate the coordination of this messaging.
It is important that government continue to provide appropriate resourcing in FY2020-21 for the ACCC and Treasury to continue its communication and education strategy. In addition, the banking industry itself should also contribute funding towards the costs of the education campaigns necessary to drive consumer uptake of the CDR in that sector.
The committee recommends that the Australian Government work with the banking industry to establish and implement targeted campaigns to educate consumers on the Consumer Data Right and the opportunities that Open Banking provides.
In the context of new and innovative products and services coming to market, the committee considers it important to recognise the need for financial literacy programs to keep pace with policy and technology change to help address any digital divide in terms of understanding new technology. While these products can have the potential to provide benefit to customers, there is also a need to ensure customers, particularly those who are vulnerable, are able to understand their obligations and any risk in order to avoid suffering detriment from an evolving marketplace.
Treatment of digital data capture practices
On the issue of digital data capture or 'screen scraping', the committee notes the strong views expressed by both supporters and opponents of this technology.
In the committee's view, it is pertinent that ASIC has found no evidence of consumer harm as a result of these practices. It is also clear that it will take some time for the Open Banking regime to provide a level of data quality and ubiquity that is currently available using digital data capture services.
As such, the committee considers that an outright ban on screen scraping is not prudent at the present time, and that in many cases these practices are enabling companies to innovate and provide competition in the financial services sector. This situation should continue to be monitored, however, as Open Banking is rolled out. ASIC's current consideration of the ePayments Code will also provide important input on this issue.
The committee recommends the Australian Government maintain existing regulatory arrangements in relation to digital data capture.
Expanding the Consumer Data Right
The committee considers that, given the technical infrastructure already in place and the ongoing work on data availability in the superannuation sector, the CDR should be expandeto superannuation as soon as possible.
The committee is unconvinced by arguments made by some submitters that additional time is required to implement the CDR in Superannuation. The superannuation industry has a poor track record of making relevant and useful data available to consumers.
In relation to the scope of Open Super, the committee considers that both customer-level data as well as product reference data would be valuable to be brought under an Open Super scheme, and that, as recommended by the Productivity Commission, super funds should be automatically accredited to receive Open Banking data.
The ACCC told the committee that it is willing to start research work on the rollout of the CDR into the superannuation sector. The committee considers that this work should commence immediately, with a view to expanding the CDR into superannuation as quickly as possible. The committee will monitor progress on this issue in the coming months and provide further comment on the implementation of Open Super in its final report.
The committee also considers that the general insurance market would benefit considerably from the rollout of the CDR. The government should flag its intention to expand the CDR into insurance and provide an indicative timeline in which this may be possible.
The committee recommends that the Australian Government expand the Consumer Data Right to include other financial services, starting with the superannuation sector and then including sectors such as general insurance.
Access to Capital (Chapter 6)
Refinements to ESVCLP and ESIC incentives
The committee is of the view that the Early Stage Innovation Company (ESIC) and Early Stage Venture Capital Limited Partnerships (ESVCLP) initiatives were designed on the basis that they could be recalibrated. It believes that such schemes must be iterative in order to facilitate success and be responsive to the needs of the sector, and that the qualification criteria for these programs now need to be amended to widen access to startups and investors.
The committee recommends that the Australian Government amend the Early Stage Innovation Company and Early Stage Venture Capital Limited Partnerships qualification criteria to widen access to startups and investors.
Creation of Corporate CIV and Limited Partnership CIV
The committee notes evidence received from the Australian Investment Council that the current Australian Collective Investment Vehicle (CIV) regime may be acting as a deterrent to international investors. Implementing CIVs as a priority would boost Australia’s competitiveness as an investment destination as investors are familiar with this form of investment. This action could help capitalise on recent political changes in Hong Kong which may lead to the deterioration in its status as a global financial centre. The uncertainty that has been created provides opportunities for other regional centres including Australia to attract new investment, companies and talent to become a regional technology and financial services centre.
The committee agrees that the creation of a Limited Partnership CIV and a corporate CIV would be beneficial in encouraging international investment in the Australian FinTech and RegTech sectors.
The committee recommends that the Australian Government implement a Limited Partnership Collective Investment Vehicle and a Corporate Collective Investment Vehicle regime to drive inbound capital investment for Australian startups.
Collaboration between large and small business
The committee is of the view that government has a role to play in creating an ecosystem which encourages competition and choice, and facilitates getting more innovative FinTech and Regtech products to market.
As such, the committee considers it appropriate that the government consider incentives to assist in and encourage collaboration between large businesses and startups.
The committee recommends that the Australian Government consider incentives to encourage collaboration between large businesses and startups.
Encourage super funds to invest more broadly
The committee is mindful of the sole purpose test in superannuation; that is, the legal requirement that requires super funds be maintained for the sole purpose of providing retirement benefits to their members, or to their dependants if a member dies before retirement.
The committee is not suggesting that a particular component of superannuation be mandated for a particular investment purpose. Additionally, the committee is mindful that superannuation funds must consider levels of risk appetite and prudently manage their costs in relation to investments.
However, the committee is of the view that there is merit in further investigation as to how the vast pool of capital available in superannuation funds can be appropriately and prudently invested.
The committee recommends that the Australian Government foster a culture where superannuation funds invest more widely, including in Australian startups, without undermining the sole purpose test.
Culture (Chapter 7)
Leveraging Commonwealth procurement
The committee considers that government should play a proactive role in encouraging growth opportunities for innovative firms through appropriate procurement policies, including at the Commonwealth level.
The committee recommends that the Australian Government undertake a stocktake to better understand the costs and complexity for small businesses, including FinTechs and RegTechs, in Commonwealth Procurement.
Challenge based innovation
The committee heard evidence on several initiatives aiming to enable X-tech firms to solve policy challenges set by government.
The committee is impressed by the work being done as part of the Business Research and Innovation Initiative (BRII). It is of the opinion that the BRII is valuable not only in opening up opportunities for SMEs to showcase their potential and grow their business, but also for allowing government to access and support innovative technologies.
The committee also notes that under the Digital Marketplace initiative run by the Digital Transformation Agency, SMEs are able to make government aware of their services and government agencies are able to ‘Ask the Market’ for participants to solve particular problems.
The importance of hackathons and similar challenge-based events was also highlighted to the committee as a means of allowing innovative firms to pitch ideas and contribute solutions to problems across a range of areas. The committee suggests that the government consider holding event-based challenges based on specific problems to augment the initiatives already taking place. Issues such as the challenge of modern award complexity could be excellent candidates for this type of program.
The committee recommends that the Australian Government consider holding event-based challenges or initiatives to enable innovative FinTechs and RegTechs to solve policy and service delivery challenges.
AgTech Advisory Council
The committee is encouraged by the work being done by the National Farmers’ Federation, the rural and research development corporations, university-based incubators, and individual companies in the Agricultural Technology (AgTech) space. It considers there is immense potential for Australian AgTech innovations to deliver productivity, market, and employment benefits both domestically and internationally.
The committee is of the view that the AgTech sector would benefit from a national leadership group to provide guidance and leadership on AgTech policy matters in a consultative and consolidated manner.
The committee recommends that the Australian Government create an Agricultural Technology (AgTech) Advisory Council to advise on AgTech policy in a consolidated manner.
Skills and training (Chapter 7)
It is apparent to the committee that there is great benefit in ensuring that Australian workers have the opportunity to retrain and reskill throughout their careers. The committee heard that microcredentials and similar skills programs will be of critical importance as Australia transitions its workforce towards emerging technologies and industries, particularly in the context of COVID-19.
The committee sees merit in the proposal submitted by the Business Council of Australia for a HECS-style Lifelong Skills Account, which would provide opportunities for individuals to retrain and reskill throughout their careers by updating their training through microcredential qualifications. The committee is of the view that further investigation should be conducted to progress such a policy.
The committee recommends that the Australian Government work with industry to ensure reskilling of workers affected by economic change and the availability and accessibility of microcredentials for those seeking to join the FinTech and RegTech industries.
Clarity around Fringe Benefits Tax and retraining
The committee sees value in the recommendation put forward by EY and agrees that eligible outplacement training should be exempt from Fringe Benefits Tax.
The committee considers that this change would improve the regulatory environment and provide benefits to employers and employees impacted by technological advancement.
The committee recommends that the Australian Government explore including eligible outplacement training under the Fringe Benefit Tax exemption provision for eligible startups.
Senator Andrew Bragg