THE Institute of Public Accountants’ (IPA) pre-Budget 2018-19 submission in January recommended that the Federal Government introduce a publicly-supported venture capital (VC) fund to enhance the entrepreneurial environment in Australia.

“The VC fund could be established by either providing a significant proportion of funds to assist VC managers to attract other institutional investors to publicly-supported VC funds or by becoming an institutional investor in a range of individual VC funds,” IPA chief executive officer, Andrew Conway said.

“This level of support by government to small business equity finance will improve the entrepreneurial environment in Australia and act as a catalyst in identifying and overcoming hurdles to successful and profitable investment. 

“Many young firms face funding problems, particularly in uncertain technological or new knowledge environments because of their unattractiveness to bank lenders.

“It is a lost opportunity to the Australian economy when innovative firms with high commercial potential are constrained by the absence of external finance,” Mr Conway said.

“Any government with a strong commitment to economic growth via research and development and investment which facilitates greater enterprise and innovation activity must ensure that early-stage venture capital finance remains available to high potential, young firms.

“Otherwise, we risk a reduction in new commercialisation opportunities stemming from national investments in science and technology,” Mr Conway said.

www.publicaccountants.or.au

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FEDERAL Treasurer Scott Morrison has called an enquiry into the impediments to business investment in Australia.

“Business has told us that regulations are one major impediment to investment, especially in terms of the volume of regulation and compliance costs,” Mr Morrison said. “Businesses find it particularly difficult when they are required to interact with multiple levels of government.

“The Australian Government has cut more than $5.8 billion of red-tape and will continue to search for opportunities to go further, including through the Small Business Regulatory Reform Agenda I announced in last year’s Budget. 

“An examination of these and other matters will strengthen our understanding of how the multitude of regulatory systems in Australia affect business investment and assist in the development of a regulatory system that enables growth and supports the ongoing transformation of the Australian economy.”

Late last year, the Council on Federal Financial Relations reviewed the report on the Intergovernmental Review of Business Investment prepared by Heads of Treasuries. The report revealed that investment was driven by a complex mix of factors, including temporary and structural factors, policy settings and institutions.

“I have written to the chair of the House of Representatives Standing Committee on Economics, Sarah Henderson MP, to request that the committee undertake an inquiry into the impediments to business investment in Australia,” Mr Morrison said.

“Business investment is critical to economic growth. When firms are empowered to invest in new productive capacity and technology, it supports innovation and helps create new opportunities and employment for Australians.”

Terms of Reference for the inquiry include the interaction between regulatory frameworks across all levels of government and how the cumulative regulatory burden can be reduced to support greater business investment; the impact of innovation policies, at the Federal and State government levels, on business investment and the role of innovation policies in encouraging greater business investment, considering approaches taken in other countries; the role that taxation policy can have on the encouragement of new business investment; the role that energy policies can have on the encouragement of new business investment; and the impact of supplier payment times, including by governments, on business investment for small to medium enterprise.

www.treasury.gov.au

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MINISTER for Revenue and Financial Services, Kelly O'Dwyer has welcomed the Australian Securities and Investments Commission (ASIC) opening up to public consultation on draft regulatory guidance for its oversight of the new Australian Financial Complaints Authority (AFCA).

“ASIC’s draft guidance is another important step in establishing the AFCA — a new one-stop shop for external dispute resolution in the Australian financial system,” Ms O’Dwyer said. 

“We are putting the governance processes in place so the AFCA is ready to start receiving consumer and small business disputes no later than November 1, 2018.”

Parliament passed legislation to establish the AFCA scheme on February 14 this year. Under the legislation, ASIC will have a new 'directions' power that will strengthen its oversight of the new external dispute resolution scheme.

“The draft regulatory guidance sets out ASIC’s approach and I encourage all stakeholders to be involved in this important consultation process,” Ms O’Dwyer said

The draft regulatory guidance Regulatory Guide 139, Oversight of AFCA, will be open for public consultation until April 6 this year..

The updated RG 139 will be finalised and published by the time AFCA launches.

ASIC is also inviting stakeholder views on the need for any transitional relief from external dispute resolution disclosure obligations.

The consultation paper and draft regulatory guide is available on the ASIC website.

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THE Institute of Public Accountants (IPA) has called on the Federal Government to show the cost benefit analysis to support the roll-out of Single Touch Payroll (STP) – especially its impact on small business.

“We support the objectives behind STP and the increased transparency and visibility it provides,” said IPA chief executive officer, Andrew Conway.

“For larger employers, the compliance costs associated with STP can be streamlined within their existing processes with minimal additional compliance costs; this is not the case for small or micro-employers. 

“The IPA advocated for the government to draw a line in the sand to stop mandatory reporting for smaller employers, pending a full cost benefit analysis.

“The government conducted a pilot program and we have been waiting for the results to prove the cost benefit analysis of introducing the program, especially in relation to how it impacts SMEs.

“The July 1, 2018 introduction of STP for employers with more than 20 employees followed by July 1, 2019 for those entities employing less than 20 employees, comes with significant ramifications for all employers,” Mr Conway said.

“The digitisation of small business is a priority for their future business growth and competitiveness; that means a financial outlay which many may struggle to meet.

“We are therefore keen to see the details of incentives that the government will provide to small business to transition to STP.

“Comments that infer that STP will reduce the regulatory burden are misguided. Small businesses already face considerable compliance issues; STP will just add to the load with mandatory pay-period based reporting.

“Many businesses not geared to make the transition will need to further engage with their trusted advisers; their accountants and bookkeepers to help meet their compliance needs,” Mr Conway said.

www.publicaccountants.org.au

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AUSTRALIA’s new crowd-sourced funding (CSF) rules are in from September 29 and the Australian Securities and Investment Commission (ASIC) is now accepting licence applications from CSF intermediaries.

Under the CSF regime, eligible public companies can make offers of fully paid ordinary shares to a large number of investors via the online platform of a licensed intermediary. Generally, the CSF regime reduces the regulatory requirements for public fundraising and the intermediaries will play an important oversight role in this process.

ASIC Commissioner John Price said the new system balanced the need for regulatory oversight with supporting innovation.

“ASIC welcomes the start of the new crowd-sourced funding laws,” Mr Price said. “Crowd-sourced funding helps both start-ups and small to medium sized businesses and investors access the opportunities that are available from an innovative economy.

“It is also important for investors to understand the benefits and risks of crowd-sourced funding and we encourage them to refer to the materials on crowd-sourced funding on our MoneySmart website,” he said.

For companies to access the benefits of the new CSF regime, ASIC must first license suitable intermediaries to provide crowd-funding services. Providers of CSF services must hold an Australian financial services (AFS) licence.

Mr Price said to facilitate implementation of this regime as soon as possible, ASIC’s Licensing team would consider applications from CSF intermediaries as a matter of priority.

ASIC has released further details of its approach to the assessment of CSF intermediaries, and the information required for both new licence and variation applications seeking CSF service authorisation.

ASIC has also released an update to ASIC Form 206 which can be used to convert an existing company so that it is eligible to use the new CSF regime.

www.asic.gov.au

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NEW RESEARCH aimS to establish current trends and best practice in the growing financial technology (fintech) lending market to small and medium enterprises (SME).

Fintech small business lenders will be surveyed as part of a collaborative research project by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) with industry organisation FinTech Australia and independent SME finance expert Neil Slonim from theBankDoctor.org.

Fintech lenders are an emerging alternative to banks for small business loans, often through seamless and highly automated online application, assessment and decision processes. 

Ombudsman Kate Carnell said fintech lenders had potential to “fill the gap left by traditional bank lenders in the marketplace”, particularly as awareness, trust and confidence in alternative lending grew.

Ms Carnell commended the sector for being proactive to ensure best practice and transparency.

“But with rapid growth in the number of lenders and the variation of fintech products, it becomes more difficult for SMEs to make informed decisions about which products and lenders best suit their circumstances,” Ms Carnell said.

“The survey will collect information from fintech lenders that can shed light on some of these issues.

“Results will be published in a report to identify industry best practice and help SMEs to better understand their fintech borrowing options.

“The survey results will also inform fintech lenders how they can help SMEs by improving the transparency of their lending products and by clearly communicating the rates, costs, terms and conditions of their products.”

FinTech Australia CEO Danielle Szetho said FinTech Australia was pleased to work with the ASBFEO and theBankDoctor.org.

“This work will help us to understand how the industry is currently servicing SMEs and steps we might take as an industry to improve the SME community’s awareness and understanding of alternative lending products,” Ms Szetho said.

“What is clear is that banks have not been adequately servicing the SME community’s needs and fintechs have stepped in with new loan products to help fill that gap.

“This is proving to be a very beneficial and cost-effective source of funding for SMEs. This research will help even more SMEs to invest in their growth and benefit from alternative lending products.”

Neil Slonim from theBankDoctor.org said, “It is not easy for small business owners to assess whether borrowing from a fintech lender is the best option for them, and if so, which lender they should choose.

“There are around 30 fintech small business lenders now operating and their websites, through which they engage with their customers, all appear to be much the same.

“As a not-for-profit SME advocate we are pleased to be working with the ASBFEO and FinTech Australia to raise understanding and transparency in a sector which is becoming increasingly relevant to small business owners.”

www.asbfeo.gov.au/consultation/fintech-survey

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SUPPORT for innovative financial technology (fintech) development has helped Australia become the second largest alternative finance market in the Asia-Pacific region after Singapore, with US$610 million raised in 2016.

A KPMG, Cambridge Centre for Alternative Finance and Australian Centre for Financial Studies report revealed Australia’s market grew more than 50 percent over the last year, leapfrogging Japan, and now makes up more than 30 percent of the total Asia-Pacific alternative finance market.

Alternative finance provides new business models for lending and other forms of finance including balance sheet lending, peer-to-peer lending, crowdfunding and invoice financing. The report confirmed the positive impact the Federal Government’s fintech agenda is having in making Australia a global fintech hub.  

“This is a fantastic outcome and reinforces Australia’s leading global position in the development and use of fintech,” Federal Treasurer Scott Morrison said. “It reflects the hard work and dedication by those in the sector, and shows the actions of the Turnbull Government to support the fintech sector are making an impact.”

Mr Morrison said long-term growth of the alternative finance market would depend on regulations that strike an appropriate balance between protecting consumers and encouraging financial innovation.

“It is therefore encouraging that the (KPMG) report detailed positive attitudes on Australia’s regulatory settings, with around two thirds of respondents considering Australia’s regulations to be ‘adequate and appropriate’,’ Mr Morrison said.

Since releasing its fintech statement in March 2016, the Federal Government has moved to ensure Australia has the right policy settings in place to make it easier for FinTech businesses to succeed in this country, the Treasurer said..

He said the government also legislated to support the Australian fintech sector to become a global leader by extending the crowd sourced equity funding framework to proprietary companies and removing the double taxation on digital currency.

The full report is available on the KPMG website.

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