2019 – what a year!
2019 was an election year, which means that until May when the election was held, many promises were made and then after the election a lot of activity happened, with the government trying to legislate its agenda and get some early wins, especially around tax cuts.
In 2019 we realised, once and for all, that regulation was never going to stop growing and that we needed new ways to deal with it. Even more so, we look towards innovation and solutions like regtech, fintech, edutech and anything else that involves technology to help us deal with this ever-increasing burden. In 2019, yet another Deregulation Taskforce was launched by the government, which followed a Senate inquiry which made recommendations for a regulation stocktake. We ask – what’s going to be different this time round to all the other deregulation taskforces? I especially recall the 2005 Taskforce on Reducing Regulatory Burdens on Business (reporting in early 2006), known as the Banks report. It made many useful and practical recommendations that could just be dusted off and recycled. And there were many more deregulation taskforces before this one. But government doesn’t work that way. Every new government has to have some kind of attempt at deregulation.
In the meantime, research indicates, unsurprisingly, that small businesses continue to be concerned about the impact of regulation. And rightfully so. The Productivity Commission has estimated that regulatory compliance costs could be as high as 4 per cent of GDP.
So far, the record for deregulation has not been great. The government’s Deregulation Agenda has arguably been unsuccessful. Since September 2013, regulation has increased by an average annual rate of 32,366 pages, with six times more secondary than primary regulation.
IPA continues to argue that regulation should be risk-based with the amount and level of regulation being proportionate to the risk. It should also be designed with small business in mind and then scaled up, which is a lot easier to do than starting with big business and trying to scale down.
Being the first year after an election meant that 2019 saw numerous inquiries and taskforces announced. Of particular relevance for accountants was the review of the Tax Practitioners Board. The IPA made its submission and took the opportunity to yet again argue in favour of a streamlined financial services regime just for accountants. This is not a return to the days of the exemption, prior to the Future of Financial Advice reforms, but something much more practical and workable, which can genuinely operate in the best interests of consumers with unmet financial advice needs. In fact, according to the Productivity Commission, 48 per cent of Australians say they have unmet financial advice needs.
The future of the financial advice landscape has been shaped by The Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which was released in February 2019. After all the sensational exposés about banking behavior the final recommendations seemed anti-climactic. Many commentators believed that the 76 recommendations were ‘soft’ or even disappointing, with the focus on the need to change culture and behavior, applying and enforcing the law and the need for regulators to be more aggressive. On the other hand, some believe that it could lead to massive disruption for the better. At an estimated taxpayer cost of $75 million, it continued to make the headlines in 2019, with more to come in the years ahead as the impact of the implementation of the recommendations is felt.
Auditors and auditing
2019 saw the scrutiny on auditors increase as the concern about audit quality continues. A parliamentary joint committee inquiry was launched in 2019 into the Regulation of Auditing in Australia, with particular reference to the relationship between auditing and consulting services and potential conflicts of interest, and other potential conflicts of interest, audit quality, the role of audit in detecting fraud, the effectiveness and appropriateness of legislation, regulation and licensing and so on. In other words, everything is being scrutinised and considered. Our submission is available on the IPA website. The IPA has had to respond to the increased scrutiny through increased reporting to the regulators, including reporting on our supervision of Registered Company Auditors, Registered SMSF Auditors and anyone who does any kind of audit work, such as auditing the books of the local sporting club.
More inquiries and more reports
Also, in 2019 we had some enlightening reports released by the Productivity Commission, including:
Review of the efficiency and competitiveness of the Australian superannuation system, which found structural flaws such as unintended multiple accounts and entrenched under performers. Fixing these could benefit superannuation members to the tune of $3.8 billion per annum.
Mental health inquiry was released to examine the effect of mental health on our economy and productivity – the cost is in the billions.
Growing the digital economy in Australia and NZ: Maximising opportunities for SMEs found that technology has not solved the ‘curse of distance’ but proximity to funds, talent and ideas must become more important. We need to consider and implement the most effective institutional and regulatory settings.
See you all in 2020.
Vicki Stylianou, executive general manager advocacy & technical at the IPA