All articles in Volume 13 Issue 8

ATO to publish private company tax details

29 April BRR image

Laws requiring the Australian Tax Office (ATO) to publish the tax affairs of companies with more than $100 million turnover are to come into effect on 1 July 2015. This is expected to affect around 700 private companies.

The ATO will publish the ABN, company name, total revenue, declared taxable income and tax payable.

While the government has suggested that they will wind back the laws, the current political environment towards taxation may mean that this does not occur. The ATO has said that the information would likely be published towards the end of 2015 and will cover information from the 2014 tax year.

Accordingly, directors of these companies should expect and plan for increased scrutiny from interested groups, including media outlets. Some commentators have suggested that the information may shine a light on tax cheats. Such sentiments clearly demonstrate that directors must be prepared for the possible reputational damage for both the company and themselves.

Advisers Senate SHJ suggest the following preparations for companies and directors:

  • Review current taxation approach and identify any areas of potential criticism or misinterpretation From this evaluation, develop and test a narrative outlining the company’s position on taxation, as the central content piece for all communication.
  • A tight, strong set of key messages based on this narrative for use in any public situation.
  • Specific coaching on how to deal with questioning from the media/politicians and third party groups.
  • An early warning/flagging system that picks up on mainstream, digital and social media coverage of the issue.
  • Specific messaging and a Q&A for employees and an easy to find position statement on the company website to explain the company’s position.
  • A media holding statement.


ACNC streamlines reporting

The Australian Charities and Not-for-profits Commission (ACNC) announced that non-government schools will not have to directly provide any financial information to the ACNC for the 2014 and 2015 reporting periods.

The ACNC will instead extract the relevant data from Department of Education and Training’s financial questionnaires.

Announcing the move, ACNC commissioner Susan Pascoe AM FAICD, said although this arrangement currently applies to the 2014 and 2015 reporting periods, the ACNC intends to pursue longer-term arrangements.

“As commissioner, I intend to seek amendment to the ACNC regulation to extend the transitional period to continue this arrangement while we work towards a long-term streamlined reporting solution for this highly regulated sector,” she said.

Currently, non-government schools benefit from transitional arrangements allowing the ACNC to accept the financial reports they already provide to the Department of Education and Training. However, the latest announcement means this arrangement will extend to non-government schools not being required to complete the financial questions in the 2014 and 2015 annual information statements.

“The ACNC is committed to streamlining reporting processes for non-government schools,” Pascoe added. “One of the objects of the ACNC Act is to contribute to the reduction of unnecessary regulatory obligations on the sector.”

Pascoe added that the announcement was reflective of the ACNC’s approach to red tape reduction, which she outlined as two-fold: “minimising our own regulatory requirements to those necessary to promote public trust and confidence in the sector and to support a robust and innovative sector; and working with other agencies to reduce unnecessary or duplicative administrative requirements imposed on the sector under the principle of ‘report once, use often’,” she said.


Corporate governance in ASEAN

Ensuring high corporate governance standards will be critical to the capability of Southeast Asian countries, according to Chris Razook, corporate governance lead, East Asia Pacific at the International Finance Corporation.

The formation of the Association of Southeast Asian Nations (ASEAN) Economic Community, which will allow goods, services and investments to flow more freely across the borders of Southeast Asian countries is expected to bring more foreign investment to member countries and help unlock the potential in the region, but Razook stresses that this will present both opportunities and challenges for companies in those markets.

In an article titled, Corporate Governance Challenges Facing Southeast Asia, he notes that the ASEAN countries have a combined per capita gross domestic product (GDP) of just $3,800, only slightly more than half of China’s $6,600 and a fraction of developed East Asian countries, such as Japan ($38,000), South Korea ($23,000) and Taiwan ($20,000).

However, comparisons across the six primary ASEAN markets – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – reveal a significant asymmetry of governance standards and practices, he says.

Razook notes that Indonesia, the Philippines and Vietnam need to continue pushing for corporate governance reforms, with common themes emerging in these countries, which together represent around 70 per cent of ASEAN’s total population.

Some of the common challenges for individual companies include:

  • Levels of transparency, particularly the disclosures of non-financial information and price-sensitive or insider information.
  • The functioning of corporate boards, including the level of independence, stewardship and oversight roles, and procedures.
  • Risk management, internal control and audit functions.
  • Conflicts of interest and related-party transactions.
  • Shareholder rights and practices, including formal shareholder meeting procedures and stronger protections for minority shareholders.

Razook adds that at a market level, there is still much work to be done, with regulators and governments continuing to strengthen and harmonise corporate governance codes and regulations.

The full article can be found here.

For more on ASEAN, register for our Company Directors Conference: Directorship:15 on 20 - 23 May in Kuala Lumpur, Malaysia. Related session and forum topics include "The Opportunity of the ASEAN Economic Community "and "ASEAN's Economic Community - a new growth frontier? "


Canada sets diversity targets

Canada has recently proposed new amendments to its federal corporate governance framework in its Economic Action Plan 2015.

The government has outlined plans to increase women’s participation in corporate leadership, improve shareholder democracy and communications, strengthen corporate transparency and reduce the regulatory burden on Canadian businesses.

Recognising that increasing opportunities for women to serve on corporate boards and in leadership roles makes good business sense, the government has proposed amendments to the Canada Business Corporations Act to promote gender diversity among public companies. It will do this using the widely recognised “comply or explain” model of disclosure currently required for TSX-listed companies and by most provincial securities regulators.

Amendments will also be proposed to modernise director election processes and communications with shareholders and to strengthen corporate transparency through an explicit ban on bearer instruments, a type of fixed-income security through which the identity of the owner can be concealed. Amendments to related statutes governing co-operatives and not-for-profit corporations will also be introduced to ensure continued alignment among federal laws.

The announcement follows the Australian Institute of Company Directors’ (AICD’s) recent diversity announcement, which recommended voluntary targets, rather than mandated quotas, for all S&P/ASX 200 boards to ensure that 30 per cent of their directors are female by the end of 2018.

Canada’s moves also follow Germany which passed a law in March forcing 100 of the country's top companies to have at least 30 per cent of board seats held by women by January next year.


A strategy for strategy

Do you think you have a winning strategy? A new book called Your Strategy Needs a Strategy, scheduled for publication in May, is set to challenge how executives approach strategy.

The book written by Martin Reeves, Martin Reeves, Knut Haanaes and Janmejaya Sinhaand from Boston Consulting Group, is based on ideas outlined in a 2012 Harvard Business Review article which states there are four broad strategy styles. Companies that can match their strategy style to their environment perform better.

Classical strategy is what we see most often, the article says, and is “familiar to most managers and business school graduates”. It is suitable for stable, long-term industries.

Adaptive strategy is used where long-term plans are less useful, where the environment is fast moving, the economics are uncertain and disruption rules. They cite Zara, the fashion group as operating in such an environment. They need to set their strategy for the short term, and hence, set the business to rapidly adapt to new circumstances as they appear.

Shaping strategy is for the environments in which nothing can be taken as permanent, for example, internet software. Fragmentation, new entrants and dominant incumbents all exist together. Shaping strategies are highly flexible and focus beyond company boundaries. These businesses shape their own environment.

Visionary strategy is for those businesses going beyond shaping their industry by actually laying down a vision of the future – companies see new markets and then create them. The examples include Edison for electricity and UPS for internet purchase logistics. These strategies are “big-bets, build-it-and-they-will come” by design.

The book introduces a fifth strategy archetype called “renewal” for those environments in which resources are “severely constrained”. This is when the current way of doing business cannot continue and a new strategy is needed. The example of American Express following the global financial crisis is cited in the book.

Businesses may need to use some elements from each style, and some forward- thinking directors might find it worthwhile to see strategies prepared in different styles.

For the full Harvard Business Review 2012 article, click here.


Oh data, where art thou? 

There are many questions about data being asked in boardrooms across Australia. Unfortunately, simple questions aren’t getting straightforward answers.

According to an article featured in Business Spectator by Wayne Goss, regional vice-president, Asia-Pacific & Japan at software company SugarCRM, answers to questions regarding the location and control they of data may be greeted with a long and frustrating answer.

Goss warns that not knowing where your data is, or how it is managed, is a cause for concern. He adds that while advancements like “ubiquitous broadband, commodity storage, virtualisation, internet protocols and low cost compute power have enabled corporates to strip out technology and management costs while simultaneously improving service delivery”, such developments have come with a trade-off.

Goss states that the conversation among board executives has now started to change, especially around data management when using cloud services. He adds that while corporate boards have been happy to sign off on new cloud services that deliver better services at lower cost, “many are now starting to better understand the resulting loss of control.”

He says this shift in attitude demonstrates that there is a big re-think underway as boards look to gain more control and a better understanding of their companies’ data.

In the same way that many consumers are starting to re-think what apps they allow on their mobiles, the corporate world is taking a good look at cloud services to better understand the status of their data.

He adds that the high-profile data breaches of the past two years are driving this change, citing Target, Home Depot and Sony Pictures as examples of costly catastrophes that have brought the issue closer to home for many directors.

Goss adds that aside from security risks, there are equally important regulatory issues at play with cloud computing, with some companies holding data and applications with local cloud providers now finding their data is being held offshore – perhaps contrary to the regulatory environments in which they operate.


Suncorp names CEO

Michael Cameron FAICD has been appointed as the new group chief executive officer (CEO) and managing director of Suncorp Group.

Cameron will take the helm in October 2015 following the departure of outgoing chief, Patrick Snowball, who has led the group for six years.

Cameron is currently CEO and managing director of GPT, a position he has held for six years and he has been a non-executive director of Suncorp Group since April 2012.

Snowball will leave the insurer in October to return to the UK.

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Tim Sheehy, CEO at the Governance Institute of Australia has announced he will be stepping down later this year.

Sheehy has held the role for 15 years having established the Governance Institute as a key founding member of the ASX Corporate Governance Council.

Succession planning began last year when Sheehy advised the board of his intention to step down at the end of 2015.

He will continue as CEO until a successor has been appointed.


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