Holding Redlich's expert guide to the new financial year

As the new financial year rapidly approaches, we outline the key changes that will take effect from 1 July 2019 – as well as in the coming months - and discuss what you can do to best prepare for them.

We examine the changes set to take place in:

• Competition & Consumer
• Construction & Infrastructure
• Corporate & Commercial
• Procurement
• Technology, Media & Communications
• Workplace Relations & Safety.

Big shots still to be fired by competition regulator in 2019

In the first half of the new financial year, on 13 September 2019, we will see the repeal of the intellectual property exemption in subsection 51(3) of the Competition and Consumer Act come into effect (see our article here). On 21 June 2019, the Australian Competition and Consumer Commission (ACCC) released draft guidelines for consultation. We encourage clients to consider their existing contracts and arrangements prior to the repeal taking effect to ensure they are not in breach of competition laws by way of their previous reliance on the exemption.

We also expect to see plenty of activity from the chief regulator, the ACCC in its priority areas including actions in respect of electrical and whitegoods products and customer loyalty programs. In February 2019, the ACCC announced it was closely examining the use of any personal data collected by schemes in the airline, retail and hospitality sectors, as well as whether the benefits promised were actually received and the competition issues around new entrants and the impact of such programs. We are yet to see the result of these investigations to date, and any outcomes are likely to be interesting in the world of ‘big data’ and the overlap of misleading and deceptive conduct with privacy laws.

The ACCC also aims to have two to three criminal cartel investigations come to conclusion and prosecutions commence each year. With increased budget support from the Government announced at the end of last year, the ACCC expected to see at least three significant cartel investigations referred to the Commonwealth Director of Public Prosecutions (CDPP) in 2019 for a decision on whether to prosecute, so we are likely to see more to be announced in the first half of this financial year.

Author: Senior associate Emily Booth 

In the new financial year we look forward to the implementation of various recently introduced legislative changes as well as the continued development of key themes in the market and reform programs already underway. 

The recent NSW and federal elections have already brought us announcements of the next cycle of major infrastructure projects. Last month, we touched on the major projects the Coalition Government committed to during the federal election campaign and in March we looked at the major projects the NSW Government committed to during its state election campaign.

We now take a look at the recently introduced legislative changes and reforms that are likely to impact the industry in the new financial year - and beyond.

National Construction Code

A major change for the building and construction industry is the 2019 National Construction Code (NCC), which became effective on 1 May 2019, repealing the NCC 2016. The NCC is a performance-based code that applies to all states and territories across the country, and all persons involved in the construction of buildings, by setting out guidance and code compliance levels that must be followed. Overarching the guidance and code is a minimum level of performance requirements. The NCC 2019 will apply as follows:

• Volume One contains requirements for multi-residential, commercial, industrial and public buildings and structures
• Volume Two contains the requirements for residential and non-habitable buildings and structures
• Volume Three contains the requirements for plumbing and drainage for all classes of buildings.

The NCC 2019  includes a number of key changes:

• Readability
  • structural changes to simplify readability, improve access, awareness and understanding.
• Performance Requirements 
  • an estimated 40 per cent of the Code’s Performance Requirements are quantified either directly or by an NNC Verification Method (VM).
• Fire Safety
  • from 1 May 2020, a new non-mandatory Fire Safety VM will be introduced
  • new Deemed-to-Satisfy Provisions for fire sprinklers must be installed in apartment buildings and other residential buildings of four or more storeys and up to 25m in effective height.
• Energy Consumption
  • a number of compliance measures to focus on reducing energy consumption by up to 35 per cent.
• Condensation management
  • provisions to reduce the likelihood of risks associated with condensation within buildings.
• Roof-top spaces
  • additional provisions to clarify the application of requirements to occupiable outdoor areas, such as roof-top spaces.
• Plumbing
  • heated water temperature control, cross-connection control and rainwater harvesting and use requirements.

Building and Development Certifiers Act 2018 (NSW)

On 31 October 2018, the NSW government passed the Building and Development Certifiers Act 2018 (the BDCA).

The BDCA implements a number of changes to improve the certification process relating to building works throughout NSW, including:

• the registration of certifiers
• requirements surrounding the independence and impartiality of certifiers
• the process for pursuing disciplinary proceedings
• increasing accreditation standards.

Certifiers will need to be “registered” by the Secretary of the Department of Finance (Secretary) and the duration of a registration license is extended from one year, until at least five years, which allows the Secretary to reward low-risk certifiers.

To improve impartiality, the conflict of interest provisions under the BDCA have been broadened to cover all, rather than some, types of work undertaken by certifiers. This means if a certifier undertakes certification work whilst having a conflict of interest they will potentially be in breach of the BDCA and subject to a maximum penalty of $33,000.

The BDCA replaces the two-stage disciplinary process under the Building Professionals Act 2005 (NSW) with a more modern compliance framework. It deletes the terms ‘unsatisfactory professional conduct’ and ‘professional misconduct’ and empowers the Secretary with a number of grounds to rely on when enforcing disciplinary action. The Secretary may also serve a written notice on the certifier to show-cause why disciplinary action should not be taken.

The new disciplinary process also involves changes to how a certifier can challenge the merits of a decision and have it reviewed. The existing review process has been replaced with the standardised internal review provisions found in the Administrative Decisions Review Act 1997 (NSW).

The introduction of the BDCA comes at a time when certifiers are under increased public scrutiny, in particular following recent high rise apartment evacuations in NSW. Future reforms in this area will need to confront the gulf between the public perception that the role of the certifier is to inspect work and pass it for quality and the reality on the ground.

Further, in support of the BDCA, on 30 December 2018 the NSW Government announced a four-point plan focussed on compliance and enforcement reforms to improve certification.  The plan includes new disciplinary policy that will see certifiers penalised for not complying with relevant legalisation or negligently signing off on a building which is unsafe or structurally unsound.

Shergold Weir Report

In February 2019, the NSW Government released its response to the Shergold Weir Report 'Building Confidence'. The report was commissioned to follow compliance issues in the construction industry at state, national and international levels.

The NSW Government’s response states that it plans to implement the following:

• appointment of a Building Commissioner
• overhaul compliance reporting
• require building practitioners with reporting obligations to be registered
• ensure that there is an industry wide duty of care to homeowners, which in effect would reverse the High Court decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2013] HCA 36. 

We are yet to see the substance of the implementation of the NSW Government’s response and pressure will build in the new financial year to see these big ticket aspirations delivered.

Security of payment legislation

NSW’s security of payment legislation has been subject to a new tranche of amendments following the Murray Report released on 31 December 2017. The amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act), whilst passed on 21 November 2018, have not yet commenced. A commencement date of December 2019 is proposed to give the necessary time to make regulations and administrative changes.

Aimed at providing greater financial security and prompter payments for subcontractors, key amendments include:

• concept of reference date deleted and replaced with monthly claims
• entitlement to make a [single] payment claim after termination
• reinstatement of the ‘magic words’ on payment claims
• reduction in time for payment from an head contractor to a subcontractor from 30 days to 20 days
• deletion of the residential exemption under s7(2)(b) of the current SOP Act
• SOP Act is unavailable for a claimant in liquidation
• court is able to set aside part of a determination for jurisdictional error (rather than entire determination)
• making directors and officers personally liable for offences under the SOP Act
• a more robust investigative and enforcement framework by way of increased penalties and new offences as well as improved investigation powers for Fair Trading.

More details of the changes can be found here.

Cladding update

The NSW Government continues to respond to the cladding crisis. 

To recap:

• in December 2017, the NSW government enacted the Building Products (Safety) Act 2017 (NSW) (the BP Act), which notably permits enforcement authorities (generally councils) to make building product rectification orders.  he BP Act continues to take precedence over the NCC and all other current and future building codes
• in August 2018, the Commissioner for Fair Trading imposed a building product ban under s 9(1) of the BP Act on Aluminium Composite Panels (ACP) with a core comprised of greater than 30 per cent polyethylene by mass for various types of external cladding construction with respect to residential and commercial buildings
• significantly, the use of a banned product is captured within the definition of ‘major defect’ in the Home Building Act 1989 (HBA), meaning the six year statutory warranty period applies instead of the two year statutory warranty period which would have otherwise applied
• both the Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2018 (NSW) (Regulation) and the State Environmental Planning Policy Amendment (Exempt Development – Cladding and Decorative Work) 2018 (NSW) (SEPP) commenced on 22 October 2018. The Regulation requires building owners with external combustible cladding to register their buildings with the NSW Government within prescribed timeframes. The SEPP makes amendments to eight existing State Environmental Planning Policies concerning the approval process for cladding and decorative works on buildings.

The impacts of the cladding crisis reach further than those who are faced with the responsibility of addressing affected buildings, either as owners or industry participants. Together with some other factors, the cladding crisis has contributed to a tightening in the professional indemnity insurance market. It may well be the issue which defines the industry for the next several years as project owners grapple with accommodating reduced risk appetites from consultants both large and small and design and construct contractors who are confronted with escalating premiums and tightening policy terms. 

AS11000 – status update and use of NEC suite of contracts as an alternative

Since Standards Australia’s announcement on 4 April 2017 that all work would cease (although not permanently) on the draft AS11000, there has been increased interest in alternative standard forms of contract, particularly collaborative or relationship principled contracts rather than traditional adversarial forms of contract (such as the AS4000 suite).

The NEC4 suite from the UK Institution of Civil Engineers (ICE), which was first published in 1993, is one potential alternative. The NEC suite has been endorsed by the Governments of UK, South Africa and Hong Kong, and is currently been used by Main Roads in Western Australia.

The NEC4 suite includes a range of options that parties may choose from, allowing it to be easily adapted to a variety of projects without the need for significant amendments, including with respect to pricing, design responsibility, incentive payments, Early Contractor Involvement (ECI) and dispute resolution mechanisms.

The optionality of the NEC4 suite combined with the focus on collaborative and relationship contracting principles that are embedded within the suite, may see the NEC4 suite being increasingly used as a preferred alternative to the standard construction contracts that are currently being used in Australia.

Authors: Construction & Infrastructure partners Christine Jones,  Helena Golovanoff and Scott Alden, associate Divya Chaddha & lawyer Andrew Morello and Victoria Gordon. 

Financial reporting thresholds for large proprietary companies to increase

Changes to the financial thresholds that determine when a private company is considered 'large' for reporting purposes will commence on 1 July 2019. The amendments to the Corporations Regulations 2001 increase the thresholds that determine whether a company has to lodge annual financial reports, directors’ reports, and auditors’ reports, and will lighten the administrative reporting burden on thousands of small to medium sized enterprises.

The thresholds, previously not been reviewed since 2007, will be doubled:

• increasing the annual consolidated revenue threshold from $25 million to $50 million or more
• increasing the value of gross assets from $12.5 million to $25 million or more
• increasing the employee size from 50 to 100 employees or more.

Read more about this in our article 'Changes to financial reporting for large proprietary companies' here.

New whistleblower protections

New legislation designed to enhance whistleblower protections across a range of statutes and industries will come into effect from 1 July 2019. The changes significantly alter and expand the protections available to eligible whistleblowers who report wrongdoing in the corporate sphere (including conduct which occurred prior to 1 July) and require affected entities to adopt and implement a whistleblower policy within their organisation. Key changes include:

• extending protections to cover officers, employees as well as suppliers and service providers and their employees, together with relatives and associates
• introducing protections for anonymous disclosure
• civil penalties for victimising or breaching the confidentiality of a whistleblower.

Read more about this here.                          

Mandatory wording for consumer warranties

Under changes to the Competition and Consumer Law Regulations 2010 (Cth) which commenced on 9 June 2019, businesses who supply services (or goods with services) to consumers and provide warranties against defects in respect of those goods or services, must now include additional mandatory wording in their warranty documentation (such as terms and conditions, or customer contracts). The changes expand existing warranty wording requirements and are intended to remind consumers of their rights under the Australian Consumer Law and ensure there is no attempt to restrict or limit consumer warranty rights.

Consumer data right and open banking in 2020

Ongoing delays to facilitate further testing have seen the launch of Australia’s consumer data right deferred from July 2019 to February 2020.  The launch of the open banking regime will see greater control ceded to consumers over their financial information that is held by banks and financial institutions, and will ultimately allow for data to be shared and accessed when nominated by a consumer, for example, when comparing products, fees and services.

While the financial services industry will be the first to undergo the testing, it would be prudent for other industries soon to be affected (such as the telecommunications industry) to undertake reviews of their internal data management processes, in anticipation of being subject to the same scrutiny as the banks.

Watch this space - Digital platforms inquiry final report due on 30 June 2019

The ongoing inquiry into the effects of digital search engines, social media platforms and other digital content aggregation platforms on media and advertising market competition is due to hand down its final report on 30 June 2019. Draft legislation is expected to be tabled in the latter half of 2019, following the release of the inquiry report and recommendations.

ASX listing rules consultation

Implementation of the rule changes proposed in the ASX’s consultation paper Simplifying, clarifying and enhancing the integrity and efficiency of the ASX Listing Rules has been deferred from the originally proposed implementation date of 1 July 2019 until 1 December 2019. 

Australian Business Growth Fund

Following the Coalition government’s election promise to establish a new public-private fund giving small and family businesses greater access to funding, there are calls for the fund to be established and industry funding made available before the end of the year. After some initial reluctance, Westpac is now believed to have come to the table as a prospective participant in the Fund. Reports suggest this leaves ANZ as the only remaining 'Big 4' member opposed to the Fund.

With an initial equity investment of $100 million, the Australian Business Growth Fund is hoped to eventually grow to $1 billion through partnerships with banks, super funds and other financial institutions. While there is no definitive timeline, businesses with annual turnovers between $2 million and $50 million and who are interested in potential public-private partnerships, should continue to watch this space for the opportunity to take up both direct financial investment and non-financial support.

Broader obligations for APRA regulated entities

The Australian Prudential Regulation Authority (APRA) CPS Standard (Standard) which will apply from 1 July 2019 broadens the obligations of APRA-regulated entities beyond other cybersecurity obligations, including relevant provisions in the Privacy Act 1988 (Cth). The Standard also contains principles-based obligations regarding the responsibility of an organisation’s board for information security, the importance of maintaining information security capabilities and policy frameworks proportionate and relevant to the size and extent of threats it faces. It also provides that APRA-regulated entities have the requirements to assess capabilities of third party providers, to classify information assets, implement various information security controls, audits and testing, and have mechanisms for incident management and response plans. 

Read more here. 

Authors: Senior associate Georgia Milne

Modern Slavery Act 2018 (NSW)

As recently reported, the Modern Slavery Act 2018 (NSW) (the Act) is to be delayed or repealed, following a parliamentary debate held on 19 June 2019.

This is due to a number of fundamental issues with the Act including:

• legislative defects (for example, the Act failing to contain the necessary provisions to capture Local Government despite the intention of the Act to apply to Local Government in the same way as State Government)
• State and Commonwealth inconsistencies potentially leading to constitutional issues and challenges under section 109.

The Act has now been referred to the Standing Committee on Social Issues and we will continue to provide updates on the Act as it develops.

Government Procurement Agreement

On 5 April 2019, the World Trade Organization (WTO) announced that Australia has ratified the WTO’s Agreement on Government Procurement (GPA), becoming the 48th member to join the GPA which became effective on 5 May 2019

By ratifying the GPA, Australia will be provided with numerous opportunities such as access to new government procurement markets. Notably, all Australian businesses, no matter their size will have access to the nation state members which currently sits at 47 members.

The Agreement aims to recognise “the need for an effective multilateral framework for government procurement, with a view to achieving greater liberalization and expansion of, and improving the framework for, the conduct of international trade”.

Some of the key features of the GPA include recognising:

• measures should not be in place so as to afford protections for domestic suppliers, goods and services, or discriminate among foreign suppliers, goods or services
• the integrity and predictability of government procurement systems are integral to the efficient and effective management of public resources and economies
• that the procedural commitments under the GPA should provide flexibility to accommodate the specific circumstances of each party
• the need to take into account the development, financial and trade needs of developing countries
• the importance of transparency in procurement and carrying out procurements that are impartial, avoid conflict of interest and corrupt practices.

Changes to local government procurement

The Local Government Amendment Bill 2019 (the Bill) was introduced in the Legislative Assembly on 4 June 2019, passing with amendments on 19 June 2019.  The Bill amends the Local Government Act 1993 (NSW) with respect to tendering requirements, rates, election planning, mutual recognition of approvals and other regulatory matters.

The key changes to local government procurement under the Bill are:

• increasing the financial threshold of a contract that requires a Council to undertake a tender process from $150,000 to $250,000 (the $150,000 threshold continues to apply to a contract for the provision of services where those services are being provided by employees of the council at the time the contract is entered into); and
• an additional exemption for the requirement to tender for a contract with a disability employment organisation approved for the particular goods and services concerned under the Public Works and Procurement Act 1912 (NSW).

Small Medium Enterprise procurement framework

On 1 February 2019, the NSW Government Small Medium Enterprise (SME) procurement framework became effective.

The framework applies to NSW government agencies procuring goods and services (excluding construction) in regional NSW. 

Regional NSW includes all areas within NSW outside the Newcastle, Sydney and Wollongong metropolitan area.

It is designed to increase participation of SMEs and regional businesses in government procurement of goods and services through a range of policy objectives, including:

• supporting SMEs and local businesses
• building capability for suppliers and buyers
• making procurement easy for SMEs
• listening to local businesses and measuring participation.

 Authors: National Head of Procurement, partner Scott Alden, lawyer Victoria Gordon & lawyer Andrew Morello

Increase to the unfair dismissal cap/ high income threshold

The Fair Work Commission (FWC) has this week announced that, from 1 July, the high income threshold in unfair dismissal cases will increase to $148,700.

Employee’s earning up to this amount are eligible to apply for protection from unfair dismissal under the Fair Work Act.

The FWC has also announced that for dismissals occurring on or after 1 July, the compensation limit will be $74,350.

Employers need to be conscious of the increased thresholds for any terminations of employment that occur after 1 July. And any employers that offer a guarantee of annual earnings after 1 July will also need to ensure that the amount exceeds the new threshold.

Increase to the minimum wage

From the first full pay period on or after 1 July 2019, the national minimum wage and the modern award minimum wage will increase by three per cent.

The decision affects close to 2.2 million or 21 per cent of Australian employees who have their pay set by a modern award and 180,220 or 1.7 per cent of employees who are paid at the adult minimum wage rate.

Key changes from the Fair Work Commission’s Annual Wage Review are:

• three per cent increase in the national minimum wage for award/agreement free employees, which will see:
• the current weekly minimum wage increase from $719.20 to $740.78 (an increase of $21.60 per week)
• the current hourly minimum wage increase from $18.93 to $19.49 (an increase of 56 cents per hour).
• three per cent increase to the modern award minimum wages
• the current casual loadings in the modern awards and for award/agreement free employees will remain at 25 per cent.

Read our more extensive update on this change here.

Coming soon…

Deadline approaches for Victoria’s labour hire licensing scheme

A licensing system to regulate the provision of labour hire services is set to be introduced as part of a raft of changes under the Labour Hire Licensing Act 2018 (Vic) that was introduced last year.

Agencies that fall within the Act or the Regulations are required to apply for a licence by 30 October 2019.

As part of this application, agencies need to obtain and disclose the following information:

• the number of workers supplied
• the types of visas held by workers
• whether an investigation by a regulator, or proceedings in a court or tribunal is on foot in relation to labour hire laws, workplace laws or minimum accommodations standards
• whether an incident has occurred in the preceding 12 months to which the applicant was required to notify the regulator in relation to occupational health and safety or workers compensation
• agencies must also meet the ‘fit and proper person’ requirement of the application. 

Read our full update on this issue here.

Author: Workplace Relations & Safety partner Michael Selinger 

Contacts

Competition & Consumer
Dan Pearce, Partner
T: +61 3 9321 9841
E: dan.pearce@holdingredlich.com

Construction & Infrastructure
Christine Jones, Partner
T: +61 2 8083 0477
E: christine.jones@holdingredlich.com

Scott Alden, Partner
T: +61 2 8083 419
E: scott.alden@holdingredlich.com

Helena Golovanoff, Partner
T: 61+ 2 8083 0443
E: helena.golovanoff@holdingredlich.com 

Corporate & Commericial
Darren Pereira, Partner
T: +61 2 8083 487
E: darren.pereira@holdingredlich.com

Procurement
Scott Alden, Partner
T: +61 2 8083 419
E: scott.alden@holdingredlich.com

Workplace Relations & Safety
Michael Selinger, Partner
T: +61 8083 0430
E: michael.selinger@holdingredlich.com 

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. 

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