The Federal Government has launched an inquiry to investigate ways to expand the corporate bond market in Australia and provide mum and dad investors with easier, cheaper access to debt securities.
The Committee will consider the tax treatment of corporate bonds as well as the Corporations Act 2001 to determine whether there are any impediments to the development of the retail corporate bond market.
The new inquiry comes after the government’s Financial System Inquiry in 2014 recommended to “reduce disclosure requirements for large listed corporates issuing ‘simple’ bonds and encourage industry to develop standard terms for ‘simple’ bonds”.
Committee Chair Jason Falinski said a number of reviews have observed that the Australian retail corporate bond market is small compared to those of similar countries.
“The Committee is interested in why Australian businesses make greater use of offshore bond markets rather than issuing bonds,” he said.
The inquiry will give debt issuers and managers the opportunity to argue for an overhaul of the requirements for companies issuing debt, potentially making it easier for them to offer debt to retail investors.
Over the last decade Australian Governments have made amendments to the regulatory regime for corporate debt to facilitate a deeper and more active retail corporate bond market.
Despite the best intentions, the Australian retail bond market remains small in comparison to similar countries and, in terms of amount of debt raised, Australian-based businesses make greater use of offshore bond markets.
The Inquiry will examine:
- the tax treatment of corporate bonds for both issuers and investors to determine whether there are any impediments in the tax system to the issue of corporate bonds compared to other forms of debt financing for business;
- related impediments within the Corporations Act to the further development of the corporate bond market, including how they interact with the tax system; and
- comparable policy settings in other jurisdictions, with a focus on those jurisdictions that are major sources of debt finance for companies operating in Australia.
“Our retail bond market is small compared to other nations, and many Australian-based businesses prefer to go overseas for bond markets than use domestic ones,” Mr Falinski said.
“What we need in this space is smarter regulation, not more regulation. I worry that overbearing laws and taxes are limiting our ability to grow a prosperous and strong domestic retail corporate bond market.
“In consultation with the Treasury, my committee will seek to determine what the government can do to encourage our domestic market.”
Submissions from interested individuals and organisations are invited by Thursday, 19 March 2020. The preferred method of receiving submissions is by electronic format lodged online using a My Parliament account.