Small businesses make a significant contribution to the Australian economy, making up 20 per cent of GDP and employing about half the workforce. Of the 2.4 million Australian companies registered with ASIC, about 96 per cent are small businesses with fewer than 20 employees.
ASIC is focused on understanding the issues facing small business and the ways in which we can support them. The following are recent initiatives demonstrating ASIC’s commitment to assist, engage and help protect Australian small businesses.
This expanded jurisdiction will provide more small businesses with access to free dispute resolution with their financial services provider.
Australian Financial Complaints Authority
From 1 November 2018, the Australian Financial Complaints Authority (AFCA) will provide consumers and small businesses with access to free, fast and binding dispute resolution. AFCA will bring together the Financial Ombudsman Service (FOS), the Credit & Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT) to create a one-stop shop for financial disputes.
All financial firms that are required to have a dispute resolution system to deal with complaints from consumers and small businesses must become members of AFCA by 21 September. This includes trustees of regulated superannuation funds who are currently subject to the SCT. ASIC will work closely with the AFCA, FOS, CIO and SCT to monitor membership compliance to ensure consumers and small businesses retain effective access to EDR (external dispute resolution) during the transition period.
Compared with previous schemes, AFCA will be able to accept small business disputes involving significantly higher credit facilities and compensation claims. AFCA will be able to accept disputes about credit facilities worth up to $5 million and award compensation of up to $1m to small businesses, or $2m for primary producers. This expanded jurisdiction will provide more small businesses with access to free dispute resolution with their financial services provider.
Online resources for small business
ASIC’s website has a dedicated small business hub with information and resources on starting, operating or closing a small business. The hub includes ASIC’s guide Running a small business in Australia: What you need to know and, for those who are considering starting a new business, our First Business app is an excellent resource to help navigate the various steps. ASIC also participated in a webinar Small Business in Australia — top things to watch out for in 2018 together with the Australian Taxation Office (ATO), Australian Competition & Consumer Commission, Fair Work Ombudsman and Australian Small Business & Family Enterprise Ombudsman (ASBFEO).
One of the key ways ASIC interacts with small businesses is via our companies register, business names register, and other corporate and professional registers. [As part of the National Business Simplification Initiative] we are currently exploring ways to modernise our business registers and the government has recently announced that the Australian Business Register within the ATO will now administer modernised business registers. One option is establishing a whole-of-government registry platform to deliver modernised business registration with the aim of simplifying government-business interactions.
Changes to small business loan contracts
Small businesses are generally offered “standard form” contracts for financial products or services on a “take it or leave it” basis, with limited or no opportunity to negotiate those terms. In November 2016, the unfair contract terms protections that apply to consumers were extended to small business loans where the upfront price payable does not exceed $300,000, or $1m if the contract is for longer than 12 months. Since then, ASIC has been working with ASBFEO to ensure the big four banks’ small business loan contracts meet the standards required by the unfair contract terms law. For further details, see REP 565 Unfair contract terms and small business loans.
ASIC will continue to monitor the big four banks to ensure that the changed loan terms are not applied unfairly, and we are now looking at other lenders’ small business loan contracts (including bank and non-bank lenders) to ensure they do not contain terms that raise concerns under the law. We have also released INFO 207 Disputes about commercial loans with suggestions on how small businesses can resolve lending disputes.