Senate Economics Legislation Committee, , 14:34 to 42:04
ASIC discusses rising corporate insolvency rates and the audit of decommissioning liabilities for offshore oil and gas companies.
Topics: Employment, Fossil fuels, Parliamentary privilege
Speakers: Speaker 4, Ms Sarah Court, Senator Vanessa Bleyer, Senator Matthew Canavan, Senator Lisa Darmanin, Senator The Hon Tim Ayres
>> we will kick off. Okay. All right. Um I declare open this hearing of the Senate Economics Legislation Committee into the 2026 and 2027 supplementary budget estimates. I begin by acknowledging the traditional custodians of the land on which we meet today and pay my respects to their elders past and present. and I extend that respect to Aboriginal and Toristra Islander peoples here today. The committee will be conducting today's hearings via video conference and in person. Understanding order 26, the committee must take all evidence in public session and this includes answers to questions on notice. I remind all witnesses that in giving evidence to the committee, they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. is also a contempt to give false or misleading evidence. The Senate has endorsed the following test of evidence of test of relevance of questions at estimates hearings. Any questions going to the operations or financial positions of departments and agencies which are seeking funds in estimates irrelevant questions for the purposes of estimates I remind officers that the Senate has resolved that there are no areas in connection with the expenditure of public funds where any person has a discretion to withhold details or explanations from the parliament or its committees unless the parliament has expressly provided otherwise. The Senate has resol also resolved that an officer of a of a department of the Commonwealth shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Witnesses are reminded of the Senate order specifying the process by which a claim of public interest immunity should be raised. I incorporate the public immunity statement into the hands up. I remind senators of their obligations under the behavior code for Australian parliamentarians to treat witnesses with dignity, courtesy, fairness, and respect. An officer called to answer a question for the first time should say their full name and the capacity in which they appear. I remind committee members and witnesses who are appearing via video conference and who are not speaking to mute the microphones. The committee has set Thursday the 5th of November 2026 as the date by which senators are to submit written questions on notice and Thursday 17th of December 2026 as the date for the return of answers to questions taken on notice for today's proceedings. The the committee's proceedings today will begin with the department of the treasury and uh uh the as we've noted the minister is on his way. Um the committee welcomes representatives from the Australian Securities and Investment Commission. I welcome Miss Sarah Court, chair of ASICH. Uh Miss Court, do you wish to make an opening statement?
>> I will make a brief um opening statement. Thank you, chair. Good morning, members of the committee, and thanks for the opportunity to come along today. Um I'm joined by commissioners Alan Kirkland and Ko Ror, our CEO Scott Gregson, and we have um three of our executive directors in the room as well, Kissa Aldridge, Peter Soros, and Chris Sandra. Since last appearing before the committee, the government has issued ASICH with a new statement of expectations that provides us with a clear mandate to support sustainable economic growth while maintaining important consumer and market integrity [clears throat] protections. We welcome that responsibility and in our view strong regulation and economic growth go hand in hand. Clear rules and fair markets support confidence, investment and innovation. And with that in mind, there are just four quick areas I'll update the committee on. Um briefly the first relates to credit private credit which is an area that continues to demand uh close attention. Um private credit has grown rapidly in Australia. It plays a very important role in providing finance to businesses and it supports economic activity. Um we recognize that private credit can deliver benefits to investors and borrowers. Recent developments, however, involving the collapse of the Bath Group have provided a a very significant test for parts of the private credit sector, and it reinforces why strong governance, effective oversight, clear disclosure, and accurate valuations are critical. ASIC's role in relation to Barla at present is that we're working closely with the voluntary administrators to trace um 3.4 4 billion that was loaned to Bathla by about 41 private lenders and that is uh across more than 500 companies. What we are focusing on in that work is looking at how the funds were raised and used and whether there is exposure for retail investors. Turning to public markets, um, markets are becoming more interconnected and technology dependent and the strategic risk environment in which they operate is becoming increasingly complex. We're seeing structural changes in how companies raise capital and we're seeing rapid developments in technology and market infrastructure. This week we convened our second financial markets innovation roundt which brought together more than 30 participants from across the financial system, government and academia. This discussion focused on what practical opportunities there are to help us improve the efficiency, accessibility, and resilience of our markets. We're taking a number of practical steps to support our public markets and strengthen their foundations, including initiatives to support greater participation and investment activity like our fasttrack IPO pathway and proposed changes to sellside research. It also includes work to ensure that regulation keeps pace with technology such as our recent updates to market integrity rules to reflect the increased use of automated tram trading systems. Turning uh thirdly to KPMG. Um we've discussed this uh matter and ASIC's work in relation to it at the committee before. Just confirming that we continue to have several investigations into KPMG underway, including into the alleged misuse of confidential client information, whistleblower victimization concerns, and auditor transparency reporting. And that work will remain a priority for us going forward. We're also doing a surveillance of audit conduct complaints, including potential whistleblower complaints by the big four consulting firms, and we'll be reporting on this work uh shortly. And then finally, turning to enforcement, I would like to update the committee on some significant recent enforcement matters. In particular, we've had two uh significant criminal outcomes um in the last few months. Former director Usman Sadiki was sentenced in August to 6 and a half years in prison with a three and a half uh sorry three year and three month non-parole period and Mr. Ian Chester was sentenced to 9 years imprisonment after being convicted of fraud offenses involving investor funds. We've also had significant penalties imposed on the Harvey Norman and Latitude Finance companies with penalties uh in the range of $55 million in a combined amount. So that is just a um a a small snapshot of some of the things that we've got um underway at the moment and we otherwise look forward to taking your questions.
>> Thank you very much Miss Court. Um we're going to Senator Canavan.
>> Thank you chair. Uh look I just had some questions on uh insolveny data. Um uh I think ASIC figures show that last year the number of insolvenies was 14,152. Is that correct?
>> Uh, thank you, Senator Kate Oro, Commissioner, let me find my current stats to confirm that number for you.
>> While um, Commissioner Ro's doing that, Senator, I I just note that, and I think I'm right on these figures, that um, there was a a recent significant bump in insolveny figures as a result of the Barla uh, group collapse. I think there was about 542 companies within that group that contributed to recent insolveny figures.
>> So the number that I've got for 2526 which I think was the year that you spoke to is 14153 I think if that's the match.
>> 153. Okay. You've got one more than what I've got. So pretty close. Uh >> did that include those bath groups? >> No. No. Because they have been in the
quarterly stat. So um for the 3 months first 3 months of the 2627 financial year we've got 4,243 um and that is an increase uh from the same period in 2025 26 um as uh court uh chair court said uh that included 542 companies in the bathler group. So the increment is in part but not in whole accounted for by that.
>> That was the previous c yearon year like the the quarter the year earlier.
>> Yep. 3556 was the year. Um it the same quarter for 2526
>> and then and this
>> so it's a 19% increase
>> and this one this last quarter what was it? 4
>> 42 43
>> 42 43
>> so um okay >> most of it is um accounted for more about 2/3 of that is accounted for by bathl or maybe even a little more than
>> but there's still there even with bathl out there's still quite a substantial
increase. Uh no because oh if if
>> I mean Bath is still a business. There's still businesses there still people who have lost their jobs.
>> I can help though with um
>> much reason to just exclude them completely but yes. Okay.
>> I was I was going to if it would assist also the statistic about um with the denominator of the number of companies. So as at 30 September 2026 um the ratio of companies entering external administration in the prior 12 months was 0.39%. Which is actually slightly down from the equivalent the year before which was 0.40. >> So we have had a a slightly larger increase in the number of companies um as well.
>> Yeah. Yeah. I'll come back to those ratios. So on the last financial year figures I've got my sums are about 40 businesses a day going unsolvent. Is that that's right?
>> I haven't done the calculation of that 14,000.
>> But now 4243 for a quarter. Is that
>> That was a quarterly figure that I gave you. Yes.
>> So roughly 120 days or so. Um
>> so I think I think the daily figure is
>> sorry sorry 190 days. Sorry.
>> Yeah. The daily figure, Senator, is 900 companies have been created each day since the government was elected.
>> Yeah, I'll come to that too. So, I've got last financial year of 40 businesses a day going in solvent. Uh, and now for this last quarter, we've got 47 businesses a day. Nearly 50 business a day going insolvent on my figures. I know you probably don't report them on a daily basis, but simple calculation. Um, are these last two years? Uh, sorry, the year I was going to ask the year before. I've got the year before being 14,722.
>> Correct. That's the number we've got as well. I think you're probably using our six stats.
>> Yeah. And so I've got these being the highest two years on record
>> for insolvenies. Uh so yes there's the the the two calculations that I referred to earlier is the number of external administrations and then if you have the denominator the number of companies um the the that former category those numbers are the highest but they're not um by no means are the last two years the highest by proportion um they're they're significantly lower than the the the peak that we saw earlier. I think
Senator as the economy gets bigger uh the the the right figure to look at uh is the proportion um insolvenies as a proportion of companies under this government at about 0.32% is close to half of the average under Howard 050% as a comparator as I said an average of 900 companies is created each day of the while just over 30 have become insolvent. That is the as as the economy gets bigger and we get more growth you would expect to see uh more companies being created uh and you would not expect to see that proportion you know that proportion is the key uh figure to focus on. So I've
been asking about insolveny data. Do all businesses that close that show up shop show up in insolveny data?
>> Uh we have different ways of measuring um insolvenies including the number that enter external administration as well as um those that data that comes through including from say insolveny practitioners. We have the company registers as well. Um so we do um although there are there is a in circum some circumstances businesses that stop transacting or stop being active businesses end up u not taking that step towards dregistration um or or they may just stop. So they may not
>> stop so not all >> businesses that are created when they get to the end of their life they won't show up necessarily insolveny data per
se. No, because they may have been voluntarily um just ceased.
>> So, it seems a bit a bit distorting to compare figures of the number of businesses created to the number of businesses that go insolvent because you're not capturing all businesses through the insolveny data.
>> Oh, well, we we capture all the businesses that um becomes insolvent.
Yes. >> but the idea is saying more business being created than in fact I've seen people online that say 30 times the number of businesses starting then closing but that's not an accurate representation as data because the insolveny does doesn't capture every business that's closing right
>> that that is as much the case in 1996 as it is in 2026
>> I'm not sure if people were making this claim in 1996 but but members of parliament have been saying that the 30 there are 30 times more businesses opening than closing
be fair [laughter] that is but that is kind of a political question. The >> the the official is answering in relation to the data that is produced. >> Um it's a political response to a political claim.
>> Okay. Well,
>> that is that that is uh what how many how many businesses uh the proportion of businesses that are insolvent has decreased uh and the proportion of businesses created has increased and that does mean that there is a database for looking at questions like how many businesses would close uh if the parliament and and the Liberals and nationals don't vote for the EU free trade agreement and the one in four Australians whose jobs rely upon our international trades jobs are threatened because you've dragged or are trying to drag your coalition colleagues into a complete repudiation okay of [clears throat] um of market economics and and uh and economic growth.
>> Can I just get an answer then? Are there are 30 are there 30 times more businesses starting up than closing? Is that true? I
>> I don't I don't have um data on companies. the data that we've got to assist you with is the external >> Um, so >> that's that's that statement I can't
>> Well, I've seen social media posts from Labour members of parliament saying get the facts on the economy 30 times the number of businesses starting up than closing and they source asset company registration insolveny statistics for this claim. So do you have ASICH data which would back up a claim at 30 times number of businesses starting up and closing?
>> So the data that I've got in front of me is in the insolveny information. Like I said we administer the company's registers as well. So happy to take on notice whether um we can assist with information about the number of um companies. We do companies and business names. So we don't do soul trading registration unless they do business names or partnerships. So there's different categories of information and if we can assist with some extra on the company register side because some of that we can get d like dregistration statistics as well that might assist you.
>> Well minister could you take on notice the government's claim or members of the government's claim that 30 times the number of businesses starting up than
closing data are you using for that? >> I can certainly see if there's more uh information that we can provide that will help you. Uh, Senator, Treasury was answering questions >> about this yesterday and pro providing their analysis of what insolveny data uh meant for the economy, but the insolveny rate, I accept uh some of the kind of grament of your questions. It is not the only indicator, but the insolveny rate is almost half of what we saw during the Howard period.
>> Thank you. I'm going to rotate the call now. Senator BL.
>> Thank you, Chair. My questions are around decommissioning liabilities of offshore oil and gas corporations. So, following a letter to ASICH from the Wilderness Society, you're ordering auditing six offshore oil and gas companies on how they disclose decommissioning liabilities in their financial statements. Have I got that right?
>> Yes. So, that's right. um each year as um usually around May sets out our priorities in relation to the work that we're doing on financial reports and audit and in doing so we identify a number three four five sort of areas of particular focus for the year ahead. So one of those areas that we um alerted the market to in May this year is on this question of um in the financial reporting side that um the disclosure of provisions by companies including their provisions for restoration and decommissioning. Um so and to the second half of your question we have ident identified a number of financial reports that we'll focus on. I think it's a little bit more than six. So I can um provide the the uh financial reports that we've identified. So it's Beach Energy, Amplitude, Strike Energy, Horizon Oil, Carnivan Energy, Q Energy, Woodside, and Santos
Okay, so you're undertaking seven desktop.
>> Sorry.
>> One, [laughter] two, three, four, five. >> Sorry, forgive me. What did I miss? Um,
Beach, Amplitude, Strike, Horizon, Caravan, Q, Woodside, and Santos. Yeah.
>> Okay. Thank you. So, you're undertaking eight desktop audits on how those eight companies disclose decommissioning liabilities in their financial statements. Is that right? >> So, which ones have already filed financial statements for the 25 26 financial year? So, where they've got um a reporting period that expires on the 30th of June.
>> Yeah. No, thank you. It's the first six of those that have the 30 June year end. Um depending on whether they're listed or unlisted, that's the date that they'll come in to us, but um they should all be in by tomorrow in any case. And then Woodside and Santos have the year end, the calendar year end. So we'll um receive those ones later. So we
if the um Yep. And so the FY2526 and the ones that will come in after the end of this calendar year are the financial statements that are the subject of the desktop audits. >> Yes. >> Thank you. And are you intending to complete the audits and produce a report by October 27?
>> It's a review rather than an audit. So we're doing a review of those and we do a review of many other financial reports as well. So um like I said we have a a program that um we identify a number of areas of focus. Our goal is to um review over 200 financial reports. So these are eight of a much wider cohort. And yes um what we do each year is um when we've completed that work and we've als we also do work in relation to audit auditors as well. We usually um in October of each year publish a report that thematically um describes the things that we've found, the issues and also the actions we've taken. Um so the one that's for the prior year we're publishing at the end of this week. Um so and so this time next year we'll be publishing the report that's our intention that will include this analysis.
>> And will it be a report just on this topic or is it a report about all of those matters you identified in May? We
we haven't made a final decision on that. Um so it's more likely I think that it would be in a wider report because like I said there's three or four other thematic areas to focus on. It's important to um include the information we have on the work we do on auditors. Um so we haven't made a final decision but I'd say more likely that it would be in in similar circumstances in the past we've tended to include it in the in the single report with the other work that we've done in the area. So
we've got about um $60 billion of cleanup costs for the infrastructure that is currently in Commonwealth waters. Is the sample of eight representative do you think of the decommissioning that's actually going to need to be undertaken?
When we um when we identify of the 200 plus financial reports, it's always a sample. Um that's that's the the design of our um programs. Uh however in this case we have certainly at least attempted to do a wide a sample of those whom we think are representative of the issues um of importance. Um so I I wouldn't say it's going to be every single um report that may have this provision that needs to be released but we hope it's a a valuable and sufficiently wide sample for us to draw conclusions.
>> And so how many corporations are there that are undertaking offshore oil and gas?
>> I don't have that I don't have that figure.
>> Okay. Thank you. Um, I've just got a quick second line of question if I got time. Chair, I'm sorry I didn't watch the clock. Thank you, chair. >> 5 minutes. >> Thank you very much. Perfect. Um, are you familiar with the report by carbon um asset retirement obligations? What lies beneath transparency assessment report? It's dated December 2025. You're familiar with that?
>> Um, I I our team is familiar with it. I'm I have not myself read it, but I'm familiar and can take questions on notice if it's a detailed question. Oh, you're going to give me it.
>> Yeah, I'll table that, please. Thank you for being so prepared, Secretary. And I'm also going to be referring to a second document which you might kindly deliver to um at the same time. It's so that report finds that the overall quality of disclosure relating to asset retirement or decommissioning obligations is poor. Um, Australian companies only provide about 19% of the relevant information and the report recommends that Australia conduct a thematic review like that undertaken by the UK Financial Reporting Council. Are you familiar with the FRC's thematic review IAS 37?
>> I'm I'm familiar with the fact that they've undertaken it. I I don't have a copy of that review with me now, but um if that's also something that you're proposing to share.
>> Yes, I I'll table that if it has
>> not been included in the bundle.
Fantastic. I was so organized. Thank you very much. Um so will ASC commit to conducting a similar thematic review of our standards of decommissioning disclosures across Australian listed oil
described earlier each um ASEX got a long-standing program of um reviewing financial reports and audit u files and our way of identifying more specific areas to focus on is the way that I described earlier in um each in that each May we have a identification of some particular areas of focus. The FRC might do things a little bit differently um in terms of how they um have areas of focus or indeed how they publish. So we're not proposing to change to the way we do our areas of focus which we've already announced. Um but are we having if we set aside the name of it or the the way it's reported are we having a careful look at the issue and will we draw thematic conclusions about the quality of the re the reports that we see that's what I've just described us
doing. But h have you considered the recommendations in this document though with a review to improving our six processes? It seems that it provides some very helpful uh recommendations that might assist you in the performance of your audit.
>> Thank you. So our teams that um undertake the work doing the review are familiar with this both the materials but also have a good close working relationship with the um financial reporting council. So to the extent there are lessons that we can learn from how fellow [clears throat] regulators undertake their work obviously recognizing slightly different provisions slightly different um frameworks but we do try and stay well connected with our fellow regulators >> um to to learn from what they've done or what they've found.
>> Fantastic because there's always room for improvement. Right. >> Yes. And just last quick question, um, can you also produce a regulatory guidance on the application of AASB137 to decommissioning obligations?
>> I think it's unlikely guidance on it and
so you could do that immediately after or together with the October 27.
>> I think we need to um do the work um in relation to the reviews first and I certainly we've not made a decision that we're proposing new guidance. We've got regulatory guidance on financial reporting that exists um when we do our work. Um, we always have an eye to if there's things that might needed to be adjusted, but by no means have we got a intention to prepare a standalone G
guidance on this issue. And possibly the report that you're intending to produce in October 2027 will include guidance for those corporations to ensure that they include decommissioning liabilities in their financial statements in future.
There is um the reports that we prepare, we've just done one a fortnite ago on financial reporting and audit in relation to um registerable superanuation entities. So we did do a standalone report in relation to their reports and auditing. And you're right to say that to the extent we describe findings in them, they're of value to people who are preparing the reports the next time round. That's why we prepare them um to give that guidance. Is it a guide? No, it's a report, but it includes better practice, concerning practice, or indeed action that we've taken. So um yes that's that will be uh that's how we prepare our reports generally. Well
>> thank you very much for your attention on this important issue and thank you for answering my questions commissioner.