Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Hansard source

Going into the 1996 election this government made, as a centrepiece of their campaign, promises to reduce the red-tape burden, in particular the red-tape burden and compliance costs on small business. Here we are 10 years later, still waiting. Indeed, their promise back in 1996 in the lead-up to that election was to reduce the red-tape burden on small business by some 50 per cent—a very ambitious target. Of course, it is a target that the government has not nearly met; indeed, it has failed badly in that goal. Not only has it not reduced the red-tape burden by 50 per cent, it has not reduced it by 10 or even one per cent. In fact, it has increased the regulatory burden on small business over the course of the last 10 years. You do not have to look very far for evidence of that. You need look no further than the GST, the business activity statement and all the compliance burdens which come from becoming a tax collector on behalf of the government.

Notwithstanding all of that, the opposition welcomes the fact that the Tax Laws Amendment (2006 Measures No. 5) Bill 2006 is the government’s first attempt, I suppose, to finally get on with doing something about the regulatory burden on business generally. Of course, business peak groups have been very active in their campaign in attempting to force the government to finally move and to do something about red tape and compliance, including tax compliance and the various burdens that go with it. The peak groups have been as one. Amongst them have been organisations like ACCI and the BCA, which is generally accepted to represent the bigger end of town—the larger businesses in this country. Organisations like COSBOA, representing small business employers and operators in this country, have also been very active in that regard.

This is an issue that has reached chronic proportions. There is no shortage of surveys which show that small business in this country is now spending on average some 40 hours a month just complying with the various regulatory burdens government imposes on it. This has a very real economic impact on those small firms. The enormous compliance burden saps business entrepreneurial spirit. It puts barriers in the way of small businesses attempting to grow, to turn a profit and to put food on the tables of their families. It also has enormous efficiency impacts on the Australian economy and, as a result, has an impact on GDP growth and therefore living standards in this country.

I have always said that the best thing any government can do for business and, in particular, small business in this country is to grow the economy, keep interest rates low and after that basically get out of the way. Getting out of the way is a critical point in that trifecta. There are some exceptions, of course, where market failure will call upon the government to intervene. There is no better example of that than the debate we are having in the parliament at the moment with respect to the petroleum repeal bill, where the opposition is insisting that the government finally move to restore section 46 of the Trade Practices Act to its former glory—a once very effective provision in that now quite aging act, but a provision that has been undermined by various court decisions, including decisions like Boral and Safeway, which the ACCC chairman himself said did clearly not reflect the legislature’s intention when framing those provisions.

With respect to the petroleum repeal bill, we have been saying that we agree that this 27-year-old regulatory regime is out of date, antiquated, anachronistic in some ways and in need of repeal. In its place we need a strong Oilcode, and I think we are pretty close to that now. I do not think we will ever get absolute agreement in the industry about the nature of the Oilcode but I think we are probably as close as we can be.

The important third tranche is the strengthening of the Trade Practices Act. The original sites act was designed to deal with market power abuse. It has not been effective in recent years, but that does not mean we throw the baby out with the bathwater. We need something to replace it. We need a very strong Trade Practices Act or, to say the same, reform of the Trade Practices Act. As we speak in the Senate we are debating this bill, and the opposition is maintaining its view that, while we support the repeal of the sites act, we do not believe the package is complete in the absence of reform to the Trade Practices Act and, in particular, section 46.

This, I suppose, is the government’s first attempt to get out of the way in the absence of examples where there is market failure and a reason to intervene. Its first attempt started with a reference of the issue of the various levels of government regulation and the way they are impacting on the business sector, including the small business sector, to an inquiry to be held by Mr Gary Banks. This led to the formation of the Banks committee and the report of the Taskforce on Reducing Regulatory Burdens on Business, Rethinking regulation.

This bill, as I said, is a first attempt to deal with some of the low-hanging fruit. Labor welcomes the measures involved, but we say they are not enough. Business is struggling just to understand the regulatory overload, let alone ensure it is always in full compliance. This is a real concern for business—not knowing whether month in and month out it is complying with the various regulatory regimes which are imposed upon it, particularly all the complex taxation rules it is expected to comply with.

In recent times the government has had a bit of an attempt at revising those tax provisions by removing a number of inoperative provisions in the tax act. We welcomed and supported that move. But I make the point again that we are not concerned so much with the inoperative provisions of the tax act as with the operative provisions of the tax act—the ones that are still in operation; that, on that basis, pose the greatest threat to business, particularly small business; and that cause small business major concern.

In recent times we have also seen the regulatory burden added to by the introduction of Work Choices. This is a nightmare for small business. Recent surveys, not surprisingly, have shown that—notwithstanding the government’s rhetoric claiming Work Choices is the best thing since sliced bread for small business—small business is not supportive of Work Choices. It is not supportive of Work Choices mainly because it simply does not understand it. How could small businesses understand what is ahead of them under Work Choices when some of the country’s best legal minds are still arguing about its implications and ramifications?

The bottom line is, in a relatively healthy economy, the overwhelming majority of small businesses are very happy with their arrangements, investing in the skills of their employees and working hard on a day-to-day basis, in the absence of an HR department, to make sure that their employees are happy and that they are getting maximum efficiency and productivity out of them. They are happy with their current lot; they do not need the threat of Work Choices. They do not need another layer of regulatory burden and compliance. They do not need another layer of complexity, and that is what Work Choices will present to them.

So the measures in this bill, while welcome, are just planing off the rough edges. We will be supporting them, but the government needs to embrace much more of what Gary Banks has had to say. We will be looking forward in the not too distant future to the government having much more to say on that than is contained in this bill. It is not all that hard. In June of this year the opposition leader and I launched the first tranche of Labor’s small business policy, a five-point plan with a key focus on reducing the regulatory burden for small business. It included the provision of a grant to small firms. Skills are an enormous issue for small firms at the moment; they are having difficulty acquiring staff. They cannot compete against big firms on wages, so the best thing they can do is to try to skill up those who are already on staff. Labor’s training bonus will give some assistance to small business people hoping to skill their staff or, indeed, skill themselves.

The second point of the plan was a new superannuation clearing house so that small businesses with obligations under the superannuation guarantee levy can rid themselves of super choice and obligations they have to their employees such as providing the infrastructure they require to take up the superannuation guarantee payment. It will also remove the fear some small business employees have about becoming financial advisers on employees’ superannuation. That new superannuation choice legislation threatens some significant fines and, indeed, jail for small business people who dare to offer advice about where their employees should turn for their superannuation savings.

The third point in the plan, which is most relevant to this bill, is the introduction of a red-tape reduction plan. It is a simple idea that puts incentives in place for government departments when they are formulating policy, tax law and law generally that is going to impact on small business. It gives a financial incentive for government departments to perform in this regard. In consultation with state and territory governments, we hope this plan will also flow on to the decision-making processes of those governments.

So there are things you can do. The fourth point in our plan is to try to improve cash flow for small firms by ensuring that larger businesses with which they do business pay their bills on time. It will allow small business to charge interest against those who are traditionally slow payers. That is an entirely appropriate thing to do, and it is an idea this government should be embracing. The fifth point in the plan is to deliver greater access for small business to appropriate broadband speeds, and to ensure regional small businesses can compete with their city cousins and are not disadvantaged by a lack of access to modern-day technology.

So it is not all that difficult. We have given the government some guidance; we have given them some ideas. We will be happy for them to steal them from us; I am sure the member for Mitchell thinks they are great ideas, and he might care to respond when he takes the call when I have completed my contribution.

Turning to the key schedules of the bill, the first measure involves an increase in the threshold for the minor benefits exemption as it applies to fringe benefits tax. The proposal is that the threshold exemption rise from less than $100 to less than $300. This measure is targeted at small businesses and means that an item that an employer provides for an employee under $300 is FBT exempt. This amendment is a simple and useful measure to reduce compliance costs for small business. The second measure associated with schedule 1 involves increasing the threshold for which fringe benefits are disregarded for the purpose of fringe benefits tax reporting. Currently, employers are expected to record and report the taxable value of the fringe benefits they provide to their employees when the value of those benefits exceeds $1,000. The amendment sees an increase in that threshold from $1,000 to $2,000. Again, it is to be noted that this is another recommendation of the Banks committee report. The measure is most relevant to the calculation of family tax benefits. Nevertheless, it does reduce compliance costs for business and makes the family tax benefit system marginally less complex.

The third measure associated with schedule 1 involves an extra concession for eligible in-house fringe benefits and airline transport fringe benefits. The amendment seeks to raise the concession from $500 to $1,000 per annum. This means that if an employer offers in-house benefits like free meals or discount goods to employees then up to $1,000 could be ignored for fringe benefits tax reporting purposes. Further, if employers such as Qantas or Virgin Blue, for example, offer discounted air travel to their employees then an aggregate value of $1,000 per annum could also be ignored as it relates to the reporting of fringe benefits tax. The measure is also of particular benefit to shop assistants and retail employees who receive discounts as a result of their employment arrangements.

The last measure associated with schedule 1 involves a change in the definition of the term ‘remote’ as it applies to fringe benefits tax concessions. The amendment introduces a new formula for calculating the distance between a tested location in an eligible urban area. Basically, travel by water will now be included in the calculation to determine whether a location is remote. The kilometres travelled by water will be assessed at double those travelled by land, and if the distance calculated is determined to be 100 kilometres or more then the location will be defined as remote. The amendment is clearly not one that will affect many Australian taxpayers. This is reflected in its estimated impact over future budget years, with a cost of approximately $1 million per financial year.

We have asked the government for more detail in relation to this measure. Minister Dutton’s staff who briefed my office indicated they would provide further details but, disappointingly, we are still waiting. But I note here that we are receiving much more cooperation from Minister Dutton’s office than in the past we received from Minister Brough’s office. It may be the case that the individuals on islands are not receiving benefits from remote location treatment, like FBT exemption for housing costs. This is reasonable, but the opposition is seeking assurance from the government about who will benefit from this particular change. We are presuming that it is not about big business executives getting FBT-free temporary accommodation on, say, Hayman Island. That would not be acceptable to the opposition.

I want to turn to schedule 2 of the bill. The amendment seeks to make a consequential amendment to GST law by making some personal vehicles and pharmaceuticals GST free under the Military Rehabilitation and Compensation Act 2004. The amendment seeks to make these items GST free for those receiving a special rate disability pension under part 6 of chapter 4 of section 199 of the Military Rehabilitation and Compensation Act 2004. As most of us are aware, the tragic Black Hawk disaster in June 1996 led to the review of the Military Compensation Scheme in March 1999, commonly known, of course, as the Tanzer report. Back then, the report recommended a new military and veterans compensation scheme, which led to the Military Rehabilitation and Compensation Act 2004. Yet, for some unknown reason, it has taken some two years for the government to get around to incorporating these significant entitlements into the appropriate legislation. The changes, however, are merely consequential amendments for the new compensation arrangements, so they should have been introduced much earlier. This is another example of the government not meeting its obligations to taxpayers in ensuring that tax changes are dealt with promptly and in a timely matter.

Schedule 3 of the bill seeks to remove the part-year tax-free threshold for taxpayers who have ceased to be full-time students. This will allow taxpayers who have ceased to be full-time students to gain the full $6,000 tax-free threshold. Currently the tax-free threshold is only received for that part of the year that a student first enters the paid workforce. However, most students now end up in the labour force for some time even before going to university—at McDonald’s is the prime example, but also in many other areas of work. So times have certainly changed and, on that basis, the opposition is supporting the bill.

It might be an appropriate time for me to move the second reading amendment circulated in my name, because I have something to say about a couple of other issues, including the James Hardie issue. I will ask the member for Lilley to sign that second reading amendment. The opposition has an ongoing concern about what is happening in the James Hardie case. We cannot understand why the Treasurer has been prepared to offer a tax break—a tax break we calculate to be worth about $1.4 billion over the course of the scheme—to the James Hardie company, which is very much the villain in this exercise, but he is not prepared to extend a similar tax break to the victims of James Hardie. It does not make sense.

The Treasurer first of all claimed that he was not prepared to legislate in this place to ensure that the James Hardie compensation fund gets the tax break it requires to be sustainable to ensure that the victims and their families are adequately compensated. Then he backflipped without saying so and moved in this place some amendments to the black hole expenditure provisions under our tax law. He did not say that it was about James Hardie, but the whole world knew it was a backflip on the Treasurer’s part. We knew that it was an amendment to accommodate James Hardie, but we welcomed that. He is too proud to admit the backflip, but we welcomed the fact that he change those provisions and we supported them to ensure that this fund operates in the way in which it is intended.

It took months and years of negotiations between the victims, the unions and the New South Wales government to get this fund into place. This is time sensitive because some of these victims are very sick, and we have to get on with it. We welcomed the changes to the black hole expenditure provisions, which extended to James Hardie the tax break they were looking for. But why will not the Treasurer extend the same courtesy to the victims?

Worse than that, why is the Treasurer attempting to claw back from the victims $1.2 billion of the $1.4 billion it is costing him to fund the James Hardie company tax break? Let me make that clear: he is spending $1.4 billion to give the James Hardie company a tax break because they say that, without the tax break, the fund is not sustainable or, worse, they will not make a contribution to the fund. They are making it a condition of their contribution that they get a tax break—that is, $1.4 billion of taxpayers’ money. We do not have a problem with that, because there are times when the collective move to fix a situation which is basically unjust, unfair and cannot be fixed in the absence of an intervention by the collective. If the James Hardie case goes to court, it will go on for years. I would like to find a way of putting this more subtly but it is hard to: most of the victims will be dead before that case is ever resolved. So it is a good thing for the Australian taxpayer as a collective to move together to fix this problem.

So we spent $1.4 billion of taxpayers’ money to give James Hardie a tax break. But the Treasurer, by denying the fund a tax break both on the money that it receives from the James Hardie company and on the money that it makes on its investments while it holds the money, is going to save $1.2 billion. So he is robbing the victims to pay for the James Hardie company’s tax break. It is morally obscene to be robbing money from the victims to pay for James Hardie’s tax break. He gets on radio—and I have heard him on a number of occasions—trying to make out that the Labor Party is weak in wanting to extend a tax break to the victims, a tax break that he has already extended to the company. He is trying to make out that the opposition is reckless, but it could be no further from the truth. It is the Treasurer who has been reckless in setting one rule for the villain company and another harsh rule for the victims. There is no logic in his approach.

So I do not want to hear the Treasurer on radio anymore trying to make out that the Labor Party is too sympathetic towards the James Hardie company. There is nothing the Labor Party can do for the James Hardie company. They have got their $1.4 billion tax break—what more could we do? Their $1.4 billion tax cut is set in concrete. What we are calling for is similar treatment for the victims and their families, and we ask for no more and no less. We have attempted to use the forms of this parliament to provide that relief—of course, the government has used its numbers to vote us down—but we will continue to use forms of this House to do so.

It is interesting we are debating taxation bill No 5 today; usually we do not get to No. 5 to all we have dealt with No. 4. Why aren’t we dealing with tax bill No. 4? There are two basic reasons. The government do not know what to do with our James Hardie amendments. We have to find a tax bill that has scope. We have to find a tax bill to which the James Hardie tax law changes are relevant. You cannot do it on tax bill No. 5 because sufficient scope is not there. The rules of the parliament, unfortunately, require us to find scope. Tax bill No. 4 has sufficient scope to include the required changes, but that bill has been magically pulled because the government do not want us in this place debating what they know is, in truth, an entirely appropriate thing to do. But, of course, Peter Costello will never do anything that might be an opposition idea. His pride comes before his responsibilities in this place, and he should just wake up and get on with it.

My second reading amendment also deals with loss recoupment. The government botched the crucial bill with respect to loss recoupment the last time it came before the parliament. This is a very important bill for business, particularly those involved in infrastructure, venture capital and mining. We should note that those areas are very much the real drivers of the Australian economy at the moment—in fact, those most responsible for giving the government the windfall gains it is enjoying. They like to claim credit for those windfall gains, but, of course, we know the truth is entirely different.

The reforms of the continuity of ownership rules were welcome, but changes to the same business test imposed a $100 million cap on these companies. The result is that non-listed companies might fail both tests and lose the benefit of those losses—not be able to carry those losses forward. The same day the government rejected Labor’s proposed amendments of the measures they called for a review which was to report in January but is now eight months late. Indeed, at the time I moved further amendments in this place which I have with me; I will not seek to table them because they are on the parliamentary record. That report is eight months late. Nothing could create more uncertainty for business than, first, a review and, now, a review that is eight months late. The review made the situation even worse. In many ways the government would have been best to not accept our amendment and just leave the bill as it stands rather than introduce greater uncertainty for those businesses which have been affected.

In response to a question in writing from me, the minister has indicated that there are billions of dollars in losses outstanding here. We are talking about billions of dollars, not small fry, and you can appreciate that this is having an enormous impact on the investment decisions of businesses in this country, particularly businesses which are at the forefront of our economic growth at this point in our history. So we need to deal with this matter urgently. The previous Minister for Revenue and Assistant Treasurer, Mr Brough, in one of his mistakes we used to infamously call ‘Brough-ups’, made the error, but now we have a new minister in place. He has been there for many months now and it is about time he tidied up the situation and gave business the certainty they are looking for in terms of loss recoupment. They are not asking for much; they are only asking for some certainty, some clarity and an opportunity to get on with the job.

The Reserve Bank governor tells us on a regular basis that one of the major things putting pressure on interest rates in this country is physical capacity constraints, particularly at our ports and in mining, and our inability to keep pace with the ever-growing demand of some of our customers, and yet at the same time we have mining and infrastructure companies in this country unable to make important investment decisions because this government cannot make a decision on an issue as simple as loss recoupment. I invite the member for Mitchell, who is due to speak next, to pass comment on that. I know he watches these statements on monetary policy closely. He knows what the Reserve Bank has been saying; every member in this place knows what the Reserve Bank has been saying. You would think this government would be spending lots of sleepless nights working out how they can best address those capacity constraints. But, instead, what do we have? We have an incompetent government and a lazy Treasurer who is not prepared to get off his backside and sort the problem out.

Minister Dutton is not prepared to do it. The Treasurer should intervene and get this thing fixed, and while he is at it he needs to move very quickly to extend the tax concession to the James Hardie fund on both the income it receives from the James Hardie company and, of course, the interest it receives on that money while it is holding it on behalf of compensation victims. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House condemns the Government for failing to adequately deal with major unresolved taxation issues including; the

(1)

failure to provide certainty to the former employees of James Hardie and their families by providing tax exempt status to the James Hardie Asbestos Victims Compensation Fund, and

(2)

creation of great uncertainty in the Australian business community by its failure to bring forward its review of loss recoupment rules”.

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