Chris Hayes (Werriwa, Australian Labor Party) Share this | Hansard source

I rise today to support the provisions of the Tax Laws Amendment (2006 Measures No. 5) Bill 2006, but I have to say that my support for that bill is not unqualified. This bill before us today deals with three aspects of tax law.

The first is the fringe benefit tax changes to implement some of the recommendations of the report of the Taskforce on Reducing the Regulatory Burden on Business: Rethinking regulation. The second is the GST car and pharmaceutical concession from the establishment of the military specific compensation scheme. The third is the removal of the part-year tax-free threshold for taxpayers who have ceased to be full-time students. These changes introduced under this bill will reduce the complexity of the system, and it can be reasonably expected that such a reduction will result in a reduction in compliance costs.

Fringe benefit tax changes included in this bill are broadly targeted at small business. I am a long-term supporter of improving the lot of people in small business and reducing their compliance costs. I know only too well what it is like to try to manage a small business, meet the regulatory requirements and try to find enough time to spend with your family, away from your business. It is difficult; it is a balancing act, and it is one that many small business owners find difficult to manage successfully—or at least manage to their satisfaction. This issue was raised with me recently, when I took part in Pollies for Small Business Week. Pollies for Small Business Week is an excellent opportunity not just to talk with the owners of small businesses about their specific needs but also to get involved, get behind a counter and, for a time, stand in the shoes of those on the front of running small businesses.

I had the opportunity to spend some time with Sam Cavallaro at Cavallaros Sweet Indulgence—which, I hasten to add, was a gourmet eatery—in Liverpool and also sell newspapers and stationery items with Chris Redondo at Ingleburn Newsagency, which is directly across the road from my office in Ingleburn. These are quite different businesses—one is a gourmet eatery and the other is selling newspapers—but they had some very similar themes.

Both small business owners expressed to me that the changing nature of their business environment had made their businesses tougher. By this they did not mean that their business was suffering a downturn as a result of a drop-off in the economic climate. Rather, competition was making things more difficult. Both men have been in business for quite some time, and both indicated to me that business was getting harder, not easier, in their line of work. Margins are thinner, competition is greater and cash flow management is more important than ever.

It is interesting that both businesses thought that competition is getting tougher. It is particularly interesting that they did not make note of this in terms of competition from like businesses establishing themselves nearby or down the road—although they freely admit that that would have some impact. Rather, the message that I received is that the competition that they were concerned about was unfair competition from larger organisations that have the capacity to engage in loss-leading behaviour—unfair competition—that means that they can secure a greater market share over a short period of time.

This brings me to the issue that I have raised on many occasions in this place: the failure of the government to implement the findings of the Dawson review of the Trade Practices Act and make businesses fairer for everyone in the market. I am sure both Chris and Sam—along with the more than 4,000 other small business people operating in my electorate of Werriwa—would enjoy the even break that the reforms of the Trade Practices Act would allow.

These small business operators are not asking for the playing field to be slanted disproportionately in their favour. All they are asking for is to be able to at least ply their trade on a level playing field. They are not looking for preferential treatment; they are just looking for the opportunity for genuine competition to be played out on a level playing field. They want the chance for the hard work and dedication that they give their businesses not to be wasted simply because a large organisation can set up shop and carry short-term losses in order to secure a greater market share.

I spent a number of hours with both these small businesses and their staff. I thank everyone involved for their time—and particularly for their patience, as I am rather a novice in both of these areas of business.

The operators made comments about how tough business can be. But what really struck me was another matter that they did not raise, and it is the second most interesting thing that I would like to draw this House’s attention to. At no time in my period with either of those businesses did these operators express any view about industrial relations or industrial relations policies. They certainly did not express a view that Labor’s position on industrial relations would ruin them. They did not express that view that the Prime Minister is attempting to perpetuate—that Labor’s plans for industrial relations would make their businesses even more difficult. They did not even express a view that Labor’s plan to clean up unfair dismissals would create the sort of burden that would ruin their businesses.

But the most telling thing about their size when it comes to industrial relations was that they did not sing the praises of this government. These businesses did not sing the praises of the government in any way as to the way in which they are being encouraged to treat their own employees. These two small business operators—and many other small business operators who I have spoken to since the Prime Minister made that famous ministerial statement on industrial relations in May last year—have not been telling me how good these changes are for them or how bright their outlook would be under Work Choices.

The government claims to have made changes with the strong backing and support of small business sectors, but when push comes to shove it is not the small business owners or operators who are singing the praises of this government’s industrial relations agenda. They are wondering what happened to the stalled trade practices reform to make their business environment a bit friendlier, a bit more of a level playing field. They are not praising the government on industrial relations.

Don’t get me wrong, Mr Deputy Speaker; I know that some business organisations and individual business operators are praising the government’s extreme industrial relations changes. However, these are not the mum and dad small business operations that the Prime Minister claims he was making these remarks about and making changes for. No, these business operations who are out there championing the cause of the government are from the big end of town. They are the people who Mr Hendy represents. I know the government says a lot about small business in their representations to the media about these things, but realistically we all have to concede that, whilst people are referring to small business, the people who are driving the agenda in the efforts that have been made to support this government’s industrial relations agenda are at the big end of town.

I mentioned earlier that a growing problem for many small business operators in my electorate is the difficulties they face in managing cash flow. I understand that a recent survey of small business operators—which was mentioned by the member for Hunter—listed cash flow management as the top issue for the management of businesses today. While the changes implemented through this bill will reduce the compliance costs faced by small businesses when it comes to fringe benefits tax and a more fundamental review of taxation, as Mark Fenton-Jones noted in the Australian Financial Review on 29 August this year:

The latest changes to the way GST and fringe benefits are calculated by small businesses are welcome measures to reduce the compliance burden. But it is only tinkering on the margin, as the whole tax system needs to be revamped with small business in mind.

I would not want to misquote the words of the member for Mitchell, but I note that in his contribution to the debate a little earlier he drew attention to the fact that he did not see the way ahead involving a tinkering at the margins but that we should be looking at fixing the system—and I think he was referring to GST arrangements for vehicles and pharmaceuticals for those covered by the Military Rehabilitation and Compensation Scheme.

The combination of small business cash flow problems and broader tax reform brings me to a problem experienced by a number of small businesses following the recent Australian Taxation Office ruling ‘Goods and services tax: deposits held as security for the performance of an obligation’. Mr Deputy Speaker, as you would appreciate, this tax ruling, which could force small businesses to pay the full GST on a sale price, even when they have received as little as 11 per cent of the price as a deposit, could have a serious impact on many small businesses and exacerbate the difficulties that they are already experiencing with cash flow. I note that the member for Adelaide has a particular concern in this regard, having recently placed a question on notice to the Treasurer about it.

This ruling has the potential to greatly cripple small businesses as they take another hit to their cash flow. Once again, it may present the opportunity for larger competitors to make a grab for market share as they are better able to manage the cash flow implications of this tax ruling. It will certainly impact very directly on small businesses—and I refer in particular to the small businesses in my electorate of Werriwa.

On 6 April this year, the Treasurer noted that the matter will go before the courts and that he will examine the findings of the case once the courts have dealt with the matter. I have to say that that is an abrogation of responsibility, if we are serious about protecting and furthering the interests of small business operators. I join people such as the New South Wales Minister for Small Business, David Campbell, in calling for the government to overturn this ruling in the specific interests of small business operators. It is about time that this government acted on behalf of small businesses across the country rather than using them to create a myth surrounding the demands of the small business sector for the industrial relations changes spearheaded by this government.

As I said, small businesses do not want these industrial relations changes. Small businesses like the certainty of the award system because they know how much they are required to pay their employees. They also like the certainty of the award system because they know that other businesses that they compete with are governed by the same set of rules. They like the certainty of the award system because it prevents the cowboys in their industry from using the full extent of the law to drive down costs and to force them to cut the wages of their staff. This is something they do not want to do, as staff in many small businesses are considered to be family rather than employees. Small businesses make every effort to look after their employees. They do not want to be forced to join this government’s race to the bottom. Despite the government’s attempts to perpetuate the myth that small business wants this government’s extreme industrial relations agenda—

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