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

I speak today in support of the measures contained in the Tax Laws Amendment (2006 Measures No. 7) Bill 2006. I cannot speak in favour of all of those measures, particularly those in schedule 2, as I feel that further consideration really is required to examine the full impact of those changes. While I believe that schedule 2 does require additional thought—and I think that the new shadow Assistant Treasurer adequately outlined Labor’s position in that regard—the provisions of the bill that I want to focus on, particularly in relation to the interests of people within my electorate of Werriwa, are those involving changes to the capital gains tax concessions for small business operators. Accordingly, I will make those the focus of my comments.

The rapid rise of small business operators over the last decade has resulted in quite a phenomenal transformation of the Australian economy and Australian society. As I have noted before, there are not many times that you can look through the classifieds in the Sydney Morning Herald on the weekend and see vacancies for plumbers, carpenters, painters, builders et cetera who do not hold ABNs. Essentially, those positions in those trade groups are very much in a small business category. My son is included in that. One of my sons being a carpenter, I know full well how he has to access his work as a small business person operating in my electorate.

Labor supports small business. While the Prime Minister and members opposite have gone to great lengths in this chamber trying to make out that Labor does not support small business and is its enemy, nothing could be further from the truth. That has never been the case and never will be the case. It is because Labor supports small business operators and because Labor supports real and genuine improvements to our system of taxation that Labor will support the amendments contained in schedule 1 of this bill.

There can be no doubt, when it comes to interpreting the existing capital gains laws in relation to small business, that you really do need a clear head and a willing mind, as you need to steel yourself against a battle with what can only be described as the most complex tax law. According to the view of an accountant operating in my area whose clients include many small businesses, capital gains concessions provisions on the sale of a small business, for instance, are the tax law equivalent of the Enigma code—virtually indecipherable.

While the code and the tax laws surrounding capital gains tax on the sale of a small business may have been unclear to all but the most expert in their fields, the impact of the law on small business operators is very real. As I mentioned earlier, over the last decade or so there has been a rapid and noticeable growth in the number of small business operators, particularly in the outer metropolitan areas, of which Werriwa is obviously one. Prior to these structural changes in the economy, these small business operators and independent contractors were largely employees. They knew their trades, they knew their jobs, and they worked hard. Their status, for various reasons, has changed, but their attitude to work has not. They continue to work hard to support their families. As their businesses grow, they quite possibly employ others. They do what most employees do—that is, build a retirement nest egg. Consequently, the impact of the capital gains tax levied on the sale of a business becomes extremely significant to these people, as often the proceeds of small business sales form a considerable part of the retirement savings of small business owners and operators. For this reason, among others, the changes before us today have a significant impact on the estimated 16,000 small business operators in the electorate of Werriwa and no doubt the many millions of small business operators throughout this country.

Changes that break the Enigma code, the complexities of our current regime, are particularly welcome. I would like to briefly refer to the comments made by the new shadow minister for service economy, small business and independent contractors. I believe that what the member for Rankin said about the recently released MYOB assessment of red-tape compliance is accurate. Quite clearly, when I talk to people in my electorate, two of the biggest things on the minds of small business operators are the BAS reporting and the allocation of GST on a daily transaction basis. These are very much the burdens which have been foisted upon small business operators to comply with and which have made life very complex for them.

It was only last week that one small business operator came to talk to me about issues of taxation in that regard. He has had some difficulty with the taxation office. He thought he was doing the right thing only to find that the way he was conducting his reporting was incorrect. Obviously I could not give him tax advice, but at least I could be sympathetic with this bloke. He certainly was making a genuine effort to comply, or he thought he was. This is a one-man operator in a small business looking after his family. He is taking significant time out simply to try to deal with the compliance issues now faced by that business.

The changes in the bill to the capital gains tax concessions for eligible small businesses include changes to the maximum net value assets criteria, the 15-year exemption, the retirement exemption, the small business rollover provisions, the changes to the active assets tests and changes to the significant individual test that will no doubt increase the availability of small business capital gains tax concessions. While the bill before us contains a number of good measures in relation to small business capital gains tax concessions, there is one notable exception. You will recall, Madam Deputy Speaker, that in last year’s budget the Treasurer announced that the value of the maximum net value of assets test would be raised from $5 million to $6 million. This is an important change for many small business operators because of the significant impact it could have on what an owner ultimately keeps from the proceeds of the sale of a small business.

When the Minister for Revenue and Assistant Treasurer delivered his second reading speech on 7 December last year, he was silent on the extension of this threshold. I note that he did mention once the change to the maximum net asset value test as part of a list of amendments that were contained in the bill, but at no time did he seek to explain why the provisions announced about the threshold extension had not been contained in this bill. I can only conclude that this notable absence from the bill may mean that the government intends to go back on the promise it made in the budget. Along with the many business operators who have made the decision to delay the sale of their businesses until the passage of this bill, I hope that that will not be the case. I hope the extension of that threshold will be promptly dealt with by the government.

This government has often promised but seldom delivered when it comes to cutting red tape for small business. This is something that was recently asserted by the member for Rankin, our new shadow minister for small business. But this is not just a matter of political hype. You simply need to speak to any small business operator in each electorate to know that that is the case. That is very much their view, and the view comes from the impositions they have seen foisted upon their businesses. This government went to the last election promising small business that it would do a number of things to cut red tape. Apart from giving the green light on industrial relations to unscrupulous employers to cut take-home pay and conditions, it has not done all that much to improve the lot of small business operators. This government has made many high-level promises but, when it comes to reducing red tape, its performance has been lacking.

The Prime Minister has previously given a commitment to cut red tape by 50 per cent. He said that he would do it in his first term of office. I do not know the exact level of success in this endeavour but, if I can judge success through the prism of those who have to deal with the federal government’s paperwork and regulation on a daily basis or through the experience of the many business operators that I speak to in my electorate, I would have to conclude quite frankly that it looks like this government has not applied itself to what must be regarded as a core promise. It presented itself at a federal election, claiming that one of its key provisions was to motivate and develop small business by cutting red tape in the order of 50 per cent. That clearly has not occurred.

It has been some time since the Treasurer announced that the government would introduce the Simpler Regulatory System Bill. In a press release on August 15 last year, the government announced its response to the Banks task force report on reducing regulatory burden on business. The Treasurer went to great lengths to outline the government’s commitment to reducing regulatory burden on business. He said:

The Australian Government is leading the way in reducing the burden of red tape to improve the economic environment further so that all businesses, large and small, can prosper and grow.

It is disappointing that these big claims have yet to be backed by action.

The Simpler Regulatory System Bill, which is to introduce the changes aimed at decreasing the regulatory burden on business, is yet to be introduced, though I note that it is set down for introduction sometime this session. But I have to say that the fact that it is not here now indicates the order of priority that this government gives to reducing the regulatory burden on businesses. Once again it seems that the government is willing to talk tough on cutting regulation and is willing to promise much but, sadly for business operators, particularly small business operators, who are willing to do everything they can to produce for our economy and are waiting for their compliance burden to be eased, this government has been, quite frankly, very tardy in delivering. In fact, based on the track record of this government, much like it has done with tax, this government continues down the path of increasing regulation rather than cutting it, which adds impediments for businesses, particularly small business.

While the small business capital gains tax concessions contained in this bill are welcome, there is no doubt that, when it comes to the complexity of Australia’s taxation system, a lot more can be done. Angela MacRae—someone with whom I am sure that most members opposite would be familiar, as she was a member of the government’s task force on reducing regulations on business—said last year at a seminar for Standards Australia:

Our tax act is the second-worst in the world behind the USA.

They were very strong words. That view was expressed by someone who is well versed in tax issues, given that she was the former tax director of CPA Australia.

While many in the government continue to crow about the achievements of this government when it comes to tax reform, in truth it is much ado about nothing. This government continues to introduce taxes—including the ‘never, ever’ GST. The shadow minister for small business was quite correct when he said that that is a federal tax. There is no point trying to run the very tired argument that the GST is something other than a Commonwealth tax. It is a Commonwealth tax. This government has made itself the highest taxing government in Australian history. The GST has added to the burden of compliance and regulation that faces small business operators every day and has done nothing more than make every business operator—from the corner store through to Australia’s largest companies—tax collectors.

Labor knows how important it is to have a competitive business environment. Labor knows and understands how important it is to encourage efficiency in our business community and to make Australian businesses as competitive as they can possibly be both domestically and internationally. Labor also knows that a key part of creating a competitive business environment is creating an internationally competitive tax system. Going back to Angela MacRae’s comments, she—as a former director of CPA Australia—indicated that we have the second worst tax system in the world, second only to that of the USA. So it could hardly be the case that we have an internationally competitive tax system at present. Ongoing business and personal tax reform is important in improving the barriers to investment, boosting workforce participation and rewarding effort. Unlike the government, Labor knows that it is important to build a tax system based on long-term goals rather than rushing in and introducing ad hoc changes to tax law.

I welcome the provisions of this bill, particularly those that will improve the tax environment for small business operators. The Board of Taxation noted in its October 2005 report on the post-implementation review of the effectiveness of small business capital gains tax concessions that the tax environment for small business could be improved by providing ‘incentives to small business generally to invest their capital to maximise employment, investment returns and innovation’. I could not agree more. The fact that the government accepted all but one of the recommendations of the board’s report was welcomed by small business operators—particularly the recommendation in relation to capital gains tax concessions. As I noted earlier, it will have the dual effect of increasing the availability of small business capital gains tax concessions and reducing the compliance burden on small business.

It is disappointing, however, that the government has not seen fit to include in this bill the extension of the maximum net value asset test from a maximum of $5 million to $6 million as announced in the budget. (Time expired)

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