Jill Hall (Shortland, Australian Labor Party) Share this | Hansard source

I must compliment the member for Makin on his fine contribution to this debate. It shows that he has a great understanding of the issue and a great understanding of the global financial crisis and the impact that it has had and he understands how the measures being offered by the Rudd government will actually support and help small business.

This legislation, the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, gives effect to the government’s 2008 announcements to provide relief to small business by reducing their PAYG instalments for the February quarter. I would like to highlight just how important this is. This simple act of reducing the PAYG instalments makes it possible for some businesses to survive. It is recognition by this government that business is doing it hard and it is the role of government to provide support to business at times like this when we have this global financial crisis. The PAYG instalment system is designed to smooth taxpayers’ cash flow throughout the year and to avoid taxpayers accruing large tax liabilities on assessments which they may have difficulty paying as a lump sum. Taxpayers earn business or investment income and pay instalments during the year towards their final tax liability for the income year. Section 45-400 of schedule 1 to the Taxation Administration Act 1993 stipulates the way the Commissioner for Taxation works out the amount of the PAYG quarterly instalments on the basis of GDP adjusted notional tax. Broadly, the GDP adjusted notional tax is worked out by uplifting the taxpayer’s income in the previous year by the year’s rate of nominal GDP growth. The GDP uplift factor can be unrepresentative of expected profit growth in the income year where economic conditions change quickly. That brings us to the situation we are in at the moment where conditions have changed. There is a recognition by the government that there has been this change and there is a need for government to step in and support business, and that this change can cause taxpayers to pay PAYG instalments that are too high compared with their actual income. I think it is vitally important that this recognition has come through. I congratulate the minister on acting so quickly to make this change. It also applies where overpaid tax is refundable to people at the end of the year when their final tax liability is assessed.

As I have already mentioned, this measure is a further example of decisive action taken by the Rudd government to assist small business to weather the global financial crisis. I will go into this measure a little and then I will talk more broadly about the impact of the global financial crisis on small business. Small businesses with a turnover of less than $2 million a year will be able to claim a bonus deduction of 30 per cent. This is one of the initiatives that the Rudd government has put in place over and above this legislation to address the needs of small business. They will be able to claim a bonus deduction of 30 per cent for eligible assets costing $1,000 or more where these eligible assets are acquired or start to be held under an eligible contract between 13 December 2008 and the end of June 2009 or are started to be constructed between these times and are installed ready for use by the end of June 2010. Small business will be able to claim a bonus deduction of 10 per cent for eligible assets costing $1,000 or more that they acquire or start to hold under a contract between 1 July 2009 and the end of December 2009 or start to construct between these times and have installed ready to use by the end of December 2010. A minimum expenditure threshold of $10,000 will still apply to other businesses.

The eligible assets the tax bonuses will apply to are tangible assets used in carrying on a business for which a deduction is available under the core provision of division 40, capital allowance, of the Income Tax Assessment Act 1997. Specifically, deduction will be available for appreciating assets under section 40-30 that qualify for allowance under subdivision 40B except for intangibles and the rights that would otherwise be included by subsections 40-32 (5) and (6). However, cars will be disqualified from the allowance merely because they use the 12 per cent method. This may sound technical but I think it is a very workable approach. Land and trade stocks are excluded from the definition of depreciating assets and will not qualify for the deduction.

Expenditure above the threshold which is capitalised into an existing asset as a second element of the cost will also qualify for the deduction. To claim the bonus the deduction will be available to the taxpayer who is entitled to the capital tax allowance deduction under division 40 of the Income Tax Assessment Act 1997 in respect of the assets. The deduction is on top of the usual capital allowance deduction claimed for the asset as part of the taxpayer’s income tax return. The deduction will be available to be claimed based on the application rate of 10 per cent and the asset’s first and/or second elements of the cost in terms of subdivision 40-C. The deduction is claimable in the income tax year in which the asset is installed ready for use. Treasury will be releasing draft legislation for public consultation soon. That is one very distinct measure that is being put in place for small business, and we have previously discussed another.

When we are looking at small business and the impact of the global financial crisis it is very obvious that the Rudd government has actually acted very quickly to address the fact that small business will be suffering because of the global financial crisis. Members on the other side of this House quote daily the number of people who are becoming unemployed, and it seems that that is something that causes them great delight. They put forward the premise that Australia is the only country that is affected by this global financial crisis when in fact the measures that have been introduced by the Rudd government have been replicated throughout the world, and the measures the Rudd government has introduced have been models for countries elsewhere. Even President Obama of the United States actually referred to the stimulus package that has been put in place. The stimulus package has not just been put in place in isolation; it has been put in place to protect Australian jobs. The members on the other side of this parliament have shown time and time again that the only interest they have in increasing unemployment is to gloat rather than to—

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