Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

It gives me great pleasure to speak on the Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015. Firstly, this bill is another example of what this coalition government is doing, and has to do, to clean up the mess that we were left after six years of Labor. Before I speak on the details, it is very important to focus on the importance of entrepreneurship, which this bill goes to the heart of. It is entrepreneurship that leads to innovation, and it is through innovation that we raise our living standards. We need to create an economic environment that encourages entrepreneurship, risk taking and experimentation, and that provides reward for those people who are prepared to put their own capital on the line and have a go. That is the way we improve the living standards of all Australians. It is that innovation through small-scale experiments, time after time, with a combination of, yes, good luck, judgement and hard work that gets the innovation and the wealth creation in this country.

We have seen examples of countries where innovation fails to happen. We have seen it in countries such as the former Soviet Union, a very rich and wealthy country. They simply failed to create innovation and they went backwards. The failures of centrally planned economies are simply failures of innovation. They are not able to produce the new drugs, the new methods of transport, the new methods of communication and the new consumer products. That is what happens to a nation if you do not have innovation.

I think of one of the greatest failures of that regime. There is a famous photograph taken in a supermarket in Houston in 1989 when Boris Yeltsin, who at the time was making his first trip to the USA, made a side-trip to a small supermarket. Other Soviet leaders had made trips to supermarkets in the USA, and they always thought these were something that were set up as a dummy display to try and show how rich and prosperous the Americans were. They did not believe it. Because Yeltsin had made an unscheduled detour, he knew that this could not have been something that had been set up. The story is that he wandered around the supermarket in complete amazement. The photograph is of him looking into the freezers, seeing all the consumer products that were available to the average American and to most citizens in Western democracies. Yeltsin later wrote:

When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people … That such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.

That is what happens when you deter innovation and when you deter entrepreneurship. One of the ways of encouraging entrepreneurship and innovation is through employee involvement—the employees having skin in the game through employee share schemes. That is at the heart of this bill. It has long been known that if you can get employees to have some skin in the game they will perform better. The member for Forde quoted Edmund Burke. I think I have an even better quote, from Adam Smith. Smith noted the importance of ownership and, in the 18th century, he said:

A small proprietor, however, who knows every part of his little territory, who views it with all the affection which property, especially small property, naturally inspires, and who upon that account takes pleasure not only in cultivating but in adorning it, is generally of all improvers the most industrious, the most intelligent, and the most successful.

So for several hundred years employee share schemes have been known to increase productivity.

This brings us to what Labor actually did during its six years of government. We saw many disasters, but perhaps this was one of their greatest: in 2009 they made changes to the way employee share schemes were taxed. Where a share scheme gave an employee an option, they made the tax payable upon the granting of the option, not when the option was exercised. Such an insane policy could only have been cooked up by a government run by ex-union officials—ex-union officials that believed in central planning. As was predicted by all and sundry, it was an absolute disaster. The law of unintended consequences applied—it stifled investment and disincentivised innovation and especially start-up companies. It also placed at an international competitive disadvantage Australian start-up businesses and entrepreneurs with a good idea looking for ways of raising capital to attract talented employees. The carbon tax was a tax on Australian companies—effectively a reverse carrot for producing goods in Australia. This was exactly the same—it placed Australian companies at a competitive disadvantage.

We can measure some of the damage Labor did to innovation and start-ups and new businesses. In 2003-04, Australia's business entry rate saw a total of 325,000 new companies, new businesses, start up. If we fast forward nine years to 2012-13, the last full year of the Labor government, you would expect, with a growing population and a growing economy, more business start-ups. But under the Labor government there was a 50 per cent decline in business start-ups. We were 100,000 start-up businesses less than we had been almost a decade ago, because of the incompetent policies of the Labor government. The damage done will not be known. We can put an economic cost against their wasteful destruction of resources, we can put a value on their wasted pink batts scheme and the wasted expenditure on school halls and the $900 cheques to dead people and people living overseas; we can measure the failure of their border protection and the wasteful destruction of our resources. But we will never be able to measure the damage the Labor Party did by disincentivising start-up businesses and entrepreneurs in this country. We will never know what new products, what new services and what new jobs would otherwise have been created without the economically reckless policies of the Labor government.

That is what this bill addresses—it addresses cleaning up Labor's mess in the area of employee share schemes. It does three things. It reverses Labor's 2009 changes to our tax laws; it introduces further tax concessions for employees of certain small start-up companies; and it supports the Australian Taxation Office in working with industry to develop and approve safe harbour valuation methods and standardised documentation to streamline the process of establishing an employee share scheme.

We on the side of the House understand the importance of innovation. We understand the importance of energising entrepreneurs. We understand that we must encourage risk takers; we understand that we must give them at least a level playing field so they can compete internationally. Ultimately, the money that we get here in the government's treasury simply comes from productive business enterprises. The more productive our business enterprises are, the more money that flows into government coffers, the more we have for all those important social programs.

I acknowledge the presence in the House of the Minister for Small Business, the member for Dunkley, Minister Billson. I commend the outstanding work he has done on behalf of the hundreds of thousands, if not millions, of small businesses in this country. We are slowly turning the tide around. After a Labor government under which more than 500,000 people in small business lost their job, we are turning it around—we are incentivising our entrepreneurs because that is the only way we can grow wealth in this country. I congratulate the small business minister for his efforts and I commend the bill to the House.

See this speech in context