Pat Conroy (Charlton, Australian Labor Party) Share this | Hansard source

I am pleased to make a contribution on the Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015. The last speaker, the member for Casey, spent most of his speech demanding an apology from the Labor Party for supposed past sins, but he was remiss in not pointing out why the 2009 changes were made. They were made to stop massive tax evasion being undertaken by established companies through the misuse of employee share schemes. We have to get the balance right, and that is why Labor are supporting this bill—because, on the whole, we believe it gets the balance right between providing an appropriate tool for start-ups and appropriate incentives for start-ups in this country to develop, to grow and to be a vital part of the economy, while ensuring that established companies do not misuse employee share schemes just to provide remuneration to employees in a way that avoids tax. We have to get the balance right.

People can talk about what happened in 2009, but the most important thing is to talk about this bill and the second reading amendment to the bill to understand that this is part of a broader debate, and that debate is about how we support innovation and research in this country and how we support jobs, going into the future. The previous Labor government did make significant reform in this area. We are supporting the sensible amendments contained in this bill. What we do not support are the government's short-sighted and drastic cuts to science and innovation that will have a devastating impact on Australia's economic growth and productivity. I am keen in my contribution to highlight the different approaches of the two parties.

This bill makes three primary changes. It reverses some of the changes of the previous Labor government that were made in 2009 regarding a taxing point for share rights for employees; it introduces further taxation concessions for employees of certain small start-up companies; and it provides for the ATO to work with industry to develop and improve safe-harbour valuation methods for employee share schemes. The Labor amendments made in 2009, as I said, were designed to ensure that employee share schemes were not misused to avoid tax. The government's sensible amendments to the integrity measures on employee share schemes will be supported by Labor. It makes sense for policy regarding employee share schemes to be enhanced six years after the previous reforms. The government's amendments constitute a logical refinement, with the aim of boosting innovation while, importantly, still ensuring that those types of schemes are not used for the purpose of tax minimisation or evasion by wealthy Australians.

It should be noted that these amendments, to a large extent, keep Labor's integrity rules in place. The new concessions are only available to genuinely new enterprises. In March last year, the Leader of the Opposition first indicated that we would consider amendments to employee share scheme rules to make sure that innovative start-up companies are not unnecessary targeted by the new measures. Since that time, Labor has consulted widely with investors, tax experts and, importantly, start-up companies. We have a very clear commitment to ensuring that Australia has the appropriate policy settings in place to support innovation, which is so fundamental to our future economic growth and prosperity. Labor has listened to feedback from stakeholders regarding the current difficulty for start-up companies to offer employees a package with the potential for a higher return through employee shares.

The government's amendments do retain some of the integrity measures of the 2009 changes and provide for more people to defer the taxation of options and shares until they are able to sell the shares. This is a sensible amendment. The proposed amendments provide for a new start-up concession. Employees of certain small start-up companies may receive this concession if their employee scheme meets a number of conditions. It is appropriate that the following limits apply to the concessions: a company must be an Australian company privately held, under 10 years old and have a turnover below $50 million; and the share or option must not be provided at a discount rate greater than 15 per cent and, in the case of an option, have an exercise price greater than an ordinary share.

The bill also provides a new power to the Australian Taxation Office to determine a more straightforward safe-harbour valuation calculator so that new companies are not required to undergo expensive valuations to allow them to access employee share schemes. So the substance of these amendments to the 2009 changes is sensible and supported by the Labor Party. It improves the balance between minimising tax evasion and supporting start-up companies, which are integral to the innovation system of this country.

In the time remaining, I would like to turn to the broader innovation system in this country that this bill needs to be considered within; that is the context of the debate we are having right now. Unfortunately, I must depart from the rhetoric of bipartisanship I have enjoyed over the last five minutes to bewail this government's appalling record on science and innovation more broadly. This bill is an important measure and is a good contribution, and should be applauded as such. But it is in the context of an appalling record on science and innovation more broadly. The result of that will be fewer jobs into the future and less economic prosperity. The last two federal budgets have cut research funding by 17 per cent. That is a straight fact. In the budget before the last one, there was a $528 million cut to science and research, including an incredibly short-sighted $111 million cut to the CSIRO.

On the broader innovation agenda, the government, and these political parties that form the government, have form on not supporting innovation. One of their first acts in 1996, when the Howard government came into power, was to slash the R&D tax concession from 150 per cent to 125 per cent. This had a devastating impact on local innovation. The new coalition government are no better. They have cut $2 billion from innovation programs, and that is having a massive impact out there. Whether it is the Commercial Ready program, Enterprise Connect or various other measures designed to support innovation and research, this impact is being felt—not just by researchers and not just by scientists but by businesses trying to increase their value-adding and increase their international competitiveness.

I have many advanced manufacturers in my region that are suffering because of these changes. And there can be no greater flagship for this short-term, myopic focus than what they have done around precincts. The last government announced a $500 million policy around precincts to drive applied research, to drive innovation. We identified a problem, and that problem was that there was not enough effective applied research being done in this country. There was plenty of blue sky research being conducted by scientists that was world's best, but too often they were focused on the research and not focused on what business needed. And on the other side there were so many businesses that were so busy, so focused on the day-to-day struggles—which is quite understandable—that they were not engaging effectively with the research community to really mine that research for new ways of improving their competitiveness.

So, in a job statement that we put out in 2013 we put aside $500 million for the precincts, which is all about bringing business and research together to develop the new ideas. We have a great track record of discovery, whether it is helping with aspects of wi-fi, whether it is a black box recorder, whether it is leading solar research in the 1980s and 1990s or whether it is the humble Hills hoist. We are great at inventing things, but we are very poor at commercialising that research in this country and having the jobs dividend that comes with it. So this $500 million package was aimed at bringing together 10 industries in precincts where we would effectively cluster, where you would get lots of applied research, learning by doing, world's best practice to really advance the competitiveness of our industries so that we could grow the industries of the future.

My region of the Hunter was well positioned to benefit in advanced manufacturing, mining related services or energy network research, where we lead the country in that particular aspect. This government has adopted and acknowledged that precincts and clustering is something to be supported, and the growth centres program is effectively the same program with a different title. New governments will change the titles of programs. That is a time honoured tradition, and that is not a problem. What is a problem is that they have slashed funding for this program from $500 million to $188 million—a massive $312 million cut in funding. They have reduced the number of growth centres or precincts from 10 to five, and obviously those five will be woefully underfunded. They have basically stood stock-still for the past two years rather than getting on with the job.

This will have a real impact on applied research in this country, and it is a real missed opportunity. It shows that this government yet again is heavy on rhetoric and light on action. They need to match their rhetoric with action, and, quite frankly, in this area dollars do matter, and that $312 million cut is very significant. And their undermining of innovation and advanced industries is not just related to precincts. We should look at what they have done in manufacturing, which is not just a driver of employment but also a driver of innovation and of research and development. For example, their destruction of the automotive industry, their destruction of an industry that employs 50,000 people directly and 200,000 people indirectly, will actually have an impact on research and development and on productivity in this country. The automotive industry conducts around $700 million worth of business research and development each year. That is about four per cent of the total, which is more than 10 times their employment contribution to this economy. In fact, it is more than 20 times their employment contribution to this country.

So, this single act of destroying the automotive industry, of withdrawing funding, of daring and bullying General Motors and by consequence Toyota to leave the country will have an impact on innovation. Their short-sighted policy around submarine construction in this country will also have a massive impact on innovation. It is well known that not only did the Collins class construction lead to the building of six world-class conventional submarines that the Navy in testimony repeatedly says are amongst the best performing submarines in the world but it also led to a vast modernisation of Australian industry. Before the Collins class project, fewer than 100 companies in this country were specified up to ISO 9000 standard. After the Collins class project thousands of companies were qualified for ISO 9000. I know there is sensitivity on the other side about the submarine project, because it represents a gross betrayal of the Australian community. They made a promise before the election to build 12 submarines in Adelaide, and they are now going to build them, by all likelihood, in Japan. Not only will we miss out on thousands of jobs, and not only will the ability of our Navy and our naval industry to maintain, repair and upgrade these submarines be in peril, but they are actually reducing the innovation capacity of this nation and the ability of the Australian manufacturing sector to be modernised to compete globally.

Another area where they are showing their short-sightedness around innovation policy is in their ideological attack on clean technology, both the industry and research. As part of the Clean Energy Future package that we introduced in 2011 there was $15 billion of industry and innovation research policy. There was the $10 billion Clean Energy Finance Corporation, there was the $3 billion ARENA program and there was the $1.2 billion clean technology program. All these were designed to help do a number of things. One was to help industry transition. The second was to recognise that just as in the 18th century the economies that pioneered research into steam power—the United Kingdom—dominated the global economy and just as in the middle of the 19th century it was the economies that pioneered research into steel manufacturing and railways—the United States and Germany—that dominated the global economy and just as in this century it is the economies that first did research into chemistry and then into the electronics industry through the transistor revolution—that is, the United States and Japan—that dominated the global economy, in the future, just as those industrial revolutions led to a series of economic dominance by those countries that did the research, the clean energy industrial revolution will be massively important to our economic competitiveness.

Those on the other side have betrayed that. They have destroyed ARENA, they have tried to get rid of the Clean Energy Finance Corporation, and they have destroyed the clean technology program—all because they want to stick their head in the sand about climate action, all because they would rather have a rust belt economy next century rather than being clean technology innovators and having clean technology industries that compete with the rest of the world.

And what is the result of all this? The result of all this is that we are facing a jobs crisis now that will get worse into the future. We have an unemployment rate that is at a 14-year high. We have an underemployment rate that is higher than any time since records began in 1978. We have a higher underemployment ratio now than during the 1980s recession or the 1990s recession, which is a massive issue. We have youth unemployment at 20 per cent, well above when we were last in government. We have 190,000 people who are classified as long-term unemployed, more than any time since records began. The long-term unemployment ratio is 25 per cent. One in four unemployed people is long-term unemployed. These people are victims of this government's lack of focus on industry and innovation policy, with a myopic focus on slashing and burning rather than investing in the key drivers of competitiveness in the 21st century: productivity and innovation. Nevertheless, this bill is an important step in rescuing that and we will support this bill. I commend the bill to the House.

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