Ian Goodenough (Moore, Liberal Party) Share this | Hansard source

These related bills, the Tax Laws Amendment (Small Business Measures No. 1) Bill 2015 and Tax Laws Amendment (Small Business Measures No. 2) Bill 2015, seek to amend the Income Tax Assessment Act 1997 in respect of companies with a total turnover below a $2 million threshold, firstly, to introduce a new tax rate of 28.5 per cent, which applies to the taxable income of qualifying small businesses and, secondly, to permit these qualifying entities to claim an immediate tax deduction for eligible productive assets costing less than $20,000 each. Nationally, small business generates $330 billion in gross domestic product, employing 4.5 million Australians. There were 280,000 small business start-ups in 2013-14. Small business provides 40 per cent of all jobs in the private sector, 60 per cent of jobs in the construction industry and 80 per cent of the employment in agriculture. Nearly 4,000 new jobs each week were created within the economy during 2014, equating to quadruple the rate of employment growth experienced in 2013. Since the start of this year, approximately 79,000 new jobs have been created, bringing the total to around 250,000 jobs created since the coalition government came to office.

Since the budget was announced in May, leading indicators have shown an increase in consumer confidence. The Westpac bank monthly consumer confidence index rose by 6.4 per cent, whilst the ANZ-Roy Morgan index rose 3.6 per cent in the week following the budget. Both indices are trending above their long-run average levels. Job advertisements remained strong. As measured by ANZ bank, the number of employment advertisements has risen in 10 of the past 11 months. Furthermore, retail trade figures have risen for 10 consecutive months, export volumes are now up 7.2 per cent on a year ago and residential building approvals are up 16.3 per cent over the past 12 months, remaining at near record levels.

As the Australian economy becomes increasingly connected with international economies through globalisation and free trade, our competitiveness increasingly matters. It is true to say that Australia's economy is more heavily taxed in comparison with those of emerging economies in our region, putting Australian businesses at a strategic disadvantage. The coalition government realises this and is taking appropriate action to ensure that the Australian economy can be more resilient and compete internationally on a more level playing field.

I researched the comparison between Australia's corporate taxation rates and some of our closest regional trading partners to assess the competitiveness of our nation in the global economic marketplace. Figures sourced from the global tax rates table published by international accounting firm KPMG reveal that Singapore has a company tax rate of 17 per cent; Thailand, 20 per cent; South Korea, 24.2 per cent; and Indonesia, China and Malaysia, all 25 per cent. The OECD average is 24.77 per cent, the Asian average is 21.91 per cent, the European Union is average 22.15 per cent, and the global average corporate tax rate is 23.68 per cent. This illustrates that, if we are to remain competitive in attracting investment capital to develop our economy, we must keep our tax rates low. Previous tax reviews, including the Australia's Future Tax System review, have suggested that there would be benefits from a lower company tax rate and that government should continue to reduce tax rates as fiscal circumstances permit. According to OECD statistics, 11 of its 34 member countries have a differential corporate tax rate for small business.

These taxation reforms are much needed to make our business environment more competitive and to attract investment into Australia. In order to take advantage of the economic opportunities presented by free trade agreements, the government must ensure that our taxation system is efficient and flexible enough to permit Australian industry to prosper. The coalition government has a strategy to encourage Australian businesses to take advantage of export markets with the emerging economies in our region, facilitated by free trade agreements with Japan, Korea, and China. Trade is projected to continue expanding as a free trade agreement is expected to be reached with India and as Australia develops stronger economic partnerships with the 10 member countries of the Association of Southeast Asian Nations, ASEAN: Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam.

The budget contains $5.5 billion worth of initiatives designed to promote small business investment, growth and employment. It is estimated that some 90 per cent of incorporated businesses, representing 780,000 small companies, will be eligible for the 1.5 per cent reduction in the company tax rate, the lowest rate for small business since 1967. In addition, a five per cent tax discount will apply for the estimated 1.7 million small unincorporated businesses, providing a cut of up to $1,000 for sole traders, to give them similar incentive. On the other hand, more than 95 per cent of Australian businesses will be eligible for the instant tax deduction on productive assets of up to $20,000 in value purchased from 7.30 pm on 12 May 2015, which will encourage businesses to invest in tools, plant and equipment to raise output.

To support our agricultural sector, the budget provides $300 million in drought assistance for struggling farmers. In addition to the small business tax cuts, accelerated depreciation is provided for investment in water facilities, fodder storage assets and new fencing. All primary producers will be able to immediately claim a tax deduction on capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills. Farmers will also be able to depreciate over three years all capital expenditure on fodder storage assets such as silos and tanks used principally and primarily to store grain and other animal feed. The accelerated depreciation arrangements are expected to improve resilience for primary producers facing drought, assist with cash flow and reduce red tape by removing the need for primary producers to track expenditure over time.

Like many of my colleagues on this side of the House, I come from a small business background. I started out in business with an $85,000 loan and, over 18 years, built my engineering supply company into a leading supplier of electrical, mechanical and pipe support systems to the commercial construction and mining industries. My company has made a lasting contribution to Western Australia by supplying iconic projects such as the new Terminal 2 at Perth Airport, the Graham Farmer Freeway tunnel, the Whitfords City and Lakeside shopping centre expansions, and the Perth Convention and Exhibition Centre, to name a few. As my company grew, I reinvested the retained profits into a commercial and residential property development business, which recently completed a district shopping centre project. I have experienced firsthand the challenges of being in business: employing staff, managing inventory, organising production, cash flow and paying the bills.

These tax reforms are a welcome boost for small businesses in my electorate of Moore, whose collective interests are represented by the Joondalup Business Association and the Wanneroo Business Association. Local businesses are experiencing the effects of falling commodity prices, the slowdown in the mining industry and the ever-increasing cost of production. It is therefore important for the government to implement policies which help to contain the cost structure of doing business.

This legislation needs to be passed by 1 July 2015 so that a lower tax rate of 28.5 per cent for small business can take effect from the start of the new financial year. The Treasury has consulted with the Australian Taxation Office in order to identify any implementation issues and integrity concerns with the proposals, as well as any potential flow-on impacts they might have within the broader tax framework. The tax rate reduction measure will cost the budget $1.45 billion over the forward estimates. On the other hand, the instant asset write-off scheme will cost the budget $1.8 billion over the forward estimates, with accelerated depreciation costing a further $70 million. It reflects an election commitment in the coalition's policy for small business.

This budget delivers for families, for small business and for our economy. It is responsible, measured and fair. It cuts taxes, will create jobs and delivers a responsible pathway back to budget surplus. I commend the bill to the House.

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