Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Hansard source

Thank you, Deputy Speaker. It is a local design, yet again—on indulgence. I am pleased to rise to speak on the Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017. It is a bill that extends the current instant asset depreciation for small business from July 2017 through another year to 1 July 2018. As members opposite have said, and as members on this side have said, there are many businesses that are appreciative of this opportunity to depreciate their assets upfront rather than going through the usual lengthy depreciate process over several years. Depreciation in this way is a very effective way to incentivise investment. The official way it is put is that it encourages capital investment by small business through lowering the pre-tax rate of return required to justify new investments. What that essentially means is that it helps cash flow. So when a business buys an asset up to $20,000 in this financial year it can depreciate that asset in full in the tax for that year rather than doing that over several years. So it does not actually reduce the amount, but it brings it forward. In doing so, it is a cash-flow benefit.

One of the problems I have with this bill is that it handles depreciation, which is an incredibly important incentivising tool, in a rather inconsistent way. I am going to talk a little bit about the history of instant asset depreciation because it is six or seven years old now. It was first introduced in the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011 by the previous Labor government when the Labor government increased the threshold from $1,000 to $6,500 as part of a broader package of tax reforms. It was within the period of the global financial crisis. It was also stimulatory.

I remember going out to my community at the time and talking to businesses that provided equipment to other businesses, whether that was refrigeration, air conditioning or solar panels, and walking through with them how this bringing forward of depreciation could actually benefit them in their selling of assets to business. It was actually designed to be stimulatory and to stimulate investment by the small business sector, and it was effective. It was passed in 2011 and introduced in 2012. It was $6½ thousand in perpetuity. We just raised the threshold. Small business knew that, from that point forward, that would be the rule. It meant that they did not have to adjust their investment decisions around changing rules. They knew what they were; they were there, we thought, in perpetuity. It was a good thing. It was a recommendation made by experts in the tax field and it was one that we were pleased to take up at that time.

Unfortunately, when the Abbott government was elected one of the first things it did in the 2014 budget was abolish the $6½ thousand threshold and take it back down to $1,000. So it was introduced in 2012; in 2014, it went from $6½ thousand back down to $1,000. It was something that we thought was a strange decision from a government that considered itself to be pro-business. It was a government that would get up and talk about how it supported small business, yet one of its first actions was to take away something that was actually greatly appreciated by small business.

Then, a little while later, we saw that the government changed its mind. In 2016, we saw the asset threshold raised to $20,000 for two years. So in the budget—in 2015, I think—it was announced that it would go up to $20,000. It was $6½ thousand; it was reduced down to $1,000; a couple years later, they increased it again up to $20,000. But it was only for two years. It was only up until 1 July 2017. This meant that small businesses were now in a position where, if they bought their assets before 30 June, they had favourable treatment on their cash flow. If they bought them after 30 June 2017, they were back down to $1,000 again. In my community I was talking to businesses about that. It calls businesses, in many ways, to plan their investment decisions around the changing tax rate—around the changing threshold for depreciation. That is never a good thing. I remember saying to businesses, 'I can't give you advice, but this is cash flow here. You don't invest in something because of this, you invest in something that you need. You should do it in the time frame that suits your business.' This, of course, was an incredibly powerful incentive for businesses to think about their investment strategies in relation to the threshold. When the cliff comes on 30 June 2017, you are back to $1,000. It is quite a different story than if you buy the month before.

Now we have the government, in May, announcing that it is extending one more time, up until July 2018. We on this side of the House are going to support it. As we said in 2011 when we introduced the initial accelerated depreciation, it is a very effective way of incentivising investment. But we would argue that it is more a way of incentivising investment in the long term if it is actually consistent—if you do not keep changing the rules and causing businesses to alter their investment strategies to maximise the benefit from the rules before they change again. Now we have had, in 2012, from $1,000 to $6,500; in 2014 up to $20,000; there was supposed to be a cliff in July this year and now it is extended for a year. In July 2018 we go back to $1,000.

We are going to support it, and there will be many businesses that manage to use this accelerated depreciation to invest in ways that they otherwise might not have thought possible because of the lengthy depreciation schedule. It is a good thing, but we would argue very strongly that if the government has a genuine commitment to using accelerated depreciation as an investment incentive, they should choose a number that they think is sustainable over the long term and apply that, so that business can actually go about its long-term planning of its investment decisions rather than changing them from year to year as the government changes its mind. So it is good for some, but not as good as it would be if we had a government that was genuinely using accelerated depreciation as more than a marketing ploy, as a genuine indication of its commitment to small business.

I said in the appropriation speech this morning that in many ways the government has, rather than a vision, a storyboard. It decides how to make something look good and that is what it announces. In some ways this is that. 'We are good for small business because we have extended it for a year.' Again I would urge the government to consider finding a final position on this and giving small business certainty moving forward. You know that we on this side of the House are in favour of that. I doubt that you would have any trouble at all convincing us that a permanent change to the accelerated depreciation rate is in order. We did it once. I have no doubt that the negotiation would be very fast and smooth and we could come to some kind of agreement, because in the long run it is good for business to have certainty over something as important as this.

There were a number of other changes that the government made back in 2014, like removing the $6,500 threshold, that were actually not good for small business. One of them was the abolition of the loss carry back. Labor had introduced it after consultation and advice from an incredible number of tax professionals. It allowed businesses that made a loss this year to draw on the tax that they had paid up to two years prior to cover that loss. Again, it was one of those incentivising tax rules which allow a business that has been making a profit to make a loss this year and then draw on it. So it incentivises investment, just like accelerated depreciation does. But the government abolished that one as well. On my side of the House, facing a government that claims to be pro small business and claims to be about incentives and investment, to see it doing something which was so negative was quite a surprise. Again, I urge the government to consider their position on that as well. It was an incredibly effective reform. It was genuine reform, at the time, and it was a great shame for many small businesses to see it go. There were many voices saying that at the time. There are fewer now because, I suspect, they do not see the government as serious on tax reform at all, except in this sugar-hit style that we are seeing today in the extension of an accelerated depreciation rate for one year only. It was important reform, and I urge the government to consider it.

I also urge the government to act on a few other things that there has been talk about recently. There was an incredibly important report on late payments from the small business ombudsman. Anyone who has run a small business, and I have, and anyone who talks to small businesses, knows that late payments are quite often the things that kill you. You can actually go out of business not because you are not viable—because you are viable—but because you do not get paid on time. In the music business, when I used to run the trade association, I used to make a not very funny joke that if every small business and large business got into a room on the same day and all handed over our money at the same time, it would clear up a whole stack of back payments. I had one situation where one company owed me $80,000 and I owed them $400. They could not net it out; I had to pay them the $400 before they paid me the $80,000. So there were people waiting for that payment, as well. I am absolutely familiar with what even a delay of a couple of weeks can do. It is an incredibly important report, and I would say that finding a solution to that—and this side of the House would be very willing—would be more valuable than whatever tax cuts and whatever accelerated depreciation you can give them. Solving that one, which actually allows businesses to be paid for the work they do relatively soon to the time they have to pay the costs of providing that service, would make an extraordinary difference.

I also urge the government to consider the impact of power costs and gas prices on business at the moment. We are hearing from some of the big businesses about how difficult life is becoming because of the size of their power bills. We have seen wholesale prices double since this government was elected—double since this government was elected. I had to say that twice, because that is an extraordinary change. We know what has happened to gas prices, and there are many, many big businesses already speaking loudly, but there are also many small businesses that are just suffering it, and trying to get through the next week and the next week after that, as their prices go up and up and up.

I also urge the government to heed the calls from small business to fix the NBN. I was out in a country town recently trying to buy a beautiful pottery tea set from an art gallery between here and the snow. It is not in the middle of nowhere; it is actually on the highway between here and the snow. He spent half an hour trying to take my money. In the end, he stood in the paddock with his credit-card reader trying to get a signal—walking around in the paddock trying to get a signal so he could take my money. If it had been in the city I would have said, 'Forget it; I'm not waiting half an hour.' I did have somewhere to go, but I felt so sorry for the guy I actually stayed there for half an hour trying to give the guy the opportunity to take my money. Businesses want customers that are willing to pay, and I was willing to pay. In this case, I could not pay, because the technology was not there. I suspect that businesses know better today than then. We are talking here about the simplest use of NBN, which is simply to take a payment. That is before you get to the possibilities of staff that live in different cities and still manage to work in a virtual office and before you get to the upload side of things. We really have to fix that, and I really urge the government to understand how seriously they damaged the capacity of business when they stuffed around with the NBN and went back to copper. It was a serious, serious step back in time.

Also, there is work on phoenixing. We all know that when companies phoenix—and many of them do it as a pattern, as repeat offenders—that it is small business that wears the cost. We all know someone who did the work and has no chance of being paid, and we all know businesses that have gone to the wall, not because they were not viable, but because there were people who were deliberately phoenixing in order to avoid payments. We have a government that does not seem prepared to act on that. The 'government of small business' does not seem prepared to act on that. There are many things still to do. Congratulations on this one, even though it is one year only, but there is much, much, much more to do.

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