Julie Owens (Parramatta, Australian Labor Party, Shadow Assistant Minister for Citizenship and Multicultural Australia) Share this | Hansard source

I'm actually really pleased to be getting up to speak on the Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018. Labor will support this bill, although we have moved a second reading amendment. The bill will extend for another year a measure, first introduced in the 2015 budget, that allows small businesses to immediately deduct purchases of assets that cost less than $20,000 that they start to use or install ready for use. Over the forward estimates, the measure will cost $350 million.

Having listened to the previous speaker claim that the Labor opposition had had some sort of epiphany in supporting this, I'd just like to correct the record a little. It's a good reminder that it was Labor in government that originally recognised the value of an increased immediate deductibility threshold for small business entities, and we increased the threshold from $1,000 to $6,500 as part of a broad package of tax reforms contained in the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011. That change was permanent. It was a permanent change in the tax law that allowed businesses to plan ahead on the assumption that, in any year, if they bought a piece of equipment, they would be able to have an instant write-off of $6½ thousand.

We opposed the Abbott government's decrease in the threshold—the effective abolishing of that change—from $6,500 back to $1,000 announced in the 2014 budget. We introduced the instant tax write-off; the Abbott government abolished it again in 2014-15. But then, a year later in 2015, the Abbott government decided to re-introduce it on a temporary basis until 2017, and we supported that. It was increased to $20,000 at that stage, but it was a temporary measure for two years. We supported it again when the government decided to extend it for another year to 2018 in last year's budget, and we support it again now.

However, we don't have the same admiration for the temporary nature of these kinds of tax laws. It's incredibly important for businesses of all kinds to be able to plan ahead. When you introduce a tax law which expires in a year then you affect the way that businesses spend their money; you affect their investment decisions. They pull things around. You can see that in the forwards. You see the cost of these measures during the years of operation, and then you see a dramatic increase in the tax take the year after because businesses have pulled their spending forward in order to make the most of a temporary change in tax law. We on this side of the House prefer to introduce tax laws that are affordable and on a more permanent basis. That allows businesses to plan under their normal business cycles rather than a cycle matching a short-term tax benefit—which this government clearly prefers, because this is the third time they've done it.

The instant asset write-off is a measure that benefits small business, and that is why, as the shadow Treasurer has said, Labor will support this bill. Labor has supported and recognised the value of increasing the deductibility threshold for small business entities, because we know it is the strength and diversity of our small and medium enterprises that will determine Australia's prosperity over the next decade. We want to get right for small businesses how we best position ourselves to take advantage of the massive wave of change that will revolutionise how our businesses operate and the world in which we live.

We know small businesses will be significant drivers of future economic growth. Small businesses are often the first to recognise new technologies, apply the energy, passion and entrepreneurial skill required to grow their business and find new ways to work in an ever more connected world. Strong local small businesses support community cohesion through the family businesses and local businesses that contribute to the fabric of our community, that satisfy local need, that create relationships and support other local businesses and that contribute to our sense of place and identity. We know that these types of measures help small business with their strategic development and their investment plans, but we don't flip-flop on our support. We believe these measures should be on a permanent basis. We opposed the Abbott government's decrease in the threshold for that reason.

We've also put forward our own policy, the Australian investment guarantee, which is a permanent tax write-off. It's a little different to the way the government has structured theirs. Theirs is on equipment up to $20,000. Ours allows business to immediately write off 20 per cent of all their new investments in tangible and intangible assets in the first year, with the balance depreciated in line with normal depreciation schedules from the first year. So there are two options on the table here: the government's temporary instant tax write-off on equipment up to $20,000; and Labor's Australian investment guarantee, which I believe is a superior plan and is a permanent one that allows businesses to immediately write off 20 per cent of all of their new investments in tangible and intangible assets in the first year.

It's worth looking at the problem that our approach solves. The economy is not delivering for middle-class and working Australians. Growth is below trend, wages are flatlining, more than 700,000 people are unemployed and nearly 1.1 million are looking for work. Business investment has declined by 20 per cent over the past five years, and the RBA has said non-mining business investment has been disappointingly low. This is despite a strengthening global economy. The government's only plan is a company tax handout to big business and multinationals, which doesn't guarantee any new investment or a single new job; it only guarantees a windfall to multinationals and costs the budget $65 billion over a decade. Labor believes that the Australian investment guarantee is a better way forward. Policies to grow human capital through substantial investments in education and skills, our physical capital through targeted investments in national and local infrastructure and an Australian investment guarantee that charges business investment into the future is the way to go.

We believe the Australian investment guarantee will boost investment and create new jobs, with the Australian investment guarantee providing targeted tax relief for businesses that invest in Australia and Australians. Under Labor's Australian investment guarantee, all businesses in Australia will be able to immediately deduct 20 per cent of any new eligible asset worth more than $20,000, with the balance depreciated in line with normal depreciation schedules from the first year. Assets such as tangible machinery, plant and equipment—for example, trucks and utes, but not buildings—and intangible investments such as patents and copyrights would be eligible for the immediate deduction. The Australian investment guarantee is a pro-growth, pro-jobs reform that rewards businesses for making new investments in Australia. Under Labor's Australian investment guarantee, only companies that make the decision to invest in Australia will benefit from this tax relief, while up to 60 per cent of the conservatives' company tax handouts, in contrast, go directly to foreign shareholders. So there are the two options: an Australian investment guarantee, which goes to companies that decide to invest in Australia, or the government's big business tax cut, 60 per cent of which goes directly to foreign shareholders.

Over the past five years, business investment in Australia has collapsed by 20 per cent. Despite strengthening global economic conditions, business investment in Australia has remained subdued, and we must act to change that. Our first plan was permanent, our instant tax write-off scheme back during the global financial crisis was permanent and so is the Australian investment guarantee. It's permanent into the future and that allows businesses to make big investment decisions and to plan ahead what they intend to do for the growth of their businesses, without considering the tax cycle as a factor in deciding how and when they invest.

I just want to run through what this actually looks like. Under normal depreciation rules for a piece of machinery, assuming the straight-line depreciation method, which is standard, manufacturing company A is allowed to deduct 10 per cent, or $1 million of the $10 million price, in each year over the effective 10-year life of the asset. So they spend $10 million on the equipment, their machinery, and they can deduct one million—that's the current situation—with the other $9 million, in equal proportions over the remaining nine years. But these arrangements aren't actually quite attractive enough to get the project off the ground.

Under Labor's Australian investment guarantee, the manufacturing company will be able to immediately expense 20 per cent, or $2 million, of its investment in the first year. The remaining 80 per cent of $8 million would then be depreciated over the effective life of the asset from the first year, in line with the original depreciation schedule. This means that the business would be able to write off $2.8 million in the first year of its investment instead of $1 million under existing arrangements. Again, because this plan once introduced is ongoing, business would not need to consider pulling that investment forward in order to get it into a year, as you would have to do with the government's plan.

I find it quite extraordinary that a government that talks about certainty and talks about supporting business comes back into this House three times in a row and extends this instant tax write-off for another year as if that has no effect. We all know in this place—any of us that pay attention to tax, and some of us do because tax is quite a fascinating subject—that best practice is that tax law shouldn't inadvertently affect the decisions that business makes. You shouldn't choose this investment or that investment because of the tax treatment. You shouldn't choose to spend now rather than later because of the tax treatment. In a perfect world, your tax system doesn't inadvertently change the behaviour of a business or an individual. Sometimes you do it on purpose—for example, you tax tobacco. You introduce taxes that incentivise or de-incentivise a particular behaviour. But you do that on purpose. You don't do it by mistake. I would say to this government that removing the permanent tax write-off and introducing a temporary one and then extending it for a year and then extending it another year and doing it so late in the year—I mean, we're doing it now for the next financial year—leaves businesses right up into this moment assuming that they need to spend their money now, because if they spend it next year the tax write-off will no longer exist. It really is quite extraordinary.

Again, your own figures show that you know that's the case, because the year after the tax write-off finishes your tax take suddenly increases. You know full well that what this does is pull the spending of businesses forward into another year, not because it's in the best interests of the business, but because you've introduced a short-term tax incentive that has that effect.

I would urge all businesses out there to have a very real look at our Australian investment guarantee. It gets an incredibly good response from the broader community. The Australian Chamber of Commerce and Industry in it's prebudget submission called for more incentives for businesses to invest, specifically arguing the government should adopt the opposition's proposed enhancement to accelerated depreciation. James Pearson, Australian Chamber of Commerce and Industry CEO, said:

Business welcomes this commitment from the Opposition – it's good policy. What's particularly positive is the proposal to make this a permanent feature. This is important as policy certainty and policy consistency is critical for business.

Innes Willox, Ai Group Chief Executive, said:

The Investment Guarantee would provide a significant boost for businesses to invest particularly for longer-lived investments. The proposed measure comes at a time when business investment, and particularly non-mining investment, has been slow to recover in recent years.

The Energy Efficiency Council said:

A new Federal Labor policy that gives an immediate tax deduction to businesses that invest in energy saving equipment would help slash energy bills …

Ken Morrison, Property Council of Australia Chief Executive, said:

… the Australian Investment Guarantee would be a powerful tool for accelerating energy efficiency gains across different industries, but especially in the built environment.

…   …   …

We welcome Federal Labor's announcement of this policy and the potential it has to help reduce costs for consumers.

Peter Strong, COSBOA CEO, said:

Labor's announcement is a welcome one as it would make it easier for Australian businesses to invest and grow. The fact that this measure is available to all businesses, big and small, is also very positive as it will help small businesses directly as well as encouraging larger businesses to invest in the products sold by small business.

Tanya Barden, Australian Food and Grocery Council CEO, said:

This initiative will go a long way to encouraging investment in high tech and high skilled projects to enhance efficiency and increase scale.

We are particularly supportive of the Australian Investment Guarantee's inclusiveness across the industry sector. The opportunity to use this Investment Guarantee towards energy saving projects is also very important.

There is quite an extensive list of people supportive of the Labor opposition's approach through the Australian investment guarantee. I wish for once that the government would look slightly more broadly for a view rather than just in its own caucus room. Look at what people are saying about this and support our proposals.

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