Dai Le (Fowler, Independent) Share this | Hansard source

Locally owned small businesses are the backbone of the community, and it is imperative that measures are taken to ensure the continuity of their success and livelihood. Throughout Fowler, you will find a multitude of small businesses, ranging from family grocers, family run restaurants, family run banh mi bakeries and special novelty shops that are a critical source of employment and income and a space for interaction. This comprises 99 per cent of the businesses in the Fowler electorate. Therefore, I see the uplifting and empowerment of these small businesses and their growth as a fundamental and necessary action to demonstrate appreciation for their contribution to the community at large.

My electorate of Fowler has over 16,000 small businesses, and undoubtedly this number well continue to grow exponentially, with a number of migrant and refugee families settling here over the decade. Many of these families rely on their self-owned business for their livelihood and as a means of employment. It is my understanding that this bill hopes to provide a pillar for small businesses in Australia through various schemes that seek to ease financial pressure and provide incentives that ensure the future of small businesses in a post-COVID world.

The instant asset write-off of $20,000 is presented as a philanthropic and adequate measure to advance the endurance of small businesses. Over these few years, the available instant asset write-off for small businesses has been in flux, ranging from $1,000 to $150,000. During the pandemic, the government at the time had implemented an instant asset write-off of $150,000 for businesses turning over up to $500 million. These measures, while drastic compared to previous years, were a necessity to keep our economy moving during difficult and unprecedented times. With these measures ending on 30 June 2023, I'm glad that the government was proactive in ensuring this did not fall by the wayside.

However, in the 2019 financial year, pre COVID, the instant asset write-off for small businesses was $30,000. But this new measure has been reduced to the 2016 level. We live in a vastly different time to 2016—a time when hardworking families and small businesses are struggling with a cost-of-living crisis. Inflation is on the rise. Food, fuel and property prices are going up and so are the costs of running a small business. Equipment costs are going up and so are electricity and water bills. That is not even including the other administrative costs of running an SME.

Despite economic conditions for small businesses seeing a slight improvement, there is still an air of uncertainty, considering that small businesses were disproportionately affected by COVID. It is undeniable that the devastating impacts that this pandemic brought still linger, and small businesses face the brunt of this. I know that the small businesses in Fowler are still recovering from the pandemic and are struggling to stay afloat. Now that we are seeing a 13th interest rate rise, I have no doubt that this will cause further pain to many in our community and Western Sydney.

A constituent Venessa Tang, who owns a homeware shop in Cabramatta, says she is concerned about the accumulation of normal tax, GST tax and income tax that small businesses are burdened with amidst rising interest rates and increasing prices conjured by the pandemic. She highlights the challenges of small-business owners, who are struggling with the cost of living and doing business like petrol, saying that these increased prices have negatively affected her business turnover and add to the risk of her losing her business.

If it's apparent that small-business owners like Vanessa are struggling, why is the amount of instant asset write-off being reduced? It is not drastic to say that the assumption that small businesses will bode well in the coming years, following this bill, is disillusioned foresight. Furthermore, this incentive is great if small businesses want to buy smaller goods, like kitchen facilities or computers, but it is not sufficient for those who may need to grow or expand their business with better, yet more costly, equipment or machinery.

In their submissions to the Senate inquiry, the National Electrical and Communications Association and the Australian Chamber of Commerce and Industry have both called for the instant asset write-off to be increased. NECA, who represents over 6,000 people within the electrical contracting industry, has urged the government to increase the instant asset write-off to $50,000 dollars. As they have rightly said in their submission, any high-tech equipment and hardware within the sector would exceed $10,000. If the instant asset write-off were increased, SMEs and contractors would be able to recover more of their investments. I urge the government to listen to those who have the lived experience of running a business and support any measures to increase the return on investment for small businesses; otherwise we could see detrimental impacts on the SME economy in the long term.

A similar issue was raised in the submission from the Institute of Public Accountants, where 75 per cent of their members work with and advise small businesses. Their submission focused on the temporary nature of the tax deduction scheme, where the government seems unable to commit to granting certainty for small businesses, preventing them from being able to plan for the long term. Additional certainty encourages sustainable business growth, creating an incentive to invest in technology and equipment. If the intent of the policy is to foster the growth and productivity of small businesses, making the write-off permanent at a higher threshold is the optimal solution.

The submission from the Mortgage and Finance Association of Australia reiterates the burden of economic pressures, inflationary pressures and the increased cost of living on small-business owners. The reduction of the instant asset write-off will place a heavier financial burden on small businesses. This struggle, in conjunction with the challenges of rising operational costs and market interest rates, will exhaust the funds of these businesses and could lead to worker lay-offs, reduced wage growth and, in the worst case, businesses ceasing to operate.

According to the ABS, the rate of business closures is at its worst, with more than 15 per cent of businesses failing in the last 12 months alone. This is the highest it has been since the global financial crisis. Half of the Australian businesses that started in 2019 were permanently closed by June this year, and small businesses are undoubtably at further risk of this, with 60 per cent of sole traders closing their doors. Therefore, Fowler's unemployment rate of nine per cent may see a dramatic surge in the coming years. With this increase in unemployment, more people in the electorate will have to rely on welfare payments from the government, placing a heavy burden on the government's social security and welfare expenses. At the same time, according to the RBA's findings in 2021, small businesses face more challenges in accessing funds through equity and obtaining funding through banks. With inflation on the rise, customers are struggling and hesitating to spend impulsively. Business owners are also struggling, trying to cut costs where possible. It's the government's duty to facilitate the recovery of small business in a post-COVID world, yet the bill fails to take into consideration the context and reality that small businesses face.

A considerable number of small businesses in the Fowler electorate are entrepreneurial ventures founded by minorities—immigrants, women and people without higher education. Support from government policies, without a doubt, can empower and facilitate entrepreneurship and reduce financial risk for these groups of people, who do not have the qualifications to seek employment elsewhere. Reducing the instant asset write-off serves as a disincentive, creating great financial risk and greater uncertainty for small-business owners that come from working-class backgrounds.

The social cost of rising unemployment affecting these particularly vulnerable groups is far too great to ignore. Without continuing efforts to effectively help small businesses retain operations, prolonged unemployment for these groups of people will have a harsh impact on their quality of life as well as their mental and physical health. The loss of self-identity and confidence resulting from unemployment not only compromises their relationships with families and social networks but also exacerbates the dwindling sense of membership in the community. These psychological impacts and other factors, such as insufficient education or English skills, operate as barriers to reemployment. Notably these work to further the problems of inequality within our area and between regions.

As I have mentioned, many small businesses within the Fowler electorate are family owned, which makes it incredibly vital that the source of income for these families is not economically affected. The pervasive ramifications of COVID-19 on the economy dictate that, with the reduction of the instant asset write-off, many working-class households will struggle to provide for their families at a sufficient level. With the median weekly income of families in Fowler naturally decreasing from $1,529 following this level of instant asset write-off reducing to the levels of 2016-19, the standard of living of these households will be reduced.

The Australian Automotive Dealer Association, a representative body for car dealers in Australia, which includes family owned small businesses, similarly advocates for a higher threshold for the instant tax write-off for small businesses in 2024. In their submission, they note that the amount proposed in the amendment is insufficient to support the investment decisions of enterprise in this industry. In Fowler, many of these small businesses are family owned by migrant families and refugees, with 77.3 per cent of families with parents born overseas. These families, who have come from diverse backgrounds, have demonstrated entrepreneurship to create a life for themselves in Australia and should have adequate measures implemented to support their livelihood.

The lax attempt to revive and provide relief for small businesses makes it harder for them to survive. The implementation of this bill may see the closure of many small firms in the education, healthcare, retail and social assistance industries that do not have sufficient working capital or cash flow to maintain operations as they recover from COVID-19. This issue is especially critical for ancillary services provided by small businesses in Fowler's substantial migrant community, such as legal, medical or financial services that focus on providing services for residents of Fowler that struggle with English. This niche differentiation of small businesses in this area is paramount to the vitality of 76.7 per cent of households in Fowler that do not speak English in their household.

The foundation of our community infrastructure may collapse if we lose small businesses and their imperative function. Moreover, the ongoing operations of small businesses stimulate competition, keeping prices low and simultaneously keeping levels of innovation high. Curtailing the extent of support that small firms receive will intensify their struggles to compete with larger businesses. This will engender a less diverse market for goods and services, creating an environment where larger businesses will dominate market segments and small businesses will be unable to compete. In many ways, this bill fails to provide significant relief for owners of small businesses and serves as a barrier for smaller firms to effectively maintain growth. It instead serves to further exacerbate the financial concerns in this period of economic uncertainty.

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