Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to this | Hansard source

I rise in relation to the Tax Laws Amendment (Small Business) Bill 2007 to support the amendment moved by the member for Rankin. This bill provides some important measures to help small business. We support those measures but we strongly assert that they do not go far enough. In fact, these measures are too little and too late to deal with the mountain of paperwork and red tape that is swamping small business in this country. It is another desperate attempt by this government, after 11 years of, effectively, inactivity on the alleviation front but a lot of activity in adding red tape and burden to small business, to show that they are doing something because of the continuing complaints that come from small business about their inability to get on with what they want to do—running effective businesses and being able to spend more time with their families instead of just filling out forms for the government or becoming unpaid tax collectors for the government’s GST. Having said that there are some important initiatives in this legislation, the government have still baulked on an important measure, which I will come to later, that could alleviate or give the option to alleviate a significant burden that falls on business in being that GST tax collector.

As for the measures in the bill which we welcome, effectively this legislation introduces a standard $2 million turnover threshold to obtain tax concessions. Prior to this legislation, there were a range of thresholds for different concessions. This was a terribly confusing situation. It was another example of the red tape nightmare that the government imposes on small business. So this step is welcome.

Labor also supports the standardisation and the three definitions of aggregated turnover to determine if a business satisfies the threshold. We also support the provisions in this legislation to increase the capital gains tax maximum net assets threshold from $5 million to $6 million and we support the decision to remove the $3 million depreciating assets test from the simplified tax system. We, of course, support the GST cash accounting threshold going from $1 million to $2 million. But we are still very concerned that so few small businesses take advantage of the simplified tax system.

In Senate estimates hearings last year we learnt that less than 30 per cent of small businesses access that system. Under the arrangements, small business can group assets and depreciate them much quicker to improve cash flow in the early years. This, you would have thought, was a welcome initiative, so why is it that so few avail themselves of it? I hope when the minister responds he can enlighten us more as to why so few businesses take advantage of this system.

Finally, we support the increase in the GST registration threshold from $50,000 to $75,000. This is an initiative that the Leader of the Opposition called for earlier in the year, and we welcome the government embracing this initiative that Labor put forward.

As welcome as those measures are, they do not go far enough in easing the pressure on small businesses, the burden of red tape. After 11 years of inaction and of promising when they came to office to halve the amount of red tape, these measures are too little too late and a further desperation in the government’s desperate throes to try to pretend that they are doing something that they have neglected for so long.

I remind the House of the Prime Minister’s commitment back in 1996, when he made a promise to ‘cut red tape for small business by 50 per cent’. What happened when the government won office? We had a review, the late Charlie Bell review, soon after the government came to office. That was followed by a report, a big launch and a lot of words, but no effective action. And then we had another report, the Banks report.

Not only did those reports not ease the problem; plenty of additional measures added to the red tape and the paperwork. The most significant measure that added to this red tape, of course, was the introduction of the GST and the mountain of paperwork that that involved. Instead of saying to small businesses: ‘We want you to do what you’re best at. We want you to get on with running your business. We want you to have the time to spend with your family,’ this government turned every small business into an unpaid tax collector for them. Tax collections through the GST now net in excess of $40 billion—a tax, I might say, the government say is not really theirs. I was almost gobsmacked last week when I heard the Treasurer get up in this House in question time and argue that this budget will see a lessening of the tax burden in proportion to the GDP. The problem in arriving at that proportion is that he left out the GST; he left out the $40 billion.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

The orphan tax.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to this | Hansard source

This was the great saviour of the nation that he now does not want to own—the orphan tax. That is what the GST is.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

Are you still opposed to it?

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to this | Hansard source

Why don’t you count it honestly, Minister; that is my point. You are the ones who have argued for it, you are the ones who have imposed the burden.

Phillip Barresi (Deakin, Liberal Party) Share this | Link to this | Hansard source

Order!

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to this | Hansard source

The minister has asked the question and I am trying to respond.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Ignore the interjections and keep going.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to this | Hansard source

Why is it that the government are not honest with the Australian public and admit it is their tax? If they do admit that, as everyone else accepts—including the Australian Bureau of Statistics, who counts it—then the proportion of tax under this government has increased and will continue to increase despite the tax cuts that are included in the budget. They are the highest taxing government in the history of this country. The only way in which this government can try to pretend they are not is by ignoring and not counting the $40 billion of GST revenue. No person in business can ignore the tax. No person can pretend it is not there. They have to collect it and they have to go through the paperwork to satisfy the government’s needs, but this government want the luxury of pretending it is not their tax.

We did have an attempt on the part of the government to not have the tax imposed. I remember when Mr Macfarlane, a former minister for small business, wanted to run a fundraising function for his seat of Groom and operated on the basis of advice from the Liberal Party in Queensland that GST was not required to be paid. I remember something like that. There was supposed to have been a tax report clearing the minister of these wrongdoings. That report has never seen the light of day. This was a former minister for small business who thought it was such a fantastic tax that every small business in the country should collect it and pay it, except his FEC. What sort of double standard is that, Mr Deputy Speaker? Six years on from the introduction of this GST, we now have a massive compliance burden. The government has not reduced red tape by 50 per cent. It has not reduced it at all. It has massively increased it.

What did the government then embark on? It said that it would have another review. The Banks review was established in October 2005, it reported and the report was released in April 2006. It highlighted many of the concerns of small business concerning regulation, red tape and compliance. This bill attempts to adopt a number of the recommendations. But I want to use the time that is left to me to go to the GST compliance issue, because I think this is terribly important and there is an easy solution. Labor has been proposing it since 2001. It is called BAS Easy.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

You’ve never been in small business, not one of you.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Link to this | Hansard source

The minister wants to parrot on in ignorance and ignore the real solutions that will help ease the red tape burden on small business. Labor proposed a concept called BAS Easy as far back as 2001. It was developed when I was the shadow Treasurer and with the assistance of the member for Rankin. Previous leaders of the Labor Party announced it, including me in that role. At the time this initiative was announced, it was criticised by the Treasurer. He had not even read the detail but he criticised it. He then moved to a position in which he criticised it, on the one hand, because it would cost business more but, on the other hand, because it would cost revenue more. How can it do both? The Treasurer, as always, was never across the detail. He is only the show-pony performer in this chamber in question time—always lazy on the job, lazy on the detail and not prepared to understand the sorts of burdens that small businesses are under. He has ignored a real proposal that could have had strong bipartisan support.

The proposal that we put forward was called the ratio method. It effectively said, based on one’s past history in terms of GST remittances, let us give small business the option of a system for GST tax remittance that would essentially involve two boxes. One box, on the approval of the tax office, would include the ratio of GST that should be submitted and the second box would contain the turnover of that business for the quarter in question. The quarter in question was the calculation that businesses had to make—but they have to do it anyway. They have to know what their turnover is. The simple calculation would have been the turnover for the quarter times the ratio. We made sure that there would be no requirement for reconciliation at the end of the accounting period. You cannot get a simpler system than that. Why wouldn’t it be embraced? The truth of it is that the government has embraced it in part. But if it has embraced it in part, why not extend it as an option to all small businesses? I ask the minister to tell us, when he gets up to respond in this debate, why he has not done it.

I said that there would be two simple boxes. The ratio could be arrived at by two methods: a snapshot method where the business could opt to have it determined at two different points in a 12-month cycle or a business norm. Business norms, interestingly enough, are already embraced by this government when it comes to the mixed food business, so it is possible and we know that the tax office has already identified business norms in certain professions. From memory, it has identified them for a whole range of initiatives in the case of retailers of mixed businesses. It has identified those norms in relation to, for example, retail trade at 0.87 per cent; the wholesale trade at 0.77 per cent; accommodation, cafes and restaurants at 0.87 per cent; property and business services at 0.76 per cent; cultural and recreational services at 0.65 per cent; and personal services at 0.80 per cent. Clearly, there is the capacity for the tax office to identify the norms. We ask: why shouldn’t small businesses be able to exercise this option in whatever category they operate?

As I said, we proposed this initiative six years ago. Small businesses in this country could have had the relief we were urging six years ago. We also proposed the $2 million threshold. We are pleased that the government have at least embraced the $2 million threshold but we want to see the BAS Easy notion extended to small business. Interestingly enough, the government have introduced what are called SAMs, simplified accounting methods, but only for retailers that sell food. That is what they did way back.

Under division 123 of the tax act the commissioner can create SAMs that some retailers can choose to exercise. It does not provide the past history method but it does provide for the schedules method, the business norm method. It only goes to, if you like, the one form of simplified BAS Easy and it is limited in its application only to those that sell food. In 2006 the Banks review said it should be extended to restaurants, cafes and caterers, and in October 2006 it was extended to them. But the question that I again pose to the minister for response when he gets to the table is this: if it is to be extended to other food retailers, why not make it available to all businesses? The machinery is there, the option is there, the principle is there, so why does it have limited application?

In the 2007 budget we had the interesting circumstance where the government claimed it was adopting this BAS Easy approach. It basically said that the SAM could be extended to all entities that have mixed supplies, taxable and GST-free, or mixed businesses. But from my reading of the bill—and perhaps the minister can enlighten us—it still seems to be restricted essentially to food businesses, because the businesses have to be mixed suppliers of both taxable and GST-free goods. Why not all businesses? That is the question that I pose to the minister.

Labor has come forward with an initiative, a practical initiative, that can ease the red tape burden on small businesses as the unpaid tax collectors of this country. This government has ignored Labor’s call to embrace it in a bipartisan way; the government is pretending to have embraced it. We have seen no legislation come forward to amend the tax act to extend the BAS Easy option beyond the food sectors of industry. I ask the minister: if the Treasurer announced on budget night that he was going to extend the principle of the SAM, when we are going to see the legislation that extends it to all businesses in this country? That is what the small businesses of this nation want to know tonight. They want to know from this government when it is going to lift the red tape burden.

I say this to you, Mr Deputy Speaker Causley: Labor are committed to lifting the red tape burden. We have been committed to doing that for some years. This government has ignored those calls. This is smart policy. It deserves bipartisan support. But, as usual, the government has squibbed it because it has failed to understand the important ramifications for small business.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

in reply—I start by thanking those members who have taken part in the debate on the Tax Laws Amendment (Small Business) Bill 2007. I will address very quickly the contribution made by the member for Hotham and, on behalf of small business in this country, say to him that they, like me, would shudder at his response and the suggestion that he, a former ACTU boss—

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

I knew it wouldn’t take long tonight—straight into it!

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

and his esteemed colleague ‘the Academic’, the two of them, were able to come up with as a way forward for small business: ‘We’re here from the ACTU and we’re here from the university and we’re here to help you.’ ‘We’re the champions of small business,’ the Labor Party say, but none of them has been in small business. They are the champions of small business, but none of them has run a small business successfully. Certainly, in the case of 80 per cent of them, none has had the capacity to indulge in a career outside of the union movement. And they are expecting small businesses in this country to believe that they have the capacity to show small business the way forward and to improve the Australian economy.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order. I would point out that I ran a small business, unlike the Assistant Treasurer.

Phillip Barresi (Deakin, Liberal Party) Share this | Link to this | Hansard source

There is no point of order.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

Of course, the point that the member for Rankin failed to add in his contribution was that it started out as a big business and then he worked it into a small business. That is a point that needs to be made.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

This had better not be a frivolous point of order, Member for Rankin.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

No, it is not. I find that offensive and it is totally incorrect. I ask that the Assistant Treasurer withdraw that comment.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

There is no point of order.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

The point here tonight is that the Tax Laws Amendment (Small Business) Bill 2007 amends the law to make it easier for up to two million Australian businesses to determine their eligibility for a range of small business concessions. The current tax laws contain a number of special concessions for smaller businesses. The issue is that the law defines ‘small business’ in different ways and, in the past, each tax type has had its own set of eligibility criteria based on the particular group of taxpayers being targeted for assistance. Each definition was tailored to the specific characteristics, policy objectives and constraints of each particular tax concession. The managed separate eligibility criteria determining what is a small business, however appropriate when considered individually, are a source of complexity and unnecessary compliance costs for small businesses. This bill collapses all of those many definitions into just one based on aggregate turnover.

The bill also delivers on a number of the government’s 2006-07 budget announcements, including increasing the capital gains tax maximum net assets threshold from $5 million to $6 million, increasing the goods and services tax cash accounting turnover threshold from $1 million to $2 million and extending the rollover relief available under the uniform capital allowance system to small business entities who use the simplified depreciation rules. This bill demonstrates what the government has demonstrated time and again: its commitment to reducing the red tape and compliance costs for Australian businesses—in this instance, Australian small businesses.

Over the past decade, the government’s strong economic performance has seen both individuals and businesses benefit from lower taxes and greater incentives to save and to invest. Now 80 per cent of individual taxpayers have a top marginal tax rate of less than 30 per cent and businesses face a top tax rate of 30 per cent. Real household wealth has doubled since 1996, and business profits are now at record highs. These results have not been achieved by good fortune alone but as a consequence of a clear economic philosophy and experience.

The member for Rankin has moved a second reading amendment asking the House to call on the government to implement amendments to the GST law to assist small businesses. The member might not have paid attention to the budget speech, but the government announced four initiatives to make the GST easier for small businesses. Firstly, I would like to note that the GST was part of the A New Tax System package, which is the most comprehensive and successful tax reform in Australia’s history and one Labor opposed at every step. The GST replaced a narrowly based and inefficient tax system and broadened the tax base to cover the services sector. What Labor always refuse to acknowledge about the introduction of the GST is that it removed sales tax, it removed stamp duty on marketable securities, it removed the BAD tax and it removed the FID—it removed all those taxes and more— and that is part of the reason why this economy is in good shape today.

People who are listening to this debate tonight, particularly those in small business and those who are trying to balance their family budget, should recognise that Labor opposed this economic reform every step of the way. They stand condemned for that stance again tonight. Although Labor now make themselves out to be economic conservatives and people who could continue to manage the Australian economy well in the future, they have opposed every step that this government has taken, particularly in relation to tax reform.

The states and territories are much better off with this broad based, secure and growing revenue source. The GST is expected to generate $42 million in revenue in 2007-08—and I remind the House that it is the states and territories, not the federal government, that benefit from every cent of GST revenues. This government recognises that tax compliance can present a challenge for small businesses. There is no doubt about that. The government has demonstrated time and time again, though, that where possible we take steps to simplify taxes for small business. To that end, the budget included four measures to simplify the GST for small business. Of course, those measures are in addition to the significant changes that are contained in the bill that is now before the House.

The government announced a start date of 1 July 2007 for all these changes and, in accordance with the Intergovernmental Agreement on Commonwealth-State Financial Relations, changes to the GST base require the unanimous agreement of the states and territories. The government has sought the relevant approval from the states and territories and, once that approval is obtained, I will move quickly to bring the changes before the parliament. I do suggest tonight, though, that Labor members contact their state Labor colleagues if they wish to expedite the process—and while the member for Rankin is talking to his Labor colleagues about this, he may also wish to discuss the payroll tax that they rip out of business. His comments about inconsistent payroll tax bases are a matter for the states and territories, and this government cannot be held responsible for Labor’s continuing mistakes in running the state governments.

The member for Rankin also raised concern about the take-up rate for the simplified tax system. The take-up rate for the STS has been reflective of any new system, in that the number of taxpayers entering the STS has steadily increased since its introduction in 2001—and some 850,000 small businesses are in the STS. The bill before the House today introduces a new small business framework. The framework removes the elect-in element of the STS and, from 1 July 2007, small business taxpayers will be able to access any of the STS concessions so long as they are a small business entity.

This bill is expected to further increase the take-up of the already successful and popular STS concessions. Through all of these debates the point remains that the coalition government has been responsible for reducing interest rates for small business from where they were under Labor—at about 20 per cent—down to the levels they are at today. The government has been responsible for driving the unemployment rate down from over 10 per cent under Labor to 4.4 per cent now—a 32-year low. We have employed 326,000 people over the last two months, and two million since we have been in government. The Labor Party have opposed us on every measure that we have put up to help small business, to reform the Australian economy, to make sure that we can build on the successes that we have maintained over the last 10 years and to set ourselves up for continued economic prosperity into the future.

People, particularly those in small business, should be reminded of those facts on a day-by-day basis. In particular, they should be reminded that the Labor Party, which is now dominated by the unions—with more than 80 per cent of their frontbench having been either a former union boss or a union hack in some other form—would stand against small business in this place if they were ever elected to government. People in small business recognise that small businesses are the backbone of the Australian economy. If we want to see small business in this country broken, then we need a return to a Labor government. Small business does not deserve that, Australian families do not deserve that and the Australian economy does not deserve that.

I thank those who have participated in this debate, and I commend the bill to the House.

Harry Quick (Franklin, Independent) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Rankin has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question. There being more than one voice calling for a division, in accordance with standing order 133 the division is deferred until after 8 pm.

Debate adjourned.