Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The bill before us, the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, contains three important schedules. The first will amend the Taxation Administration Act 1953 and, in doing so, reduce the PAYG instalment amounts for certain taxpayers by 20 per cent, starting from the December quarter of last year. Schedule 2 contains a number of consequential amendments to the recent changes made to the unclaimed money regime with respect to temporary residents’ superannuation. Schedule 3, the biggest section of the bill, includes a range of amendments relating to income test changes that were announced almost a year ago in the 2008-09 budget.

The coalition parties support the principles underpinning this bill and obviously will be supporting its passage on the whole. We are very concerned about aspects of the definition of ‘reportable employer superannuation contribution’. We are concerned that it will mean the integrity measures that are being introduced will not apply equally to all employees. I will come to that later as I deal with the substance of each schedule.

As I said, schedule 1 implements an announcement on 12 December last year by the Minister for Small Business, Independent Contractors and the Service Economy that the government would, from the December 2008 quarter, reduce the quarterly PAYG instalment by 20 per cent for quarterly taxpayers. The reduction, outlined by the Assistant Treasurer in introducing the bill and announced by the government at the time, will apply to small business entities, individuals, multirate trustees, full self-assessment taxpayers with $2 million or less of instalment income for the previous income year and full self-assessment taxpayers with more than $2 million of instalment income for the previous income year who are eligible to pay an annual PAYG instalment but have chosen not to.

The announcement by the minister for small business last year followed a call by the member for Moncrieff, the shadow minister for small business, independent contractors, tourism and the arts, almost a month earlier, on 20 November 2008. The member for Moncrieff, the shadow minister for small business, Mr Ciobo, called for PAYG relief for small businesses, which were suffering severe cash flow problems. The coalition’s proposal called for the allowable margin of error in PAYG instalment variations to increase from 15 per cent to 30 per cent for the 2008-09 financial year. That proposal would have allowed small businesses themselves to adjust their PAYG instalments to reflect the reduction in turnover that many, of course, are experiencing. This would have direct cash flow benefit for small businesses and would help protect the jobs of Australians employed by small businesses.

We recognise, by talking to small businesses, that they are experiencing severe cash flow problems. It was the member for Moncrieff who first called for PAYG relief. After almost a month the government responded with a different measure but a measure which nonetheless provides PAYG relief for small business. As a consequence, we naturally support that schedule. The member for Moncrieff, the shadow minister for small business, will address the substance of those issues later today during this debate.

Schedule 2 is a non-controversial measure, which the coalition will also support. As I said at the outset, it contains consequential amendments to the recent changes made to the temporary residents unclaimed money regime. It will make the rules governing unclaimed superannuation for Australian residents consistent with the rules governing unclaimed superannuation for temporary residents who have departed Australia. This will reduce the compliance burden on superannuation funds in maintaining two separate regimes and will remove the distinction between maintaining a register for temporary residents and for Australians with unclaimed super.

Schedule 3 contains a number of key changes to income tests for financial assistance programs, many of which were announced in last year’s budget. The coalition of course supports genuine integrity measures to ensure that government assistance is provided to those who are intended to receive it. The coalition, when in government, demonstrated its commitment to maintaining the integrity of income tests by undertaking a range of reforms to income tests, starting in the 1996-97 budget—for example, extending the range of fringe benefits included in the family payment income test and ensuring that income was accurately reflected for determining child support payments.

The schedule amends the methods of income testing in a variety of ways, as I said, with the intent of ensuring only those intended to receive the government benefits actually receive them and that taxpayers are not able to artificially reduce their income to receive benefits they would otherwise be ineligible for. There are two elements to the income testing. These include the items included in assessing income and the income threshold for that test. The schedule makes amendments to the first of these by expanding the definition of items used to determine income. This is outlined in great detail in the bill and in the explanatory memorandum. Nonetheless, I will go through each of them because they are important in a number of regards. The element of income testing goes to ensuring the integrity of those government assistance programs.

As many members pointed out yesterday during the debate on the Commonwealth seniors health card bill as it applies to salary sacrificed contributions into a superannuation fund and superannuation stream income from a tax source, we strongly disagree with that bill. That bill passed this House last night without our support; it was a bill that we strongly opposed. That bill adds amounts that are salary sacrificed into superannuation funds and superannuation stream income from tax sources to the income test for the purposes of the Commonwealth seniors health card. We believe that, when it comes to eligibility for the Commonwealth seniors health card and salary sacrificed superannuation and superannuation from taxed sources, the status quo should remain. We strongly oppose the government’s moves in that area. It is estimated that those measures in the bill that passed this House last night will remove eligibility for the Commonwealth seniors health card from around 22,000 senior Australians. At present, many in that category are under immense pressure. This is a vital concession for just under 300,000 senior Australians. It is available for those who are not receiving a government benefit and are on incomes of under $50,000 for singles and $80,000 for couples, and it provides affordable prescription medicine and health care, and a range of other benefits, to help senior Australians maintain a decent quality of life. The member for Warringah and the shadow minister responsible for that bill outlined in great detail our position on that in the debate that concluded about 12 hours ago in this House.

There are three key parts when it comes to the schedules within this bill. Part 1 changes some income definitions used in the tests. Part 2 changes the reporting requirements for tax purposes. Part 3 changes some of the actual income test to give effect to the changes in part 1. Part 1 introduces definitions for adjustable fringe benefits, reportable superannuation contributions, total net investment loss, rebate income, income from Medicare levy surcharge purposes and, finally, reportable employer superannuation contributions. Starting first with adjusted fringe benefits, this schedule inserts a new definition of the adjusted fringe benefit to replace the existing definition of a reportable fringe benefit. The definition of a reportable fringe benefit used for tax purposes is not suitable for income testing as it does not reflect the cash benefit received by the employees. The Family Assistance Office currently uses an identical definition to the one being introduced by this schedule, and the definition better reflects the fringe benefit received by the employee. So it is consistent with the income definition currently used by the Family Assistance Office. As adjusted fringe benefits will be included in the new definition of rebate income, this new definition will apply to a range of income tests.

Part 1 of the schedule inserts a new definition with respect to reportable superannuation contributions, and that will include salary sacrificed superannuation contributions and reportable employer superannuation contributions. It will ensure that salary sacrificed amounts are included under the income test when determining eligibility for a range of government benefits that would include family tax benefit A, the Medicare levy surcharge and a range of other benefits that taxpayers right across the spectrum are able to claim. It also inserts a new definition of total net investment loss and a related definition for financial investment. At present, net rental property losses are considered when it comes to the calculation on income tests. This new definition will expand that definition to also include losses arising from financial investments. A total net investment loss will include a taxpayer’s losses from financial investments and/or rental property that exceed the income they receive from those sources. Currently, as members will know, a loss from a rental property can be claimed as a tax deduction and is also included in assessing income for determining eligibility for government benefits. While losses from financial benefits can be claimed as a tax deduction at present, unlike rental property losses they are treated differently. This schedule will put those on an equal footing and ensure that Australians who choose to invest in rental property are treated in the same manner as those who choose to invest in financial investments.

Rebate income is another of the new definitions. This definition will consist of the sum of other definitions and include taxable income, adjusted fringe benefits, total net investment loss and reportable superannuation contributions. This single definition will make it easier to amend income tests in what—and I am sure that those following this bill closely would agree—will be a whole range, a plethora, of other legislation that will require consequential changes. Rebate income will be used for determining eligibility for the senior Australians tax offset, the pensioner tax offset and a trustee’s eligibility for an offset.

The definition of income from the Medicare levy surcharge will be used to determine a taxpayer’s liability for the Medicare levy surcharge. It is similar to rebate income, as it is a definition that consists of the sum of other definitions. Like rebate income, the definition will make it easier to amend the income test for the Medicare levy surcharge. This definition will include taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment loss.

Part 1 of this schedule also provides a new definition for reportable employer superannuation contributions—or RESC, being the acronym that was mentioned earlier. At this point I must point out that the Senate Standing Committee on Economics has had a short inquiry into this bill and concerns have been raised during that process by coalition senators in respect of the proposed definition of the reportable employer superannuation contributions. With the concern that that definition may create an unintentional bias, coalition senators recommended that the bill be amended to ensure that equality is provided and that inequality in how these measures apply is removed.

The reportable employer superannuation contribution does not include payments made by an employer to meet the compulsory nine per cent superannuation contribution. It is proposed to include amounts made by employers in addition to that nine per cent. The proposed definition will include payments made by the employer to an employee’s superannuation fund on the reading of the bill where the employee ‘has or has had or might reasonably be expected to have had the capacity to influence the size of the payment or the way the amount is contributed so that his or her assessable income is reduced’.

However, the proposed definition also states that any contributions made by an employer to an employee’s superannuation fund that the employee did not control will not be included in the definition. This includes contributions made by an employer as part of an agreement that has been negotiated by a third party. In the wake of the concerns of the coalition senators and the way the bill is currently constructed, the opposition is extremely concerned that in its current form the bill will include employer superannuation contributions made in addition to the compulsory nine per cent for income tests for one group of employees but not for another. That is on a strict reading of the bill and on the evidence that the coalition senators saw in their inquiry. The integrity measures may well only apply to one group of employees and make employees covered by a union agreement exempt from these integrity measures.

Obviously, if the integrity measures are going to apply with respect to amounts above the nine per cent and the intention of the government is to ensure that additional contributions above the nine per cent are included for income-testing purposes, clearly the intention should be that every employee is on the same footing. It appears, under this bill, that those employees who choose to negotiate their own arrangements will be treated less favourably than those under a union negotiated agreement when it comes to eligibility for government benefits. It raises the spectre of creating a bias towards workplace agreements negotiated by unions over those that are negotiated by employees.

It appears very likely—and the coalition senators were very concerned about this—that the proposal could leave two people receiving precisely the same additional superannuation contribution, who are on precisely the same salary, in different situations when it comes to eligibility for government benefits. That is how it appears on the reading of the bill. To give an example, say an income test for a certain government benefit is $51,000 and there are two employees with a taxable income of 50,000 a year and both of their employers make a 15 per cent superannuation contribution to their superannuation funds. One employee may have reached an agreement with their employer for that and the other employee may have had it determined by a union negotiated agreement. Nevertheless, both employees take home $50,000 and both have had the additional contribution of up to 15 per cent made. On the reading of this bill and on the reading of the report by the coalition senators, one employee will have that additional six per cent above the nine taken into account when it comes to eligibility for government benefits but the other will not. This example illustrates what we believe is a serious inconsistency. Obviously, if these income-testing measures are going to apply—and, of course, at this point in time no additional contributions are taken into account for the purposes of income testing going to the intent of those income tests—and if the purpose at the moment is to take certain benefits that are provided into account, then they should all be taken into account and the testing should be blind to whether an employee has negotiated that agreement or whether a union has negotiated that agreement.

In short, if the coalition’s concerns are right then what this bill would be saying in effect is that there should be an exemption from what the government says all other Australians should be subjected to. So we flag that very serious concern now. I said at the outset that we broadly support the measures to improve the integrity of income testing for government assistance programs and the further protection of the integrity of our tax and transfer system. As I said, this bill does not deal with superannuation issues with respect to the Commonwealth seniors health card. That was dealt with in another bill last night. That bill we believe is a bad approach by the government—and a breach of their election commitments—and we strongly oppose it. I have said with respect to this bill that, whilst those income tests have a number of effects, we are concerned with that inequality in superannuation as it goes to union negotiated agreements, or, in fact more widely than that, agreements negotiated outside an employee’s control, compared to a superannuation contribution negotiated by an employee themselves.

We could of course move an amendment to that effect here in the House, but what I have determined to do is to give very ample notice of it to give the minister the opportunity to consider the comments that have been made and the concerns that have been raised. If, when we get to the Senate, those concerns have not been rectified then we will certainly be moving an amendment in the Senate to try and correct that anomaly and to correct any other unintended consequences that may arise. For the benefit of the House today we raise that concern. The fact that we do not move an amendment today does not in any way suggest that our concern is not real. Rather, in terms of the procedure of the House today on this issue and the technical issues involved in what I admit is a very comprehensive bill, we flag those concerns today, in the wake of those concerns being highlighted by coalition senators, to give the government the opportunity to propose an amendment that may correct that before it gets to the Senate. We will not be opposing this bill when the debate concludes but we certainly flag that serious issue with the minister and await his response.

Patrick Secker (Barker, Liberal Party) Share this | Link to this | Hansard source

The question is that this bill be read a second time. I call the honourable and, given his new haircut, frictionless, member for Blair.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I was quite happy to go along with what my daughter did recently—which was to engage in the World’s Greatest Shave campaign for the Leukaemia Foundation of Queensland, a wonderful organisation. When the Mayor of Ipswich decided to put in $1,000 if I got my head shaved, I could not resist the temptation. I speak in support of the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. This bill deals with some tax law reform which improves the fairness and the integrity of the tax system in this country. It does it by three schedules, and I will deal with schedule 2 firstly, then schedule 3 and then schedule 1, which is the main schedule I want to talk about.

Schedule 2 makes some very technical changes to ensure that the general unclaimed superannuation money regime is more consistent with the temporary resident unclaimed superannuation money regime. There are some consequential amendments as a result of the payment of temporary resident superannuation to the Australian government. Schedule 3 gives effect to some reforms with respect to income tests which were announced by the Treasurer in the budget 2008-09. With effect from 1 July 2009 the reforms amend the relevant income tests in the tax and transfer system to include certain salary sacrifice contributions to superannuation, which will henceforth be known as reportable superannuation contributions, net financial investment losses and adjusted or non-grossed fringe benefits.

I listened with interest to the member for Casey talk about the third schedule. I understand the position of the coalition is to support schedule 3, which means that they will be supporting income test changes to include certain salary sacrifice contributions to superannuation. This is interesting because yesterday we heard many unctuous and sanctimonious comments from those opposite on the reform that we are bringing in with respect to social security and, particularly, the Commonwealth seniors healthcare card. Under that legislation and those amendments that we brought into this House yesterday the definition of a cardholder’s adjusted taxable income was changed to include income from a superannuation income stream with a taxed source. In other words, there is consistency between income earners—whether they earn money working at a computer, in a retail outlet or digging ditches for the local council or whether they receive money from an income source from superannuation which is taxed. So effectively taxpayers are treated the same way whether they are wealthy or whether they are working class.

The other aspect of the change we brought in yesterday was to include, in the definition for the cardholder’s adjusted taxable income, income being salary sacrificed to superannuation. So yesterday the coalition opposed it and today, with respect to another bill, they support it. There is a real inconsistency in the coalition’s position on this matter. One only has to look at the coalition to see that they are Arthur one day and Martha the next on this issue. The comments made yesterday can only be interpreted as political in the circumstances, because, truly, if they were consistent then they would not support our position with respect to schedule 3. The amendments with respect to net financial investment loss are consistent with other reforms and other legislation. For example, losses on rental properties and negatively geared properties are taken into consideration for the purpose of payments of family tax benefit and also for child support assessment. We are making the tax system and the assessment system, with respect to benefits, consistent across the board. Schedule 3 is an important reform and I think it is worthy of support.

Schedule 1 is the schedule I want to talk about in particular. It gives effect to the government’s December 2008 announcement to provide relief to small business. I have contended on numerous occasions that this side of the House, the Labor Party, supports small business and always has done. I go back to the Trade Practices Act, which we brought in under the Whitlam government. The Labor Party is the party which supports small business. Those opposite on many occasions simply mouth rhetoric, but what action have they taken? One example is the greatest burden that small business bore under the Howard government, which was the imposition of the GST. I was in business for 20 years before I came to this place, and the Howard government increased our administration by bringing in the GST, something they never previously supported but foisted on the Australian taxpayer.

Changes under the Howard government with respect to income tax payment and assessment also caused a lot of grief for taxpayers throughout the country. The PAYG instalment system replaced the provisional tax and company tax instalment system from 1 July 2000. That system was supposed to be designed to ensure efficient collection of company income tax, amongst other payments to the Commonwealth. But if you ask anyone in business they will tell you that the quarterly situation continues to cause them grief. It is a problem for people in business. Having to come up with money every quarter rather than annually is often a burden on cash flow.

Taxpayers who satisfy certain criteria can have their quarterly tax instalments based on the prior adjusted taxable income year. Of course, that is changed for the base year and is reduced by any net capital gain included in the assessable income—except for superannuation entities—by any tax deductions used in calculating that assessable income and by any tax lost, to the extent that it carries forward into the succeeding income year. Businesses, individuals and taxpayers who pay the quarterly payments include certain individuals, small business, multirate trustees and other taxpayers—for example, companies which are taxed as entities—which have $2 million or less in base assessment instalment income for the previous income year. Many small businesses would have smaller turnover than that. Those who report more than $2 million in instalment income for the previous year and are eligible to pay annual PAYG instalments but have not chosen to do so can also pay under the PAYG instalment regime.

Paying tax is a burden if you are in business. We know we all have to do it because we want to travel on good roads and make sure that our hospitals function effectively and that our schools, which educate our children, are cathedrals of learning and education. So we have to pay tax, and business has to pay its fair share. The amendments in this bill have received positive press comment. Peter Anderson from the Australian Chamber of Commerce and Industry, who is not always the greatest friend of this government, talked about the amendments in schedule 1 of this bill as being a boost to business confidence. He applauded the small business tax deferral in that regard. The Australian Chamber of Commerce and Industry also welcomed the measures in the circumstances. Reducing the impost on a temporary basis is good in the circumstances when business is facing the challenges of the global financial crisis.

This bill is important for business. It is important because business and small business make up the heart of the economic development and wealth of this country. Small business is a challenge for anyone. Those who take up the burden and the challenge of small business are on their own in many ways. No-one provides holiday pay for them. No-one provides sick leave for them. They go out on their own and take a punt, and they should be supported as best they can. Small business employs millions of Australians. Whether it is small shops, accountancy practices, doctors’ surgeries or trades, small business is the absolute heart of our economic development.

Too often, small business is the forgotten player in our community and is not given the kind of assistance and help that is needed. Big business can lobby hardest and has government relations officers. Big business is often the entity which has the ear of government. It is a tragedy, I think, that small business does not get the voice that it needs in the halls of government. It seems that small business is often left out when it comes to reform as well. So I am so pleased, as someone who was in business for more than 20 years, to support this change. The PAYG instalment system, which is supposed to smooth taxpayers’ cash flow throughout a year, is a burden, as I say. It is difficult for taxpayers to meet the quarterly instalment. I sometimes wonder whether, in fact, going back to the days of an annual system would not be better.

Taxpayers pay tax under the Taxation Administration Act. Subdivision 45-L of schedule 1 of that act stipulates the way the Commissioner of Taxation works out the amount of PAYG quarterly instalments. As I say, it is based on GDP adjusted notional tax. There is an uplift factor, of course, which, again, is a challenge for small business people. They get their instalment; then the tax office sends them the letter they do not like to receive and they find they have to increase the amount they have to pay. Every time I received one of those I thought, ‘Oh, no, not again.’ This is a problem for those in business, so amendments like this, which provides for a 20 per cent reduction of the amount of the PAYG instalment worked out under that subdivision for the quarter including 31 December 2008, are important for small business.

The announced 20 per cent instalment reduction broadly represents the reduction in average instalments necessary in a single quarter to reflect the expected slowdown in small business growth for the 2008-09 income year. We will see that because of a rise in unemployment and a downturn in GDP growth. We have seen six or seven of our trading partners in recession, China’s growth slow down for the first time in seven years, Japan go back 4.6 per cent in the last 12 months and the effects on our trading partners’ economies wash across our shores as well. For the next year or so we are going to do it pretty tough in Australia, and any help we can give small business is always worthy of consideration and support.

Broadly, a small business is a business that had an aggregate turnover of less than $2 million in the previous income year. I know that in my electorate of Blair there are many, many businesses which have turnovers less than this. I go through the big shopping centres in my electorate and see small business operators everywhere at shopping centres like Riverlink, Yamanto Shopping Village and Brassall Shopping Centre. All those shopping centres have small business operators, people who are real entrepreneurs and who have taken the risk. They should be rewarded and supported. If we can help them in any way, that is terrific.

The amendments in this schedule are aligned very much with what the Rudd Labor government is doing to help small business across the country. We have announced a $42 billion Nation Building and Jobs Plan to build infrastructure. Things announced in my electorate of Blair in South-East Queensland will help small business—like trade training centres in Ipswich and the Lockyer Valley. They show the assistance we are giving small business as well, because small business employs tradespeople: carpenters, plumbers and people who work in the other wet trades. Helping our tradespeople and building industry is really important in Ipswich, where the growth in population is so rapid.

Small business operators in my electorate have warmly welcomed the stimulus packages announced last year and earlier this year. I also think the $2.7 billion tax break to allow small business to claim an additional 30 per cent tax deduction for eligible assets costing $1,000 or more is tremendous for small business. That is extremely helpful to small businesses who thought about bringing in a new computer system but could not do so, or thought about bringing in a new lathe or buying some more equipment for their business. That is important because now they have a chance to get an increased tax deduction in those circumstances. That will help the operators in manufacturing areas such as Wulkuraka, Ipswich and Raceview. It will help them to achieve what they need to do.

The small business advice we are giving in rolling out business enterprise centres throughout the country is also helping small business, just like the amendments in this legislation. The Ipswich Business Enterprise Centre in my electorate is dealing with not just Ipswich but the rural areas outside as well. It is functioning, operating, helping, mentoring and giving advice to small business. For those people who want to take a chance—tradespeople, those who want to set up business or a franchise or who just want to get ahead and do the best for their family—business advice is really important. Giving money to assist businesses in their pockets and business advice from business advisory services located in suburban, rural and regional areas is so helpful to small business. It beggars belief that those opposite are not supporting our Australian Business Investment Partnership. The Property Council of Australia supports it and the big banks support it—they are putting money in to support it. But those opposite seem to be opposing it. They say they support jobs, but Treasury says we will lose up to 50,000 jobs if foreign banks leave this country. So helping business by establishing the Australian Business Investment Partnership is so important in the commercial property sector in Ipswich and the rural areas. Guess what? Those commercial enterprises employ small businesses. They employ independent contractors and tradespeople to work in those sectors.

The investment in local schools in my electorate is very important too. Yesterday, during the MPI, I announced a number of schools which were looking forward to bringing forward projects. One of the schools which I mentioned, All Saints Primary School at Boonah, is bringing forward their property development by five years. Bethany Lutheran School, which is a little school of about 200 in Ipswich, is bringing forward its redevelopment by about four years as a result of what we are doing. This is making a real difference, because schools cannot just think, ‘We’ll reconstruct our school’. It gets done by tradespeople and architects, and they are so excited about that. That will help small business in my area and small business generally. This is the biggest school modernisation program in history, supporting construction and tradespeople and small business across the country.

During the many mobile offices I run across Ipswich and the rural areas, what really strikes me is the number of people that come to me and say, ‘I am going to buy a house. I am going to build a house. I haven’t done that before, but I am going to do that.’ We have seen nearly 30,000 first home buyers enter the property market to the end of January as a result of the increase in the first home owners grants. These are practical ways to help small business, because houses get built by trades people and businesspeople. In my electorate it was announced that 133 new homes were to be built, mainly on the south side of Ipswich, by local tradespeople—a $36.3 million injection into the local economy. This is extremely important for building confidence in the Ipswich and rural areas. Tragically, we saw a rise in unemployment in the Ipswich and West Moreton areas of about 400 last month. But delivering 711,000 new training places over five years, and the recent $298 million commitment with the jobs credit account, will make a big difference to helping those people in their transition.

One of the most exciting aspects in my area to help small business and business generally is the redevelopment of RAAF Base Amberley near Ipswich. It is getting an injection of $1.1 billion by the Rudd Labor government, and that is having a big impact locally in terms of investment, infrastructure and jobs. So investing in roads and infrastructure is really important to help small business. In my area you can see the impact on small business of changes brought in by the jobs plan. You can see what it is going to do to help small business, so the schedule 1 amendment, which provides instalment reduction for small business of 20 per cent, will have a big impact on the small businesses that operate locally. It is to the credit of the government that we have undertaken this task, because helping business is just so important.

I have said before that those on this side of the House are the real advocates of free enterprise. We are the real advocates of free trade and the free market. We support business because we believe that giving people the opportunity to earn an income, to advance in life and to uplift the economic development of themselves and their families is what Labor is all about. It is lifting people up. It is helping people who come from disadvantaged backgrounds, giving them an education, giving them decent health care, giving them help in business. That is what the great Labor tradition is about: nation building, jobs planning, helping the economy and helping small business. I commend the bill to be House.

Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Link to this | Hansard source

I rise in the parliament today to speak to the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. This bill deals with three schedules, all of which represent quite different outcomes. Schedule 1, which is in the area of PAYG relief, will reduce by 20 per cent the PAYG instalment amount for certain entities. This schedule also allows the PAYG instalment amount for quarterly taxpayers to be reduced by regulation rather than legislation. The coalition agrees with this schedule and is pleased that the government now agrees with us that pressure needs to be eased on Australian enterprise to protect and grow jobs.

Schedule 2, which deals with temporary residents super amendments, contains consequential amendments to temporary residents’ unclaimed money regime changes made in 2008. The coalition supported legislation that required superannuation funds to pay unclaimed super of former temporary residents to the ATO. That legislation was intended to reduce the amount of unclaimed super funds belonging to temporary residents who have departed Australia. This schedule provides an appropriate compliance regime, which we support as it provides consistency for the superannuation industry.

Let me now move to schedule 3, which is all about reportable superannuation contributions. I am particularly interested in this area of the bill in my capacity as shadow minister for superannuation. This schedule troubles me as it may result in inequitable outcomes for some employees, and I wonder whether or not this may be an unintended consequence of the bill as it is currently drafted. Part 1 of this schedule deals with the definition of reportable superannuation contributions. This definition includes salary sacrificed amounts under the income test when determining eligibility for government benefits. Part 1 of this schedule creates a new definition for what is called reportable employer superannuation contributions or RESC. When we talk about the RESC this does not include payments made by an employer to meet the compulsory nine per cent superannuation guarantee contribution. It only includes amounts paid by employers in addition to the nine per cent compulsory superannuation contribution. So the new definition of RESC, if this bill passes, would include payments made by the employer to the employee’s super fund where the employee ‘has, or has had, or might reasonably be expected to have or have had, capacity to influence the size of the payment or the way the amount is contributed so that his or her assessable income is reduced.’ Any payments made by an employer to an employee’s fund that the employee did not control would not actually be included as RESC.

Let us have a look at how this would apply in the real world. This definition of RESC means that contributions made by an employer as part of an agreement that has been negotiated by a third party are not included. Just because it has been negotiated by a third party, it is not included. Third party agreements can be negotiated by any number of people and entities. But in many cases they are negotiated by a union representative. What concerns me is whether or not this is an unintended consequence of the bill and if this is, in fact, an attempt by the government to infuse some ideological base into the bill, which I think would be to the detriment of Australians.

I am concerned—and I know the member for Batman would join with me in this concern—that this schedule has the potential to create two classes of employees: one class of employees who choose to negotiate their own employment arrangements and another class of employees who choose to have an arrangement negotiated, for example, by a union representative. They will be treated differently. So my concern is that employees who choose to negotiate their own arrangements will, as a result of this bill, be treated as second-class citizens. Therefore this is not an equity measure, as Australians who choose to salary sacrifice in their super because of an individual decision are going to effectively be punished, and that is where my concern really rests.

On the other hand, contributions made to employee super accounts because of third party agreements—let us say through a union representative agreement—will be afforded an inequitable advantage. Such employees will have their contributions included as RESC whilst those under a union negotiated agreement will not. You have to say to yourself: where is the common sense in that? Is it in the national interest to create these two classes of employees? I know that my colleague the shadow Assistant Treasurer and member for Casey gave an example in his remarks earlier and I want to highlight this example again because I think it demonstrates where the concern rests.

Let us take, for example, somebody working in a business on the left-hand side of a road. They are in a business, working away each and every day. Let us say that directly across the road there is another person working in another business. Let us say that those two people happen to be friends. Let us say that they both earn $50,000 per year and that both of their employers make a 15 per cent contribution to their superannuation funds. Fifteen per cent of $50,000 is $7,500. Let us say that they are both looking at a certain government benefit and that the income test for that government benefit is just a bit above their salary, at about $51,000. Let us say that the person on one side of the road has reached an agreement with his employer to have 15 per cent paid into his superannuation fund and that the person on the other side of the road has employment conditions that have been determined by a union negotiated agreement. So one person, over here, has determined their own arrangements with their employer, but the person on the other side of the road, earning the same amount of money, has had their arrangements negotiated by a union representative. They are both in the same situation: they are both earning $50,000 a year and they have $7,500 contributed to their superannuation fund. The person who has had their arrangements negotiated by the union will be eligible for the government benefit, because the contributions made by his employer above the nine per cent have been determined by the union negotiated agreement. So the person on the right-hand side will be eligible for the government benefit, only because their arrangements have been negotiated by a union representative, but the person across the road, this mate of the other person, will not be eligible for the government benefit because their additional component—that six per cent which is above the nine per cent, making the 15 per cent—has been determined by them; they have negotiated it themselves, and therefore they will not be eligible under the income test.

That is a very practical example, I think, of the concern that the coalition is raising about this bill. Why would you want to create that difference? I know that the Minister for Small Business, Independent Contractors and the Service Economy, who has just joined us in the chamber, would be very concerned about creating differences amongst employees in businesses throughout Australia. Why would you want to do that to two hardworking Australians earning the same amount of money and getting the same contributions to their super? That is a very important thing, because the whole issue of adequacy of superannuation going forward is a critical concern for Australians. This bill will create those two distinct classes of employees, and that really is what is concerning. The opposition is very concerned about any initiative which creates unfair advantages for particular employees over others. If that is the case—if this unintended consequence of this bill does that—I think it is very difficult for any government to argue that this can be an equity or integrity measure, because the result is inequitable. It is a result that, at its best, will create division and inequity in the workplace, and that is a result which I think is unsatisfactory.

The shadow Assistant Treasurer has highlighted this issue. I think it is also very important to make the point that, in the Senate inquiry into this bill, this issue was also highlighted. The senators raised it as an area of concern. So here is an opportunity for the government to clarify this issue. The government has an opportunity to fix this particular issue in this bill, and I would ask the government to seriously look at this issue and clarify it by moving an amendment which puts this issue beyond doubt and assures the parliament that, in that situation that I identified of two hardworking Australians earning the same amount of money and getting the same level of superannuation, one person will not be treated more favourably than the other and that, in fact, both Australians will be supported equally. I think that is an objective that all members of parliament should be pursuing.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. In particular, I wish to make most of my comments in relation to schedule 1 of the bill, which relates to the amendments to the withholding amounts under the PAYG system for small business. I am very pleased to rise to my feet at a time when we have in the chamber with us the Minister for Small Business, Independent Contractors and the Service Economy, because I know that the minister has very much been leading the charge in delivering benefits to the small business community in what I think we all acknowledge is a very difficult business climate for business generally but in particular for small business.

The initiative outlined in this particular bill is one on which I have received much positive feedback in my local community from small business. The impact of these changes will ensure that, under the pay-as-you-go withholding system that most small businesses would be required to withhold their tax instalments under, there will be an adjustment to the amounts that are required to be withheld to take into account the decline in economic activity and the expected decline that that would lead to in their own profits at the small business level. It would affect quarterly instalment taxpayers. Under the current system, the pay-as-you-go instalments are based upon the GDP adjusted notional tax for those taxpayers. That will continue to be the case, but there will be some amendments that go to correct the fact that the current GDP uplift factor can on occasions be unrepresentative of the expected increase in profits that a small business might be likely to derive.

To explain this point, in the 2008-09 income year, as it presently stands—prior to this measure—the GDP uplift factor is currently about eight per cent. Let us contrast against that eight per cent GDP uplift factor the fact that profit growth for small business is expected to be two per cent under MYEFO. So, when you compare those two figures, you can see that, had the government not sought to act in the way in which we are acting in this bill and as we were acting when the minister made the announcement back before Christmas, small businesses all around this country would be required to withhold tax at a higher rate—which, obviously, would have had cash flow implications for them.

In reality, at the end of the year, the tax liability of the particular taxpayer will be reconciled, and they will pay tax according to the income that has been derived throughout the income year. An anomaly would exist as a result of the operation of the GDP uplift factor, as it currently stands, if the government did not act. That anomaly would ensure that small businesses were being required to withhold a significant amount—indeed, an excessive amount—of money when we consider what we might reasonably expect them to be liable to pay, in terms of tax, at the end of the financial year.

The impact of this measure is of great significance in local communities right around the country in relieving the burden of having to withhold that additional amount. It does free up much needed cash flow for businesses that are already doing it tough in a very difficult business environment. I have to say that the feedback I get in my local community is that many small businesses are doing it tough. I also want to put on record the fact that I have had many reports of local small businesses that have been doing very well. No doubt, those businesses that have a very sound business model and are very well managed have been able, in some cases, to do reasonably well in recent times. But I think they are the exception, and there are many others that are doing it tough.

I have had many reports to me in my electorate office and as I move around throughout my local community about the impact of cash flow. More and more small businesses are reporting to me the fact that their debtors are not making payment within the 30-day period—in some cases not within 60 days or 90 days—and, indeed, it is blowing out. Many local small business owners and operators are reporting to me that even their good customers—the customers that have always stood by them and have always tried to pay on time, many of whom are often facing the same cash flow difficulties themselves—have found it more difficult to make their payment timetables than might previously have been the case. This, obviously, has a very big impact on a small operation—a small business will be very much affected by cash flow difficulties. That is why I think this measure is so significant. It is one of the most significant proposals to address the specific issue of cash flow for small business out there in the public domain at the moment.

I understand that the measure will impact on approximately 1.3 million small businesses, so its impact right around the country will be significant. It applies to the instalment amount shown on the BAS for the quarter ending 31 December 2008. In addition to introducing this measure, the bill also contains a measure that allows—on an ongoing basis—for a regulation-making power so that this situation can be monitored and adjusted as the times require. Obviously, where there is a significant, sharp and—for many—unexpected turnaround in their own local small business activity then the operation of the usual calculations under the GDP uplift factor will create the anomaly that has led to this change. So it makes sense to allow for and to provide for regulation-making power to ensure that—where sharp changes in economic activity occur—decisions can be taken to liberate some cash flow for small business, particularly in those cases where it is apparent and evident that they will not be required at the end of the financial year to pay the amount of tax that they would otherwise be required to withhold.

This measure is an important measure, but it is a measure that should be considered in the context of the many other measures that the government has introduced to try to assist small business. I was talking earlier about some of the difficulties that small businesses have reported to me in my community. Apart from the cash flow issue, many have said to me—and cash flow is often connected to this issue—that they are finding it more difficult to secure and maintain their financing arrangements with their lenders. In this regard, I commend the minister for the good work that he has done in convening a roundtable with small businesses, banks and other lenders. The work that has been undertaken at that level has led to a communique. I think it was a brave decision on the minister’s part to open himself up and to open up his office as a clearing house for these particular issues. Not only was it a brave decision; it was the decision of a minister who is so committed to his constituency that he is prepared to take on that very practical and very helpful responsibility of receiving those complaints and then following them up with the lenders. I think that is something that has been very much welcomed throughout the small business community in this country.

One of the issues that small businesses have been reporting back to me, in addition to the cash flow issue, is the financing issue. For many of them, there is a more specific issue that they raise, and that is that, often, their ability to access finance is largely secured by their own property—their own assets. In a context where, in some cases, property values have declined, it is increasingly difficult for small business to rely upon the assets that they have within their portfolio—in some cases, it may be as simple as the family home. Where those assets are being relied upon as the security upon which any borrowings are sought, it is obviously very significant to consider what impacts are occurring out there in the property market more generally.

A point which I think is not made often enough is that the first home owners grant has also had an impact for small business at that level. The first home owners grant, by providing added stimulus in the residential property market, has ensured that there has been something of a floor put in that market. Certainly the feedback that I have been receiving from local real estate agents in my community is that this has stimulated the property market, particularly the first home owners end of the market and, in doing so, has provided a floor in the market which has had a flow-on impact and benefit for those small businesses that are relying upon assets that they hold in the property market. Having this floor in the market has provided them with the security that they need to have more concrete discussions with the banks in order to secure the funds that they need. As I mentioned earlier, cash flow issues are putting more pressure on small business and, in many cases, that is leading businesses that otherwise would not have had to seek out those additional financing facilities now being required to do so.

This measure really needs to be considered along with the suite of other measures that have been put in place, including those that were contained within the Economic Security Strategy, which was handed down in October—and the payments which started to flow through the economy in December—and also, more particularly, the most recent round of stimulus payments. In respect of those payments, there has been considerable support within my local community for a campaign that I have been trying to run under the banner of ‘Keep Penrith Working’. I have had much support from the local business organisations. In particular, I wish to acknowledge the very strong support that I have received from Jill Woods, the Chief Executive Officer of the Penrith Valley Chamber of Commerce, and Mr John Todd, General Manager of the Business Enterprise Centre. I note in passing the efforts of the minister in providing additional funding on a recurrent basis to the Business Enterprise Centre. I know that that contribution of funding has allowed the centre to provide a suite of services to local small business that they previously did not have the capacity to deliver. They have provided a great and outstanding service, helping small business in our community, and with that added assistance they have been able to provide even more help at a time when it is very much needed.

In addition, I have had support from Paul Brennan of the PVEDC; Gladys Reed, the General Manager of the Penrith City Centre Association; Peter Jackson-Calway, the Manager of the St Marys Town Centre Management Committee; and Mr Ian Palmer, from the Schools Industry Partnership. I also wish to acknowledge the council, under the leadership of the mayor, Councillor Jim Aitken, and Mr Alan Stoneham, the General Manager of the Penrith City Council, for the work that they have been doing in getting behind this initiative.

The first stage of the ‘Keep Penrith Working’ initiative commenced with a campaign in the local media, supported by local business groups. We ran very hard on the first tranche of stimulus payments coming through over the last week or so. We brought the local business groups together and called upon local residents to spend locally when they started receiving those cash payments—and many have already started to receive them. We asked them to think about what they can achieve for their local community—for themselves, their family, their neighbours and other people in their community. By spending their money thoughtfully and in the local economy, they can actually help to support the jobs of the people living in their community. It is an important initiative—one that I am very pleased to be associated with. I thank those groups for lending their support and getting behind this proposal.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

Have you delivered one job?

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

The shadow minister at the table is asking whether any of these measures have delivered any additional jobs. I was talking a moment ago about the first home owners grant. Specifically on that point, the Minister for Housing was pleased to report to the House the other day that recently at Ropes Crossing, Delfin Lend Lease, in response to the uptake in demand for the housing as a result of the first home owners grant, have now had to put on an extra 36 people in my local community—36 extra people. So, as to whether I am able to produce evidence of one job, I have produced evidence of 36. Clearly, there are many more jobs in my local community that are being delivered as a result of the stimulus efforts of the government, but that is just one example.

I also wish to comment briefly on some of the other measures that complement the 20 per cent reduction in PAYG instalments by directing my comments towards the small and general business tax deduction, which was originally announced at 10 per cent but then was increased to 30 per cent as a result of the most recent stimulus package announcements. I mentioned earlier the good work of the Penrith Business Enterprise Centre. John Todd reported to me recently that his office has received numerous phone calls requesting more information about this particular measure. He said, ‘It’s clearly a measure that’s getting out there. I think it is being promoted by the accountants as something that will assist local small businesses and, as a result of that, there is real interest in this measure.’ It is a significant measure because it will not only encourage businessowners not to defer making an investment in a capital item for a business but also enable people to bring forward some of those purchases. It is significant because of the flow-on effects from that investment having been made. I note that the opposition has been critical of this proposal. At the time of the announcement, the Leader of the Opposition made some comments in relation to the stimulus package, and I quote him from a doorstop, where he said:

You see what he has offered—

and I am assuming he is referring to the Prime Minister—

small business, the only thing he has offered small business in this package is a 30 per cent depreciation, a tax deduction in effect, for equipment purchased this year. But if you’re a small business and you don’t need any new equipment, maybe you’ve got all the equipment you need, or you’re struggling with your own cash flow problem, that actually isn’t much help at all.

I would not expect the Leader of the Opposition to acknowledge the benefits that flow from the PAYG initiative, the reduction in instalments required to be paid. It is not his job to promote the good aspects of government policy, but I certainly wish to ensure that the positive benefits of that measure are noted here today.

Let us look at what the Leader of the Opposition said. He said, ‘This is of no real benefit to small business and certainly does not provide any immediate or direct stimulus to the economy.’ I find it extraordinary that, just a few days earlier, the Leader of the Opposition made some comments in relation to his own proposals for depreciation allowances and various tax deductions and he made a completely contradictory point. On that occasion, a journalist asked him a question in relation to his proposals:

That won’t have any short-term stimulus effects, will it, or even medium-term?

Mr Turnbull’s response was:

… with great respect you are completely wrong, because if you provide accelerated depreciation and an incentive for people to invest in more efficient buildings, more efficient water systems, more efficient lighting systems, they’ve got to hire a contractor to do the work. And so immediately people are put to work. So that’s the type of policy that will get you an immediate pay-off in economic activity and in employment.

What I fail to understand here—and I think I fail to understand it because of the logical inconsistency in what the Leader of the Opposition has said—is how the Leader of the Opposition’s depreciation allowance is going to create economic activity, short-term stimulus and jobs, yet our proposal is not going to deliver that. (Time expired)

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

As shadow minister for small business, I am pleased to rise to talk about the policy that is before the House today, the policy that Labor is introducing as part of its pitch to the small business sector. We know—it is often quoted and has perhaps become a cliche but for good reason—that small business is the engine room of the Australian economy. Right now there are about two million small businesses out there, employing around 3.8 million Australians, who are doing it tough. They are doing it tough for a variety of reasons. No doubt the global economic crisis is one of those reasons. But, in many respects, they are doing it tough as a direct result of this government’s failed and flawed policies that are not only not assisting small business but actually making it tougher for small business.

I noted what was said by the member for Lindsay, who spoke before me. He raised a whole raft of different points, and I would like to embrace some discussion on a couple of those points. I found it most fascinating that the strongest argument the member for Lindsay could put forward about what the Labor government was doing for small business was to talk about how the first home owners grant was providing a floor underneath home values. The member for Lindsay came into this chamber and said, ‘I recognise that a couple of small businesses’—can I say to the member for Lindsay that it is not a couple; it is the majority of small businesses in this country. These are men and women who put their very houses at stake, who take real risks out there to generate value and to employ Australians. They do it with their houses at stake. It is not ‘a couple’; it is the majority, Member for Lindsay. And if you had any conceptual understanding of the real risks that these small business men and women face when they make a decision to open a shopfront or to employ an Australian, you would understand how pithy it is for you and other Labor members to say to them, ‘Well, we have made it a bit easier for you because we have put a floor underneath your house values through the first home owners grant.’ What an indictment of the Labor Party that that is one of the strongest arguments that Labor can come up with about what they are doing to assist small business in this country. It is no wonder that Australian small business men and women are looking at this government and shaking their heads in disbelief.

The measure that we have before the chamber today in many respects demonstrates how completely out of touch the Labor Party is with small business. It is bad enough that we have union hack after union hack after union hack coming into this chamber trying to talk about how much they understand small business. The reality is that the closest most Labor members have gotten to a small business is when they have walked in the front door to buy a coffee. That is about as close as most Labor MPs get to small businesses in Australia.

The measure that is before the House today is an interesting measure. It is an interesting measure because it is, for all intents and purposes, largely a copy of a policy announcement that I made months earlier. When I was going around Australia talking to small business representatives—small business lobby groups, peak advocacy groups and, most importantly, the men and women who run small businesses—they were saying to me: ‘Look, you have got to understand that we are under massive cash flow problems—massive cash flow pressure. What we need is government policy that will help to alleviate the cash flow problems that we have as small business owners.’

So, on the basis of that, I put my head together with that of the Leader of the Opposition and we came up with a pretty good policy that would directly go towards assisting small business owners. We knew that small business owners were saying to us: ‘Look, we don’t really know how bad this economic downturn is going to be. We don’t really know what the impact is going to be on our revenue figures. We don’t really know what is going to happen with our costs. We would like to be able to vary our PAYG instalment payments so that we can basically make an educated guess but, if we get it wrong, not be penalised.’ The current law is that a small business owner, when making their PAYG instalment payments, can have a margin of error on their variation of up to 15 per cent. If the margin of error is in excess of 15 per cent, the tax office penalises them for getting it wrong.

The Leader of the Opposition and I announced on 20 November last year a proposal that said: why don’t we double the margin of error from 15 per cent to 30 per cent? By doing that, we can ensure that small business owners retain control of the variation they seek on their PAYG instalment and, if they get it wrong—because these are unique economic circumstances in relative terms—they are not going to get whacked around the head by the Australian Taxation Office. That is the policy that I announced on 20 November. So, lo and behold, with the Labor Party completely bereft of policies, the small business minister went to the Labor Party policy cupboard labelled ‘small business policy ideas’, opened the doors and found nothing there. It was just staring back at him. Then the Liberal Party announced a policy and the small business minister said: ‘Thank goodness! We can have a policy now. We will just copy the Liberal Party policy and tweak it a bit.’ That is what happened. The Labor Party went out there and announced their policy, and they said, ‘What we’re going to do is to give every small business in the country a 20 per cent deduction on their PAYG instalment.’ It sounds reasonable, except for a couple of problems. It is an inferior policy to the proposal that was put forward by the coalition, because not every business wants a 20 per cent deduction.

Under Labor’s policy, with a 20 per cent automatic deduction coming through on, for lack of a better term, invoices from the Australian Taxation Office on the PAYG instalment, you could be a business that has actually had a revenue increase.

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

You said there aren’t any of those.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

No, I did not say there aren’t any. I never once said that there aren’t any. The fact is that you could be a business that has actually had a revenue increase. There will not be many, but there will be some. You could have had a revenue increase, yet you are going to get a 20 per cent deduction from the tax office. If they pay that amount from the tax office at a 20 per cent deduction, and the margin of error compared with their final return is out by more than 15 per cent, what happens? They are going to get whacked with a penalty from the tax office. That is why this Labor Party policy is a very inferior policy to the coalition’s policy.

I have got to say that the minister at the table, the Minister for Small Business, Independent Contractors and the Service Economy, knows that to be true. He knows that there are going to be small businesses out there that are potentially going to get whacked with a penalty from the tax office as a result of Labor’s policy. That is why the minister has got his head down. He knows that this policy is inferior to the policy that the coalition put forward. He knows that there will be small business men and women in this country who, as a direct result of this flawed policy, are going to get whacked with penalties from the tax office.

Instead of adopting the coalition’s policy, which would have been a far superior policy for small business and would have enabled the small business owner, who knows their business best, to make an educated guess about what they wanted to do—‘Do we want to reduce our PAYG instalments by 10 per cent, 20 per cent, 30 per cent or maybe even increase them?’—the government, in typical Labor Party fashion, has said: ‘No. One size fits all. You’re all going to get a 20 per cent reduction on your PAYG instalment.’ And there is a little asterisk at the end of that which says that if the margin of error is more than 15 per cent when it comes to the final payment, it is bad luck. The small business owner is going to get whacked around the head by the ATO and have to pay a penalty. That is what Labor just does not understand about small business. That is what Labor just does not get about small business. At the end of the day, we have a group of people sitting on that side of the chamber and the closest they have come to small business is to walk into a small business and buy themselves a coffee. That is the problem. My concern is that they are so out of touch with the actual needs of small business that they are just getting it wrong when it comes to small business policy.

I note that the member for Lindsay and others in this debate have spoken about Labor’s 30 per cent investment allowance. Again, on the face of it, it seems reasonable. You would probably accept Labor’s investment allowance if there were nothing else offered, and unfortunately that is currently the situation from the Labor Party. But Labor fails to understand that you have got to have a dollar to spend a dollar. There is no point having a 30 per cent investment allowance if you are in small business and you are struggling with cash flow and do not have any money to spend. There is no point providing them with a 30 per cent allowance when they do not even have a dollar to spend because they are under cash flow stress. If there is one clear and consistent message that small business is delivering time and time again, it is: ‘We have cash flow stress at the moment. The best thing you can do is to free up our cash flow.’ You do not free up cash flow by providing an incentive to small business and saying to them, ‘Spend more money and you will get 30 per cent back.’ It is great if you happen to be one of those fortunate businesses that are awash with cash and can invest more money. But if you are one of those businesses that does not have a need to purchase plant and equipment, if you are one of those businesses that is faced with a cash flow situation that does not free up cash to invest in new plant and equipment, it does nothing for you. Labor just does not understand that. That is why the coalition’s proposal is far superior.

James Bidgood (Dawson, Australian Labor Party) Share this | Link to this | Hansard source

You don’t understand productivity, do you?

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

I hear the member opposite saying that the coalition do not understand productivity. Let me say to the member: not only do we understand productivity; if the Labor Party understood productivity they would not confine their investment allowance to plant and equipment. They would include intellectual property and productive investment such as software. This just demonstrates again why this government is all talk. They talk about productivity but the reality is that, under Labor’s proposal, if you purchase software which will boost productivity you are not eligible for the investment. I think that the member opposite ought to get educated about what his own policy is, because quite clearly he has no idea.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

I ask the members opposite to keep their voices down. It is very hard to hear what the member for Moncrieff is saying. There are ample opportunities in this place to have your views heard. At the moment the member for Moncrieff is on his feet and he has the say.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

Thank you for the protection of the chair, Mr Deputy Speaker. In other aspects of the Labor Party’s failed small business policy, again Labor’s actions do not match their rhetoric. The Labor Party say that they are concerned about cash flow and about small business costs. I have already demonstrated how the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, which is before the parliament today, does very little for small business and, to the extent that it does assist small business, it will also actually penalise a number of Australian small businesses. I have demonstrated how the government’s investment allowance is basically useless for a lot of small businesses because if they are cash strapped or in a situation where they do not need new plant and equipment it is not going to do anything for them. I note that the member for Lindsay said earlier that he did not really understand the point that the Leader of the Opposition was making—well, that is the point. The Leader of the Opposition made it perfectly clear that for many small businesses Labor’s investment allowance was next to useless. It stands in stark contrast to the coalition’s policy—the proposal of the Leader of the Opposition that the member for Lindsay spoke of—which would not apply only to small businesses that are already cash strapped; that is the key difference.

We get to the all-important issue of what Labor’s policy is doing to business operating costs. We know that at the moment Labor are seeking a whole raft of reforms on industrial relations, a key component of which are moves to modern awards. So far, pharmacies, restaurants and caterers, retailers and newsagents have all come out and said that, as a direct result of Labor’s industrial relations changes, business costs will increase from 10 per cent to 30 per cent and that, at a time when businesses are doing it tough, the only way they can deal with this increased labour impost on their businesses is to shed staff. I say to members opposite: do not take my word for it as the shadow minister; read and understand the press releases from the Newsagents Federation, Restaurant & Catering and the Retailers Association when they say that small-business owners will be shedding jobs because they now face a 10 to 30 per cent increase in their operating costs thanks to Labor’s policies.

The member for Lindsay and other members come into this chamber and wring their hands and say how concerned they are about the employment of Australians, but I say to them: if you were genuinely concerned about employment in this country you would reverse this failed policy that Labor has put forward. There will be thousands, probably tens of thousands, of jobs lost. The restaurant and catering industry alone predicts 8,000 job losses as a result of Labor’s changes. We have members standing up and saying, ‘There were 36 new jobs created in this area.’ But there are going to be 8,000 job losses in that one sector alone. Multiply that across the economy and we are talking about tens of thousands of jobs being destroyed by Labor’s industrial relations changes and their modern awards program. It will be cold comfort to those so-called working families, as the Prime Minister calls them. There are not too many working families under this Labor government. There are plenty of ‘redundancy families’ but there are not too many working families.

I note that the bill provides a regulation-making power to allow the amount of PAYG instalment worked out under section 45-400 to be reduced in the future. Significantly, it does not provide any relief in the permitted margin for error in instalment amount variations. This goes to the central point I was making earlier. If Labor were serious about making it easier for small business then the minister—and I appeal to Minister Emerson at the table—would amend the legislation to increase the margin for error. Allow businesses to have a greater margin for error before the tax office seeks to impose a penalty, because that will improve the policy that is before the House today. This policy is one very small step. It does not do much for small business. But if Labor changed just this aspect of the bill it would make it a little bit easier for small business owners—who might, as I said, be at a distinct disadvantage as a result of this policy—because it would mean they were not going to get whacked with a penalty from the tax office.

As the explanatory memorandum accompanying the bill notes:

While taxpayers may vary their instalment amounts calculated and notified by the Commissioner themselves, many are reluctant to do so, as underpayments can trigger—

the general interest charge penalty I spoke about. Again, that is why the coalition’s proposal to increase the margin for error from 15 to 30 per cent would make a significant difference to small businesses right across Australia. The current penalty unreasonably discourages small businesses from using that tool under the PAYG instalment revisions to manage their cash flow. PAYG instalment revisions are an important way that small businesses can manage their cash flow. That is part of the reason they are there—to assist small businesses to manage their cash flow. The last thing we need is for small businesses to face extra penalties as a direct result of Labor’s policy.

It is time that Labor removed themselves from the trade union movement long enough to get a bearing on what is going to directly assist small business. It is not going to be modern awards; it is not going to be loose promises about on-time payments from government—which I know is a very big point for the minister at the table. The Labor Party trumpet how they are the champions of small business because they are going to make sure that the Australia government pays on time. The fascinating thing is that, ever since the Labor Party were elected, on-time payments have gone backwards. Now, fewer small businesses are being paid on time. It is one thing for the Prime Minister to announce, ‘We are going to make sure small businesses are paid on time.’ It is one thing to put that into print. But it is a whole different thing to actually execute that promise. The reality is that things have gotten worse under this Labor government.

Labor in New South Wales, give them long enough, will just stop paying bills altogether. That is what has happened in New South Wales under the Labor Party. If you were a creditor of NSW Health and they ran out of money it would be: ‘Tough luck; we will pay you when we can. It could be in six months.’ We know that it is possibly only a matter of time before federal Labor become the basket case that New South Wales Labor are. At $2 billion per week, they are racking up enough debt to get us there very quickly.

In summary, the coalition acknowledges that the bill before the House will have a small beneficial impact on small business. It could have a much larger beneficial impact on small business if Labor did a couple of simple things such as increasing the margin for error to give small businesses back the tools to make revisions themselves without threat of penalty rather than having a one-size-fits-all, 20 per cent approach. It is okay but it is not great. I hope that Labor will continue to watch coalition policy announcements in the small-business arena so that in the future they might have ideas as well. (Time expired)

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to speak on the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, which deals with three main areas, but before I do that I might make some comments about the opposition’s small business spokesman, the member for Moncrieff. I have never heard such a diatribe coming from a representative of the Liberal Party on small business. The real question for the member for Moncrieff is whether he supports the current opposition leader or whether he is a fan of the member for Higgins. That is the real question that he needs to make very clear on the record.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

Mr Ciobo interjecting

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

Well, there is certainly no doubt that you do not support small business. These measures are very important for small business. These taxation amendments do a number of things. Schedule 1 covers the government’s announcement of December 2008 and reduces PAYG instalments to provide relief for small businesses—a very important aspect of this bill. Schedule 2 provides greater coherence and consistency on unclaimed superannuation for temporary residents. Schedule 3 gives effect to the reforms to income tests announced in the 2008-09 budget.

These are very important reforms. Millions of small businesses will benefit along with other taxpayers. However, before I go into the detail of the bill, I would like to make some broader remarks about taxation, and I believe the content of this bill facilitates those conversations. Firstly, as a new member of parliament, someone who was elected at the 2007 federal election, I think it is important that I make some in principle remarks about my views on taxation generally. I would like to make some clear statements on the core issues so that people know where I stand on these types of matters.

The word ‘taxation’, as it has developed in much of the Western world, has become a byword for bad. That is something that I have never understood. In my view, taxation is a manifestation of civilisation. Fundamentally, it is about people making a contribution to their community and to people who are less well off. Certainly, some countries have structured their economies in such a way that taxes are used for purposes that they should not be, and there are tax regimes that drive inefficiencies and reduce incentives and productivity. But taxation is often, in large part, a sign of the generosity of a society or culture. For example, I believe taxation revenues that are used to help out the needy or the disadvantaged in a targeted and useful way is a very important thing for a society to be doing. In fact, I would go as far as to say that unless a society sets its tax levels such that it can build quality education systems and quality schools and train and pay quality teachers then the society is doomed in a modern world. Tax revenues directed towards education are in fact a most worthwhile investment and can make a contribution to the set of financial circumstances that we have.

It is inherently good for a society, in my view, and inherently in the economic interests of society to have a modern taxation system. Nevertheless, despite the fact that there are so many positive arguments and examples as to the good use of taxation and the necessity for taxation, much negativity has been associated with taxation, and that is in large part because of the ideological jihad that has been waged on taxation by the neoliberals and others of conservative origins. The neoliberal mantra which exists, despite all of the evidence, has been that there is one economic policy solution for everything—tax cuts, tax cuts, tax cuts. It is more of a theology for those people than an ideology, in my view. No matter what is happening in the economy, the refrain today from the Liberals and the conservatives is always the same. The foolishness of this blind adherence has never been better illustrated than it was today by the member for Moncrieff.

Let us compare the difference between the economic predicament of the United States of America today and that of Australia today. Whilst there are clearly a number of economic factors at work in the meltdown of the American economy, in my view, one of the most important contributing factors has been the policy the Republicans continue to take to the electorate—that is, of course, tax cuts, tax cuts, tax cuts. This has plunged America into unprecedented levels of debt. Significantly, Americans had a massive level of debt when the financial crisis arrived over the last year or so. The pot of gold at the end of the rainbow, the Republican tax-cutting rainbow, never materialised. It was an illusion and it always has been. The theory went: if you cut taxes you grow the overall economy, so the overall tax take increases. That just never happened—certainly not to the level created by such a healthy economy. The reckless Republicans kept cutting taxes, especially for the rich, but their economy never responded the way that they expected. Year after year, despite mounting evidence that the theory was less credible than the tooth fairy, they kept believing in it. Debt levels rose and rose. Demands for services of course continued. Revenues were not there to pay for those services. As the lack of investment in social infrastructure continued and the need grew, so did the US deficit. There was a massive US debt to pay, a huge mismatch in social infrastructure and need, and a lot of scepticism in the US economy.

Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order. I would ask you to bring the member back to the bill before the House.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

I have been listening very carefully to the member’s speech. The bill is an amendment to the tax legislation. He is giving his views on taxation and some overseas examples. Even though the member is very close to the border, I think he is within order.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Mr Deputy Speaker. I will, of course, come back to the bill before us today in short while, but I think it is important that we put on record the international context of these issues. I think it is important that we compare what we do here in Australia with other taxation regimes. The reality is that we do live in an international economy and, more than ever, the relationships that exist between our countries and our economies are growing, and I think it is important that we put some of these comments on the record.

So what have we been left to deal with as a citizen of the international community? The American taxation policy and debt levels have had a double-whammy effect. They have deepened their economic crisis and reduced very significantly their capacity to respond with policy settings that will help them dig themselves out of their crisis. In short, America’s previous tax policy has magnified the current financial crisis that is crippling their economy. That crippled capacity makes it much more difficult for their economy to respond. On top of this, the US social policy has lagged behind the standards of most other advanced Western democracies.

In contrast, Australia, with a balanced tax policy, has been able to respond. We have been able to provide both a sensible and a bold response because we know our debt is manageable. I am not an advocate for high taxation. I am a very strong advocate for balanced taxation. I am an advocate for sensible taxation levels that enable us to provide for a decent society. Yes, sometimes the time is right to cut taxes. Sometimes cutting taxes is the right thing to do. There is a right time to provide tax relief. There is a right time to cut taxes to stimulate the economy. But this is very much a judgment call that our government is making. It is not an easy decision to make, but we are making those tough decisions.

A society that can provide decent services through taxation whilst still maintaining budget surpluses whenever possible and taxation levels that enable businesses to grow and thrive is a society that is on the right track. We have seen what the result has been when a group of ideologically-driven neoliberals have waged a jihad on our taxation system. We see it today, I think, right now in America, in an economy that is crippled and that cannot necessarily respond in the way it—

Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Link to this | Hansard source

Mr Deputy Speaker, I ask you to ask the member for Corangamite not to move away from your earlier ruling. This bill is a taxation bill in Australia, and I would ask him to come back to Australia.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member will resume his seat. There is no point of order.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

Deputy Speaker, I put it to you that Australia is an example of the reverse of the United States, because we have had a more balanced taxation regime in place and because we have run budget surpluses. Our economy is in better shape to respond to the set of financial circumstances that exist internationally. In response to this international financial crisis, government surpluses built up by previous Labor and Liberal governments are now able to be poured into projects that can cushion the economy. Not only can they do that; put into areas such as education infrastructure, they will make our country even more productive and efficient into the future and create thousands of jobs. That is where I stand on the broad question of taxation. I stand for taxation levels that balance maintaining surpluses in good economic times so that we have the financial capacity to respond with economic stimulus in times of economic downturns—tax levels that are well targeted to social services balanced with tax levels that allow businesses to thrive and grow.

I will now return to the detail of this bill. We are refining a bill to deliver a balanced outcome on pay-as-you-go taxes, amongst other things. This bill covers three areas. The amendments will provide a 20 per cent reduction in the amount of PAYG instalments worked out under section 45 and other sections that follow for the quarter that includes 31 December 2008 for certain small business taxpayers; and a regulation-making power to allow the amount of the PAYG instalments worked out under the section to be reduced in the future in circumstances specified by the regulations within these arrangements.

The announced 20 per cent PAYG instalment reduction measure for small businesses broadly represents the reduction in average instalments necessary in a single quarter to reflect the expected slowing in small business profit growth for 2008-09. So what we are doing is providing a better balance in the current economic climate.

Schedule 2 makes the general unclaimed superannuation money regime more consistent with the temporary resident unclaimed superannuation money regime and other consequential amendments as a result of the payment of temporary residents’ superannuation to the Australian government.

Schedule 3 gives effect to the reforms to income tests announced in the 2008-09 budget. The reforms amend relevant income tests in the tax and transfer system to include certain salary sacrificed contributions to superannuation and net financial investment losses.

As I said, this bill shows the balanced approach this government is taking in relation to our taxation system. But, just as importantly, it shows that we as a government are prepared to move quickly and decisively to assist small businesses to weather the global financial crisis. The 20 per cent cut in the February instalment provides important and effective help to small business. It provides immediate and much needed cash flow for small businesses. Around 1.3 million small businesses with aggregated turnover of $2 million per annum or less will get immediate taxation relief.

So that is what we are doing as a government. We are providing a balanced taxation regime. We are providing immediate financial relief to families through cash bonuses. We are providing jobs by putting surplus money into social infrastructure, particularly education infrastructure. We are providing immediate taxation relief to small businesses. This help to 1.3 million small businesses will help sustain employment for the millions of employees working for these businesses and will be a big boost for our economy and jobs when it is needed.

I sometimes wonder what the opposition would have done in response to the financial crisis that has been whipping around the world. It is certainly very hard to tell from their current responses, which chop and change day by day or hour by hour. But I am pretty sure they would have had a fairly lethargic response. They would have gone down the same path as their American ideological idols. They would have chased the illusory pot of gold at the end of the Republican economic rainbow. They would have cut a narrow band of taxes, putting in place long-term structural deficits. They would have cut income taxes, mainly for the rich. They would have closed their eyes wishing, hoping, believing and expecting that everything would just go away.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, on a point of order: standing order 75 goes to tedious and repetitious speeches. We have—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

There is no point of order.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

This is certainly a very significant bill. It will help small businesses, it will help to keep our economy ticking over and it will help to shelter our economy from the worst excesses of the world financial crisis. I commend the bill to the House.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. Firstly, may I express to the House my outrage at some of the statements we have just heard from the member for Corangamite. His speech was not only tedious and repetitious but also somewhat misleading, and the fact that I cannot get those 20 minutes of my life back again is also slightly annoying. It is simply utterly outrageous for someone from the government to walk into this House and say with blatant effrontery, audacity and indeed temerity that the $42 billion to be spent on social infrastructure is coming out of ‘surpluses’. The figures show that, in December, this government was $14 billion in the red. The member for Corangamite stood here and spoke of the government’s record of surplus, but this government has delivered not a single surplus.

The 2007-08 budget, framed by the Howard-Costello government, delivered a surplus of $18 billion or $19 billion and it was a credit to the Howard-Costello years. The 2008-09 budget, which was framed with such fanfare by the Labor government to show a $22 billion surplus, was $14 billion in the red by December. Yet the member for Corangamite walks in here and talks about the government’s record of surpluses and the government’s $42 billion cash splash for social infrastructure that is coming out of the ‘surplus money’ that is just floating around in the government system. Clearly he was on planet Zorb when the government brought in a bill to borrow $200 billion, to increase the issuance of government bonds by $125 billion to allow $200 billion worth of debt. Clearly he was on the moon Zorbette, which goes around planet Zorb, when yesterday the government brought in Ruddbank to take contingent liability up to $28 billion. This government is putting this nation $228 billion in hock.

Let us compare that to the Howard-Costello years. We paid off $96 billion of debt. We paid off $56 billion of interest on that debt. That is $152 billion. We put $60 billion in the Future Fund. That is $215 billion.

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I raise a point of order. I would like to draw your attention to the fact that the honourable member has yet to address one element in this bill. I do think that, whilst you have been generous in allowing a wide-ranging discussion—

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

The Chief Government Whip will resume his seat. I have been listening very carefully. The member is talking about deficits and surpluses, which I am sure will lead into the bill very soon.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

With great respect to the Chief Government Whip, the member for Corangamite spent 15 minutes on nonsense and then had the hide to say, with five minutes to go, ‘Now I’ll direct my attention to the bill.’

The Howard government also left $20 billion in the bank—$232 billion was what the Howard-Costello years either paid off in debt or mounted up in surplus, compared to the $228 billion of debt that the Rudd government has put in. That is almost half a trillion dollars of daylight between our side of politics and the Labor Party’s. So for the member for Corangamite to walk in here and speak about surpluses is simply and patently ludicrous.

This bill—in deference to the Chief Government Whip—has three schedules. Schedule 1 provides for a 20 per cent reduction in PAYG instalment amounts for certain small business taxpayers and amends the law to allow PAYG instalment amounts to be determined by regulations. On the surface, that is a reasonable measure. Yet, if we look into it, it is a deferral of 20 per cent of what we knew previously as provisional tax and now know as instalment amounts. So the instalment amount is reduced by 20 per cent, but the tax payable on the income still needs to be paid at the end of the financial year. There is actually no permanent relief; it is a temporary relief. Whilst I acknowledge the government’s other measure for small business of increasing up to 30 per cent the ability to expense items of a capital nature, that is it for small business.

Small business employs 46.5 per cent of people in this nation. It is the powerhouse of this nation’s employment. And that is all the government is going to give us: a deferral of 20 per cent of PAYG instalments, which will be paid in full at tax time, and assistance with the expensing of items of a capital nature. Thirteen billion dollars gets splashed around to individuals, and I am sure they will appreciate it, but we know that 80 per cent of the December cash splash was saved. We know money from the US experiment in cash splashing, albeit through tax rebates, was saved. Of the $13 billion, 80 per cent will be saved. It will have no great input into consumption.

That $42 billion package, rather than being spent on Pink Batts, boom gates and social infrastructure, which only has a 30c return to the dollar on GDP, would have been better spent providing assistance to small business, which employs 46.5 per cent of people. It would have been better for this government to address payroll tax, that evil, insidious, job-destroying tax. It was brought in at two per cent in 1941 when child endowment was brought in during the war years, to help offset the cost of that child endowment—noble, one could imagine. In 1971, it was brought across to the states as a source of growth revenue for the states, and the states of course immediately increased it, to the point now where Queensland has the lowest rate at 4.5 per cent and the ACT the highest at something like 6.75 per cent. It is a job-destroying tax. It simply says, ‘I’m going to tax your payroll regardless of productivity.’ Economic pundits would say it is an efficient tax because efficiency relates to your ability to escape or evade a tax. It is efficient because you have nowhere to go. Yet different states have a range of regimes, albeit that some harmonisation legislation has come in. States tax payrolls of small to medium companies and large firms. They tax a company just because that company wants to employ Australians—outrageous, yet this government does nothing about it.

Moving on to schedule 2, it contains consequential amendments to temporary residents’ unclaimed money regime changes. Last year, the coalition supported the government as they required superannuation funds to pay unclaimed super money from temporary residents back to the ATO to reduce the amount of unclaimed super belonging to temporary residents that was sitting in super funds. This schedule makes rules governing unclaimed super for Australian residents consistent with the rules made for those temporary residents.

Schedule 3 amends the income test used for means-testing government transfer payments and concessions and aligns the income test for dependency tax offsets with the income test for family assistance payments. This is about saving almost half a billion dollars over the forward estimates. It was announced during the budget speech in May last year and contains a range of components. One of those components has to do with the Commonwealth seniors health card. We know that the government introduced legislation—it was debated yesterday—regard-ing the Commonwealth seniors health card, where 22,000 senior Australians, self-funded retirees who have worked hard and receive the benefit of that card, will have it stripped away because of the changes here by the Rudd government. The amendments in this bill will add total net investment losses to the income test for those Commonwealth seniors health cards.

Part 1 of schedule 3 has to do with total net investment losses. It simply adds a new definition to that term ‘total net investment loss’. Currently, only net rental property losses are considered with respect to total net investment losses when offsetting against government payments. This definition will now be widened to include losses arising from any financial investments at all: shares in a company, interest in a mortgage investment scheme, forestry managed schemes, any option or right—anything at all. Currently, if you have a net loss on property, that net loss is added back onto your income to determine your eligibility for certain payments. This government, of course, loves to means-test everything, because apparently, if you are earning over $100,000, you do not get access to family tax benefit A. Over $110,000, you do not get access to the childcare benefit. The ranges vary as we go. Now, to further make it difficult for Australians, to make it harder for working families, this government will expand the definition of total net investment loss to include losses not just from rental property but from every other financial investment. That is how this government will pull back half a billion dollars, by simply denying hardworking families access to government benefits by increasing means testing, somewhat on the sly.

Part 2 of this schedule requires employers to disclose the reportable employer superannuation contributions, or RESC, which are the amounts that people salary sacrifice into super over and above the standard amounts required by law or agreed to by agreement. These will have to be disclosed on behalf of an employee in the annual payment summary provided to the employee, in the part-year employment summary provided to the employee upon the employee’s request and in any annual withholding report that is provided to the ATO. At present, employers do not include the RESC amounts in the payment summaries provided to the ATO. Part 2 of this schedule will require employers to report the RESC in the same way that they currently report reportable fringe benefits. This is an extra reporting requirement, an extra burden, an extra compliance cost.

Before the election, the then Leader of the Opposition, now the Prime Minister, Mr Rudd, said, ‘For every new regulation, for every new compliance, I will take one away.’ Well, where is it, Mr Rudd? Where is the one you are taking away? You are adding a new compliance here. Where is the one you are taking away? Where is the regulation you are dispensing with? Every bill I see come before this House has new regulations, new compliance, new requirements for adherence imposed by big government. But I have not seen any taken away—none at all. Where is it? The Prime Minister pledged, yet I have seen his pledges broken so many times it is becoming somewhat laughable. He pledged that, for every one regulation, every one compliance, he would take one away. Well, we have one here. Where is the other side of the ledger? The silence is always deafening.

Part 3 of this schedule makes changes to some income tests to include the new definitions in part 1 of this schedule. For example, the new ‘total net investment loss’ definition will include not just the loss from rental property but also the loss from any other financial investments. That will be taken across pretty much every single benefit that is paid across every single piece of legislation. That is why, in 2009-10, the government is looking to save $164 million; in 2010-11, $192 million; and in 2011-12, $203 million—half a billion dollars taken away from hardworking families simply because they sought to invest. ‘How dare they invest!’ I say to the Labor government. ‘How dare they! Let’s take away some of their benefits. Let’s take away some of the money that is paid to them to assist in a whole range of areas, from child care through to raising children, through to making ends meet. Let’s take that away because they have the temerity to invest!’

The coalition will move to amend this bill in both houses to ensure equality in the treatment of employer contributed superannuation. We look forward to the government meeting in good faith for that amendment to occur.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. This bill provides for a 20 per cent reduction for the December 2008 pay-as-you-go tax instalment quarter for businesses. The bill also contains three other measures, relating to, firstly, superannuation; secondly, income test reforms relating to salary sacrifice, contributing investment losses and fringe benefits; and, thirdly, eligibility for government means-tested payments.

I want to focus my remarks on the aspect of this bill relating to the 20 per cent reduction in pay-as-you-go tax instalments. We have nearly two million small and medium sized businesses in Australia that will benefit from this measure. Some 7,700 of those businesses are located in the Makin electorate, which I represent. Until I was elected to this parliament I was one of those small business operators, and so I understand and empathise with business operators around Australia. I understand the long hours they work, the financial risks they take and the amount of red tape and government regulations, from all three levels of government, that they must comply with.

Having operated a small business throughout the term of the previous Howard coalition government, I also understand just how little that government did for small and medium sized businesses. In fact, I say quite truthfully that I cannot recall one single measure about which, when it was announced, I thought to myself as a small business operator: ‘This is good for me or good for small business.’ I cannot remember one.

I want to say this with respect to the coalition’s track record as well: I have heard a number of their speakers come into this place today and criticise the regulations and laws relating to the way small businesses have to operate and how we should be doing this and we should be doing that. What I say to members opposite is: if you have any criticisms of the current laws under which small businesses operate then just remember that those are the very laws that we inherited and which you did nothing about for 12 years. So do not come in here after this government has been in office for a year and point to all the woes with the laws relating to small business and say the laws should be fixed, because you had 12 years to do that.

Perhaps even more importantly, I say to them: we all know that we are currently going through some tough economic times. I would have thought that, when it comes to supporting small business and, in turn, jobs and the economy and the future of this country, these would have been bipartisan matters, matters on which we could have worked together, because ultimately I would like to think that we all have the best interests of the people of Australia and the future of this country at heart. But that does not seem to be the case. Coalition members opposite talk a lot about the importance of small and medium sized business to Australia’s economy and they claim to be the friends of small business; however, their rhetoric is not matched by their actions.

Conversely, the Rudd government does recognise and does value the important role small and medium sized businesses play in Australia. The Rudd government has already implemented a number of measures to assist them. I will come to some of those a bit later but this bill contains one such measure, and that is to reduce the February pay-as-you-go tax instalment by 20 per cent. That will provide small business with a much needed cash flow boost during what we all know are very difficult economic times.

Pay-as-you-go tax instalments are based on the previous year’s tax returns and are estimates of the tax that the business is likely to pay for the current year. When the annual returns are lodged, any overpayment will be refunded to the business by the Australian Taxation Office or, conversely, if additional taxes are owed by the business, the shortfall will be paid to the Australian Taxation Office. For many businesses, that adjustment usually occurs some time after the end of the financial year. Most small businesses and, I would imagine, medium sized businesses do not run to their accountant on 30 June each year and sort out their tax issues. Most of them, from my experience, do so some time after. In fact, as you would know, Mr Deputy Speaker, the laws allow an extension of time for tax returns to be lodged when they are lodged by accountants and on behalf of the business sector. So it is usually some months after that those adjustments are made. That means that, if there is an overpayment of tax due to the estimates used for the pay-as-you-go instalments, the business forgoes the use of those funds for several months, sometimes up to a year.

If the business operates on a bank overdraft, as many of those businesses also do, then additional costs are incurred in the form of bank fees and interest charges that are made on the bank overdraft. So if during the year you have made tax payments of several thousands of dollars in excess of what you are liable for when the final assessment is made and you have used your overdraft facility to fund those payments, then clearly you are paying additional costs through those interest rates that the bank will charge, and, as we all know, additional fees are attached to an overdraft. For the business, it means not only reduced cash flow but increased costs. Therefore, reducing pay-as-you-go tax provides businesses with extra cash flow and possibly lower bank charges—money that, in these difficult times, can be used in so many other ways.

I said earlier that, since being elected, the Rudd government has taken a number of measures to assist small and medium sized business in Australia. The most recent example of that was on 6 March when the Minister for Small Business, Independent Contractors and the Service Economy convened a roundtable with small business organisations and representatives of the banking sector to resolve issues relating to the access of credit for small business during these times of global credit squeeze. With the banking sector having difficulty accessing overseas funds or having to pay higher interest rates for those funds, credit to small business has tightened and higher interest rates and bank fees charged for that credit are placing, again, additional strain on small business operators. In fact, my understanding is that around 40 per cent of bank wholesale funds are sourced offshore and that figure has been rising significantly in recent debt issues. So, it is difficult to get credit for these businesses to operate. If they can get it, it is becoming more expensive. Anything we can do to improve their cash flow will be welcomed by them.

With respect to cash flow, I make this additional point: anyone in small business, and medium sized business for that matter, would know that one of the biggest impediments to surviving in business is to ensure that those who owe money pay on time. In difficult times it is more likely that a business’s cash receipts will take longer, again placing more financial strain on that business, and that is why it is important to try to reduce the monthly outlays for businesses that are already in existence.

I will come back to the business roundtable convened by the minister, because there were some very important outcomes that came from that which I want to talk about. At the roundtable, the banks undertook to seek to maintain the levels of funds available to the small business sector and continue to make loans to viable small businesses. That is self-explanatory: continue to make funds available to them and provide loans to those businesses that are viable. It is the only way they can continue to operate. The banks also undertook to pass on to small business customers, to the maximum extent possible while maintaining prudential standards, reductions in the costs of funds to them—again, to try to reduce their overheads. Thirdly, on a case-by-case basis and with regard to the customer’s cash flows, and with their agreement, the banks undertook to consider loan restructuring and other options so that the business can continue to trade. These are all sensible practical measures that were instigated by the minister as a result of convening the roundtable and as a result of his interest and support for small and medium sized businesses in Australia. This is a practical, decisive step taken by a minister who understands the industry and understands the importance of these measures to the industry.

What this government has done goes further than that. I want to speak about one specific area where I have had many years of personal experience, and that is with respect to business enterprise centres, which I have been associated with for several years. Many small business operators have skills in the delivery of the services or goods of the sector they enter into. However, they do not necessarily have the business administration skills associated with successfully managing the business and the plethora of government obligations placed on them. Many small business operators also often lack basic accounting and marketing skills, which ultimately causes them additional overheads in having to pay for professional help, such as legal advice, accountancy or marketing. From my experience, the majority of small businesses that failed did so not because their business venture was unsound, but more likely because their business management skills were lacking. In this regard, the business enterprise centres that have been established around Australia in recent years provide an invaluable range of services to the small businesses operators around Australia. The services they provide assist with business planning, business networking and business marketing—a whole range of services that each individual centre tailor-makes for their constituency wherever they are in Australia. I commend them for what they do. In fact, they do what they do because originally most of these centres were structured by business communities coming together to look for ways to help themselves.

The Rudd government, in its first budget, provided $42 million of funding to support the activities of the 36 business enterprise centres around Australia. It is the first time the federal government has done that. It was not done by the previous Howard coalition government. Members opposite talk about how they support small business. Where was their financial commitment to these centres? It was not there. But it certainly came with the election of the Rudd government, and it came to most of the business enterprise centres around Australia.

In my own electorate, the Tea Tree Gully Business Enterprise Centre has received funding of a million dollars over the next four years, as has the Salisbury Business and Export Centre, which, whilst it is located in the neighbouring electorate of Port Adelaide, also provides services to many of the small businesses located in the western parts of the Makin electorate. As I said a moment ago, these business advisory centres are not new. They have been around for a long time. But it took a Rudd government to come in, recognise their importance to the business sector and provide appropriate funding. It is another good example of the difference between what you say and what you do, because the Rudd government came in and did what it said it was going to do. The coalition members opposite talk a lot about being friends of small business but, in fact, they did very little.

The support for the business enterprise centres and the measures in this bill reducing the pay-as-you-go tax by 20 per cent for the December quarter are only two of the number of measures taken by this government. I want to talk about some of the other measures because they are important. Since it came into office, this government has implemented a far-reaching program of cutting red tape in the 27 areas of state and federal regulation affecting businesses. Red tape is one of the most difficult problems that most small businesses operating face. This is because many of them do not have the management skills.

I turn to the on-time payment guarantee. Small businesses certainly appreciate being paid up front or within a short period of time after they carry out their work. All small business contracts up to $1 million with Commonwealth departments will be paid within 30 days, or penalty interest may be charged by the small business. These are significant steps.

With regard to selling to governments, the introduction of greater consistency and simpler processes will make it cheaper and easier for small business to participate in tenders to sell goods and services to government agencies. These measures help small business.

With regard to relieving the skills shortage, we all know that for years that one of the biggest barriers to small business prospering and growing was their inability to attract suitably skilled staff members. This government has invested in 701,000 new training places over the next five years. Those new training places will skill up the employees that businesses around Australia need. We have also implemented a simpler superannuation system. Small business will be able to send all of their superannuation payments to a single clearing house that will distribute the money to their employees’ various super funds, free of charge, as of 1 July 2009. The last point I make in respect to those measures is the reduction in taxes. Tax relief of up to $50 a week was provided for small business owners from 1 July 2008, with a commitment to reform the business tax system.

These are all practical, serious measures that have been implemented by this government in the short space of one year. Contrast that with the support given by members opposite. We know that there may be more work to be done. Particularly at this time, when we know that the economy is going through a global financial crisis and we know that we need to do whatever we should do, and are able to do, to cushion the Australian community—and Australia’s small business—from the effects of the global financial crisis, the Rudd government is acting decisively and it is acting sensibly.

I want to talk about the last series of measures that this government has implemented in order to support and assist small business. Again, in doing so, I contrast the difference between this government and the previous coalition government. I refer to the $10.4 billion economic stimulus package that was announced by the Rudd government prior to Christmas and, subsequently, the $42 billion package that was announced recently. Within those packages—and certainly within the $42 billion package, which I will start with first—$14.7 billion was allocated to building the education revolution and assisting 9,540 schools around Australia with a series of school improvement measures. Every one of those measures, every one of those schools and every one of those particular projects involves small and medium business. Every one of those projects means jobs, work and contracts for people in the business sector.

Secondly, there is the $6.6 billion allocated to boost the national stock of community housing by 20,000 homes around Australia, which includes the additional defence housing. Who are the prime beneficiaries of that $6.6 billion? Somewhere in the allocation of those funds, business will get a direct stake in that outlay. To roll out that construction work, you would need to depend on small and medium sized businesses. There is the $3.9 billion for energy efficiency measures for the 2.7 million homes around Australia that will get free insulation. Who will carry out that work? Small business—and I have already been contacted by a number of small businesses who applaud the government for what it has done in that area alone, because they can already see the jobs that it will create. In fact, I quoted some figures in a speech in this place last week where some 4,000 additional jobs are going to be created through the rollout of that home insulation program. Small business is right in the middle of that, as is medium sized business. And there is the $2.7 billion which will provide small and general business tax breaks for businesses in the future with the additional 30 per cent rebate for any investments made.

If you want to support small business and if you want to support medium business in this country, particularly during these tough economic times, the best thing you can do is give them opportunities to have ongoing work. You could not do that any better than with the $42 billion package that this government has committed to. You could not do it any better than with the $10.4 billion package that the government committed to prior to Christmas. That package also included money for first home buyers where it increased the first home buyers grant from $7,000 to $14,000 and for new homes to $21,000. Again, who is going to build all those homes? It will be small and medium businesses which are able to benefit directly from that.

I come to the very last point in respect of those packages, and that is the money given to families, the direct payments made to families. When those families spend the money it will be small business, whether it is in the retail sector or elsewhere, that will benefit from it. (Time expired)

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I must compliment the member for Makin on his fine contribution to this debate. It shows that he has a great understanding of the issue and a great understanding of the global financial crisis and the impact that it has had and he understands how the measures being offered by the Rudd government will actually support and help small business.

This legislation, the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, gives effect to the government’s 2008 announcements to provide relief to small business by reducing their PAYG instalments for the February quarter. I would like to highlight just how important this is. This simple act of reducing the PAYG instalments makes it possible for some businesses to survive. It is recognition by this government that business is doing it hard and it is the role of government to provide support to business at times like this when we have this global financial crisis. The PAYG instalment system is designed to smooth taxpayers’ cash flow throughout the year and to avoid taxpayers accruing large tax liabilities on assessments which they may have difficulty paying as a lump sum. Taxpayers earn business or investment income and pay instalments during the year towards their final tax liability for the income year. Section 45-400 of schedule 1 to the Taxation Administration Act 1993 stipulates the way the Commissioner for Taxation works out the amount of the PAYG quarterly instalments on the basis of GDP adjusted notional tax. Broadly, the GDP adjusted notional tax is worked out by uplifting the taxpayer’s income in the previous year by the year’s rate of nominal GDP growth. The GDP uplift factor can be unrepresentative of expected profit growth in the income year where economic conditions change quickly. That brings us to the situation we are in at the moment where conditions have changed. There is a recognition by the government that there has been this change and there is a need for government to step in and support business, and that this change can cause taxpayers to pay PAYG instalments that are too high compared with their actual income. I think it is vitally important that this recognition has come through. I congratulate the minister on acting so quickly to make this change. It also applies where overpaid tax is refundable to people at the end of the year when their final tax liability is assessed.

As I have already mentioned, this measure is a further example of decisive action taken by the Rudd government to assist small business to weather the global financial crisis. I will go into this measure a little and then I will talk more broadly about the impact of the global financial crisis on small business. Small businesses with a turnover of less than $2 million a year will be able to claim a bonus deduction of 30 per cent. This is one of the initiatives that the Rudd government has put in place over and above this legislation to address the needs of small business. They will be able to claim a bonus deduction of 30 per cent for eligible assets costing $1,000 or more where these eligible assets are acquired or start to be held under an eligible contract between 13 December 2008 and the end of June 2009 or are started to be constructed between these times and are installed ready for use by the end of June 2010. Small business will be able to claim a bonus deduction of 10 per cent for eligible assets costing $1,000 or more that they acquire or start to hold under a contract between 1 July 2009 and the end of December 2009 or start to construct between these times and have installed ready to use by the end of December 2010. A minimum expenditure threshold of $10,000 will still apply to other businesses.

The eligible assets the tax bonuses will apply to are tangible assets used in carrying on a business for which a deduction is available under the core provision of division 40, capital allowance, of the Income Tax Assessment Act 1997. Specifically, deduction will be available for appreciating assets under section 40-30 that qualify for allowance under subdivision 40B except for intangibles and the rights that would otherwise be included by subsections 40-32 (5) and (6). However, cars will be disqualified from the allowance merely because they use the 12 per cent method. This may sound technical but I think it is a very workable approach. Land and trade stocks are excluded from the definition of depreciating assets and will not qualify for the deduction.

Expenditure above the threshold which is capitalised into an existing asset as a second element of the cost will also qualify for the deduction. To claim the bonus the deduction will be available to the taxpayer who is entitled to the capital tax allowance deduction under division 40 of the Income Tax Assessment Act 1997 in respect of the assets. The deduction is on top of the usual capital allowance deduction claimed for the asset as part of the taxpayer’s income tax return. The deduction will be available to be claimed based on the application rate of 10 per cent and the asset’s first and/or second elements of the cost in terms of subdivision 40-C. The deduction is claimable in the income tax year in which the asset is installed ready for use. Treasury will be releasing draft legislation for public consultation soon. That is one very distinct measure that is being put in place for small business, and we have previously discussed another.

When we are looking at small business and the impact of the global financial crisis it is very obvious that the Rudd government has actually acted very quickly to address the fact that small business will be suffering because of the global financial crisis. Members on the other side of this House quote daily the number of people who are becoming unemployed, and it seems that that is something that causes them great delight. They put forward the premise that Australia is the only country that is affected by this global financial crisis when in fact the measures that have been introduced by the Rudd government have been replicated throughout the world, and the measures the Rudd government has introduced have been models for countries elsewhere. Even President Obama of the United States actually referred to the stimulus package that has been put in place. The stimulus package has not just been put in place in isolation; it has been put in place to protect Australian jobs. The members on the other side of this parliament have shown time and time again that the only interest they have in increasing unemployment is to gloat rather than to—

Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order. The member is reflecting on members on this side of the House and imposing motives that are simply untrue. I would ask her to withdraw.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

I am listening carefully to what the honourable member is saying, and I would ask her to carefully observe the standing orders because it is certainly disorderly to reflect on any member of this chamber.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I can assure you, Mr Deputy Speaker, that I was not reflecting on any individual member of his chamber—rather I was reflecting upon the fact that I feel the opposition’s approach to the rising unemployment rate leaves a lot to be desired, and I think that the Australian community and the Australian economy would benefit—

Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise again on a point of order. The member implied, and in fact said directly, that the members of the opposition took glee in rising unemployment—which is not the case. That is impugning a motive. It is a very unhelpful slur in this debate. I would ask that she withdraw it.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

There is no point of order. Again I remind the honourable member for Shortland that she ought to be extremely careful not to reflect on members of the opposition or, for that matter, members of the government.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

Returning to the context of my speech, I would have to say that I feel the Australian parliament and the Australian people would be much better served if the opposition were to actually offer some positive solutions to unemployment rather than focusing on their own employment within this parliament.

I think one of the main aspects of the last stimulus package, and a very important aspect of the last stimulus package that will benefit small business, is the Building the Education Revolution component of that package. Not only does that package benefit each and every school within this great nation of ours but it also benefits small business. Every school will become a mini construction zone. It will provide employment for a countless number of tradespeople and trades assistants. It is a recognition that for jobs to be created you need to stimulate the economy.

With the stimulus package at the end of last year, Australia’s retail figures held up where comparable countries actually experienced a severe and serious decline in their retail sales. Also included in the latest stimulus package is the commitment that will see Australians being able to access insulation for their homes. That will create work for small business—businesses manufacturing insulation as well as businesses manufacturing solar hot water systems, which is another component of the stimulus package. It will also create employment for people installing those items.

As the member for Makin said, the assistance that is available for families within this package will, once again, transfer to and benefit small business. The Rudd government has shown how governments can support small business. It is acting decisively and showing that it has real concern for Australian’s jobs. It is focusing on getting Australia through this financial crisis; it is not focusing on maintaining its members’ own jobs within this parliament. The Rudd government is focused on the big picture. It is focused on Australia and the future, while the opposition is focused on its own internal problems.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

In 2008 the Rudd government announced that it would take action to protect small business from the effects of the global economic crisis and provide relief to small businesses by reducing their pay-as-you-go instalments for the February quarter. The Tax Laws Amendment (2009 Measures No. 1) Bill 2009 gives effect to that announcement, amending the Taxation Administration Act to guide the Commissioner of Taxation in working out the pay-as-you-go instalments on the basis of a GDP adjusted notional tax for taxpayers who pay in quarterly instalments. The government wants to protect small business. We know that it is at the heart of the economy. Certainly it is at the heart of economic activity in my electorate of Wakefield.

This bill is just part of the government’s overall response to the global economic crisis. Our response is aimed at boosting the economy and, in particular, keeping demand ticking over for small business. Let us look at what the government has done. We have secured banking deposits through a guarantee. We have provided an economic stimulus package which provided payments to all pensioners—not just age pensioners but disability pensioners as well. We have introduced the Nation Building and Jobs Plan, with the first home buyers boost, the $950 hardship bonus for 21,000 drought affected farmers and the largest school modernisation program in this country’s history. All of these measures build and strengthen the economy and boost jobs in small business and trades, which are two vital sectors in the northern suburbs of Adelaide and in the country towns to their north.

There is a fair bit of evidence that small business is benefiting from these measures. Only yesterday the front page of the Adelaide Advertiser, under the headline ‘Families splash Rudd’s cash’, reported:

… retailers are reporting a surge in sales, only days after millions of families began receiving … payments.

Some rural outlets recorded a 100 per cent sales boost last Thursday …

Places like Elizabeth in my electorate recorded strong demand in their retail sectors. I commend Steve Lewis for such a good article on the front page of Adelaide’s Advertisera positive story about the economy. So there are plenty of examples of how families are spending and retailers are benefiting. Big W revealed that its national sales were one-third higher last Thursday than the same time last year. In the same week, Coles reported record sales of TVs and DVD players, and we know that Woolies intends to put on 7,000 new workers.

This bill is part of the government’s response to the global financial crisis. It is part of our way of insulating Australia and its small businesses from the global financial crisis. The bill provides for a 20 per cent reduction of the amount of the pay-as-you-go instalments for the quarter that includes 31 December 2008 for certain small business taxpayers. It also incorporates a regulation that allows that instalment rate to be reduced in the future, to take into account future circumstances. These measures will provide relief for hundreds of small businesses in my electorate, particularly around the area of Gawler, which is a hub of small business. There are many small business owners and a real entrepreneurial spirit in that town. It is a great town to live and work in. I lived on Tod Street in Gawler many moons ago. This measure, along with the economic stimulus investment, makes sure that small business can weather the economic downturn around the world in which 30 banks have either collapsed or been nationalised and in which many of our economic trading partners have gone into recession or have recorded one quarter of negative growth.

The current pay-as-you-go instalment system works well when the economy is operating in normal circumstances. It means that taxpayers do not accrue large lump sum tax debts annually. Obviously, the global economic situation over the last 12 months means that business is far from normal. This bill provides temporary relief from the taxation regime, which assumes a general rate of business income, adjusted upwards for GDP growth. That GDP uplift can, in a time of uncertainty, either overestimate or inaccurately represent the real expected profit growth of small businesses. In other words, they end up paying tax on expected profits which never materialise. This bill resolves that issue, which is a very important thing to do. It provides immediate and much needed cash flow relief to small businesses. It encourages confidence in the sector at a time when it is most needed. It makes the system far more flexible and far fairer. As I said before, this bill allows for regulations to make future adjustments much easier, building flexibility into the law. Small businesses are important to the country and schedule 1 of this bill certainly assists them.

Schedule 2 of the bill addresses the issue of unclaimed superannuation and makes the general unclaimed superannuation money regime more consistent with the temporary resident unclaimed superannuation money regime. It aligns those two things and, as I said in a previous speech in this place about temporary residents and superannuation, superannuation is the mechanism to deliver one of the great objectives of social democracy—that is, a dignified retirement for all Australians. Poverty amongst the elderly is a tragedy—it is one of the reasons we acted to give pensioners a bonus in last year’s package and initiated a comprehensive review of the pension scheme. These are critically important things for Australia’s pensioners and elderly citizens.

This bill supports the legislation passed last year which provides for better and more consistent treatment of temporary residents who work in this country. It is better for temporary residents and it is better for Australian taxpayers. These are simple, fair changes, and the bill before us amends various parts of other acts, including the income tax legislation, small superannuation accounts legislation and the super guarantee and co-contributions legislation in order bring our super acts into line. It allows the Australian Taxation Office to pay the superannuation guarantee amounts recovered from employers for temporary residents directly to the unclaimed money regime rather than to a super fund, which would then be required to return the amounts to the unclaimed money fund in any event. These amendments to the broader unclaimed money regime are intended to make the existing unclaimed superannuation provisions more compatible with the provisions inserted to support the payment of temporary residents’ unclaimed superannuation to the Australian government. In essence, they make things simpler and fairer. Basically, the legislation will negate the need for two very different unclaimed money regimes.

On this side of the House we believe that Australians have a right to live in retirement with independence, financial security and dignity. That is why we believe so strongly in superannuation, both as a mechanism to ensure a dignified retirement and to boost national savings—and national savings will be the key to future prosperity. We on this side of the parliament are the party of national savings. Unfortunately, that commitment is not always shared by those opposite. As the Prime Minister noted in his essay, the record of the previous government is not that good. He said:

The average ratio of household debt to annual gross disposable income more than doubled to 114.5%, up from 49.8% under the Hawke-Keating governments; household net savings to net disposable income fell to an average of 1.1%, down from an average of 7.9% under the Hawke-Keating governments; and the level of Australia's net foreign debt increased to 55.5% of GDP, up from 37.9% of GDP under the Hawke-Keating governments.

That was a comparison between the Howard government’s record on private savings and the record of the Hawke and Keating governments.

The Liberal Party’s solution to our current problems is to call on the government to pay small business superannuation obligations. Of course, they have not costed this policy. We have, and it would cost a staggering $43 billion over four years. That is more than the cost of the government’s nation-building plan, and all it really would do is add to profitability—it would just be a transfer of government revenue to company profitability. On the one hand they complain about debt in this place, and then on the other they run these mad, uncosted ideas designed to wreck both Australia’s budget position and our record on national savings up the flagpole. Most recently, John Howard, the former Prime Minister, proposed a payroll tax holiday for businesses which would have the effect of adding $16 billion to the deficit. Of course, Mr Howard had 10 years to eliminate payroll tax and did not act on that. Members opposite might remember that in 1993 the Fightback package proposed to eliminate payroll tax and pay for it with a 15 per cent GST. I think that probably Mr Howard is urging those opposite to get rid of payroll tax and jack up GST. That has always been their intention in the longer term. The measures outlined in this bill are responsible, they provide flexibility for small business and they are part of boosting our response to the global financial crisis. I commend them to the House.

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. This bill amends the taxation laws in three principal ways to give effect to a number of policy decisions and budget measures. Seminally, it gives effect to the impact on small business of the global financial crisis and global recession. We know that small business is the backbone of a large part of our economy. In my electorate of Page there are over 10,000 known small businesses—that is, registered ones, so we can imagine how many more small businesses there would be if that many are registered. That certainly forms the backbone of our local regional economy. The small business measure in the bill is particularly important to give some relief to small business in these times. We know that one of the biggest complaints and common refrains from small business is about compliance—not the fact of it, because we all know that we have to have compliance, but the burden of it. This government has recognised that and is making changes already to lessen the compliance burden on small businesses, as well as other changes.

The Minister for Small Business, Independent Contractors and the Service Economy convened a round table discussion with the banks on 6 March to talk directly with them about access to credit for small businesses. Small businesses in my area as well had come to me and talked about a tightening of their access to credit. We found that there had not been a tightening per se; there had actually been an increase in credit going to small business. But we found in some of the regions—like in my seat of Page—that it had not been going there. There seemed to be nervousness on the part of the banks about extending credit to the small businesses. That is one of the things that has been corrected by the minister. The minister also, sensibly, set up his office as a clearing house so that complaints or issues arising could go directly through his area. As a result, there has been relief for small business in quite a few areas.

I will now turn directly to the three amendments, marked as schedules 1, 2 and 3, in this bill. I will address them seriatum, setting out their practical and legislative effect and noting some points about the importance of those three. Schedule 1 gives effect to the government’s December 2008 announcement to provide relief to small businesses by reducing their PAYG instalments for the February quarter. The bill amends the Taxation Administration Act 1953, which sets out how the Commissioner of Taxation works out the amount of pay-as-you-go—PAYG—instalments on the basis of the GDP adjusted notional tax for taxpayers who pay quarterly instalments. The amendments will provide for a 20 per cent reduction of the amount of the PAYG instalment worked out under section 45-400 for the quarter that includes 31 December 2008 for certain small business taxpayers. There is also a regulation-making power to allow the amount of the PAYG instalment, worked out under the respective section that I have just cited, to be reduced in the future in circumstances specified by the regulations.

The announced 20 per cent PAYG instalment reduction measure for small businesses broadly represents a reduction in average instalments necessary in a single quarter to reflect the expected slowing in small business profit growth for the 2008-09 income year. It is a further example of the decisive action taken by the government to assist small businesses to weather the global financial crisis, and we know that we cannot stop some of the impacts of the global financial crisis—as the Prime Minister says, it is like a global cyclone—but we can batten down the hatches, be prepared and give some protection against the impact that it will have. The 20 per cent cut in the February instalment will provide immediate and much needed cash flow for small businesses and that is a priority. It is a priority at all times and it is even more of a priority in the times that we are facing. The measure will offer relief to around 1.3 million small businesses with aggregated turnovers of $2 million per annum or less. That is a significant number of small business operators who contribute a significant amount to our economy.

Schedule 2 makes the general unclaimed superannuation money regime more consistent with the temporary resident unclaimed superannuation money regime and other consequential amendments as a result of the payment of temporary residents’ superannuation to the Australian government. The government made amendments to the unclaimed superannuation legislation last year in order to reduce the number of lost accounts and unclaimed money in the superannuation system, a situation which arises when temporary residents depart Australia without taking their superannuation. Some people might say, ‘So what?’ But it is a big problem and it is a problem that has gone unchecked for a long time. It is an issue that needed to have some action taken around it so that it could be brought into the framework of superannuation.

The bill will also amend various acts to support the temporary resident unclaimed superannuation regime, including the income tax legislation, small superannuation accounts legislation, superannuation guarantee legislation and co-contribution legislation. It also makes changes to the broader unclaimed money regime, and it will be more compatible with the temporary resident unclaimed superannuation. The changes will also avoid the need for superannuation providers to maintain two very different unclaimed money regimes and facilitate the administration of the general unclaimed superannuation money regime. That is an important point because we are talking about administration and the compliance. As I said earlier in my speech, one of the issues that small businesses are always seized with is the burden of compliance, and anything that can be streamlined is a welcome change.

Schedule 3 gives effect to reforms to income tests announced in the 2008-09 budget. With effect from 1 July 2009 the reforms amend relevant income tests in the tax and transfer system to include certain salary sacrifice contributions to superannuation, to be known as reportable superannuation contributions, net financial investment losses and adjusted or non-gross fringe benefits. This bill, in the area of schedule 3, gives effect to four budget measures which I will turn to later. The measures enhance the fairness and integrity of the tax system by removing inconsistencies in the treatment of non-wage remuneration and will provide certain savings with the budget measures over the four years.

Under schedule 1, which is the PAYG instalment reduction for small business, the announced 20 per cent PAYG instalment reduction measure broadly represents the reduction in average instalments necessary in a single quarter to reflect the expected slowing in small business profit growth for the 2008-09 income year. It will provide immediate and much needed cash flow relief to small businesses and encourage small business confidence. That is important because, in times when we are facing global financial crisis and global recession, business confidence obviously suffers. We, as government and as members of parliament, have to do everything we can to ensure that that business confidence stays up, even facing the situation that we do, but at the same time we have to speak very frankly with Australians and small businesses about the situation that they are facing. This measure can add to that small business confidence by encouraging it, and indeed it will.

The regulation-making power will build more flexibility into the law to allow the instalments calculated on the basis of GDP adjusted notional tax to be reduced in the future—and that is important—and, in circumstances that will be specified by the regulations, to more accurately reflect changing economic circumstances. Small business taxpayers who will be eligible for the reduction are small business entities, a partner in a partnership that is a small business entity or a beneficiary of a trust that is a small business entity for either the 2007-08 income year or the 2008-09 income year. Broadly, an entity is a small business entity for an income year if it is carrying on a business for the income year and its aggregated turnover is less than $2 million for the previous income year or is likely to be less than $2 million in the current income year.

On schedule 2, with unclaimed superannuation money, one of the key points is that the amendments will contribute to the co-contribution legislation but will also, importantly, make sure that there will not be any need for the businesses to maintain those two very different unclaimed money regimes. So, apart from the other changes they introduce, that one is really important given the nature of small business. With those comments, I commend the bill to the House.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

The Rudd government understands that you do not just create business success. The government understands that the policy settings play a crucial role in helping business, particularly small business, to achieve its potential. That is why the Rudd government is committed to implementing the policies that provide practical support for small businesses and, in particular, independent contractors. The measures in the Tax Laws Amendment (2009 Measures No. 1) Bill 2009 are a further example of the decisive action taken by this government to assist small businesses to weather this global economic crisis. We have, as part of our $42 billion Nation Building and Jobs Plan, a plan for these tough economic times that aims to strike the right balance between supporting growth and jobs now and delivering much needed investment in strengthening the economy for the long term. In that, we are providing an extra $2.7 billion of temporary tax breaks for small businesses and other businesses to boost their investments and to assist them with their planning.

It should be noted that this very responsible nation-building plan was not supported by the opposition, which is a bit strange considering that I have heard the opposition claim for many years now that they are the friends of small business. Yet this position that was adopted by Labor, a $2.7 billion provision to assist small business, was opposed at a time when, quite frankly, small business needed all the encouragement they could get. After listening to those opposite speaking on this bill earlier, I find it clear, quite frankly, how out of touch they have become.

By the way, that does not stop just with small business. You start to see this pattern emerge. Only yesterday, the opposition drafted an amendment committing them to supporting amendments to rip away the redundancy pay of hardworking Australian employees. This is at a time when we are, regrettably, faced with the reality of redundancies, and I certainly see signs of that in my own electorate. That is nothing to be proud of, but it is something that we need to be understanding about. I think the last thing people want to see is their elected members of parliament coming and doing something so extreme as to take away those protections that they rely upon and should be able to. It was not this side of the House that decided to ignore the health experts, the AMA, the police and parents concerning the alcopops measures. This is, again, not an issue of political gamesmanship; these are very serious things when you think about the consequences not only for my kids and your kids but for everyone else that we represent throughout our constituencies who could possibly be affected by these measures.

These are things which are now becoming a little symbolic of the opposition. I submit that, in a place like this, you cannot be in opposition simply for the sake of opposition. Certainly, the Rudd government was elected, and elected quite significantly, with a very clear mandate for reform. But to be opposed at every step of the way on fundamental issues not only stands us apart in terms of domestic politics but also stands the opposition apart from every credible—and, indeed, conservative-led—country in the free world at the moment. I say that with particular respect to the economic stimulus package.

We know that small business is the backbone of our economy. It is the economic powerhouse. Therefore, we are committed to working with small business and to helping them to remain viable—particularly during the challenges that are now being thrown up by the global financial crisis. As I indicated earlier, the Nation Building and Jobs Plan has specific benefits for small business people, many of whom, obviously, are in my electorate and every other electorate. Those who have a turnover of $2 million or less will be able to claim a reduction of 30 per cent on their eligible assets, which are those that cost $100,000 or more. Assets must have been acquired between 13 December 2008 and 30 June 2009, or construction on them must have been started between these times, with installation occurring before 30 June 2010. For assets acquired between 1 July 2009 and 30 December 2009, and where they are installed and ready for use before 31 December 2010, there will be a deduction available to the small business people concerned of 10 per cent of the asset costs. They are very real, and they are very much appreciated out there among the small business people that I—and, no doubt, others—talk to. It is easy for people to talk about small business being the backbone of the economy but, too often, these are nothing more than hollow statements. You have got to be prepared to follow these up with tangible benefits to show that we are actually backing small business, which is the lifeblood of this nation.

As a former adviser to a number of businesses from a range of different areas, I know the importance of helping business and of helping the development of small businesses—which go through those fledgling stages—into mature organisations. I also know about the importance of the part they play not only in our local economies but also in our state and national economies. Small business and independent contractors create much of the prosperity that we currently enjoy. Three-quarters of a million small businesses employ nearly four million people, while there are another 1.2 million businesses in the country that are still small businesses but do not employ anybody. So you are talking about three-quarters of a million small businesses employing up to four million people. That is quite a significant number. It does take a lot of commitment to commence in a small business in the first place—apart from everything else, to endure the financial risk, which is something that is not taken lightly. People do actually go some way to ensuring that they safeguard their decisions in that respect, but the reality is that the various industries in which small businesses operate are highly competitive, and therefore efficient, areas.

I, for one—and I hope this goes for every member of this House, quite frankly—am committed to working with small businesses in my electorate. No doubt each and every other member has the same view, which they apply in their electorates. Let us face it: when you cut through this, we know that locking in prosperity really comes from the security and the ability of small businesses to be able to grow and flourish. I know that my region has the capacity—and deserves the opportunity—to lock in its share of Australia’s prosperity. My electorate deserves to be able to share in that now and into the longer term because it is contributing to the building of greater prosperity measures.

Local companies in Werriwa are good enough to compete on the world stage and, by the way, many already do compete successfully. I would just like to single out one: Broens Engineering. I happen to know this company quite well. Carlos Broens, who operates the company—which now employs in the vicinity of 350 people—when I first met him, was, along with his brother, a toolmaker. Our kids went to school together. Carlos came from South America, established his business here and found a niche in advanced engineering. He is not tertiary educated, though he is a very good toolmaker. He brought his skills to bear in such a way that his organisation now has, apart from everything else, contracts with Mercedes-Benz and, I think, BMW—although I am not quite sure about that. His business certainly exports to China—out of Ingleburn, I might add. In addition to all that, he has been preselected for the manufacturing of the wing roots on the Joint Strike Fighter, if that contract goes ahead. Here is this little company, started by two people down in the backblocks of Ingleburn, now absolutely out there competing on the world stage. Last year alone, I think Carlos took on 34 apprentices. For an outer metropolitan area of Sydney, that is a very significant commitment to staff development and training from a person who knows the value of working with TAFE colleges. As a matter of fact, he has actually set up, on his site, a more localised element—if you like—of a TAFE campus, as he engages with TAFE New South Wales to deliver training to his employees in Ingleburn.

Local companies are to be encouraged because they, like Carlos Broens’ organisation, will deliver results. Our policy settings have to help small business to achieve. It is not about going out there and picking winners—looking at what the economic climate is going to be like and picking which company is likely to succeed in that climate. We need to make sure that there is proper competition within industries. We want effective and efficient industries emerging. We need to back our small businesses and let them rely on their ingenuity, their skills and their flexibility to be able to deliver results.

Mr Deputy Speaker Scott, I have spoken to you on many occasions about my electorate of Werriwa and, in particular, the business community there. In my electorate I have 4,000 small businesses which are actually employing people. There are 6,000 businesses which are predominantly independent contractors—owner-drivers, consultants et cetera—that do not employ anybody. In terms of the small business component, we are talking about 10,000 people within my electorate who would qualify at this stage. So about 60 per cent of my business community fall within this category. Just to provide some perspective: 94 per cent of all my local businesses have a turnover of less than $2 million. That shows you what end of the market they are at. A lot, as I indicated, are consultants—many working from homes these days with the advent of mobile phones and computers—independent contractors, owner-drivers et cetera. They are driving their local business, but we need to assist them, and we did that through our announcement the other day of our Nation Building and Jobs Plan. Small business will directly benefit from that $2.7 billion. Every single one of the small businesses in my electorate is hardworking. They have to be to achieve commercial success. The government believes that they should be rewarded for their effort, their risk taking and their entrepreneurial endeavour so that they can continue to thrive and, importantly, create local jobs.

Only recently, I was very happy to see that a contract had been awarded to widen the Hume Highway between Ingleburn and Campbelltown. This section of the highway is about 16 kilometres. It is a total spend of $140 million. I was particularly keen to see that a local company, based at Prestons within my electorate, won that contract. I was pleased not just because George Kypreos is a very good fellow with a very good engineering team that has runs on the board for engineering and highway work but also because, as it was a local company that won the whole contract, there is a very real chance that other local contractors and other locals will be employed on this project to widen the highway—which could possibly be a three-year engineering task. That is good for the local economy. The people who will work on that project will probably buy their goods at the local shops and, if their partners work, they will be accessing local childcare providers. This is good for the whole economy. So the fact that a local company won the contract was absolutely fabulous. This local company—started by George and one or two others many, many years back—competed against people nationally to win that $140 million project. To successfully win a contract like that shows that it can compete on a national scale. We sell ourselves short if we do not value small businesses, because those small businesses can develop into what George Kypreos has done with Nace Engineering.

During the election campaign I was very pleased to be able to announce, with the now Minister for Small Business, Independent Contractors and the Service Economy, Dr Craig Emerson, that the Macarthur Business Enterprise Centre would receive $1.4 million over a four-year period—$350,000 a year—in ongoing funding to provide a one-stop shop for small businesses in the Macarthur-Liverpool region. I am pleased to report that this commitment has been fulfilled and the Macarthur BEC is now receiving that funding. The small business community in Campbelltown had been vocal in their call for a one-stop shop approach to business advice—including advice on setting up a business and regulations and legal advice. This one-stop shop in Macarthur—an outer metropolitan area of Sydney—will provide advice to people who want to start or to develop their small businesses.

Bruce Hanrahan, a good friend and long-time resident of the area, is the chairman of the BEC—and the chair of many local charities, too, I might add—and he does a sterling job of building up business confidence in our region. When I discussed the use of the grant with the vice-chairman, Tim Bryant, he said that he was very keen to have the opportunity to invest in small businesses within the whole region—not focusing simply on Campbelltown. His view was that the funding would allow the BEC to deliver key business services to local small businesses, including providing small businesses with the opportunity to learn more about doing business and to seek specific advice that is relevant to their business and the future of their business. The funding provided to the BEC will enable the BEC to strengthen and expand their capacity to help small business debutantes in their existing operations, including, as I indicated, in the Liverpool region.

Liverpool, as you are aware, Mr Deputy Speaker Scott, operates very clearly as another area of Sydney. I am very honoured to represent not only the people of Campbelltown but also the people of Liverpool. Harry Hunt, President of the Liverpool Chamber of Commerce and Industry, indicated that he was thrilled about the funding opportunity for the BEC. He said that for the first time the Macarthur BEC will now be able to promote and help expand small business in the Liverpool region by providing invaluable business information such as legal, tax, accounting and marketing advice to those who ask for it. That comes from a very successful business entity within the Liverpool region. He sees the role of his organisation, the Liverpool Chamber of Commerce and Industry, as being similar to that of the Macarthur BEC: to help develop businesses. When we develop businesses we create jobs. I am currently working with Mr David Waudby, the CEO of the Macarthur BEC, and his team— (Time expired)

Kerry Rea (Bonner, Australian Labor Party) Share this | Link to this | Hansard source

I too rise in support of the legislation before us today, the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, and I do so because I have a very strong view that this nation and this government should be supporting small business in any way that they can. Small business is basically the lifeblood of this country. In every electorate across the country, we have small businesses that are the mainstay of our local communities—whether they are the petrol station, the fish and chip shop, the newsagent or the tradesmen who out there doing business, renovating and doing important building jobs. No matter what sector of the community we look at—as both individuals and citizens concerned about our local economies—it is small business that holds together the very fabric of our local communities and our national community. That is why I am very pleased that the government has decided to bring in this legislation to introduce a 20 per cent reduction in the PAYG tax instalments for the December quarter of this year. Not only is small business the most important sector of our economy, creating jobs and keeping cash flow moving throughout the nation; it is also the key indicator of when the global financial crisis is really hitting hard. If small business starts to be seriously affected by this financial crisis, it will really bring home to our local communities just how vulnerable we can be at times like these.

There is no doubt that we are in a global financial crisis. There is no doubt that we are facing an economic cyclone that we have not seen since the Great Depression. Whilst we use these grand terms, whilst we talk about the situation, whilst we all keenly watch the financial reports on television, whilst we look in the newspapers at how the share market works and whilst we may have many concerned discussions in corridors and over coffee tables about the collapse of Lehman Brothers or about Freddie Mac and Fannie Mae, for the people of my electorate of Bonner, it is when the local takeaway stops delivery services because their customer numbers are down that it really starts to hurt. It is when the local newsagent puts off the high school students it employs on a casual basis on Saturday mornings that people really start to take notice of what is happening. It is when the video shop is not employing as many young people—those university students who rely on part-time jobs to basically feed themselves each week—that it really comes to the crunch and people start to realise the significant impact of this financial crisis. What does that mean? It means that the government has to do something to support small businesses and to keep the economy moving through stimulus. It is important that we create a level of flexibility in this current financial year. It is important that we allow small businesses to have an even greater cash flow in order to keep their heads above water.

It is also significant in terms of these amendments to acknowledge the extraordinary times that we are in. Whilst PAYG instalments are determined by the tax commissioner and basically are a reflection of what a small business is expected to pay in tax over a full year, based on their income, I think we would all agree in this chamber that on 1 July last year nobody in this chamber, or indeed out there in our local communities, would have expected this level of fluctuation in our economic situation to occur in just a few short months. I think it is quite practical to accept that none of us can really predict what the actual income of many of our small businesses will be up until the end of this financial year. Introducing a bill that enables small businesses to take a 20 per cent reduction over the December quarter will give them the cash flow that they will need to keep their heads above water over the next few months and, therefore, will have an ongoing effect in terms of support for the local economy right throughout our communities.

I cannot stress enough how important small business is and I cannot stress enough how important measures like these are for our local small businesses. It is quite telling when you look at the figures for small businesses across the country. In my electorate of Bonner alone roughly 30 per cent of businesses employ fewer than five people. That is significant. Almost half the businesses employ fewer than 20 people. If we do not continue to support small business to create stimulus in our economy, we are facing not just a cyclone but an economic tsunami. It really comes down to supporting those families out there who are struggling.

As we know, small business people are from ordinary families who are just trying to keep their heads above water. They are not the people who are cashed up, they are not necessarily sitting on massive assets and they are not in the financial position that most of us are in to be able to tide ourselves over at a time like this. They live from week to week and from month to month, so any form of financial support that allows them to keep their cash flow moving is quite significant in keeping those businesses alive. I know this from talking to many small business owners in my electorate, like Irene, the Ukrainian woman who runs what I think is the best deli in Wynnum and provides the best sauerkraut, German sausages and smoked meats I have ever eaten—

Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Come to the Yarra Valley.

Kerry Rea (Bonner, Australian Labor Party) Share this | Link to this | Hansard source

It would have to be good! She will certainly appreciate this support for her business. I know that it will also make a big difference to Don, who has run a very small business for many years—Win Trophies at Upper Mount Gravatt. He has always been very supportive whenever I have had a request for a trophy for a school or a badge for some particular occasion. We could all talk endlessly about the small businesses that will be supported.

I also want to emphasise how important it is to support small businesses because of the impact that they have on our broader economy. It is so important that we support the economic stimulus packages that have already been released by the government. In Bonner alone, more than 7,000 people are employed in the retail industry, not just in the big supermarkets but in the local dress shop, the local fruit and veg shop, the local video shop, the fish and chip shop and the coffee shops that we have throughout Mount Gravatt, Wishart, Carindale and Belmont. Those small businesses keep community life going but also provide essential employment for local people—particularly our young people and people who depend on casual employment. Through the economic stimulus strategy and the Nation Building and Jobs Plan, it is absolutely essential that we go out there and provide for spending in the community which goes into the small businesses, like the local hardware shops.

At the same time, we have to accept that small businesses are always struggling with paperwork and administration. Obviously, maintaining their tax payments and keeping their costs moving are very important parts of keeping their heads above water. So the support provided through the 20 per cent PAYG instalment reduction in this bill is just as important as the spending package, because it means that when the good times do come again—and I am sure that they will—those local businesses, many of them family businesses, will still have their heads above water, having survived the tide, because they actually had a government that cared enough to say, ‘We will give you the flexibility, we will support your cash flow and we will give you the support you need through the hard times because we want you to be there for our local communities and our national economy when the tide turns and we are all facing more prosperous times.’

I certainly applaud the first schedule in this bill. The other two schedules are also very significant, with superannuation changes in schedule 2 and income changes in schedule 3. At this point I want to focus on the amendments in schedule 1. I know that many small businesses in my electorate and others will benefit from these changes. When I have the opportunity to host a small business forum in the next couple of weeks—with the Minister for Small Business, Independent Contractors and the Service Economy—I look forward to explaining not only these amendments but the many other packages that this government is providing to help small businesses to keep their heads above water.

In conclusion, this is not something that is going to a sector of the community that does not deserve it, nor is it going to a sector of the community that does not pull its weight. I know how much support chambers of commerce and other business organisations are giving to individual businesses. The community of small businesses support each other, and I am pleased that this government is enabling advisory groups and various other mentoring programs and is making other sorts of grants to support chambers of commerce and business organisations to help individual businesses that may just stay alive with a little bit of support from their peers. That is why, in closing, I would like to particularly congratulate the Wynnum Chamber of Commerce, who have just received a $100,000 grant from the minister for small business to provide mentoring services, financial advice and many other essential services to our small businesses to make sure that they can keep that little bit ahead of the game in such difficult economic times. I commend the bill to the House.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

in reply—I thank all honourable members who have contributed to this debate. Many honourable members, including the member for Bonner, commented on schedule 1, which provides immediate and much needed cash flow relief to many small businesses. Those small businesses that pay four quarterly tax instalments on the basis of GDP adjusted notional tax will have a 20 per cent reduction in the instalment due for the quarter that includes 31 December 2008. These amendments also include a regulation-making power to allow reductions in instalment amounts to be made in the future. This measure is one of a number of government initiatives designed to encourage small business confidence, boost business investment, bolster economic activity and support long-term economic growth in the face of the global financial crisis and the cash flow difficulties created for small business.

Schedule 2 shows the government’s commitment to reducing the number of lost accounts in the superannuation system. The amendments to the unclaimed superannuation legislation last year were targeted at reducing the number of lost and unclaimed superannuation accounts held by departed temporary residents. The amendments contained in this schedule improve the general administration of the unclaimed money regime and align the general regime with the temporary residents superannuation regime. This will assist superannuation providers in meeting their unclaimed money obligations.

The amendments contained in schedule 3 of the bill are designed to enhance the fairness and integrity of the tax and transfer systems. This will be achieved by removing inconsistencies in the treatment of certain non-wage remuneration and taking better account of certain losses. From 1 July 2009, individuals who have access to salary sacrifice arrangements to reduce taxable income will be treated the same as those who do not for the purposes of determining eligibility for certain means tested programs. Salary-sacrificing individuals who benefit from tax concessions will continue to do so. However, these benefits will no longer flow through to the assessment of means tested programs and tax offsets.

I note the comments of the honourable member for Casey with regard to two employees on similar conditions who may be treated differently. This matter was also raised by the opposition in their additional comments to the report on the bill by the Senate Standing Committee on Economics. The opposition’s concern is that the definition of ‘reportable employer superannuation contributions’ may create an unintended bias, as individuals on the same total income may have different reportable employer superannuation contribution amounts depending on whether their employment conditions are set by a common-law employment contract or an industrial agreement. The bill seeks to ensure that only amounts that an individual has elected to be salary sacrificed will be reported for tax and transfer purposes. Where a person has no capacity to influence the amount of superannuation contributions being made on their behalf then the additional amounts will not be assessed for means tested programs. For instance, where a small business employs two individuals and offers each a minimum 15 per cent superannuation contribution as part of the standard arrangements then these amounts would not be reportable employer superannuation contributions. If, however, one individual elects to salary sacrifice an additional $5,000 then this $5,000 would be a reportable employer superannuation contribution and would be taken into account in determining eligibility for tax and transfer concessions. This would apply regardless of whether the individual were under a common-law employment contract or an industrial agreement.

Having said that, can I say I do appreciate the spirit in which the honourable member for Casey has raised this concern. He has raised it genuinely and sincerely. I will reflect further on the opposition’s concerns and will communicate with the shadow Assistant Treasurer before the bill enters the other place as to whether the government intends to take any action in response to those concerns. I also indicate that I would be more than happy to make Treasury officials available to him for further discussions over the parliamentary break before the bill enters the Senate.

The adjusted value of fringe benefits will also be included for the purposes of income where not already included. In addition, net rental property losses will be included in those programs that do not currently include them and expanded to include net losses derived from financial investments such as shares or managed funds.

Dependency tax offsets will be better targeted so that those on high incomes are no longer entitled to claim them. The changes will also reduce workforce participation disincentives that can be associated with the dependency tax offsets. Those earning more than $150,000 will not be entitled to claim the dependent spouse, housekeeper, child housekeeper, invalid relative or parent/parent-in-law tax offsets. The definition of income used in determining eligibility for the offsets will be aligned to that applying to family assistance payments.

Together, these measures will ensure that various tax and transfer programs are fairer and better targeted to those in need of government assistance. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.