Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill introduces the small business and general business tax break—a key part of the government’s Nation Building and Jobs Plan.

The $3.8 billion tax break will help boost business investment, bolster economic activity and support Australian jobs.

The tax break is targeted towards encouraging and sustaining business investment in the face of the global recession

The pervasive downturn in the global economy has reduced much of the investment activity we have seen in recent years.

Projects are being cancelled or postponed in light of the economic outlook globally.

These are challenging times for businesses, particularly small business and the 3.8 million Australians they employ.

The Updated Economic and Fiscal Outlook showed business investment is forecast to fall by 15½ per cent in 2009-10.

The December quarter national accounts showed that business investment growth slowed further in the quarter to 1.1 per cent. Declining global growth and falling commodity prices have hit confidence hard and have seen business scale back their investment plans.

In response, our small business and general business tax break increases and extends the investment allowance we announced in December last year.

It provides a temporary tax break to provide stronger encouragement for all businesses—particularly small- and medium-sized enterprises—to continue to invest. The SME sector is a crucial part of the Australian economy.

And the response from business has been very positive.

The Australian Industry Group said:

This measure will help sustain business investment and support jobs and productivity improvements.

And the Council of Small Business of Australia, said:

Small business owners will also consider purchasing equipment to take advantage of the tax break, it provides some room for decision making and assist businesses that need to upgrade equipment or purchase new equipment to develop new products and markets.

In December, I was pleased to visit the Incitec Pivot plant in Brisbane to see firsthand the impact on business from this measure. Incitec Pivot has brought forward investment because of the investment allowance.

The tax break provides an additional 30 per cent tax deduction for investment in eligible assets.

It is available for new investment in tangible, depreciating assets—that is, plant and equipment—for which a deduction is available under Subdivision 40-B of the Income Tax Assessment Act 1997.

As with previous investment allowances, the tax break applies to new assets. It also applies to new investment in existing assets. In this way, the tax break is carefully targeted toward expenditure that will add to economic activity and the country’s capital stock.

Taxpayers will be able to claim a bonus deduction of 30 per cent of the cost of an eligible asset that they contract for, or start to construct, between 13 December 2008 and 30 June 2009, provided they start to use or have the asset installed ready for use by 30 June 2010.

Those that cannot meet the 30 June 2009 deadline may still be entitled to a bonus deduction of 10 per cent of the cost of an eligible asset they contract for, or start to construct, after this date and before 31 December 2009. They must start to use the asset or have the asset installed ready for use by 31 December 2010.

Small business entities need to invest a minimum of $1,000 to qualify for the tax break. All other businesses need to invest a minimum of $10,000.

This is a key component of our efforts to support small businesses and those they employ.

The tax break will be able to be claimed as a bonus tax deduction in the income year that the asset is first used.

This means that a small business that orders a new capital item at a cost of $2,000 tomorrow and has it installed by the end of June 2009 will know that it will be able to claim a bonus deduction of $600 in their 2008-09 tax return.

As I have said before, there will be no quick fix to this global recession.

But we will not surrender small businesses and those they employ to the fate of the global recession.

We are doing what we can to help see Australia through.

And the small business and general business tax break is a crucial part of the strategy.

To conclude, I seek for those opposite to support businesses, particularly small businesses, and jobs.

I seek their support for businesses that have already brought forward investment in good faith, in anticipation of this tax break.

And I seek their support to give other businesses the confidence they desperately need to continue to invest.

Full details of the amendments in this bill are contained in the explanatory memorandum.

Debate (on motion by Mr Wood) adjourned.