Bernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | Link to this | Hansard source

I want to speak briefly on the bill itself, and I want to make sure that I place a few comments on the record about this bill, about what it does and about how it will impact small business in a range of ways. Much has been made by this government of the small business measures in the budget, and those opposite are very quick to speak rapaciously about themselves. I am sure that will be the case, again, in the debate on this particular bill. When this small business bill was introduced into this place the minister said:

This is … the largest jobs and small business … package in Australia's history.

That is a big call. I want to remind the minister that just talking about jobs will not actually create jobs, and it certainly will not help with the highest unemployment rate in two decades that this government is now presiding over. All the rhetoric, all the theatrics and everything else that we get in this place certainly will not help the people who find themselves on the unemployment queues. This government has presided over the decline and end to our automotive industry. This government has broken its promise to build our future submarines in Australia, which would employ Australians in much-needed jobs of the future.

I want to congratulate the maritime workers and all workers currently visiting Parliament House. They are here to remind the government of the promises they made to South Australia and to the shipbuilding industry when they were in opposition and running around the country making promises to a whole range of people, which they are finding now difficult to keep.

What we have in front of us is a very sluggish wages growth and a government intent on attacking the wages of some of our lowest paid workers. They are the facts. If this government were really serious about small business and really honest about jobs and growth, then why is it that the Australian Bureau of Statistics' data confirmed that unemployment, last month, rose to 6.3 per cent. That is a very big number. It is a terrible number because of what it means for ordinary people and their families, as well as what it means for confidence in small business and in our economy, and because of what it means for people's ability to manage their own smaller economies, their household budgets, their household economies.

What we see before us is that, for the first time in 20 years, there are now more than 800,000 Australians unemployed. That is the first time in two decades. It is 114,000 more people who have joined the jobs' queue since Tony Abbott and this government were elected and since Bruce Billson was appointed Minister for Small Business. That is not something that this government ought to be proud of. When you hear the government members talk, they are going to crow about this in some way. But this is good as I cannot wait to hear how they will spin that.

The last time the unemployment rate was 6.3 per cent was in 2002 when Tony Abbott, under a previous government, was responsible for employment. The unemployment rate is higher now than it was under Labor during the global financial crisis. Unemployment, believe it or not, is higher today, supposedly under the genius stewardship of the Liberal government, than it was under Labor during the global financial crisis.

While Tony Abbott and the Liberals were trying, last week, to save the Speaker's job, 40,000 Australians joined the jobless queue in July. The figures also show a disturbing 0.4 per cent spike in youth unemployment with 13.8 per cent of 15- to 24-year-olds unable to find work. That is almost 300,000 young Australians currently unemployed. These are really bad numbers. These are numbers that the government should be focusing all of its attention on rather than the other things that it finds itself preoccupied with.

Australia does need a plan for jobs and it needs a plan for the future. Sadly it is not getting either from this government. It is clear that the Liberals do not have a plan. They do not have a plan for jobs, let alone a plan for jobs of the future. It seems that they can always come up with a plan for their own jobs but they are not so good at finding a plan for jobs for ordinary Australians.

Labor will never support—just to be clear—a two-tiered penalty-rate system that would leave millions of Australian workers worse off. This is an assault on decent working conditions of Australia's 11.8 million workers. But it seems to be the only rhetoric the liberal government can make when it talks about jobs. It immediately transitions from jobs to just penalty rates, that somehow this will fix all ills. Sadly, it is not the answer.

Labor's shadow minister for employment, Brendan O'Connor, got it right when he noted that rather than a race to the bottom on wages Labor believes the government should focus on jobs and economic growth through investing in skills and training, infrastructure, innovation and entrepreneurship. They are things that seem almost foreign to this government. Labor does have a plan for the jobs of the future and I will return to that in a little while.

The specific measures of this bill are welcomed by Labor, particularly the tax offset for unincorporated small businesses. It is a relatively modest boost. Let us be honest, it is good—it is welcome, there is no question about that—but it is very modest. That five per cent capped at $1,000 is small. A lot of small businesses will be enjoying the fruits, of up to $1,000, but I am sure they will not be throwing massive parties about the largess from this Liberal government.

Let me remind you of where some real and significant work was done to assist small business. It was Labor that gave the single biggest tax cut in history for small business. Labor gave that single tax cut for unincorporated small businesses back in 2012, when it increased the tax-free threshold from $6,000 to $18,200 and it continues to go up. That was a significant increase and was the single biggest tax cut for small businesses, which they will continue to enjoy into perpetuity. That is called real assistance. It was Labor that made that change and it was a significant boost to all sole traders, to the mum-and-dad entrepreneurs and the corner-shop partnerships alike.

Labor also welcomes the immediate deductibility of professional expenses along with the changes to the fringe benefits tax for portable electronic devices. Both these measures will help small business; however, as noted in the government's own explanatory memorandum to the bill, the changes to the FBT are estimated to have a small but quantifiable cost to revenue over the forward estimates period. I am happy to give credit where credit is due but let us keep all things in reasonable perspective. By any measure, the real test for the success or otherwise of government policy settings for small business is measured in the various monthly and quarterly statistics that are released by independent analysts.

I assure the minister for small business that every time he gives himself and his government a pat on the back—which they do very often—he needs to remember that the unemployment rate continues to climb, on his watch. For every little pat on the back the Liberals give themselves another person has lost their job. At the last election it was Tony Abbott who promised Australians he would create one million new jobs in five years. Instead, he has presided over the highest unemployment rate since the global financial crisis. It is not a good look and not good if you are one of the ones who ends up without a job. The fact is you cannot deliver a million new jobs if the unemployment figures keep going up. It just does not work that way.

It was also Tony Abbott who, at every opportunity, declared there was a budget emergency. I remember the shrill calls of that dire emergency and the calling in of the fire brigade. It was so imminent and so dire it was almost like the earth was splitting open and we were about to fall in—unless Tony Abbott got elected. Then everything would be fixed. The Liberals were calling this a really big budget-emergency crisis when the budget deficit was $24 billion. It was an absolute tragedy.

The problem they face now, with their budgetary genius, is a little problem called $35 billion in budget deficit. It has gone up, significantly. Back then it was an emergency. The world was coming to an end. There was a $24 billion deficit. Debt and deficit; that is all we got from the Liberals. Now, they are really quiet on debt and deficit. You hardly hear those two words in the same sentence. In fact, you hardly ever hear the government talk about it. Why would they not talk about it? Because it was $24 billion but now it is $35 billion. Gee, that is not a bad record, is it! Under their watch, the deficit has gone well above $35 billion.

The Minister for Small Business is well known for his enthusiasm and his theatrics, but these performances will not help small business or get people off the unemployment queues. The government have presided over the closure of the car industry and seem intent on exporting our Future Submarine jobs overseas—they almost seem determined to have that aim. It is curious. You have to look at this carefully and ask: why are they so determined, at every turn and corner, to give these things away? We had the fiasco of them saying that Australians could not build submarines. In fact, according to the then defence minister, you could not trust Australians to build even a canoe. If that is a reflection of the view of the Liberal Party, you would really have to question what these people are thinking.

Remember how Joe Hockey, before coming to office, promised that there would be a surplus in his first year and every year after that? 'I promise a surplus in the first year and every year after that,' he said. Of course, you would have to ask: where has that promise gone? Who was his make-believe intended for? It is also important to remember that Joe Hockey's own budget numbers are built on bracket creep. According to the Grattan Institute, around four-fifths of the government's return-to-surplus promise depends on bracket creep—in other words, you pay for it through your own taxation rates creeping up, which means the government does not have to do any work. According to the assumption of the Liberal government of a surplus in the future, four-fifths of it—almost all of it—is actually built on the back of taxpayers automatically paying more tax through bracket creep. Again, it is genius work. How hard do you have to work as a Treasurer to come up with that? Literally, if you just spent your days at home, it would happen under your watch without you having to do anything.

We have the Treasurer this week talking about lowering taxes—it is an interesting call. There is a new thought bubble every week. He refuses to look at some sensible revenue sources, such as cracking down on our unfair and unsustainable superannuation tax breaks, which even the superannuation industry thinks should be reformed, or looking at multinational tax avoidance in a whole range of areas. These are things that Labor actually had on the table. It is good, sensible legislation that would go some way towards redressing some of the inequitable tax treatment of multinationals that profit shift and do a range of other things, not just here in Australia but globally. We put some things on the table. When the Liberal Party come to government the first thing they do—it is almost their first act—is save the multinationals. 'Let's take that off the table; there's no way we're taxing them more. Let's immediately look at low-income earners—low-paid workers—and how we can take a little bit more off them. Let's see how we can cut pensions. Let's see how we can take a little bit off ordinary people'—but, of course, for ordinary people that little bit is a lot. It is actually a really big number.

I would like to think that this small-business tax offset will deliver a much needed boost for small business. I genuinely hope it does, but what small businesses really need is a plan for the future. They need a plan for jobs, a plan for confidence and a plan that helps them to build the future. Some experts already claim that between 40 and 60 per cent of current jobs will not exist in the future. Our future prosperity, of course, depends on harnessing Australia's entrepreneurship around a whole range of areas. That is difficult to do when government not only does not support that but takes away the tools and mechanisms that were previously in place. I have talked many, many times about the whole range of programs, assistance measures and bodies that were set up by Labor to ensure that Australians could take good ideas from the backyard, the garage or wherever, right through to that difficult process of commercialisation, which is really what is needed. There is no point just having a good idea. Ideas are free; they are everywhere. You can pick them up all over the place—you can talk to someone and come up with a good idea. Transforming that idea into something real that then gets commercialised, creates jobs and opportunity, helps the economy and, in the end, helps raise revenue for government is really difficult and complex. That is where the government needs to assist. That is what every other country in the OECD does. That is what successful countries do. In Australia we are really bad at it, and what this government does is add fuel to that fire by making it worse.

Australia has an unprecedented opportunity, I believe, to transition from an economy based on resources, primary industries and domestically-focused businesses to one that is based on high growth, on knowledge and on intensive businesses that can compete globally. Why shouldn't we be able to compete like the rest of the world does? There is no point in saying that now wages are too high or something else—it is just not the case—because in comparable economies where wages are just as high and where the competitive environment is just a strong they do well. We do not do well in those areas, maybe there are other things at play—that is what I would like this government think about.

The recent start-up economy study undertaken by PricewaterhouseCoopers and commissioned by Google Australia projected that in the right conditions, high-growth technology companies could contribute four per cent of GDP or about $109 billion and add 540,000 new jobs to the Australian economy by 2033. This from a base of approximately 0.2 per cent of GDP today. They are big numbers, they are good numbers. They are the sort of things that governments ought to focus on and genuinely look at how to support and grow—and not only our productivity but also the jobs of the future and small business.

Over the last two decades many countries have recognised that high-growth, science and technology—words that the Liberal Party are not comfortable with—based businesses are important drivers of economic growth. A growing number of governments have responded by launching programs designed to mature, nurture and promote businesses that are focused on these areas. The rest of the world is doing it but the problem is we are getting left behind. For example, since 1972 the Credit Guarantee Corporation of Malaysia, through its guarantee schemes, has been supporting the Malaysian economic development agenda by helping small-and medium-sized businesses get access to financing. If Malaysia can do it, why can't Australia? If Malaysia can support its small businesses in getting access to finance, why can't Australia? When you talk to small business one of the top three things they always say is a problem for them to grow and develop is access to finance. Why is it so hard in Australia for us to at least follow suit with the rest of the world? To date the Credit Guarantee Corporation has been instrumental in the establishment of more than 427,000 small to medium enterprises. That is how it has worked in Malaysia, and that is how it could work in Australia.

It is similar in the United States where since 1953 the US Small Business Administration has delivered guarantees and other forms of assistance to small business. In the UK, the Enterprise Investment Scheme is designed to help smaller high-risk existing companies to raise finances. It does so by offering a range of tax reliefs to investors who purchase new shares in those companies. It works alongside the Seed Enterprise Investment Scheme, which offers similar assistance in relation to new companies. The UK's Enterprise Finance Guarantee is a loan guarantee scheme to facilitate lending to viable businesses that have been turned down by mainstream commercial loan facilities. By providing lenders with a government-backed guarantee for 75 per cent of the value of each individual loan, the scheme gives small business a chance. That is what Labor wants to do in Australia. It is not a question of whether we are treading on new ground or testing this new scheme. It is a fact that everybody else is doing it—the United States since 1953 and the UK since 1972, but Australia is yet to have this.

But Labor has a plan on this—we have put a scheme on the table, we have a proposal and we will be taking it to the next election. Let me tell you, Labor will be here with those policies.

Government Members:

Government members interjecting—

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | Link to this | Hansard source

As usual, I know that government ministers on the other side do not understand this. They are uncomfortable with the words: growth, science, maths, the environment, renewable energy, innovation, entrepreneurship—they start to shudder when they hear these words. The Liberal Party is the party of small thinking. Small 'l' liberal really means small thinking—1950s, yes, but the world has moved on. Jobs of the future, growth, entrepreneurship is what we need for the future. We need governments that reflect this.

We also need a government that understands that R&D actually helps our economy—it is not a cost but an investment. We need a government that understands that the jobs of the future are not about shutting down wind energy, but are about promoting renewable energy—it is about sustainability. It is not about destroying through one comment the renewable sector in wind power generation, because the Prime Minister does not like the 'awful look' of them or that perhaps that they are noisy. Come and speak about noise to some of my constituents who live next to major roads and highways. They will tell you a thing or two about noise. When it comes to cheaper electricity and making sure in the future that Australia is just keeping up, then let's talk about those things.

This government is not comfortable with these words: mathematics, science, engineering, entrepreneurship, start-ups, crowd-sourced equity funding—they think these are terrible thoughts and concepts from another era. They are a government from another era, that is for sure. But Labor does recognise there is much more that governments can do. You can do that through support. You can support small business and encourage those that want to go out and have a go and grow their businesses. That is exactly what Labor did in government—we did not just talk about it, we did it through substantial tax assistance and really good measures. In fact, as soon as a Liberal government got into power they completely wiped out these measures. Small business is very unhappy. Small-business representatives, medium-business representatives and large-business representatives are unhappy about it. The government now, after it has seen the damage it has done, is trying to repair some of this by reintroducing some of those measures. Which is, of course, why we are supporting them. In effect, they are just a reintroduction of Labor's policies. Many small businesses are desperately trying right now to find, for example, access to finance, because they are constrained by difficulties in the methods that exist in getting traditional funds through banks and through other methods—it is either too expensive, too difficult, they may not have the balance sheet strong enough or they might not be capitalised enough. Again, these are probably all foreign concepts to the Liberals. The Liberals, when it comes to small business, have only two tired old lines—that small business people mortgage their home. We know people do that, but it is not the only way. Some do that. Some cannot get money because they do not have the capital or equity, so they look for other sources of financing. If a government is smart enough, it will put in place schemes to assist them. That is what Labor are proposing to do.

Under Labor's plan, we will work with the banking and financial services industry to develop 'Start-Up Finance', a partial guarantee scheme which will support the development of Australian microbusinesses by improving their access to finance. Currently Australian microbusinesses either struggle to get a loan or may borrow via residential mortgages. We all know that. There is no great science or analysis in that. They do that in the absence of cheaper more appropriate financing alternatives.

There are some well-established credit guarantee schemes supporting start-ups, micros and small businesses in the UK, the US, Canada, France and Germany as well 46 other countries around the world that we could compare ourselves to. This is where we should be turning our eyes and looking for some innovation ourselves. Australia is one of the only countries in the developed world without such a scheme and, as a result, we risk being left behind. I would say that we are being left behind.

Labor proposes to create a new $500 million smart investment fund which will back-in great Australian ideas and help convert those ideas into businesses, jobs of the future and a stronger economy and, at the same time, support revenues to government which, in turn, will support ordinary Australians. Our smart investment fund will partner with venture capitalists and licensed fund managers to co-invest in early-stage and high-potential companies, providing a Commonwealth investment of up to 50 per cent of the start-up capital needed to help Australian companies commercialise innovations.

This is part of Labor's plan for the jobs of the future. That has to be the basis from which we start, if we are going to be serious about long-term economic growth. Economic growth is not that great at the moment. We have to realise that the numbers are not just going to magically go up unless government takes a proactive approach to growing the economy and making sure that we transition our economy from old-style manufacturing and resources to the high-skilled jobs of the future. That transition will take a long period of time. We need a government that supports that. You do it through skills and training and a whole range of other methods and investing in the right places.

Another important role for government is in assisting small business to provide certainty on the provision of the relevant skills and training opportunities. That is something Labor put in place and invested money in, including in apprenticeships, traineeships and a whole range of other incentives around how that works. Again, sadly, when the Liberals got elected the first thing they did was cut all that. They just wiped it off the table. They say it is a saving. I say it has had a detrimental, negative impact on small business and the economy.

Labor's policy is to provide guaranteed funding to TAFE so that businesses can get the skills they need. That is what businesses say they want. That is because it works. That is the reality. Our TAFE system is strong. It is proven. Infrastructure is in place. We have the right people as part of our TAFE network. But we have to fund that. It is like anything in life. If you starve something, eventually it does wither. We have known for a long, long time that the Liberals just hate the TAFE system. They hate it. They just do not like it. It is as simple as that. It is ideological hatred. They hate it, and so through consecutive liberal governments they starve, poke at, demonise and do everything they can to diminish the TAFE system in Australia with this crazy view that, somehow, the private sector will do a better job. Why can't we do it in tandem? Why can't we have the private sector doing its bit and doing a great job and the TAFE system doing a great job and doing its bit as well? Of course, when you only have one eye, you cannot see both sides of the argument.

Over a million Australians every year participate in skills training. Labor are very proudly the party of skills, training and apprenticeships. We are committed to providing a quality TAFE system. We will do that. I also want to take this opportunity to remind the government that it was Tony Abbott and Joe Hockey who cut more than $2 billion from skills and training programs just over a year ago in their first budget. That is what they decided to do in an economy that needs to grow and needs skills. If I were to ask ordinary Australians, 'If you were going to grow the economy and develop skills and training, what would you do?', I do not think they would come back and say, 'We would cut $2 billion from the programs that help provide skills and training.'

This is a really confused Liberal government. They are distracted by a whole range of issues—budget emergencies and crises. They have so many crises internally. Tony Abbott needs to call the fire-engines that he used to talk about for the deficit into the party room. They have fires going in every corner of their party room on a whole range of issues. That is fair enough. Parties have that happen from time to time. There is chaos inside the Liberal Party. That is okay. That is part of their internal party processes. But the tragedy of all that is that it is distracting the government from doing their job and from doing a good job in trying to get people off the dole queue and into a really good job.

If you are the Treasurer of the country, Joe Hockey, your answer if someone cannot afford a home in Sydney is: 'Get a better job.' That is not a fine principle. If you are poor, stop being poor; if you are sick, stop being sick—that is the message from the Liberal Party. That would be fine if there were the jobs there to be had, but unfortunately under the Liberal Party the unemployment rate is now at 6.3 per cent. This is worse than during the global financial crisis. Where is the crisis today? The crisis is just the Liberal Party and the Liberal government.

As a contrast, Labor has a proud record on providing tax assistance for small business and helping the economy. It was a Labor government that introduced the instant asset write-off and the tax loss carry-back for companies which worked really well to assist our economy and small business people. They helped people to keep their jobs and to keep their businesses. That is why we did so well during the global financial crisis compared to so many other economies, be they in North America, Europe or other places.

Let me remind you that it was the Liberals who cut these tax assistance measures only to realise how effective they were and are now trying to restore them a couple of years later. Labor introduced these tax assistance measures for small business because we understood the stimulatory boost that they would provide to the sector and the Australian economy more broadly. This was welcomed by small business. It was a disaster when the Liberals took them away.

Labor's tax assistance, when combined, was worth more than $5 billion over the forward estimates. This is what Labor believes in and stands for. We have a strong view about assisting ordinary working Australians and helping businesses—small, medium and large. We have a long-term plan for small business to drive innovation and boost economic growth in a sustainable way. We recognise the work that is done by all people involved in those enterprises to help our economy stay strong and make sure that people actually have a job among the jobs of the future.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

What a delight it is to once again rise to speak about the government's $5.5 billion Jobs and Small Business budget package announced in the 2015-16 budget. Before the winter recess the first tranche of measures was introduced and passed. Those bills reduced the company tax rate from 30 per cent to 28.5 per cent for companies with an aggregated turnover of less than $2 million, as well as making consequential changes to the treatment of franking credits. They also allowed for the immediate deduction of expenditure on each and every item of capital equipment with a value of up to $20,000—and wasn't that well received by small businesses across the community.

These measures are already providing a much-needed boost to the bottom lines of the 13,000 registered small businesses in my electorate of Ryan, and the 780,000 eligible small businesses across Australia. And who could forget Labor's reaction to those bills? Labor claimed to support the bills. But, instead of working with us in the spirit of bipartisanship to inform small business owners of the positive impact of the changes on their business, the Leader of the Opposition rose in this place to attempt to shut down debate. It was not his finest hour, and one that small business owners across Australia would do well to remember when given a chance to pass judgement at the ballot box. Because, for all of Labor's professed support for small business, they are remarkably late converts to the cause of small business tax cuts. Who can forget the member for Oxley's 6 May contribution to the debate in which he described small business tax cuts as 'ham-fisted' and 'against the wishes of Australian business'? Given the member is also the shadow minister assisting    his leader for small business, it is fair to assume that his views represent Labor's thinking on the subject. This makes the Leader of the Opposition's professed support for small business tax cuts all the more hollow. Unlike those opposite, members on this side of the House understand small business. And, unlike those opposite, these bills demonstrate that we have a clear and unambiguous track record of delivery.

This brings me to the substance of this bill, the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015, which is the third of four bills that will constitute the overall Jobs and Small Business budget package. This particular bill helps small businesses by making three substantial amendments. Firstly, it amends income tax laws to provide a five per cent tax offset, capped at $1,000, to individuals who run small businesses. This measure is designed to ensure that tax relief for owners of unincorporated small businesses broadly mirrors recently legislated tax cuts for incorporated small businesses. Secondly, it amends the Income Tax Assessment Act 1997 to allow for the immediate deduction of certain costs associated with starting a business, including government fees and charges as well as costs associated with raising capital. And, thirdly, it clarifies and extends the fringe benefits tax exemption that applies to employer provision of work-related portable electronic devices such as mobile phones, laptops and tablets. This will reduce red tape by eliminating the requirement for employers to demonstrate that devices do not have 'substantially identical functions' in order to qualify for the exemption.

Returning to the first of these changes, the government has committed $1.8 billion over the forward estimates to providing a five per cent income tax offset of up to $1,000 to individuals who run small businesses. The amount of the tax offset is five per cent of the income tax payable on the portion of an individual's income that is attributable to the business. The offset can be claimed from multiple income streams, but the total offset is capped at $1,000.

There is a simple rationale behind this change. The government committed to introducing a 1.5 percentage point small business tax cut from 1 July 2015, with the cut having been legislated and passed prior to the winter recess. However, by its very nature as a corporate tax cut, it only provided benefit to those companies incorporated for tax purposes. Seventy per cent of small businesses are not companies and therefore did not benefit from the tax cut. This tax offset therefore has two purposes. The first is to ensure that unincorporated small businesses are provided with tax relief so that they can employ, grow and prosper. The second is to avoid a scenario in which a company tax cut made in isolation induces small business owners to incorporate where they otherwise would prefer not to do so. It is inefficient practice for companies to go through the red tape and expense of restructuring on the basis of an arbitrary tax change, and the government is keen to avoid this.

One of the most well-received changes introduced in the Jobs and Small Business budget package was the ability for small businesses to immediately deduct from their taxable income the cost of each individual capital equipment purchase up to a value of $20,000. This bill continues the theme of immediate deductibility by allowing for the immediate deduction of the costs of government fees and charges, the costs of obtaining advice on business structure and the costs of raising capital incurred in the starting of a business. Previously, expenses of this nature were deductible over a five-year period. Anyone who has started their own business will tell you that the start-up phase of a business is the most challenging time for cash flows. So it makes sense for the government to return cash to start-up businesses immediately rather than over a five-year period.

The third change introduced in this bill provides greater clarity to fringe benefit tax exemptions relating to the provision of portable electronic devices. The advent of a multitude of new portable devices such as smartphones and tablets in recent years has posed an increasing challenge to existing tax laws. Currently, fringe benefits tax exemptions do not apply to portable electronic devices where the devices have substantially identical functions to a device that has already been provided to an employee. The proliferation of devices has created uncertainty and confusion as to whether, for example, a tablet and a laptop ought to be considered substantially identical for the purposes of fringe benefits tax exemption. The current definition has not kept up with technology and is creating unnecessary red tape for small businesses. This bill provides resolution by removing the so-called substantially identical functions test. This means that small business employers who provide multiple portable electronic devices to an employee can claim a fringe benefits exemption for all of those devices.

There are 2.3 million small businesses in Australia that have less than $2 million annual turnover. However, these businesses provide 43 per cent of non-financial private sector jobs in Australia and around one third of non-financial input. And yet small businesses face a set of additional challenges in competing with larger entities. Economies of scale are not as easily achieved. Access to finance can be more difficult. The burden of red tape and compliance is proportionally greater. As a result the failure rate of small businesses is higher than that of larger competitors. And evidence from research conducted by the Reserve Bank indicates that business conditions in small businesses have become even weaker relative to larger businesses since the global financial crisis.

The Australian Bureau of Statistics reports that of the nearly 300,000 small businesses founded in 2010-11, just half were still operating in June 2014. This is a problem for the economy. Not only is the small business sector a large employer of Australians, it also tends to contain new businesses with new ideas, new concepts and innovations. If the small business sector is not equipped to flourish, Australia as a whole is the poorer for it. That is why the tax relief and red tape reduction contained in this bill will bring such welcome relief to small businesses. For small business owners, these changes mean more money in their pockets, and money in their pockets sooner and with less tax ambiguity. In turn this means more money to reinvest into growing their business and employing more Australians.

The coalition government is all about cutting taxes and red tape to make it easier for small business to succeed. This bill forms part of the coalition's historic $5.5 billion Jobs and Small Business budget package that cements the coalition government's status as a true friend of small business. I commend the bill to the House.

Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

It is my privilege to rise to speak on the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015 after the member for Ryan and other thoughtful contributions from both sides of the House. I want to pay tribute to the small businesses of this country—the people who take the risks, who work extraordinary long hours, who ensure they have their own skin in the game when it comes to the success or failure of their business. Most importantly of all, I want to pay tribute to the jobs they create. In my community and in communities right around the country, they are absolutely crucial to our prospects as an economy and our prospects as a nation.

As other contributions have noted, the bill does three things for small businesses: the first is a five per cent tax discount for unincorporated small businesses up to $1000 a year; the second is the immediate deductability of professional expenses; and the third is an expansion of the FBT exemption for work related portable electronic devices. As the shadow minister, the member for Oxley, flagged this morning, we will be supporting all three of these measures, because we consider them fundamental to doing what we can in this place to ensure that we are giving small businesses in this country the support they need and deserve.

It has become very easy for people in our line of work to describe small business as 'the engine room of the economy'—of course, that is true—but underneath that expression there is a whole range of important contributions that small businesses make that are not always perfectly understood. We do understand they are a critical source of production and employment, but it is not well understood that much of the innovation in this country comes from small businesses. The Bureau of Statistics talks about 85 per cent of innovative firms being small businesses. What that really means is that our ability to be a creative innovative nation rests on the work that small business does. The success or failure of small business says a lot about our capacity as a nation that is fuelled by aspiration and enterprise.

It is not secret that Australia is going through a difficult period when it comes to employment. For the first time in more than 20 years the unemployment outcome the other day has more than 800,000 Australians out of work—the first time since 1994. The unemployment rate today is higher than at any stage during the former Labor government, which of course covered the global financial crisis and its immediate aftermath. The unemployment rate is the highest it has been since something like 2002,when the Prime Minister was the employment minister. The nation is crying out for the sorts of jobs that small businesses can create and we need to make sure that we are giving them all the support they need. Sometimes that means getting out of the way; sometimes it means tweaking the tax system. There are all sorts of tools and levers at our disposal to help small businesses in Australia.

It is a risky decision to be a small business person. To go out on your own does require a leap of faith; there are higher fixed costs and greater financing difficulties for getting into the game and greater fluctuations in demand than for large businesses. In my local area there are 10,746 small business operators who take that risk, work those hours and put themselves on the line to become successful. About 60 per cent of those businesses are sole traders, and 4059 of them employ local workers. They are an important source of jobs in our community. I pay tribute to them for that reason. The main point of my speech at the recent Logan Chamber of Commerce awards was to thank the small business people in our community for creating jobs in a community that is crying out for jobs. Every extra job we can create matters in Rankin, which covers the northern part of Logan City and the southern Brisbane suburbs. Every time a small business person goes from being a sole trader to employing one more person—or two more people, three more people—that makes a huge difference to the people who are employed and to our community more broadly. So I did pay tribute to them at the Logan Chamber of Commerce business awards. I was pleased to sponsor the emerging business award, because I am particularly supportive of those people who are having a crack for the first time. In this case the award went to the M1 Business Centre; I congratulate them on winning that award.

These sorts of things are important for recognising the work of small businesses. It is obviously crucial that we do that but the decisions we take here are far more important to the policy setting, the policy climate, the small business climate and the economic environment that small business operate in. That is why the small business sector was so damaged by the extraordinary hit to their confidence that happened after the 2014 budget. It was confidence dropped off a cliff. The Prime Minister promised that there would be an adrenaline charge in our economy and that all of this confidence would come surging, and then the first Hockey budget, the 2014 budget, absolutely smashed confidence for small business in this country.

The government were blindsided by broken promises and twisted priorities. They abolished the instant asset wright-off and tax loss carry-back provisions—worth about $3.8 billion to small business. They did that against the adviceof the small business sector, not just the peak bodies. You could not walk down the street in my community—and I assume my colleague the member for Fraser will tell you it is the same in his community—without people raising the issue of the abolition in 2014 of that crucial assistance, via the tax system, for small businesses. They were asking small business to pay more tax at the same time they were reopening tax loopholes for some of the biggest companies that operate in Australia—big multinational companies. They reopened a loophole at the same time that they cracked down on small business. When you hear people on the other side of the House make contributions about their support for small business, never forget what happened to confidence after the first Hockey budget, and never forget that before they reinstated some of these tax measures they had first abolished them. When you remember that the government first abolished Labor measures, it concerns us greatly that the government wants to be patted on the back for what they have done in the small business sector. They are now reinstating them and they want to be congratulated as if they have done something extraordinary.

In a debate last night about some of the same sort of issues, those opposite were saying before the election that Labor's policies were disastrous for small business—that Labor's policies for small business were a disaster and that they were some version of socialism. They did not even realise that the policies in the 2015 budget are an inferior carbon copy of the Labor policies we had in place before the election—the policies that were abolished by those opposite.

That was not the only thing, because they did not just smash confidence and abolish and then reinstate some of our tax measures. They also had something like $845 million in cuts for small business programs, including the abolition of Commercialisation Australia, the Innovation Investment Fund, Australian Industry Participation, Enterprise Solutions, Industry Innovation Councils, Enterprise Connect and Industry Innovation Precincts—$845 million in cuts in programs that were designed to help small businesses and particularly to make them as innovative as they can be so that they can grab market share and create jobs. All of that needs to be seen in the context of the hit to consumer confidence that came from the first budget—that stinking 2014 budget, which will go down in history as one of the worst-received budgets since Federation. It is the main reason that consumer confidence has fallen for 15 of the last 17 months, and confidence today is 17 per cent below what it was when the government changed hands, in September 2013.

Of course, we support the reinstatement of our policies, particularly when it comes to the instant asset write-off schemes and the accelerated depreciation of motor vehicles. We support their reinstatement, because we wrote them. They were abolished and unfortunately they are coming back in an inferior way, but we support them because they are essentially the things that we consider to be important for small business. We also support cutting the small business tax rate by 1½ per cent. In fact, in another one of those cruel ironies, those opposite voted against a company rate cut of two per cent, and then one per cent, when it was put before them during the last parliament. Of course we support lower taxes on small business people in this country, if it gives them that little bit of extra help. We will also be supporting the smaller measures in this bill.

I will not go through all the details. Other contributions, including the member for Oxley's fine contribution, went through the measures in some detail, looking at how they operate and at all of the numbers. I just reiterate that each of the three of them—the five per cent tax discount for the unincorporated businesses, the immediate deductibility of professional expenses and the expansion of the FBT exemption for work-related portable devices, like phones and iPads—will be receiving the support of this side of the House.

We do not think we should stop there. I think that is an important point. When the job is done of reinstating Labor policies, which were doing some good in the small business sector and can do some good again, it is important that we do not just think that the job is then finished. There is a whole range of things that we can do to support small business, whether it be giving them the NBN, which was promised to them, or properly supporting renewable energy in this country, or properly training apprentices. All of these sorts of things will boost the capacity of small businesses in this country.

We on this side of the House have a plan—one that was announced by the Leader of the Opposition, and has been talked about regularly by the shadow Treasurer and the shadow Assistant Treasurer, who joins us in the chamber today—for our aspiration to get the small business company rate to 25, when it can be afforded. That is an important bit of additional assistance for small business. It recognises some of the additional obstacles that small businesses in our community face when it comes to cash flow and all kinds of other issues. Rather than deducting the cost of incorporating a small business, we also want investigate ways to make it easier for them to experience the benefits of incorporation. I commend to the House the recent speech by the Leader of the Opposition when talking to COSBOA, the Council of Small Businesses of Australia, a very well-led organisation. The Leader of the Opposition pledged to work with small businesses, their representative organisations, accountants and the legal profession to try to work out a specific class of corporations for small business. The US has achieved that successfully and we can do it here, too. That would give businesses the ongoing benefits of incorporation without the ongoing burden of red tape —genuine red tape, not the red tape that sometimes gets passed off in this place as something else—which is something that should interest all of us on both sides of the House. As I said before, we would also give them a first-class, world-class NBN and we would also do what we could in government, in addition to all of the measures I have mentioned, to restore confidence in the small business sector—confidence that was smashed by the first Hockey budget.

Again, we support the bill. We wrote big chunks of it and we are pleased to see it back. Like a welcome friend it has returned. At one level it is quite comical—I am sure the member for Forde is about to do it too—that they claim they should be congratulated for reinstating these Labor policies that they trashed 18 months ago. These small-business packages were a proud achievement resulting from the work that Wayne Swan, the member for Lilley, did in part of his extraordinary response to the global financial crisis that set Australia apart in the world, despite the usual dull-headed opposition of the member Dickson and others, who can probably hardly spell economy let alone understand it. We are proud to support these measures—we wrote most of them. No doubt the member for Forde will claim congratulations for them. I wish him well but I think most people in the small business sector would understand that it was Labor that wrote these policies. They are glad to see them back, as am I, but let us not pretend that the government deserves congratulations for them.

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

It is always a pleasure to follow my good friend the member for Rankin. The ability of those opposite to rewrite history never ceases to amaze me. The most important piece of support we have provided to not only the small business sector but the business sector more generally in Australia since we came to government, which those opposite have failed to acknowledge, is the repeal of the carbon tax. An enormous weight was lifted from the business sector in this country in July last year when that insidious tax was repealed. Those opposite pontificate about the costs for small business yet they came out of their national conference with a new policy to reintroduce a carbon tax via an ETS or another mechanism that is going to be a hammer blow not only to small business in this country but also to large business. We are going to see jobs and opportunities lost across the Australian economy as a direct result of the policies that those opposite will introduce if they ever return to this side of the chamber.

It is with great pleasure that I stand here today to support the Tax Laws Amendment (Small Business Measures No. 3) Bill. This bill seeks to amend various taxation laws to provide tax relief and reduce red tape for small business. That is something that we as a government over the past nearly two years have been focused on—reducing the red tape and regulation burden in our economy. Since last year's budget and following the success of this year's budget more than $50 billion in budget repair measures has now been legislated. It is interesting to note that those opposite fail to mention the dire circumstances in which they left the Australian budget when they lost government in 2013. We have focused on delivering real tax relief and real red tape reductions for the small business sector but also for the Australian economy more generally.

According to the NAB, business confidence and conditions continue to climb, sitting at plus 10 points, well into positive territory and near a two-year high. I note with interest that the member for Oxley in his contribution talked about the number of people unemployed. I am sure all in this House would like to see far fewer people unemployed—800,000 people is far too high a figure. Those opposite have made the comment that that figure is higher than it has been in 20 years. I remind the member for Oxley and even the member for Rankin, because I think he touched on that, that our workforce in those 20 years has grown substantially and, whilst the unemployment rate of 6.3 per cent is not acceptable and we want it to be lower, in 1995, which is their comparison point—which, by the way, was during a Labor government—the equivalent unemployment rate was 8.4 per cent, or two per cent higher in real terms than it is today. Again, that was under the Labor government of those opposite.

The recent break from parliament gave me the opportunity to visit many businesses in my region, including many small businesses who are feeling the positive effects of the budget's Jobs and Small Business package. It is tremendous to see how local small businesses in Forde are feeling growing confidence in a government that is providing them with the right tools they need to grow their business—new businesses like Delirium Fashions, who opened recently in Beenleigh. They have provided a wonderful fillip to the main street of Beenleigh as they take the opportunity to establish a new business at a time when also as a government we are investing some $3 million into the Beenleigh town centre redevelopment. In my electorate of Forde we have approximately 11,000 small businesses. These businesses are run by hardworking, dedicated and innovative people who put their life and their assets on the line every single day that they go to work. The small business measures passed from the 2015 budget will make a huge difference to the many business people in our local community and also across the country.

This bill is the third of four bills our government has introduced to deliver one of the largest jobs and small business packages in the nation's history, worth some $5.5 billion. The company tax cut of 1.5 per cent and accelerated depreciation for small business bills have already passed the House and the Senate.

This bill will provide a tax discount for unincorporated small businesses to improve cash flow, allow immediate deductibility of professional expenses and expand the fringe benefits tax exemption for work-related portable electronic devices, further reducing red tape.

Small businesses can face proportionately higher regulatory costs than larger businesses because of their inability to take advantage of the economies of scale and in understanding and complying with regulation. Schedule 1 of this bill will provide a five per cent tax discount for approximately 70 per cent of Australian small businesses which are not incorporated, capped at $1,000 per year. Similarly to the company tax cut, this bill extends that benefit in a proportionate way to a greater number of unincorporated small businesses. Australian small businesses are made up of a wide range of different enterprise structures, and this Jobs and Small Business package budget measure is structured to ensure we assist as many small businesses as possible.

Currently, unincorporated business income is taxed at its owner's marginal tax rate. This feature of Australia's tax system means that the company tax cut that we introduced previously would not benefit unincorporated businesses—and, because of this, our sole traders, many of them tradies, mum-and-dad business partnerships and family businesses operating through a trust, would miss out if we only focused on a small business company tax cut. The measures in this bill will ensure all small businesses are entitled to a tax cut, regardless of how they are structured. This tax cut of up to $1,000 for each business owner will help improve cash flow that can be reinvested in the business, hopefully helping the business grow and achieve its potential.

Schedule 2 of this bill provides immediate deductibility of professional expenses for small business. Currently, there are some expenses related to starting a business that have to be depreciated over five years at 20 per cent of the original cost. Under the changes in this bill, new businesses will be able to immediately deduct rather than depreciate over five years. This will not only improve business cash flow; it will improve record-keeping requirements that small businesses face and also hopefully reduce the cost that they incur in dealing with their professional advisers each year. Small business owners will be able to claim the deduction for the entire amount of those professional fees and get on with growing their business and Australia's economy. This measure to immediately deduct professional expenses when starting a business will be available from the start of the 2015-16 income year.

Schedule 3 of this bill reduces red tape within the fringe benefit tax system by expanding the FBT exemption for work-related portable electronic devices. By simplifying FBT arrangements for small business, we can reduce the existing complexity in complying with current rules and improve access for employers to work-related benefit exemptions. Small businesses with an aggregated turnover of less than $2 million will be able to access an FBT exemption for all portable electronic devices that are provided for work purposes. This exemption will be available even if multiple devices have substantially similar functions and have been provided by an employer to an employee for work purposes.

Under the FBT system, fringe benefits are not taxed at an employee's marginal tax rate but are, instead, taxed at the top marginal tax rate. Currently there is an FBT exemption for five categories of work-related items that are primarily for the employee's employment. These categories apply to portable electronic devices, items of computer software, items of protective clothing, briefcases and tools of trade. With the portable electronic device category, an FBT exemption can currently be provided for more than one device provided the devices do not have similar functions.

We recognise, with the development of new products and the increasing overlap in functionality, that it is becoming more difficult for employers to determine which devices can access the existing FBT exemption. These legislative provisions that allow for the FBT exemption for portable electronic devices and computer software have not kept up to date with evolving technology. This bill seeks to resolve that problem. Allowing the existing FBT exemptions to apply to items that have substantially similar functions, as proposed, will simplify the current rules and provide employers with more flexibility in the number and nature of items provided to employees. Simplifying this exemption is expected to lead to a reduction in compliance and red tape costs for employers. More than 30,000 businesses are estimated to initially benefit from this measure.

Overall, this bill, coupled with the other Jobs and Small Business package measures announced by the government in the 2015-16 budget, encourages small businesses to provide their staff with the necessary tools they need to undertake their day-to-day activities but also to help grow the business in which they work. Our government is seeking to create a more competitive system that supports, not hinders, small business growth. The hardworking men and women of Australian small business deserve a government that will provide them with the best opportunities possible to invest, grow and succeed in their small business ventures—because we want to see our small businesses grow to become medium and, ultimately, large businesses.

The coalition government has introduced some terrific measures to ensure Australia is best placed to start and grow small business. The measures in this bill, along with all the measures in the Jobs and Small Business Package, are not only about helping small business but also about creating jobs and building a strong economy. I commend this bill to the House.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for the Environment) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Small Business Measures No. 3) Bill, which implements the government's unincorporated tax discount for small business. As a person who comes from a small business background; who has had skin in the game; who understands risk, reward and the opportunities and benefits of engaging and employing people in the workforce I support this bill. I wholeheartedly welcome these changes and the benefits that they will have for all of the small businesses in my electorate of Paterson.

The unincorporated tax discount is a reduction in the amount of tax you are required to pay on the income of a business that is not a company. That means that the income of small businesses that are run as sole traders, partnerships or trusts will be eligible for the tax discount. It is from these changes that small businesses in my electorate of Paterson will most benefit. Paterson is a regional and rural electorate. We are small business. Small business is the absolute engine of our economy. I am encouraged that as a government we are making these changes to benefit this engine room of our economy, our small businesses. This is because we understand that it is through these small businesses that jobs are created. We understand that, if you remove barriers for and provide opportunities, incentives and encouragement to small business, you will actually grow the employment market. You will build on the 380,000-odd jobs that have been created, the more barriers you remove for small businesses.

Generally, small businesses represent almost 97 per cent of all Australian businesses across the spectrum of business. As at June 2013, small businesses were employing around 4½ million Australians, which accounts for around 43 per cent of private, non-financial sector employment. As I said, small businesses employ round 4.5 million Australians nationally. Small business is huge and the value of small business to our economy cannot be underestimated.

In rural and regional areas, we are seeing some of the larger companies go, and they are not going to be replaced. When Hydro Aluminium left Kurri Kurri, we did not see other companies move in and employ another 500, 800 or 1,000. What we will see is a multitude of small businesses coming in—with 10, 20, 30, maybe 50 and, if we are lucky, 100 employees—coming in to fill those spaces to grow and create opportunities. That is why it is critically important that we do what we can to encourage small business investment, growth, expansion and opportunity.

In a regional electorate such as Paterson, the most common employers, as I said, are small businesses. As at June 2014, there were 8,955 small businesses in my electorate. This tax discount is a reduction of five per cent on the tax payable on business income, capped at $1,000 per taxpayer each year. That is called an incentive. That is called job creation. Even though it is a package for small business, as you take the burden off, as you increase the profitability of a business, you will grow the employment pie.

For sole traders in Paterson, this discount applies to the tax liability associated with their income from businesses that they declare in their annual return. For businesses run through a partnership or a trust, the discount of the tax liability is associated with any business income distributed to them from the partnership or trust and which they declare in their annual tax return. These amendments will leave small business owners in Paterson with dollars, dollars and dollars extra in their pockets.

In my electorate of Paterson, I saw how small businesses were crippled under the previous Labor government. With the red-tape burden and lack of confidence, they were crippled. I have been in consultation with small business owners in my electorate, particularly when they were struggling, as part of a campaign of over two decades now, and I was approached by an incredibly high number of small businesses who were practically drowning in unnecessary red tape that only escalated under the former government. The greatest growth curve under the former government, despite their promises, was in red tape. Small business people should have been putting their energy, their efforts and their resources into growing their business to earn an income—if they have the income, they have profitability; if they have profitability, they can actually employ people. Instead, they were putting their time, energy and efforts into addressing red tape and reporting requirements. That took away profitability and income and, therefore, reduced opportunities for employment.

It is because of this—and, through the regular meetings I have with small business owners, relaying their feedback to my coalition colleagues—that we have mapped out a very clear pathway that is a better deal for small businesses in this nation, including, I am glad to say, those in my electorate. As I said, the majority of employers in my electorate are small businesses.

So it is no surprise that I recently had the Minister for Small Business, my colleague Bruce Billson, visit my electorate. We sat down with the chambers of commerce and discussed the challenges and issues and, importantly, the opportunities that exist for small businesses to grow. These forums were held at Nelson Bay and near Maitland. I thank the Nelson Bay & District Chamber of Commerce, which hosted the first forum, at Nelson Bay; and the Maitland Business Chamber, which held the second forum. That forum was held at Mortels Sheepskin Factory—basically, across the road from my electorate—and coincided with the expansion of that small business. Under this government, Mortels have seen the reduction of red tape, have seen the opportunities and are expanding their workforce, creating local jobs in manufacturing, and they are to be congratulated.

What is important is that each of these chambers of commerce is a unique reflection of the broad spectrum of businesses within my electorate. They comprise lawyers, real estate agents, veterinarians, accountants, tourism operators, farmers, electricians and builders, for instance. They were all present. They all came to talk to the minister and each put to the minister issues that were concerning them. As I said, the overriding issues were red tape and government barriers to growing their business. The two different areas had quite unique issues—one being a largely tourism seasonal market and the other being the rather large regional city of Maitland. I congratulate the minister and his team for sitting down and discussing these issues but, more importantly, for taking on board and listening to all of the concerns that were raised. These forums were a success, because this is the government that is committed to removing those hurdles, those barriers, that small businesses encounter each and every step of the way through.

We want to grow small business. As a government, we have consulted widely on our package. We have engaged with small businesses. We meet with them regularly. We actively seek them out. We want to address the obstacles they are facing. We want to know what can be done to reduce red tape. As a government as a whole and across the spectrum of our colleagues, all the way through to the backbench, we have been providing the feedback to the minister so that he understands from a grassroots level exactly what is wrong. It is because this government understands the actual value of small businesses to a thriving economy that we need to support our small business men and women in our community.

The 2015 budget was a game changer for the hardworking men and women of Australian small business. The amendment of the unincorporated tax discount for small business is part of our Growing Jobs and Small Business package, which is the biggest economic recognition of the small business sector in Australia's history. Small business has been and continues to be the enduring focus and priority for this government. In taking steps to achieve this, we are reducing the corporate tax rate from 30 per cent to 28.5 per cent for small businesses with annual turnovers of under $2 million. It is estimated that up to 780,000 companies could benefit from this measure. I see our Growing Jobs and Small Business package as a package of practical measures designed to help small business to invest, to hire and to grow. We want to enable small businesses to thrive across our nation and to create the necessary jobs that we need in our communities—nowhere more so than in places like my electorate of Paterson.

In summary, the coalition's Growing Jobs and Small Business package is outlined as follows. It will be the lowest small business company tax rate in almost 50 years. The purpose of the bill is to provide tax cuts of 1.5 per cent down to 28½ per cent for incorporated small businesses with an annual turnover of up to $2 million. The unincorporated small businesses will get a five per cent tax discount up to $1,000 a year. Small businesses can claim an immediate tax deduction for each and every asset purchased up to $20,000 from budget night through to 30 June 2017. That, in itself, will have the flow-on effect of these purchases going across the whole of our community. Start-ups will be allowed to immediately deduct professional expenses, which will provide cash flow benefits immediately. We are expanding tax concessions for employee share schemes. These measures provide more incentives for Australian small businesses to create more jobs and to increase training opportunities for all Australians. Most importantly, they are designed to keep small businesses sustainable. We do not want to see boom-bust cycles. We want to see sustainability in business, because if we have sustainability in business we have sustainability in employment. Let me tell you, Mr Deputy Speaker, small business agrees with each and every one of the points that I have outlined under this Growing Jobs and Small Business package.

The provisions also generate changes to fringe benefits tax exemptions on portable electronic devices for small business. This measure will allow small businesses an FBT exemption for more than one qualifying work related portable electronic device in an FBT year, even when the device has substantially identical functions. It is essentially removing a previous restriction in relation to the pre-existing FBT exemptions. The amendments I speak on today will also generate immediate deductibility of professional expenses to small business with an aggregated turnover below $2 million. Previously, these expenses had to be depreciated over a five-year period.

I understand, and the government understands, that the costs of starting small businesses are often overwhelming and can be a deterrent for people taking the step into small business. So these measures will potentially affect two groups who incur expenses for professional advice, taxes, fees and charges from Australian government agencies—commonly known as 'black hole' expenses—in the process of starting a new business: small businesses and those intending to start a small business who are not connected with larger businesses. For those seeking advice on appropriate entity structures, the legal expenses in establishing the entity, stamp duty and the cost of preparing a business prospectus, for example, add up very, very quickly. They are front-end costs, when that money could be placed into helping start the business, grow the business and sustain the business. These are front-end cost, so their immediate deductibility is particularly important. As I said, they will be eligible for immediate deductibility, thereby assisting those small businesses, particularly in my electorate, through providing immediate deduction of professional expenses and increasing the cash flow for business start-ups.

These measures are going to be critically important and nowhere more so than in the agricultural sector of my community. I have around 1,145 small agricultural businesses in my electorate. Mr Deputy Speaker Vasta, you would be aware of the storm events that went through the Hunter Valley, particularly in the Dungog-Maitland-Port Stephens area, where people were put in a desperate situation. So anything that we can do to take the monkey off the back of small business and provide incentive opportunity for people to stay in business is nowhere more important than on the land producing the food and fibre that we need is to be welcomed. I know from my travels through my electorate and from discussions with my constituents that they encourage us to do even more, because they are hungry to be in business. They want sustainability. They want affordability. They have the determination. All they need is the encouragement that a minister like Bruce Billson and that a government like the Abbott government is giving them, which is to go forward to invest, to create, to grow and to deliver the jobs that we need in this nation. I support this bill.

Paul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | Link to this | Hansard source

I am very pleased to rise to speak on the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015. This is an important bill, which will amend a range of tax laws as part of the government's vital jobs and small business package. I would like to emphasise three issues in my contribution to the debate this morning. Firstly, why it is so important to boost start-up businesses and small business. Secondly, the fact that the Abbott government is pursuing a suite of policy measures to address this objective. Thirdly, the specific measures which are contained in the bill before the House this morning.

Let me start by highlighting the importance of start-up businesses and the technology sector in particular. Around the world, start-up companies form a critically important part of the growth cycle. A start-up company is one that is formed from scratch, typically with the aim of commercialising some technology, such as software, medical technology, biotechnology or renewable energy technology. The technology sector is vitally important to create new businesses and to create new jobs, because the evidence suggests that this sector creates new businesses and new jobs at a higher rate than across the economy in general.

I want to cite a recent report by the advocacy group StartupAUS. That report is entitled Crossroads 2015, and the authors of that report noted predictions` that the technology sector has the potential to contribute four per cent of GDP and add 540,000 jobs to the Australian economy by 2033. But, if we want to build a strong technology sector in Australia, we need a strong start-up culture. If you go to Silicon Valley, if you go to Israel and if you go to any of the other tech sector hot spots around the world, what you see is an end-to-end system. The system includes start-up companies being founded in large numbers. There is ready access to finance at both an early stage, from so-called angel investors, and at later stages such as the venture capital stage and, later on, a public offering. Most importantly, there is a pool of talented people to be found—not just to work in such businesses but, indeed, to create and to establish such businesses.

In Australia, we have had some significant successes, and I will mention a couple of companies. Atlassian produces software which helps software teams collaborate. It was founded by two UNSW graduates—Mike Cannon-Brookes and Scott Farquhar—in around 2002. Today, it employs some 1,000 people around the world, and a recent transaction has valued the company at several billion dollars. Another leading Australian tech company is Cochlear, which is a world leader in hearing implant technology. Its global revenue is well in excess of $900 million a year, and it is commercialising and selling a product which is based upon technology developed in Australia—indeed, it is based upon research carried out at the University of Melbourne. These are amongst the most visible of Australia's tech sector companies, and they are companies which began as start-ups and have achieved significant scale.

There is plenty of activity throughout the start-up sector in Australia, and some of the earlier stage companies are not as visible, but they are certainly very impressive when you get a sense of some of the things that they are doing. For example, if you visit the tech sector co-working space Fishburners in Pyrmont in Sydney, you feel a palpable sense of energy and dynamism. You notice the diversity of the people there and the many start-up businesses they are working to get off the ground. One such business is Wattcost. The founder, David Soutar, explained to me that Wattcost's product will allow you, as a consumer, to monitor your home power usage on your mobile phone without needing complicated installation.

Another trend which we are increasingly seeing in the start-up sector in Australia is growing support coming from large corporates working with start-ups. I recently had the opportunity to visit Telstra's accelerator, muru-D, based in Paddington in Sydney, which is home to a diverse range of start-up businesses. Every few months, there is a new class of start-ups that comes through. These businesses secure a spot at muru-D for six months. During that period, they receive tailored support, including legal services and access to specialised skills within Telstra, such as, very importantly, the user experience team. Telstra provides a cash contribution and, in return, takes an equity stake. On my visit to muru-D, I had the opportunity to speak to the chief executives of a number of these start-up businesses. One, for example, serves the inbound Chinese tourist market, offering customised experiences. Another is a business called Disrupt Surfing, which allows customers to order surfboards with customised designs.

What is in it for Telstra and the corporates that are supporting start-up businesses in this way? First of all, it allows them to be seen to be supporting the Australian technology community. But it also gives these companies access to start-up talent and cutting edge ideas. Of course, ultimately there can also be a commercial advantage, should it be the case that some of these businesses become very large and become substantial users of communication services. We are seeing similar trends in the start-up sector in other industries—for example, a range of finance sector businesses. The new Sydney fintech hub Stone & Chalk is an illustration of this trend. It has received seed funding from many of Australia's largest financial institutions, including: ANZ, HSBC, Macquarie Group, Suncorp and Westpac.

Clearly, if we can increase and elevate our level of start-up activity in Australia, the economic benefits over a number of years will be significant. The public policy paradox is that policymakers can identify this goal, but, ultimately, it is only individual entrepreneurs prepared to take significant risks who can generate the flow of start-ups that we need. The role for government, I would suggest, is to help create the conditions in which entrepreneurs are prepared to take these risks.

That brings me then, secondly, to the suite of measures which the Abbott government is pursuing to stimulate start-up activity in the Australian economy—to stimulate start-up activity, to stimulate entrepreneurship, to stimulate innovation. For example, there are our commitments to streamline business registration processes to make it quicker and simpler to set up a new business.

Our work in relation to employee share ownership plans is extremely important. Employee share schemes are vital for start-up businesses. The reality is that start-up businesses generally are not in a position to offer generous cash remuneration to talented employees. What they can offer, though, is an opportunity to share in the upside should the business do very well, and that is typically done through inviting employees to participate in an options plan. That is standard practice in the technology sector around the world—in the US, in Israel, in Europe and in many other markets where start-ups have a significant role and where their technology sector is vigorous and active.

Unfortunately, the previous Labor government thought differently. It was hostile to employee share schemes, and the tax settings introduced by the then Treasurer, then and now the member for Lilley, were extremely unconducive to offering employees the opportunity to participate in options schemes. In fact, Australia had a tax treatment under Labor which was out of step with most of the rest of the world because you were subject to being taxed on the value of the options in the year that they were issued to you.

We have taken a very different approach. We have changed the law. With effect from 1 July this year, the law in Australia is now aligned with that in most other markets. It consequently makes it much easier for start-up companies to be able to offer participation in options plans to employees, and they are once again competitive in attracting talent, bearing in mind that in doing so they are competing with other employers who are seeking to attract these skilled IT employees.

The Abbott government have also announced that we will remove obstacles to crowdsourced equity funding. Current legislation in Australia means that equity crowdfunding platforms face some significant regulatory barriers. I recently had the opportunity to meet with the founders of Equitise, Chris Gilbert and Jonny Wilkinson, and they explained to me some of the challenges that a crowdsourced equity-funding business model faces in Australia. Equitise is an Australian business, but it was officially launched in New Zealand late last year because of the fact that the New Zealand regulatory settings were changed some time ago. In Australia at the moment there is still some work to do. The Abbott government have made a commitment that we are going to change the laws to facilitate crowdsourced equity funding. We have committed to bringing in legislation in the spring sittings this year. That matter is, happily, in the hands of the energetic and irrepressible Minister for Small Business. He is pursuing it vigorously, and that is good news.

We have also announced changes to the significant investor visa. People who are issued such a visa will now be required to invest at least $500,000 in eligible Australian venture capital or private equity funds, which in turn invest in start-up and small private companies. This again is another important policy measure to stimulate innovation, to stimulate entrepreneurship, to stimulate the start-up sector.

Let me turn thirdly, then, to the specific measures in this bill, which form another part of the overall suite of measures I have talked about to stimulate small business and to stimulate start-ups. This is the third of four bills that the Abbott government has introduced to deliver the Jobs and Small Business package. The measures in this bill will provide improved cash flow for start-up businesses and small businesses and will reduce red tape.

A key measure in this bill is that individual taxpayers with business income from an unincorporated small business will receive a five per cent discount on the tax payable on their taxable income from that source, up to a cap of $1,000. This is important because some two-thirds of Australian small businesses are not incorporated, so this is a measure which gives unincorporated small businesses equitable treatment as compared to incorporated small businesses. Of course, we have announced a reduction in the company tax rate for small businesses in corporate form.

Another important measure in the bill before the House this morning is the immediate deductibility of professional expenses to small businesses. This is very important. Often, when a small business is established, the legal and professional costs are quite significant, and that is certainly the case for start-up businesses in the technology sector, yet today the tax treatment is such that you cannot write off the full cost of those professional expenses in the first year; you have to spread it over five years. We are changing that so you can have immediate tax deductibility for those expenses, and that of course will provide an immediate cash flow benefit which is of great value to businesses at that very early stage of life, when cash is often in short supply.

The third important measure in the bill before the House this morning is the change to the fringe benefits tax treatment of work related devices—iPhones and other smartphones, tablets, personal computers and so on. Previously, the way that the fringe benefits tax legislation worked essentially made it difficult to get the desired tax treatment in respect of an employee with multiple devices, even though, as we all know, typically in businesses of all kinds, and certainly in tech based businesses, an employee will very commonly have a laptop, a tablet, a smartphone and in many cases even more devices than that. We have changed the fringe benefits tax treatment so as to not distort business decisions. That is a measure in the bill before the House. It applies to small businesses with an aggregate turnover of less than $2 million per annum. This is going to deliver red-tape benefits but also prevent fringe benefits tax treatment affecting important business decisions as to the choice of tools which are provided to employees to do their work.

The role of small business and, within that, the role of start-up businesses are absolutely critical. The Abbott government is pursuing a wide range of policy measures to stimulate and to facilitate such businesses, and the measures contained in the bill before the House this morning form part of that suite of policy measures. They are sensible, they are stimulatory, they will encourage business, and I commend them to the House.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I notice that we have a group of young people sitting in the gallery: I welcome them to the parliament today, and I hope that they are enjoying their time here in the capital.

Mr Acting Deputy Speaker, as you well know, small businesses are a key driver of Australia's economy. They underpin the growth in innovation and provide millions of jobs for Australians right around the country. The measures we see today in this bill, the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015, give even greater confidence and encouragement to the small business sector. Small business is an absolute priority for the Abbott government, clearly demonstrated by this bill before the House today. I need to acknowledge the very persistent efforts by the Minister for Small Business, Bruce Billson, the member for Dunkley, as well as his absolute passion and dedication to his portfolio. He has been in this role for some years and has been a very dedicated and enthusiastic minister for small business. The small businesses I talk to know that with this minister, they have an absolute warrior on their side. And not before time: I think there were about five or six small business ministers under the previous Labor government—it was like a revolving door! And Labor ministers treated small business as basically drawing the short straw in portfolio applications. It was shabby and dismissive treatment indeed, and I despaired of that through those dreadful six years of Labor. The coalition government has a totally opposite approach. With our small business minister who is in cabinet—in cabinet—and who is part of Treasury, we are literally putting our money where our mouth is. For the first time ever in Australia, small business is at the table every time a decision is made by cabinet. No matter what the proposal, no matter what the legislation, no matter what comes into cabinet, small business has its place at the table—and there is no-one that we would prefer to see there other than the current minister.

It is simply not enough to mouth the words 'we support small business', like some throwaway line. A government must actively deliver policies that foster and grow businesses—as we are doing, in part through the bills we see here. Small business is more important than ever in the Australian economy. We in this place are graphically aware that the Australian economy is in transition and faces significant structural challenges from both domestic and international factors. A move to broader-based growth is happening, and small businesses are a key part of growth. So we need small businesses to have even more confidence to invest, to grow, and to employ even more workers, given that small businesses employ nearly half of the workforce in Australia.

What I really like about small business is this: we often see the very first job opportunity which a keen young person has is actually in a small business when the owner gives that young person a go and says: 'Yes, I will support this young person in my small community.' And at the other end of the spectrum, I often see that it is—again—a small business where the owner says: 'I will give a mature age worker a go in my small business.' I see this all the time in my electorate of Forrest, where there are nearly 13,000 small businesses. In Western Australia, around 97 per cent of all businesses are small businesses.

The impact of small business is frequently underestimated, but it is so critically important in small rural and regional communities. It is the small businesses that are part of our communities in so many ways. They support all of our organisations—community services, and sporting organisations. It is our small businesses who are there and who open up when I as a farmer might need them at whatever hour of the day that might be. Below-trend economic growth has driven increasing unemployment, particularly youth unemployment, and that is why small business is so important. A combination of factors such as low interest rates and the falling Australian dollar will encourage employment and business growth over the longer term. There have been positive signs that this is already happening, with job advertisements increasing.

The coalition government's Growing Jobs and Small Business package is the biggest economic recognition of the sector in Australia's history—that is profound: in Australia's history. Make no mistake as to exactly what we are offering, Mr Deputy Speaker: we are offering the lowest small business company tax rate in the almost half a century since 1967. We are cutting the corporate tax rates from 30 per cent to 28.5 per cent for small businesses with an annual turnover under $2 million. Not only that, we are also offering the same incentive to unincorporated small businesses through a discount of five per cent, or up to $1,000, for 1.7 million small businesses that are unincorporated. That will give them that same incentive to innovate, to invest, and to employ. Small business companies will pay less tax. We are providing accelerated depreciation arrangements to small businesses and primary producers. We are simplifying depreciation rules in tax law to increase the threshold for immediate tax deductibility from $1,000 to $20,000. Our farmers will be able to immediately deduct all eligible capital expenditure on fencing and water facilities. Fodder storage assets will be deductible over three years.

These very practical budget measures reflect our understanding of the complex nature of small businesses across our country. It also demonstrates our commitment to those men and women who invest their own resources into small business—who have a go, who take enormous risks, and who employ others. We cannot undervalue or underestimate their efforts. Small businesses also have the advantage of being adaptable and flexible. They are frequently able to respond profitably to changing circumstances—and they will run with their instincts. Studies indicate that it is small businesses that are often the entities which test and pioneer innovative ideas and business practices which are really critical to future economic growth, as well as critical to job prospects and improved living standards. While small companies play a significant role in the Australian economy, they also face a unique set of operational challenges and, as a consequence, typically have higher failure rates than larger companies. As we know, another issue for small business is often access to finance. Funding for small businesses is essential to facilitate productivity growth and job creation. Improving access to finance for small business was one of our commitments.

I want to go back to talking about the farming sector. It is amazing when I am out in the community how many people do not understand the fact that farmers are not just farmers but are also small-business people. Delivering support and incentive to farmers, small businesses and rural communities, particularly in drought-affected areas across Australia, will facilitate investment in longer-term preparedness measures. That is what we have done by providing $70 million to assist those primary producers to claim accelerated depreciation for water facilities, fodder storage and fencing. Farmers will be able to claim more favourable accelerated depreciation for water facilities and things such as silos. This will allow farmers to more effectively store and use water and fodder. If you are on a farm, water and fodder are two critical issues and two critical costs. Water storage, and particularly fodder storage, are very important and are a key part of on-farm economies and efficiencies.

New fencing will also be able to be depreciated in the first year, meaning more money in farmers' pockets sooner. Cash flow is frequently a problem not only in small business but farming small business and, specifically, in drought-affected areas. Drought preparedness was a key priority identified as part of the Agricultural Competitiveness White Paper process and these accelerated depreciation measures will create an incentive for farmers to do more with on-farm preparedness activities and to increase their productivity.

The depreciation measures are in addition to the $333 million in drought support that was announced previously by the Prime Minister. There was $35 million for shovel-ready, local infrastructure and employment projects, and $25.8 million for programs to manage pests, animals and weeds in drought-affected areas. These are all part of this package. There was $20 million to expand existing social and community support programs, particularly access to mental health support and counselling services for drought-affected families and communities.

It is hard to understand these things unless you have been through this situation yourself and have seen the despair that goes with being in a area affected by drought over a long term. It is hard to understand it unless you have seen what it does to your own business—unless you have had to make decisions about your livestock, about whether you can or cannot plant, about what your future might be, about whether you can afford to actually send your children to school or keep them at school, or whatever stage your children are at, and about what it does to the family unit.

In my work in the farming sector I frequently saw a lot of women, particularly, in farming businesses bear the brunt when things got really tough. It is interesting to see how people respond. In a manual environment, the men would get on with the daily work of the farm and do what they could do and what they could control. The women often had to manage not only issues such as drought, a lack of income, and managing the family, but also the critical issue of family relationships. In small regional communities that is often some of the key work that women do. It is not only just within their community, but as part of the family unit.

One of the toughest challenges facing families on the land in this uncertain environment is that of managing the family unit, because most of the businesses on the land are family-farming businesses. The effect on the family unit is intense. The relationships and the impacts have to be managed. It all comes at a cost, so the investment that the government has made in that space is particularly important: the $1.8 million to fund additional rural financial counsellors to help people in drought-affected areas, to help people make good decisions about where they are at as a business and as a family. It helps them to know what tough decisions they need to make and how this will impact on the family as well as the business. These are the very real and confronting issues that are faced over and over again.

I experienced this frequently during the dairy deregulation years, given the number of small businesses that had no choice but to exit the industry. I worked with a number of farmers and farming families during that time. I saw the stress and the pressure. I saw it firsthand and the changes I brought in people's personal health and circumstances. It was extreme. I saw damaged people. There were people who, even five and 10 year on, would come and give me a hug if they saw me in the supermarket or in the paddock or on the rails at the sale yards. After all that time they would still sometimes break down in tears, because we shared that process and I shared what they went through. Unless you go through this process yourself, it is impossible to understand what these people go through. It is that human element that is most impacted.

It is the same in the dairy sector. I worked with a group of women who were dairy farmers themselves but also were part of family businesses. So many of them had to manage the relationships that changed when the family and the business got into significant financial difficulties. The pressures came from everywhere. It was like a vicious circle. The women were in the middle of that, trying to manage the relationship between perhaps fathers, sons and daughters, the decisions they had to make about the business, the family, the education and the future. All of that compounds into the family unit, so the resources that are put into this place are particularly important. I cannot speak more highly of those who engage in this space. Equally, for those who have to make very tough decisions, it is a matter of having a plan for what is next, a plan B for what they will do when the change has to happen.

In supporting the bill before the House, I am absolutely committed to small business. Equally, I am very proud to be part of a government that has very clearly, consistently and continuously demonstrated its commitment to small businesses of all types in this nation.

Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

Indeed, one of our most important issues is small business driving Australia's economy back into a strong position, which it was not able to do under a Labor government. It is quite simple. Too often, Labor, held captive by special interest groups, forget that it is small and medium businesses that generate the economic confidence and the cycling and multiplier effects that see Australian money kept right here in Australia, driving new jobs and opportunities for young Australians, in particular.

Part of my job in Bowman is to make sure that every local can engage with the real economy. In my electorate, there are 3,000 Australians who are receiving income support right now. Many of them are doing so for very good reasons. But, 800 of that 3,000 people, not all of them young, are absolutely job ready and looking for an opportunity to do the simplest of tasks, even those without training. But they are denied. Imagine just how soul destroying it is to turn up 10 times every fortnight to look an employer in the eye at a job interview and be told no. It is soul destroying to have it happen once in your career. But for those on Newstart who are trying to remain eligible for their payments it is an experience that they are subjected to daily. This must change.

We must not measure a job seeker's desire for work by how many job interviews they front up to and are rebuffed at. We need to measure that will on their ability to pick up a pen or shovel or to join an NGO and be part of a team, shoulder to shoulder, cheek by jowl, with other Australian workers. Every Australian deserves the right to be able to wake up on a Monday morning and show up somewhere to learn a capability and, from that, gain opportunity in this incredible global economy and the role Australia plays in it. But our welfare system has failed those people.

They are not all 17 and 18 years of age. They are not all people who are working in the fast food industry, trying to hold on to their penalty rates. There are 50-year-olds and above who feel that they have been ejected from the economy and completely disconnected from it. In my electorate, there are 800 such people. You can multiply that number by 150 electorates. These are broken souls with broken lives. They do not deserve that fate in this great nation. We are a nation big and generous enough to give everyone ago and not sideline people and disconnect them from the opportunities Australia can offer.

If you do an international comparison, you will find that Australia has the highest proportion of dwellings that have under their roof not a single person with a job. We have the highest proportion in the OECD of households utterly reliant on welfare payments to put food on the table. We have to break that nexus. We have to break into those households and offer just one person the opportunity to earn a wage, something that most of us here take for granted. But some people do not take it for granted, particularly in poorer parts of our large cities and in our regional cities where industry is disappearing.

Paradoxically, in remote Australia, employment rates are fairly high if you are lucky enough in the lottery of life not to be Indigenous. If you are Indigenous, of course, the figures are alarming. It is virtually impossible to set up a small business in an Indigenous community. It is impossible to lease a space to run a business. It is impossible to own your own home.

I want to give a snapshot of that. In the tiny western Arnhem community of Ramingining, if you finish high school—and the odds of that are slim—the odds of you finding a job in your community are at five per cent. What happens to the rest of those people? They are committed to a life of welfare. The odds of someone ultimately finding any form of employment in that community is 15 per cent. It is almost exclusively public sector salaries—money transfers into Indigenous communities handed out by government to do things the government want you to do. What is missing in Indigenous communities is small business, self-evidently. What is missing entirely is a private sector of any form except the local store, which receives government money to remain viable. I support fully the opportunities of training Indigenous people in that one small business called the community store. But, in Australia, we have 67 per cent workforce participation. In Indigenous communities, we have 15 per cent public sector workforce participation and barely a private sector job for hundreds of miles.

How did we create this? How did Australia manage to put together a remote Indigenous picture of zero private sector? That is the complete absence of small business and the ability to benefit from the legislation we are debating today. There is simply nothing to do and no possibility to own a home or business or to give it a red-hot go. There are Indigenous Australians who could easily run a barbershop, bakery or takeaway store. There are a whole range of services they could run, but they are thwarted at every level by the Native Title Act and by an overall despondency that prevents people from giving it a crack. It is okay to fail. That is at the heart of entrepreneurship. But it is something that is completely removed from these parts of Australia.

I will come back now to the mainstream and cities around this country where unincorporated small businesses were a blind spot for the Labor government for six years. It took the Liberal Party and this coalition government to recognise that we need to reward unincorporated small businesses. If you do not, company tax cuts benefit only 30 per cent of businesses in this country. We are delivering an elegant solution by offering a five per cent discount on the tax payable for individuals who have a business income from a business that is not incorporated. It makes complete sense. It is roughly equivalent to the 1.5 per cent company tax rate that is enjoyed by those whose businesses are incorporated. In essence, it is capped at around $1,000 per individual. That is incredibly welcome to those small businesses around the country.

I want to set the picture here. In my electorate, we have around 1,500 incorporated small businesses. But many, many more small, unincorporated entities are giving it a go, with people working from home and seeing if their business can fly before determining if they want to actually lease a location. By giving them these concessions to set up and use a single portal and immediately write off some of their costs, you are activating the very engine room that is going to get us out of this mess that we are in.

No-one in this chamber, regardless of how self-important we are, can do anything about collapsing commodity prices. None of us can do anything about the debt mire that Europe finds itself in. Australia was heading in the same direction until we changed government and turned the plane out of its death dive. No-one can do anything about the challenges we face from South-East Asia and the missed opportunities because we do not have an open mind towards foreign investment, but we can do something for our small businesses.

We can do something for the people who sweat over spreadsheets every night, for the people who never know who will walk in the door the next day, for the people who never know whether they will have an income the following day. These are people who take a chance; these are people who take risks. They are not people who receive a regular public sector income every two weeks and who can add on top of that overtime whenever they feel like it—they do not have that luxury. They do not live with that certainty. But, without them, we are nothing.

We are one of the great small business nations on earth. Maybe after the Czech Republic, we have the most number of small businesses per head of population. So we have a proud heritage, one that we can celebrate. But if you do not introduce things like this bill when you are in government then you do not do the right thing by small business. Do not take my word for it—you would expect me to support it because I am on this side of the chamber. Actually talk to the people who know. Talk to the representative groups that are looking out for small business and that understand that the only way to multiply money is to (a) keep it in your country; (b) spend it on people in your own community; and (c) be value-adding. There is no value-adding in employing more public servants. You pay them a salary out of the tax everyone kindly pays, but there is no multiplying factor for a public service. They are not in that industry. The bigger make your public service, the more you crowd out innovation. That is why, over here, we say: it is not that we have anything against public servants; we just do not like borrowing from China and the Middle East to pay their salaries. If you are going to have public servants, that is fine, but make sure they are on the front line delivering a service. Those are utterly reasonable propositions.

Take Queensland. I am the only doctor here that works in active practice at the moment. I work in a wonderful hospital most Fridays. Under the former coalition state government, waiting lists were diminishing as we set up incentives for doctors to get through their waiting lists. Within two or three months of Labor's return to power in Queensland, around the corner came the waiting lists, and they are now growing again. That in itself is bad enough. But, in relation to the health system, Labor went to the election saying, 'We are going to re-employ all of those nurses that were taken away by Campbell Newman.' When we went to the hospitals in the last month and said, 'Where can we put the nurses?' the hospitals said, 'We don't know. We're actually doing the job okay without all those nurses,' because the nurses were not doing face-to-face work at all. They were second- and third-tier education nurses, not looking after patients. The hospitals did not actually need them. It was an Anna Bligh strategy to hide unemployment by employing more nurses. The great majority of them never saw a patient. Now we have hospitals that do not need them. They are working perfectly well without the extra non-service-providing nurses. Labor can put them back in out of ideology. Labor will pay their debt back to the unions and employ them. But you will not see one change in standard of care or in the number of services provided unless they are on the front line. At the moment, the front line is adequate in A&E, but we are watching waiting lists very carefully, as they are already blowing out. I have diverged slightly, Deputy Speaker, and I appreciate your indulgence.

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

I was going to cite relevance; I am getting there.

Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

You were very good to me to not cite relevance, but thank you for letting me deliver that important anecdote about entrepreneurship. Ultimately what we want is private provision of these services that is efficient. If you take a small business that operates cancer treatments, they have just 11 people per linear accelerator and deliver cancer-treating services all over this country. Today, as soon as you step into a public hospital in New South Wales, there are 23 people running around that same linear accelerator doing 50 per cent fewer treatments. Please think about it. There are nearly double the number of people scurrying around the machine, from nuclear physicians through to cleaners, seeing 50 per cent fewer patients and treating them for their cancer. If it is your relative waiting for public cancer care, how do you feel about being told there is no treatment for six weeks because 'we are full'? You are not full; you are just not efficient and you are using way too many people to do way too few services.

I can understand that in the public system the slower you work, the more money you save, but that should not be how our health system works. At the moment, in too many state systems, it is. That is why the small business notion of having some competition in the area of cancer care is so important. In this case they are incorporated small businesses, but it makes no difference; they all have to start from somewhere. Our great small businesses often begin as unincorporated entities.

If you are living in a remote community, you deserve to be able to start a small business and give it a go, but there are so many Indigenous Australians who would love to give it a go and cannot. One of the great achievements of the Parliamentary Secretary to the Prime Minister, Alan Tudge, is his determination to see basic ratios of government contracting going to Indigenous owned and controlled business. That is a really important start. But federally we do not control a great deal of that sector. We need the states and territories to agree to the same thing. When there is work to be done in the community, let it be done by the local people.

Was that Labor's approach? Of course not. They trucked in the bureaucrats and they called in the remote housing providers and they built houses for Indigenous Australians while Indigenous Australians were spectators. Since when was housing construction a spectator sport? The argument was that they had to build these houses quickly. They were built quickly, badly and wastefully, when a small business incorporated in each of those communities could have done that work, could have given basic skills to young Indigenous people to erect dwellings. They are flat packed these days. They come in on a truck and they are up in four weeks. It is not a complex job anymore. It simply needs to be supervised by someone who knows how to do it. We could have done that in every community. We passed it up. That generation of young Indigenous Australians never had a chance to be part of their own small business. They were occasionally allowed to sweep the slab in the morning as part of their mutual obligation, and then they were sat on the side while the driven-in employees, who were mostly from large towns and cities, did the job. That was a disgrace and that was a passed-up opportunity that could have seen trained tradesmen, young Indigenous tradies, now travelling around remote Australia doing the work in other communities. Forget that. Labor blew it.

Now what we have is a government absolutely committed to small business; we are obviously committed to tax cuts but, more importantly, to tax cuts for 70 per cent of unincorporated small businesses. As I said, do not believe me—listen to ACCI. They acknowledge small business is the engine room of the Australian economy. They know you need to be able to immediately deduct these legitimate professional costs associated with setting up. What is the point of celebrating the fact that you tell people to wait up to five years to write stuff off when your business, more than likely, will not even exist then? We have to give them a start. We have to cultivate small business. We have to encourage Australians to have a go. I have made my point that that needs to be in Indigenous Australia. I have made my point that it needs to be within my electorate. I have made my point that we need to recognise the importance of entrepreneurship and of small business having a go. We need to recognise and salute people who have chosen that as their profession, thank them for the fact that Australia has one of the strongest small business sectors in the world and recognise that only the coalition is looking after their interests.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

It is wonderful to have the opportunity to speak on these very important measures that have been championed so effectively by the Minister for Small Business. The measures, which touch on taxation, also afford the opportunity to talk more generally about the importance of creating a low tax environment in Australia and so provide a contrast to some different approaches.

In this bill there are three important measures, the first of which is a simple tax cut on the income of unincorporated small businesses. Incorporated small businesses were provided with 1½ per cent tax cut in the budget from 30 per cent to 28.5 per cent. But 70 per cent of small businesses are not in fact incorporated and so it would not be fair not to provide a commensurate benefit to those unincorporated businesses, and that is precisely what this provision will do. There are many hundreds of thousands of sole traders and millions of entities that fit under this provision, and they will receive a five per cent deduction in their annual tax bill up to $1000—that is $1000 that can be reinvested into growing their business, and that is absolutely appropriate.

There is another important provision related to the deductibility of professional services fees. One thing that we can all confidently state is that there is no small business out there that enjoys paying professional services fees, that these are minimum cost of entry and something you have to do in small business. That is particularly so in setting up a small business: there are issues about the structure of the company, the board, insurance, setting up the accounts correctly, making sure all the right forms have been filled out with ASIC. Frankly, none of that is fun, but all of it is required. Under the existing scheme you pay those fees now, but you are only able to deduct those expenses over a five-year period. So you might pay $30-40,000 to your local lawyer, accountant, et cetera to set up your business and then you have to wait five long years to get the money back, effectively as a loss through your tax return. The underlying concept of depreciation is that certain assets which sit within a business should be expended over the time that reflects their useful life—machinery, computers and so on. Professional services fees really have similar characteristics to other expenses which are expended on a cash basis in the year they occur. This is a very good initiative and will assist many small businesses around the country to get more cash back from tax deduction they claim on the cost of those professional services.

There is also an existing provision in the fringe benefits tax rules, which is a hangover from an earlier era, and it only allows small businesses to provide one work related device to employees without attracting the fringe benefits tax. We know now that devices which are provided to employees are not some feature of a nice salary package; they are absolutely core to people's activities in business. We are spending three or four hours a day on mobile devices, and much of that time is business related. The notion that it is a salary-packaging benefit is illogical, and I suspect there are many employees who would not see the provision of a work iPad as of great personal benefit, as it requires constant attention to work activities. In future for businesses with a turnover of less than $2 million these devices and other products provided to employees will not attract fringe benefits tax.

I recently visited Studio Shirts in Padstow in my electorate with the Treasurer. It was a tremendous visit, where we were able to touch on the impact of these various initiatives for small business. Roger Touma and his team do a fantastic job in designing and manufacturing shirts, pyjamas and a range of other clothes. They employ quite a few local residents. Roger told the Treasurer and me that since the budget he had seen a substantial increase in orders for his shirts and other garments; he believed it was a consequence of the confidence engendered by these small business measures. Roger's business has a turnover of more than $2 million and so does not qualify for these measures, but nonetheless it is benefiting from these initiatives because many of Roger's clients are businesses with smaller turnovers—small retailers, mail order companies and so on—that are ordering more shirts now than in May. That is really good news.

There are lots of great small businesses in my electorate. Constance and Alexis Barberakis do a fantastic job at the Spot Cafe at Riverwood. These two young entrepreneurs are sisters in their early 20s, and they are building a business that is much loved by the local community. We want to support those kinds of businesses. We want to support Aaron Mi and his business, Taste of Shanghai, at Hurstville, which probably has the most popular dumplings in Banks. That is saying something, because we have many dumpling restaurants, but the Taste of Shanghai is a fantastic example of a great small business. We are proud to support them.

These measures are about tax, and there is nothing more fundamental to the activities of the federal government than getting the tax system right

It is good to have the Parliamentary Secretary to the Treasurer here for these remarks, but it seems to me that it is important in any construction of tax policy that we look very carefully at what impact it will have on business and households. An obvious point is that we must look very carefully at the impact of tax policy on business and households. It is notable that, according to Credit Suisse, which conducts as global survey of household wealth, the median net wealth in Australia is the highest in the world. As of late 2014, the median net wealth in Australia, according to Credit Suisse, the respected investment bank, was the highest in the world. That suggests to me that it is incumbent upon government to not do anything which puts that status at risk, because the fact that we have high median net wealth is a very good thing indeed.

The largest component of household wealth is owner occupied housing, but the second and third are very relevant to this discussion, because they are two areas where the opposition is proposing to introduce taxes that will have substantial negative impact on our community. According to the ABS, most recently, the average household has about $132,000 in superannuation and has about $129,000 in investment properties. So the second and third largest sources of wealth for Australians are superannuation and investment properties.

So, what should a government sensibly to? A government should sensibly minimise tax and not do anything disruptive that is going to make the accumulation of assets in the second and third biggest asset classes more difficult for Australians. But the opposition is proposing to do precisely that. The shadow Treasurer has said very clearly that the opposition proposes to increase taxes on superannuation for hundreds of thousands of Australians—not only Australians who have already retired and are drawing on superannuation, for whom there will be a tax increase if they earn more than $75,000, but also for Australians who are in the phase of accumulating superannuation, if they should earn more than $250,000. Those are the figures that the opposition says today, but clearly there is every chance of those changing to the detriment of Australians in future. So, it is a matter of significant increases in taxes affecting hundreds of thousands of Australians in the second largest category of assets for Australian households. That just does not make sense, and that is something this government strongly opposes.

The other tax area that is very fashionable to debate in certain quarters at the moment is so-called negative gearing. The opposition has demonstrated a very clear willingness to look at increasing taxes on housing, effectively by changing negative gearing. It is important to understand what negative gearing is, because it seems to me that there is sometimes a lack of clarity about what negative gearing actually means. It actually means that if you lose money on something through the fact that you are paying more in interest than you earn from it, then you claim a tax deduction. That is it—that is all it means. To repeat, negative gearing means that if you lose money on something because the cost of the interest exceeds the revenue you get from it, you get to claim it as a tax deduction. That principle is completely enshrined in the way that all Australian businesses operate, because you can always claim interest costs against revenue. It is also important to point out that negative gearing does not simply apply to housing. There seems to be a sense that negative gearing is some special thing that is just created for housing. It is not. It is a broader principle in our taxation system that, if you lose money on a profit and loss basis because the interest costs and other costs exceed the revenue, you obviously claim tax because you effectively lost money on it in that year. That is the principle. This government is very strongly committed to defending negative gearing, but the opposition is plainly not committed to that at all.

But what does it mean? Investment property is the third-largest source of wealth for Australian households. What the opposition is proposing potentially to do is increase taxes on people who seek to build an investment portfolio. That is basically what it comes down to, despite the fact that the principle of negative gearing is very simple: if you lose money on something because the cost of interest and other things exceeds the revenue, then you get a tax deduction. It is a very important debate, and, as in all things, clarity is important.

The other thing the opposition seeks to do is reintroduce a massive carbon tax. It is going to be very bad for Australia—

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

Can I bring you back to the bill before the chair. If you can draw a line where you are going. I have been very good with latitude but I would like to see the relevance of this one.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

Indeed, the bill is about taxation measures to help build the Australian economy.

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

Small business.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

What I am seeking to do is contrast the very negative impacts on small businesses, and indeed on all Australians, of a massive electricity tax, through the carbon tax. We know that at its recent conference the opposition proudly committed to an extraordinarily high target, which will massively reduce Australian GDP and see power bills go up by 78 per cent. That is something to which we are implacably opposed, and will continue to be. In summary, these are important initiatives for small business and it is very important that they get through the House. I strongly support the bill.

Kelly O'Dwyer (Higgins, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I am delighted to stand in this place and speak on the Tax Laws Amendment (Small Business Measures No.3) Bill. The government has introduced legislation for three more measures to support small business as part of the 2015 budget's $5.5 billion Jobs and Small Business package. In essence, this is a bill that cares about small business. But why do we care about small business? First, because every business starts as a small business; second, because the coalition understands small businesses are the engine room of the Australian economy; third, because small businesses provide employment and with it true economic security and opportunity for Australians; and, finally, because the coalition understands that you have to generate wealth for individual and community prosperity and in order to get the revenue that the government needs to provide services and infrastructure you need to be able to have that wealth generated. It is, after all, business and not government that ultimately generates this wealth.

The coalition understands that by growing the economy we grow wealth, which means the government is better able to provide for Australians now and into the future whilst keeping taxes as low as possible. The coalition understands that the government's role is to create the right settings to unshackle business from onerous and/or ineffective regulation and encourage growth. Ninety-six per cent of all Australian businesses are small businesses and they represent the largest employer by sector in our nation's economy. My electorate of Higgins has over 20,800 small businesses, each contributing significantly to our local economy—from the cafes to the restaurants to the retail outlets such as florists, there is an abundance of small business activity in my electorate. I also have shopping precincts in my electorate that are destination points for people who want to do fashion shopping, whether it is High Street Armadale or whether it is Chapel Street in South Yarra. In my electorate I also have the largest shopping centre in the Southern Hemisphere, Chadstone Shopping Centre. All of these strips and centres have small businesses in them that help to grow our economy and employ people. Importantly, many young people begin their working life in small business. Pleasingly, in 2013-14 we saw strong growth in the small business area, with over 280,000 new businesses established providing opportunity for today's youth to get the start they need.

While many issues in this place are of genuine concern to Australia's young people, the ability to find employment and build a career remains rightly fundamental to young Australians and, as we know, that is essential in creating a secure and ultimately happy life. In addition, women represent one in three small business owners and notably it is women who constitute the fastest growing cohort of small business owners in Australia, with an increase of four per cent in the 12 months to June 2015 compared with an increase of 1½ per cent in male business owners over the same period. I am equally pleased that these measures introduced today will help over 400,000 women small business owners, as well as entrepreneurs and job seekers.

This bill will ensure that all small businesses receive a tax cut—no matter how they are structured. This measure will provide an automatic boost to the 1.7 million unincorporated businesses—sole operators and partnerships—to grow. By providing individuals who draw their income from an unincorporated business with a five per cent discount on the tax payable on their taxable income, we are able to create a lower taxing environment. This tax offset will be capped at $1,000 per taxpayer per year. This will give a range of small business owners, from tradies who operate as a sole trader to the mum-and-dad-run milk bar—similar to the one my grandparents started up all those years ago—through to family businesses operating through a family trust.

In circumstances where we are able to lower taxes, we should. Lower taxing environments encourage innovation and entrepreneurship. The government's measures will encourage and enable small businesses to grow and reinvest in ideas, equipment and people. This tax cut will increase cash flow for small businesses and lead to an increase in economic productivity. The coalition does not believe that you can tax your way to prosperity in order to unleash the potential of individuals and businesses. We need to do everything we can to make sure that we minimise the tax burden on all Australians. All new small businesses will be able to immediately deduct some start-up expenses, such as legal advice and registration fees, that previously had to be depreciated over five years. This will improve cash flow and reduce red tape. This will mean that businesses will not have the burden of having to track these expenses over the five-year period and will be able to spend less time dealing with regulations and more time in other areas such as improving or expanding their businesses.

This bill will also ensure that small business see a reduction in the current regulatory impositions they are faced with when trying to comply with the current fringe benefits tax rules. The government recognises the importance of being able to stay connected in the digital economy and so employers will be able to access an FBT exemption for portable electronic devices they provide to their employees. These amendments build on the successful passage of the first two bills through the Senate, confirming all small businesses' access to an immediate tax deduction for assets costing less than $20,000 and the 1½ per cent tax cut for small businesses with a turnover of less than $2 million. This is the biggest small business package in Australia's history. At the heart of the package are measures to provide tax relief and reduce the red tape and regulatory burden for small businesses. The last of this collection of bills, to enable small businesses to restructure without facing an immediate capital gains tax liability, is scheduled to be introduced in the spring sittings.

The government is committed to ensuring that Australia is the very best place to start and maintain a small business. Our Jobs and Small Business package is creating the right conditions for Australian businesses to thrive and grow. We are focused on creating the right environment for the over two million small businesses across Australia and those who they employ. Since the coalition came to office, around a quarter of a million new jobs have been created. Company registrations reached a record high in 2014. It is clear that we are already seeing results. I am pleased that these small business measures will build on these strong foundations for the benefit of the Australian people now and into the future. I commend this bill to the House.

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015. The dry part of the bill is that this bill is the third of four bills the coalition government has introduced as part of the government's $5.5 billion Growing Jobs and Small Business package. When I say it is the dry part: it is a massive change for small business and a massive boost for small business, but it is a reasonably dry bill. This bill amends taxation laws to help provide taxation relief to small businesses and provide less red tape.

As the member for Higgins and Parliamentary Secretary to the Treasurer just said, more than 70 per cent of our two million small businesses are unincorporated. Schedule 1 of this bill will provide a tax offset to small businesses with a turnover below $2 million. The tax offset will be five per cent of the business's tax liability. Schedule 2 amends the Income Tax Assessment Act 1997 to provide an immediate deductibility of expenses to small businesses with a turnover below $2 million. Schedule 3 introduces legislation to allow small businesses to access fringe benefits tax for portable electronic devices, provided they are for work purposes.

In my electorate everyone understand the nature of small business, and lots of my friends have small businesses which do more than $2 million. They would like us to do more in this space—and we would like to do more in this space. I do not think there is anybody in this parliament who does not back small business or understand the urgency small business must have to prosper. We have, in this place, a willingness to put our hand in other people's pockets; that is how we operate, and it is very important. But we must be able to do it from a position where they understand it.

My parents worked very, very hard in small businesses. The traditional family unit of dad at work and mum at home when the kids got home from school did not apply to us. Mum and dad worked very hard in their businesses. My dad and my mum did not get into small business because they liked filling out forms. They did not get into small business because they liked working long hours. They got into small business because they wanted an opportunity to create wealth, and an opportunity for us, their children, to prosper. That we three boys, my two brothers and I, have done reasonably well in our lives and gone on to those things is in no small measure due to the effort of my parents' work, opening a shop in New Farm in Brisbane at five in the morning and closing at eight o'clock at night 363 days a year, with a half day on Good Friday and a half day on Christmas Day.

In my maiden speech I made the point that what government has to do is get our hands out of small businesses' pockets and get off their backs. Accountants and solicitors must no longer become de facto tax collectors and compliance officers. They must be the ones that allow small businesses to grow and allow small businesses to plan their next move as opposed to making sure they do not get into trouble.

Everyone in this place, I hope, understands that government does not create wealth. Business creates wealth. What government can do is to set up the circumstances around which business can operate. If we do that successfully, business operates, people get employed, wealth is generated and reinvested in our community, and so on. People buy cars; people buy houses; people buy TVs; people buy everything. They send their kids to school; teachers get employed—all that sort of thing. What the government does do is to get some big projects that small business can operate through. Small business cannot do the $500 million dam. Small business cannot do the $16 billion Carmichael mine. But what small business can do is form part of a logistics chain that provides services for those big facilities.

I have said before in this House—and I will say it again until something happens: what we have done in this place, and in the state government in particular, when it has come to the tendering process, is to have made these things so big that the local firms can no longer tender. We think we are saving money by making a $200 million job instead of $10 million or $20 million jobs. We say that that provides good economies of scale and certainty for the taxpayer. But are we providing the best value for the taxpayer? The way I see it—and I have said it before in this House—is that, when you see those big jobs now and you see those things done—and, again, I will state that I have no actual evidence of this—the profit is taken at the very start; it is not what is left over at the end.

It is about the subcontractors; it is about the person who lives in the city—and I especially talk from a regional perspective here. These jobs come in. We have complied and we have made these things so hard to get there that only big businesses can actually achieve all those things. We get tender documents that are a foot thick. We turn them over; we go to the back; we check the numbers—the lowest number still gets it! But, because the numbers are so big, and the compliance with the regulations is so big, our local firms cannot do these jobs. So we get a Lend Lease, a John Holland or a Thiess to come into towns in regional Australia and in regional Queensland, and they do the job—and we get a great bit of infrastructure. But the profit does not stay in our community. The people do not stay in our community. The infrastructure is there, but the money has only washed through our community once.

What government must do, when we get these big projects, is to make sure that they are structured for the local firms—with the taxpayer being protected at all times and value being given to the taxpayer. If we could break those things down to $20 million or $30 million jobs and let the local contractor have a real shot at these things, I think that we would be able to show that we can get better value for money in our communities and can get these things to wash through. What I mean by that is that the first firm gets it; everyone is employed by them—all the way down to the bloke who drives the pie van that comes out to see them at morning tea who is making some money on the way through. We are all winning.

My seat of Herbert is based in Townsville. When it comes to the north of Australia, what we need to do is make sure we are backing our industry. We need to make sure that we are making it as easy for people to get into business as we possibly can. This bill principally applies to smaller businesses, and we must make sure that when we get these small businesses we are able to back them.

That brings me to something else I want to talk about today, and that is the Carmichael mine. Make no mistake, the approval of Adani's Carmichael mine was not turned over by the Federal Court. I understand that one part of one briefing note, one bit of paper, was not in the briefing note that went to the minister. We need to make sure that that mine gets approved as quickly as possible. Whether we like it or not, the problem for industry in northern Australia, the problem for industry in Townsville, is that we pay for the wastage of power from the Pine Rivers shire, from the Pine Rivers all the way through. Industry has to pay for all the power that is shed through transmission. We cannot get a real go with that. So, what Townsville Enterprise, the people around Townsville and our region, and I are doing is getting together to do our own energy white paper. We will be feeding this into the northern Australia development people and feeding it into the office of Ian Macfarlane, the Minister for Industry and Science.

When it comes to power in North Queensland, the Carmichael mine, being at Claremont, will need some form of power there. What will most likely happen is that they will build their own power station there and burn the overburden to create electricity. What can we as a government do? With our new renewable energy target, with our new emissions scheme, what can we do to make that better? What can we do in our region to make these things happen? What can we do in our region to assist with those things?

I have always been of the opinion that what I want in Townsville is a stinking great big coal fired power station right in the heart of Townsville so that we can ensure power is delivered as cheaply as possible. The question I have asked Townsville Enterprise to ask the experts in our area is why that should not be done; why we need a mosaic; why Tully-Millstream, with its hydroelectricity, should be used; why we have the world's best solar power precinct west of Hughenden; why we have even wind, at the Kennedy wind farm; why the Burdekin dam cannot be raised to produce electricity; why we cannot use the ethanol coming from North Queensland Bio-Energy at Ingham; why they cannot all go into a mosaic; and why, through the development of northern Australia, we as a government cannot bring in and provide the connectivity around that so we have a mosaic of power supply to make sure that our energy market is competitive, is cost-effective and gives as much help to big business as humanly possible. If we get big business going, it gets small business started, and that is what this bill is all about. That is what government is supposed to do. Government is supposed to set the agenda so that small business can operate in this space. If we get the big picture right, small business will flourish. We do not have to do anything for them, because they are doing it already.

What we do have to do is tell them to take the handbrake off and tell them there will be certainty. At the moment, my city is seeing a lack of confidence, and that confidence comes from things like this mine, which has been in the offing for an awfully long time now. This is a good project not just for North Queensland, not just for Australia; this is a good project for India and this is a good project for the world. We need to be able to produce this stuff and be able to get this stuff out of here, because that is good for everyone. Coal will still be a major player in our city. It will still be a major player in our country. I am proud to stand here and say that we have a fantastic mine west of Townsville, and I will fight for it every day in my community. If need be, I will fight the election on it—but, gee, I hope we have already started digging by then.

This bill is all about making sure that we are doing as much as possible to get out of the road for small business. If the federal government can get the macro right, the micro will look after itself. We can take these little bits of red tape away from small business, and small business can have that conversation with government: 'I understand now.'

The scary thing is that, in the first year of our omnibus repeal days, we removed over 50,000 pages of legislation, and you know what? No-one noticed. No-one noticed that we removed over 50,000 pages of legislation. No-one noticed that we removed over 75,000 rules and regulations in this place. That is how much work we have had to do. What we are doing now—the job that Christian Porter, the Parliamentary Secretary to the Prime Minister, is doing—is a big job, but it is worth doing because we need to support our industry.

We need to support not just the areas we are already but also the areas we are going to be. If there are going to be five million or six million people in the north of Australia, we are going to need major energy and we are going to need major input. We are going to need good baseload power, but we will need it to be delivered in a mosaic of fashions that makes sure that we are meeting our world targets. I have always said that everything we do in our lives impacts on the environment and it is how we manage those impacts that makes us work.

This bill is about making sure that this parliament, this government, this party, is doing what it can to get out of the road to make sure that small businesses have the opportunity to grow, because, if they can grow, it means their kids are going to school and their kids are getting cars, which means that mechanics are getting work, which means that the service stations are working, which means that everyone in our community benefits. That is what this legislation is about and that is what government has to be about, as far as I am concerned.

I support this legislation. I think it is a great piece of legislation, but it is just start. I thank the House.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015, No. 3 of the government's four bills in this space. I acknowledge the contribution by the member for Herbert—a heartfelt contribution. He is a member who is well connected with his electorate, who not only leads from the front but is a generator of ideas. He is a driving force in his electorate. Having been up there recently, I know he is well regarded by his electorate and, I am sure, a strong, bold and humorous personality within the community. I congratulate you on the speech you just made to this House. It was heartfelt and to the point.

The member made some very pertinent points in his contribution around the government's earlier tax reforms, the No. 2 budget measures which we introduced into the House, which assisted incorporated bodies. These measures were well received at budget by many businesses, including those in my electorate of Wright. One of those measures was the $20,000 instant tax write-off. A company in my electorate by the name of Stark Engineering, trading as Warwick Cattle Crush, put on an extra five staff to handle the increased workload. They are an engineering company that build specialised cattle handling equipment in the way of cattle crushes. Their price point ranges from $5,000 a crush to about $20,000. What they have come up with is partnering with people on the land in what they call 'processing cattle', which is done on a yearly basis and involves taking the calves off the cows and processing the steers. It is quite a labour intensive task. This family has introduced a set of hydraulics into rams so that one person can, from a set of toggles, effectively replace three people in a set of cattle yards, with the use of automated doors and automated crushing. This also reduces the risk of harm to animals. The price point on their top-end range of products is around $20,000. When the instant tax deductibility write-off came in, benefits flew immediately into my electorate. This demonstrated in a real way how the Stark family set about filling orders for those businesses and operators who chose to take up one of the incentives that we provided through the budget. They were an incorporated company and so were able to take advantage of this measure. There are many in the small business sector who were unable to take advantage of it, and there are measures within this bill that provide for unincorporated companies—partnerships, trusts et cetera—to be able to take advantage of a five per cent tax deduction.

Most on this side of the House come from some type of small business background. I was a transport operator. I started with one vehicle. My wife and I gambled. That is what all small businesses do: they take a gamble. You think: 'I'm going to back myself in small business. I'm going to leave the secure job that I have at the moment and I'm going to try and cut out a life for me and my family and see if I can make it on my own.' That is the genesis, that is the motivator, of people making the transition into small business. I bought one vehicle, one truck, and started transporting goods up and down the road. A long story short: I ended up building from that single truck to 14 transport depots around the great state Queensland. I employed 105 permanent staff and had a payroll of roughly $80,000 every week. If I had thought I would have ever got to where I ended up then it was never my dream. I was never driven by the smell of success. I was always driven by the fear of failure.

It is that understanding of the value of money, it is that drive, it is that passion which I know is instinctively inherent in the members on this side of the House, because that is where we come from. That is our belief. That is why we generate small business packages that have such an inherent bias towards small business. The small business sector is the engine room of our economy: 80 per cent of the economy is employed through the small business sector. When we look at our macro figures of the national unemployment rate, yes, there are the large companies who employ a sector, but the bulk of it comes from small business. So, if you want to influence change in the unemployment statistics, the easiest way to do it is to incentivise small businesses to put on one extra employee right around Australia. If you assume that, across the nation, the average income is $700 or $800 a week in the small business sector, then to incentivise a small business to do that the government needs to take its hand out of the small business pocket. We are doing it in a number of ways.

The previous speaker mentioned our red tape reduction: 50,000 pages of red tape. That may not have a dollar figure associated with it from a small business perspective, but I know from a time perspective that if someone is out the back office working, toiling away on occasions until midnight each night, trying to process their daily accounts in order to open trading doors the next morning and be prepared, I would say that they are not productive hours. We need to incentivise businesses to have more productive hours that generate more cash flow so that with any savings that they can find they will hopefully do one of a number of things with it. You want them first to put on an extra employee to make their day a little easier. In the event that they cannot do that, let us ask them to hopefully take a holiday. I know in small business that many years can go past where you do not get a holiday. Guess what happens when a small businessperson goes away on a holiday? They will buy some airline tickets. They will stay at a motel. They will have a waiter wait on them at a restaurant or something like that. Again, it has that flow-on multiplier effect in any economy that they choose to land in. If they have a little bit of extra coin, they might even buy a new vehicle or invest in the community. They could invest in a car dealership that has a number of employees. What I am saying is that the genesis of creating wealth is from making sure that we have a tax environment for our small businesses in which they can prosper and go forward.

This bill speaks to a 1.5 per cent tax rate for unincorporated companies, at a maximum of $1,000 per taxpayer. If you are in a partnership with four partners, it is not $1,000 for the partnership; it is $1,000 for each partner. Also provided in the bill is an immediate deductibility for expenses for small business, and that is in and around professional expenses If you have reached out to a firm to do due diligence for you, or if you have incurred some cost in setting up the business from a professional services perspective, that amount of money would normally be amortised over five years at a rate of 20 per cent. There are provisions in this bill to allow you to bring forward all of that expense and deduct it in the first year. For someone who does not really have their head around tax deductibility, what does that mean? Predominantly, what it means is that—if your net profit was $1,000 for the year and your additional expenses in that professional services area were $500—you would only pay tax on the $500 rather than on the $1,000.

There are also some provisions for the fringe benefits tax and personal electronics devices. That was more of a tidy up. Previously, if you were a business owner you provided staff some tools of trade—for example, a mobile phone and a laptop or an iPad—bizarrely enough, the fringe benefit provisions only allowed that you were able to claim, as a business owner, on one of those items. This bill will address that. That is not going to change the orbit of our planet, but it is in there. It is a step in the right direction, and it moves us toward a more positive environment for small business.

Right in the heart of my electorate, there is a village called Beaudesert. Off to the right of Beaudesert, there is a planned industrial park. It is exciting, from a small business perspective. At the moment, it is just a cow paddock. It looks like outback Queensland. But the plans and the infrastructure that are set to go in there will provide a base for small business to be incentivised to come to Beaudesert and to Bromelton Park, and invest in the future and provide employment. The community are enthused about the new project that is coming to my area, even those who have finished work and are at the later end of their lives—people who have lived in Beaudesert or in the scenic rim and surrounding areas all of their lives. Property values have gone up predominantly with CPI. But, with the possibility of an extra 12,000 people in the community, we are starting to see upward pressure on housing prices. That is driven by small business. With those increased values, people start to become financially independent and, as a result, they start spending more money around town, and it flows on.

It is all about making sure that we get our first building block platform in place. I believe that the state government has made a $25 million contribution to put in some road infrastructure. There is currently an application before the state department for $9 million for sustainable regions. The local government, led by John Brent, has given a commitment of $6 million, in partnership with Urban Utilities, for water and infrastructure. We have three tiers of government lining up to invest large sums of money with the single purpose of trying to attract small, medium and large business to an industrial park. That just shows the focus on stimulating our economy through small business, not only by this government but by all tiers of government.

We all know that a vibrant community and the quality of life that Australians expect must be underpinned through a strong and robust small business sector. We all know that we must allow businesses to get on and make a profit. Profit should never be seen as a dirty word. We should encourage businesses to make profits—especially from a government perspective. That is because when people are making profits, they are paying taxes. With that tax revenue, government can invest in hospitals, in schools, in state government and in road infrastructure. Taxes are good. Quote me on that! Tax revenue is generated when business makes a profit. Most of our tax receipts come from the business sector—from those businesses that have taken the risk, that have gone on the journey, and that are now making a profit and making a contribution to our nation. It is right that this government—full of businesspeople in their own right before they came to the House—partners with small business to make sure that our nation can be the best that it can possibly be. This bill goes right to the heart of that purpose.

Karen McNamara (Dobell, Liberal Party) Share this | Link to this | Hansard source

I rise to support the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015. This bill provides for amendments to various taxation legislation, in order to provide tax relief and reduce red tape for small business. The reality is that, if we want more stable jobs that provide meaningful work, we need to enable stronger small business. This government acknowledges the vital role that small business plays in the Australian economy. Australia's two million small businesses produce more than $330 billion in economic output and employ over 4.5 million people. The Minister for Small Business, the Hon. Bruce Billson, stated, 'Australians are well known for their enterprising spirit and their willingness to have a go,' and he was absolutely correct.

The coalition has a strong track record in supporting business. We understand that you cannot have a strong and healthy society without a strong economy to sustain it, and that you do not have a strong economy without profitable businesses. On the New South Wales Central Coast, small business is collectively our largest employer. In Dobell, there are 8,703 businesses each employing between one and 20 people. Small business plays a crucial role in ensuring that there are local jobs available for mums and dads, school leavers and mature Australians returning to the workforce.

We want to see business thrive and grow. At the heart of our economic plans for growth is small business. The 2015 budget is focused on growing jobs and helping small business innovate and grow. The $5.5 billion Jobs and Small Business package is the biggest small business package in our nation's history. This package will create the right conditions for small businesses to thrive and grow, and it will assist Dobell's 8,703 businesses to invest more, grow more and employ more.

In the words of the Business Council of Australia:

The budget is without doubt a shot in the arm to small business, and creates a better environment for business confidence that will drive investment, job creation and economic growth.

As the Minister for Small Business stated when he introduced this bill:

Small business is the engine room of our economy. The contribution of the hardworking women and men of small business cannot be understated.

This bill contains three additional measures to support small business as part of the 2015 budget $5.5 billion Jobs and Small Business package. These measures provide amendments to various taxation laws to provide tax relief and reduce red tape for small businesses. This includes the provision for unincorporated businesses with an annual turnover of under $2 million to receive a five per cent tax discount, capped at $1,000 per tax-paying business owner. This will benefit approximately 70 per cent, which is more than two-thirds, of Australian small businesses. This bill will ensure that all small businesses are entitled to a tax cut.

Other features of this bill are the provision for immediate deductibility of professional expenses for small business. Presently, there are some expenses related to starting a business that have to be depreciated at 20 per cent of the original cost over a five-year period. An example would be legal costs or costs associated with raising capital. This bill will allow for such expenses to be immediately deducted instead of depreciated over five years. Also this bill addresses reducing red tape within the fringe benefits tax system by expanding the FBT exemption for work related portable electronic devices for small business.

Only the coalition government understands the varying needs of Australian small businesses. We know that one size does not fit all, and our budget measures reflect this. With the introduction of the three measures in this bill, five out of six of the small business measures from the budget package have been introduced into parliament. The sixth and final measure will enable small businesses to restructure without facing an immediate capital gains tax liability. That bill is scheduled to be introduced later in the spring sitting.

The government are committed to ensuring that Australia is the best place to start and maintain a small business, and our Jobs and Small Business package is creating the right conditions for Australian businesses to thrive and grow. As stated by the CEO of the Finance Brokers Association of Australia, Mr Peter White:

Tax breaks for small business will help businesses expand and create jobs while the Jobs for Families will ease the burden on the household budget and relieve pressure on mortgage repayments.

In detail, the three new measures contained within this bill provide, firstly, under schedule 1, provisions for a five per cent tax discount for approximately two-thirds of Australian small businesses which are unincorporated. This measure will provide tax relief to thousands of small unincorporated businesses across Australia. Owners of unincorporated small businesses will receive a five per cent tax offset on their small business income. This discount will be capped at $1,000 per individual business owner in an income year, and it is delivered as a tax offset, providing a tax cut to the large majority of unincorporated entities for the 2015-16 income year and beyond.

Small businesses predominantly operate as a sole trader, a partnership, a trust company or a combination of these. Currently, unincorporated business income is taxed at the owner's marginal rate of personal income tax. This feature of Australia's tax system means that a company tax cut will not benefit unincorporated businesses, so all the tradies who operate as sole traders, the mum-and-dad business partnerships and the family businesses operating through a trust would miss out. This tax discount will contribute to increased cash flow for unincorporated small businesses with turnover below $2 million and will have a cost to revenue of $1.8 billion over the forward estimates.

The New South Wales Business Chamber have welcomed the benefits of the cut in the company tax rate by 1.5 per cent for incorporated entities and the tax discount of five per cent, up to $1,000, to small unincorporated entities. Additionally, they are of the view that this may facilitate capacity for the small business owner to employ, to take on an apprentice or to extend the hours of a current employee. They also noted that these are the measures that will be well received in regional Australia, where unemployment is high and job opportunities are limited.

Schedule 2 of this bill will provide immediate deductibility of professional expenses to small businesses with an aggregated turnover below $2 million. Previously, such expenses had to be depreciated evenly over five years. This will potentially affect businesses that incur expenses for professional advice, taxes, fees and charges from Australian government agencies. These expenses are commonly known as the 'blackhole' expenses. This includes those in the process of starting a new business and those intending to start a small business which is not connected with a larger business. Providing an immediate deduction for professional expenses increases the cash flow for business start-ups as soon as they generate taxable income against which to make the deductions. This proposal will take effect for expenditure incurred in the 2015-16 income year and beyond and will have a cost to revenue of $30 million over the forward estimates.

Schedule 3 of the bill aims to reduce the compliance burden for small businesses within the FBT system by expanding the FBT exemption for work related portable electronic devices for small business. FBT applies to certain cash benefits such as the provision of free or discounted goods and services—including, for example, car parking and entertainment—that are provided by an employer to an employee in substitution for salary and wages. FBT was introduced in 1986 as the means to tax such non-cash benefits and, in doing so, endeavours to maintain the fairness and integrity of our tax system. In its 2014 report, Review of tax impediments facing small business, the Board of Taxation noted stakeholder concerns about the complexity of FBT and the disproportionate compliance burden it placed on small business when compared with larger businesses. Currently, employers can exempt one qualifying work-related item per FBT year, where the item is substantially different from other, exempt work-related items. The proposal within schedule 3 seeks to simplify the current rules and provide employers with more flexibility. Schedule 3 also provides an FBT exemption for small businesses that provide their employees with multiple work-related devices, even where the items have substantially similar functions. This applies to small businesses that have an aggregated turnover of less than $2 million per annum. This will create a red-tape reduction and compliance saving for many small businesses, and will provide encouragement and certainty for small businesses to provide their staff with all the necessary tools to grow, to build their businesses and to have a go. This measure will commence at the beginning of the next FBT year on 1 April 2016.

This bill builds on the successful passage of the first two bills through the Senate confirming that all small businesses will have access to an immediate tax deduction for assets costing less than $20,000, as well as the 1.5 per cent tax cut for small companies with a turnover of less than $2 million. I am a committed supporter of small business, because I understand and I know firsthand how much they contribute to our local communities and to our economy. I appreciate and understand the opportunities which a thriving small business can create in the electorate of Dobell. I am proud to be part of a government that is providing these opportunities for so many people who want to have a go and start a new business. As previously stated, the $5.5 billion Jobs and Small Business package is the biggest small business package in our nation's history. It is all about helping Australians have a go. It is about support for those who have the will, vision, and drive to start a new small business. This is especially true in regional areas, such as the New South Wales Central Coast, and particularly in my electorate of Dobell where, as I have mentioned before, collectively, small business is our largest employer. Since my election, I have been working alongside many of the small businesses in Dobell to identify and address the barriers that prohibit growth and employment opportunities. It is estimated that this bill will assist approximately 95 per cent of Dobell's businesses to invest more, to grow more and to employ more. Our support for small business is matched with support for job seekers. This is why we are helping all Australian participate through over $330 million in targeted spending on new job initiatives. This is targeted at employers and job seekers to support the transition into work. We have also introduced incentives for employers to help mature-age job seekers over the age of 50 to get back into work.

While it is businesses which create jobs, there is a need for government to reduce the impediments and to encourage the right conditions for Australia's small businesses to grow and to become more productive. This bill provides other means to achieving this. Reducing the tax rate for more than 90 per cent of incorporated businesses with an annual turnover of under $2 million is definitely a game changer; and allowing small businesses with an annual turnover of under $2 million to immediately deduct each and every asset costing less than $20,000 that they purchase from 12 May 2015 until 30 June 2017 has been the encouragement that many need to re-equip and update. Only the Abbott coalition government has a responsible, long-term economic plan that will grow the economy and fix Labor's mess. Statistics released by the ABS on 29 June 2015 revealed that the Abbott government has overseen a period where the number of jobs in small business has increased by 46,000—this is in contrast to the loss of almost half a million jobs in small business under the Rudd-Gillard-Rudd government. In addition to this great news, small business start-ups are up by 18.17 per cent, and small business closures are down by 12.5 per cent. These are positive indicators of green shoots in our economy. The NAB Monthly Business Survey for May 2015 reported that 'the recent federal budget and interest rate cut appears to have had a positive impact on business confidence', and that 'this the highest level of confidence since August 2014'. This government has a plan for our future and is keeping our commitments to the Australian people.

Another thing we have done is to secure free trade agreements with China, South Korea and Japan. This is also very positive for many of the small businesses in Dobell, as it is allowing them an opportunity to grow overseas as well. Our Jobs for Families reform is about delivering a simpler, more affordable, and more accessible childcare system, giving parents more choice when it comes to balancing work and family. I well recall, with much affection and great appreciation, the enthusiasm of the now Minister for Small Business as he campaigned with me in Dobell during the 2013 election campaign. He projected his support and enthusiasm for small business, which inspired and gave hope to the many small businesses that he met with in Dobell. I would like to congratulate the Minister for Small Business for keeping the commitments he made to my electorate, and for the outstanding work that he has done. I commend this bill to the House.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise and speak on Tax Laws Amendment (Small Business Measures No. 3) Bill 2015. I would like to start with the three schedules and the three things this bill actually does. The first thing the bill does is to provide a discount on the tax rate for unincorporated small businesses. We have seen what this government has done in understanding the importance of small business; we have lowered the corporate tax rate from 30 per cent down to 28½ per cent. But we recognise that many small businesses—in fact, the majority of small businesses—are not incorporated, and that therefore they would not get the benefit of that reduction in the tax rate. So we have passed that on with a five per cent discount on the tax liabilities on small businesses, capped at $1,000 per taxpayer per year—so that those unincorporated small businesses can get the benefit of that tax rate reduction. We have put this in the budget at a cost of $1.8 billion, but I would like to make a prediction: that this reduction in the corporate tax rate, after time, will not cost the budget one single cent. In fact, I believe it will result in greater taxation revenues flowing into the Treasury.

The reason I say that is that we simply have to look at our history. Think back to when our corporate taxation rates were in the high 40 per cent range. Then under the Hawke government they were lowered, and under the Howard-Costello government they were lowered. Every single time we lowered those corporate tax rates, from the high 40 per cent range to their current rate of 30 per cent, guess what happened. We actually had more taxation revenue, not just in overall terms but also as a percentage of GDP, flowing into the government coffers. So the lower the corporate tax rate was, the more money we actually had flowing into government revenue. The reason is simple: incentives count. The economy is not a fixed pie, as many on the other side of the chamber seem to think. They think that the pie is fixed and you slice it up and then you are just arguing about what proportion of the pie people get. We can grow the pie and we can shrink the pie. One of the best ways to grow that pie is to encourage people to have a go in business. That is what reducing the corporate tax rate does: it attracts investment. In our economic history, that has happened every time, and I believe it will happen again this time. Time will tell.

The second thing about this bill is that it brings an immediate deductibility of professional expenses. Previously, when a business was starting up it could only depreciate some of their start-up expenses over five years. They may have accounting costs and set-up costs. Those costs can run into the hundreds of thousands of dollars, even for a small business. They could only write that off and depreciate that over five years. We are saying that small business can now depreciate those costs up-front in year 1. Why is this important? It is important because it gives incentives to start businesses. That is what we need in this economy, to create and grow jobs. Those start-up businesses—those businesses that do not exist today but will be started in the years to come—will drive the prosperity of this country going forward. So we have to do everything we possibly can to encourage as many businesses as we can to start up, to experiment, to innovate and to try new ideas. We have to realise that many of them will not succeed. In fact, most of them will fail. But that is to be expected. Just a few of those—a tiny fraction—will strike gold. They will come up with the innovations, the new business ideas, the new methods and the new technologies that will drive this economy forward. Therefore, everything this government can do to encourage people and make it easier for people to start up a small business and have a go increases the prosperity of future Australians. That is what this bill does.

The third thing the bill does is provide a fringe benefit tax exemption for portable electronic devices for small businesses—a small but important step to define what is not taxable for fringe benefits purposes. These are three simple but important measures to encourage the small business community of our country.

It is interesting, when I look at the speakers list, that there are very few Labor members speaking on this bill. But there is some commentary by a former Labor leader, the former member for Werriwa, one Mark Latham. He criticised all of the coalition's provisions in perhaps one of the most delusional, error-ridden, misguided, ignorant and, I would say, embarrassing pieces that I have ever read. Mark Latham wrote, 'Big is best.' This is how the former member for Werriwa describes small business people:

… a pack of blank-faced losers serving up kebabs and pizza slices in greasy food halls and shopping malls.

That is what the former Labor member for Werriwa thinks about small business. He goes on:

Small businesses, in effect, are the garden gnomes of the modern economy – purely ornamental and totally dispensable.

That is the attitude that we saw during the past six years of government when this Labor mob was running the show. They thought small business was ornamental and dispensable. How else could you explain that in the six years that the Labor Party was running this country no fewer than 519,000 people in small business—citizens of this country—lost their jobs? We could fill the MCG more than five times over with the number of people employed in small business at the start 2007 who became unemployed because of the policies of the Labor government and its disdain for small business.

I would like to add that the current boundaries of the seat that I represent here in the parliament, the seat of Hughes, overlap with where the former member for Werriwa represented. In fact, when I have been out doorknocking I have had people tell me that the only other politician they had seen doorknocking was the former member for Werriwa, Mark Latham. But they added that they had chased him out with a broomstick. The former member for Werriwa, Mark Latham, gives his reasons as to why big is best. He cites the Big Banana, the Big Pineapple and the Big Peanut. I think that says it all—that the former member for Werriwa thinks the Big Peanut is an example of why big is best.

This delusion that big is best is a real danger to our economy. We have seen this mistake, this ideological failure—this fallacy that big is best—in the former socialist economies behind the Iron Curtain where they thought if you have giant economies of scale, you have big industries and you make everything big, that you simply become more efficient and can outproduce the West. History tells us that that failed. What becomes efficient is innovation. Small business drives innovation. That is what Mark Latham and many on the Labor side of politics today simply do not realise. It also happened in the Chinese economy. The reason why the Chinese economy is so successful today is that they realised that big is not best.

I come from a background in the furniture, lighting and homewares industry. I can remember in the 1980s there were many giant factories where the Chinese communist government thought the way to go, the way to be efficient was to have these giant factories, run by the government. But, as we see, bureaucracy takes over, innovation gets stifled. The Chinese worked out that the true way to progress is to have thousands and thousands of small and medium sized factories, all competing against each other. We often say, 'Made in China,' thinking that it is just one or two factories that produce everything. It is the complete opposite. The Chinese have been successful because they understand that you do not allow your industries to become overly concentrated and that you have thousands and thousands of players in every industry sector.

With respect to the delusion that 'big is best,' we could perhaps take a few lessons from nature. Island gigantism is a feature we see in nature on remote islands where animals there tend to grow oversize, compared to similar species on the mainland. We have seen examples—the elephant bird of Madagascar; the moa of New Zealand, which is like a giant emu; the giant gecko of New Zealand; the giant rabbits of the Mediterranean island; and of course the famed dodo bird. These animals living on remote islands, shielded from competition, simply grew and became oversized. When there was a change in the environment, when other civilisations settled on those islands and there was more movement of ships, overgrown species simply could not compete and they became extinct. This country is in danger, whereby sectors of our economy will fall into that situation of island gigantism. If we look at industry after industry in this country we see dangerous levels of concentration that are harming our economy and innovation and are threatening our future prosperity. This is not because of the idea that big is best, it is not because of the way things are; it is because of decades of deliberate policies of government.

I will go through a few things. We need a level playing field between small and big business so that competition is there to keep those larger companies on their toes. That is what small business does.

Look at bank fees and charges in Australia. Over the last 15 to 20 years we have seen the margin on loans that the banks charge, the profitability of the loans to small business from the big end of town banks—the four larger banks—increase, increase and increase every year. Going back, there used to be very little difference between the margins on loans to small business and loans to big business. There is now quite a substantial margin where we know the banks make a lot more profit from charging small business.

We all talk about the importance of the rule of law. But in a legal dispute between a small business and a large business, our rule of law has broken down. The small business can lose in that dispute, even though they have right on their side and the law on their side, because they cannot afford the legal fees because of the way we set up the legal system. We have seen it with retail rents where we have had government regulation to protect and shield the large retails from competition. That has resulted in the most distorted market that you could possibly see where a large retailer would be paying between 2½ and five per cent of their turnover in rent but a small retailer, selling dollar for dollar the same product, would be forced to pay 20 to 25 per cent of their turnover in retail rent, for no other reason than the fact they are small.

We have also seen this in our competition laws where we have failed by allowing the evils of anticompetitive price discrimination to white-ant the free market, to give favour to the larger corporations. We need to turn this around. That is what this bill does. We need to level the playing field between small business and big business, to ensure that those small businesses have that opportunity. We want to give new migrants to this country a chance. Migrants in the past have come to this country, set up businesses and made a success of themselves. We need to pass that on to the new migrants of this country, arriving today, to ensure that they have the same opportunities that past migrants have had. That is what this bill is all about. It is one of our steps to strengthen the small business community, to give them a greater opportunity to compete and to give them greater incentive to have a go. I commend this bill to the House.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

I rise with pleasure to speak on the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015. We hear again and again in this place that small business is the engine room of the Australian economy. There are literally thousands of small businesses in the Petrie electorate and the value they provide to our local communities is enormous. As the federal member for Petrie I do want to take this opportunity to place on record my thanks to the small businesses, the sole traders, the partnerships and the other individuals who operate businesses within the Petrie electorate for the work they do. Thank you to the people you employ in the business you run, because it creates a big difference to the Australian economy. You are not only providing yourself with a wage or a business income; you are also paying tax, which enables the federal government to invest in defence, health and everything else. However, in many cases you are also providing jobs for local people who live in the Petrie electorate and for that I certainly do thank you. Coming from a small business background myself, I am a huge advocate for them and for the staff who work in those businesses. Any good business owner, whether from a small business or a large business, knows that staff are the backbone of any business. Without good staff, you will not have a great business. I conduct regular small-business breakfasts in my electorate, and the issues that small business owners raise with me again and again are that red tape should be reduced, that productivity, where it can be, should be increased and that taxes should always be kept as low as possible.

The federal coalition government does understand the value of Australian businesses, small and large, but also all private enterprise. Already we have seen the first two bills of our jobs and small business package pass through this parliament, which we are very pleased about. We have ensured that all small businesses have access to the immediate tax deduction for assets costing less than $20,000. I think the small business instant tax write-off is really significant for small business. If they can buy an asset that will be used in their business and it can be instantly written off, that is a great thing. I recently visited a dental surgery in my electorate and they had invested recently in a new microscope which looks for oral cancers and other defects in patients' mouths, so they were able to write that microscope off instantly. I went to another small business where they installed a 10-kilowatt solar system on their roof. They were able to take advantage of solar power in their business, using it daily. That means cheaper power bills, but, because the solar package came to less than $20,000, they were able to write that off instantly and take advantage of the instant asset tax write-off. Yet another business that I visited were able to update their computer systems and put in a new server, which is very important as well, to manage their IT needs. Because that server was under $20,000, they were able to instantly write it off, reinvest back into the business and, hopefully, expand their business to hire more staff, which is always a great opportunity for local people seeking work.

We have legislated as well a 1½ per cent tax cut for small companies with a turnover of less than $2 million. Significantly, that means that, if they have made a $100,000 profit for the year and they are normally paying $30,000 in company tax, which all companies pay to the Australian government, they will be required to pay only $28½ thousand in tax, so they will save $1,500, which they can reinvest back into their business, perhaps to pay off a business loan or some other measure. And we have progressively been cutting red tape, to the tune of something like $2.45 billion as at the end of March this year.

This measure, however—No. 3—adds to this. We know that something like 70 per cent of small businesses are not actually companies. They are not proprietary limited companies and would, therefore, not benefit from the company tax cut. This includes businesses like sole traders, partnerships, family trusts or even subcontractors. All of these set-ups provide an important service to the community. I think of subcontractors in particular. I know that the member for Bendigo does not support subcontractors. I was listening to her maiden speech as she said there should be no subcontractors in Australia. I say to the member for Bendigo that she should get out and actually meet some of the subcontractors in her electorate, because they do provide a valuable service to many industries throughout this country. Yes, they are a more flexible workforce, but, yes, they are also generally rewarded at a much higher rate. Organisations like these—sole traders or partnerships—will be able to take advantage of the $1,000 tax offset which we are introducing here.

Basically, we are providing a tax discount for unincorporated small businesses. It will help improve small businesses' cash flow by reducing the amount of tax payable in the financial year and will help alleviate the problem of higher regulatory costs. This bill will see a tax offset of five per cent of the income tax payable on the portion of an individual's small-business income, capped at $1,000. This will see small business owners having higher after-tax earnings, which they can then, of course, reinvest back into their business. This is so important if we are to give small businesses a foothold in the unpredictable global business environment. It might not even be $1,000; it could be $500 that they save. All of this adds up. Every dollar they can keep in their business and not have to pay to the government can be reinvested—for example, in fuel. Five hundred dollars worth of fuel might see that small business fill up their vehicle for the next five or six weeks. They might want to update their website. If they have saved $700 or $800 that financial year, they could reinvest that into updating their website. Or they might want new public relations merchandise such as new shirts or clothing, or perhaps a pop-up tent or something that they can use at a market, all to promote their small business. It is the little things that count; that is the point that I am making here—and this small initiative will help those businesses that are not incorporated.

The bill has the full support of the Australian Chamber of Commerce and Industry, and I would like to quote some words from CEO Kate Carnell:

It is encouraging that the government is looking after those 1.7 million unincorporated small businesses, including tradies, sole operators and partnerships, with other support. Making it easier for small businesses to claim tax deductions for their expenses will make it easier for small businesses to invest.

Kate continued:

These deductions are particularly powerful when combined with recently announced measures to help new businesses, including allowing new start-ups to immediately deduct professional costs, such as for legal and accounting services, as well as streamlined company registration and removing barriers to crowd-sourced equity funding.

I want to take this opportunity to congratulate one of the cabinet ministers in the coalition government, the Minister for Small Business, the Hon. Bruce Billson, for his dedication and passion for his portfolio. I know from personal experience that he is always keen to hear what is going on in the Petrie electorate and to listen to feedback from my local small business owners. He was in the electorate recently for a small business forum and he chatted to, probably, 30 or 40 small business owners and was very intent in listening to their needs.

I know that both the small business minister and the rest of the cabinet are always looking to the next thing that they can do in this space and how else the government can support small businesses. We know that, while the public service is essential for jobs and for maintaining important services, small businesses are where we want to see more jobs created. I always encourage small businesses in my electorate, which may be sole traders or partnerships, to look at how they can grow their business and at how they can put on more staff that may be able to assist in the business. That is the purpose of any changes like this, to see how we can stimulate more growth for jobs which will, indeed, support local people and help reduce unemployment. We know that small business is the backbone of this, and I certainly do thank them for that.

The government is committed to ensuring Australia is the very best place to maintain, run and invest in a small business. Our Jobs and Small Business package is creating the right conditions for Australian business to thrive and grow. Thank you.

Matt Williams (Hindmarsh, Liberal Party) Share this | Link to this | Hansard source

At the heart of the growing Jobs and Small Business package are tax cuts for over two million Australian small businesses which will help drive investment and employment across our country, and this is much needed. The budget delivers $3.25 billion in tax cuts for small business and $1.75 billion in accelerated depreciation measures, in addition to the benefits Australian small businesses are gaining from the abolition of the carbon tax.

I want to go through a few key initiatives that will encourage business start-ups and entrepreneurships, which are what our country needs to promote more. We are doing this through a number of initiatives. Start-ups will be able to immediately deduct professional expenses incurred when they begin a business. Streamlined business registration processes will make it quicker and simpler to set up a new business. The government will remove obstacles to crowd-sourced equity funding, and there will be expanded tax concessions for employee share schemes. These are all important and crucial initiatives.

Let us remember that a lot of big businesses commenced their life as start-ups and small businesses. A quick overview of history shows that the Microsofts or Apples of this world often started in a garage somewhere around the world. Obviously these examples were in the United states, and Westfield is a great success story of the Australian business community. It started in the suburbs of Western Sydney as a delicatessen selling specialised food products. I have just returned from a meeting with a number of US senators, and it was interesting to hear them reflect on the successes of some of their American states, whether it be Texas or North Carolina. Lower taxes and better regulation were all key ingredients behind stimulating the economy for more jobs and improving employment for greater prosperity in their regions.

As the member for Petrie mentioned, there are important measures in this bill, such as the unincorporated tax discount for small businesses with a five per cent discount on tax payable on their taxable income. We have had considerable community support on these measures, whether it be from ACCI, or from the Small Business Council. When I have been touring my electorate and talking to numerous small businesses over the many months since the budget, whether it be in hospitality, or retail, or a general service area, they have all been extremely optimistic and positive about the benefits of this budget for them, whether it be the tax cuts or the incentives, and they have been buoyed by the commitment the government has given to support them.

In that respect these are very important initiatives that the federal government has introduced. We know that small businesses are the heart of our economy. In my state they are 98 per cent and across Australia they are 96 per cent. Imagine if every small business expanded and grew. What a difference that could make to our economy. What a difference that could make to our employment prospects. This is why we are focused so strongly on this key element of the economy. These are hard-working mums and dads and hard-working families who work six or seven days a week to continue the small business that their previous generation set up. They need this support, they deserve it and they will benefit from it.

In terms of a couple of other measures that I will specifically address in relation to this bill, there is the cut to the company tax rate for 780,000 incorporated businesses by 1.5 per cent, which is significant in its own right. There is also the immediate deduction for every asset up to $20,000. We had a look at the results of purchases of equipment from JB Hi-Fi recently, whether they be computers or telecommunications equipment. Small businesses have seized on this opportunity, have spent and have helped stimulate our economy. This is part of what this measure was intended to do. One of the major in objectives was to stimulate the economy, to encourage businesses to go out with confidence and spend knowing that they would get returns on their investment.

We are the party of lower taxes and lower regulation. We are working in order to improve that as best we can, and it is delivering results. We have had increased employment numbers and we have increased consumer confidence. Whenever a business indicator comes out there is a bit of optimism knowing that our economy will benefit from these important measures.

I commend this bill to the House. It is a great initiative by the federal government.

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour, and the member will have leave to continue his remarks at that time.