Kylea Tink (North Sydney, Independent) Share this | Link to this | Hansard source

I move:

That this House:

(1) notes that:

(a) the politicisation of tax reform is holding this country and economy back; and

(b) this process of politicisation is frequently felt by small to medium sized businesses through their contact and engagement with the Australian Tax Office (ATO); and

(2) calls on the Government to recognise the importance of improving productivity within the small to medium business sector and ensure the ATO is working with businesses towards this outcome.

As someone who both grew up in a family that relied on the income of a small family business and has owned and operated small businesses myself, I know exactly how rewarding and at the same time challenging this environment can be. Now, as the member for North Sydney, I am delighted to speak on behalf of the third-largest business community in the country. It's for this reason that I move this motion today—for, if I cannot speak out against the politicisation of our tax system and the impact this is having on small to medium-size businesses across our community, who will?

At a time when these businesses should be protected and supported by our government systems, they are instead being drowned by red tape and dreading calls from the ATO as the tax office pursues modest debts from small operators, whilst large multinationals continue to report bumper profits with little attention. Twenty twenty-three was a tough year for our usually resilient small-business community, with the Australian Securities and Investments Commission identifying that rising business costs were a key contributing factor to small-business annual insolvencies.

As we entered 2024, CreditorWatch predicted the business failure rate would increase from 4.4 per cent to almost six per cent by the end of the year. At the time, the Council of Small Business Organisations of Australia CEO Luke Achterstraat warned that small businesses would need to prioritise cash flow management as higher costs were undoubtedly set to continue throughout the year, and cost-of-living pressures would make it difficult for small business to pass additional costs on to customers. He also argued it would be critical for banks, business partners and regulators to support small businesses wherever possible. Yet, two months into the year, my office was inundated with calls from accountants and small-business operators who suddenly found themselves under the direct scrutiny of the ATO.

Then, just last week, as we waited to hear what the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, would suggest our government prioritise to support small to medium-sized businesses, many were dismayed to read that the number of administrators being appointed to struggling businesses had grown at an astonishing rate. Not surprisingly, it was businesses in New South Wales and Victoria who were at the greatest risk of being forced under. The report identified that, gallingly, the ATO is playing an active role—a significant role—in driving businesses to the wall as it goes into overdrive collecting debts, particularly from small businesses. While I was not surprised by the finding, I was relieved to see it was finally being identified as an issue.

We know small-business owners are currently paying themselves less and working longer than average to support their enterprises. The modest initiatives the government identified to try and help—like the instant asset write-off and the energy rebate—came far too slowly to make any meaningful difference. Large multinational businesses, including supermarkets and companies in the mining and energy sectors, seem to get away with modest tax payments relative to their profits while small businesses face lightning-fast calls from the ATO for payment of small debts and with threats of insolvency.

Interestingly, the recommendations of the ombudsman on Thursday included, among other things, an ambitious plan for tax concessions. Disappointingly, while he identified the upside of reform, he stopped short of criticising the way in which tax reform in this country is currently pursued. For what it's worth, I agree with the ombudsman that better access to government contracts and savings from cheaper payment systems for the sector will be welcomed, but these things will not fundamentally reset an environment that has become dominated by increasingly complex red tape.

Last week, the Reserve Bank further downgraded its expectations for our economy, reporting it has grown by just 0.9 per cent in 12 months to the end of June. At the same time, a corporate insolvency measure compiled by Insolvency Australia showed many businesses are struggling to deal with the drop-off in economic activity and the increase in overall costs. Businesses in New South Wales accounted for over half of all insolvency appointments in the last 12 months. The reporting identified that small and family businesses are being hit particularly hard.

While the nation's small-business ombudsman warns that without ambitious and targeted reform we could as a nation be 'sleepwalking into a big corporate economy', we are yet to see this government show any intention to push for far-reaching tax reform. Indeed, if the actions of the ATO are anything to go by, it seems the appetite is simply not there.

As someone who fundamentally believes small family businesses are the engine room of our economy, I believe it's time for this nation to have a government that looks beyond the politicisation of tax policy and supports and incentivises small family businesses while ensuring our nation stops relying on income generated off the back of individual workers.

Marion Scrymgour (Lingiari, Australian Labor Party) Share this | Link to this | Hansard source

Is there a seconder?

Allegra Spender (Wentworth, Independent) Share this | Link to this | Hansard source

I second this motion and reserve my right to speak.

Jerome Laxale (Bennelong, Australian Labor Party) Share this | Link to this | Hansard source

I'd like to thank the member for North Sydney for bringing this motion to this place and acknowledge her upbringing in a small family business, something we share. Recently, my local state member, the member for Epping, resigned—you might have heard of him: Dominic Perrottet. In his valedictory, he quoted some advice he received from former prime minister Paul Keating. Keating said to him:

Dom, I had to teach my bastards to care about money and you need to teach your bastards to care about people.

As we debate this motion today, that is a particularly apt quote to consider.

Keating, as he has the power of doing, encapsulated perfectly in just one simple phrase the balance we must strike in governing, particularly on tax reform. If we pursue tax reform, we have to care about money. But we also have to care about people, because taxation is not just pure economics. It's about ensuring fairness, fostering growth and, above all, supporting the people and businesses that support our nation. Australia has a long history of tax reform and has often been driven by necessity and, at times, by vision, but nearly all reform has been contested.

In the modern era the Hawke-Keating era stands out. In the true Labor way, the introductions of the fringe benefit tax, capital gains tax and dividend imputation system were deliberate steps to ensure that our tax system was fairer, more progressive and more attuned to the realities of a modern economy. Subsequent governments have made their own marks on our tax landscape. The Howard government introduced the GST. Other reforms, such as the Gillard government's mineral resource rent tax and carbon tax, were unfortunately short lived, swiftly dismantled and then not replaced by subsequent governments. How different our country would have been if those important reforms weren't politicised and inevitably repealed.

In just a tick over two years, we have moved forward on tax reform. Apart from our significant reforms to the tax code and income tax, we've introduced a global and domestic minimum tax rate of 15 per cent for large multinationals—many are based in my electorate; that's okay—and changes to the petroleum resource rent tax to ensure offshore LNG companies contribute more sooner. They're good steps, and they're significant. Like all Labor reforms, they are deeply rooted in fairness and equity. Big multinationals should pay their fair share of tax. Our resources sector should contribute more from the profits they make off our national resources, and income tax should contribute less to the national intake than it does at the moment. With every measure I've named, from the past and the present, opposition came from nearly every angle. Tax reform remains a political football for the Left, the Right and those in the middle.

I give this history because I think it's important to illustrate that tax reform in this country is rarely easy or straightforward. It's always contested. Therefore, by definition, it involves tough decisions, political courage and, often, significant and drawn-out debate, yet the politicisation of tax reform has time and time again hampered our nation's ability to create a stable and effective tax system that serves the long-term interests of our society and economy. When tax reform becomes a political football, kicked around for short-term vote harvesting, we all lose.

I speak from personal experience when I say that navigating the challenges of running a small business is difficult. I spent my childhood on the floor of my family's business, and before I came to this place I was juggling that business while also serving as director on a number of boards. My time in the private sector taught me a lot, but if there's one thing I learnt it's that certainty matters—certainty for investors, for directors and for sole traders—because certainty creates growth and uncertainty creates doubt.

The politics of fear and division creates uncertainty. There is no example more current in this parliament than the uncertainty created around energy policy, and we've had similar uncertainty created around tax reform. Delays have real-world impacts, and they impact small business. It would be nice for this parliament to give the electorate some certainty on our big national challenges: fairness, equality, energy, decarbonisation and, of course, tax reform. I join with the member for North Sydney and, I'm sure, millions of Australians who yearn for a parliament that from time to time can achieve consensus, not just perpetual conflict.

Allegra Spender (Wentworth, Independent) Share this | Link to this | Hansard source

The tax system, like the legal system, is a fundamental structure that underpins Australia's modern society. It raises the revenue we need to pay for government services, it redistributes national prosperity and it has the power to promote or stifle investment and activity in our economy. But Australia's tax system is no longer fit for purpose. While there are many aspects that require reform, the impact that the current system is having on small businesses requires urgent attention.

Like the members who have spoken previously, I grew up in small business, and I've run a number of small businesses in my time. This group of people who are driving the economy, who employ 42 per cent of private sector workers, are an incredibly important part of my electorate and our community, but small businesses represent a declining share of Australia's GDP. They currently represent around 33 per cent of economic activity, down from 40 per cent in 2006, and it's getting worse. ASIC data shows that insolvencies have risen by 40 per cent over the last 12 months, and half of those small businesses that have managed to stay afloat have considered closing their doors.

This chimes exactly with my experience over the last few weeks, talking to small businesses in Wentworth. Many of them are questioning whether they should go on. This is a major concern for the Australian economy, as small businesses are also a wellspring of innovation and productivity. Private investment in Australia, as a share of GDP, is at its lowest level since the early 1990s, with corporates choosing to distribute profits to shareholders rather than reinvest in innovation, and that innovation is what we all need. From my discussions with small businesses, they are asking for three things from our tax system. They want the ATO to partner with them when they hit hard times. They want policy certainty—that once the government announces a policy, particularly a tax policy, it will be followed through. And they want tax reform that builds resilience and innovation in the economy. Frankly, we're not getting any of those.

Firstly, let's talk about our central tax agency, the ATO. It's a hindrance rather than a help. In a recent survey released by ACCI, the ATO was listed as by far the most difficult agency to deal with in terms of meeting compliance requirements for small to medium businesses, with over half of businesses saying the government could be doing a better job—and it should be. But, secondly, even when the government is explicitly trying to use the tax system to help small businesses, the politicisation and the back and forth in this place mean that the wedging opportunities stop creating that certainty for small businesses.

We saw this with the small business instant asset write-off that Labor promised to deliver in last year's budget but only managed to pass the legislation for in the dying days of last financial year. The uncertainty created by the government's inability to pass a core budget measure that was promised to the small business community exacerbated confusion and frustration in the business community. I was hearing stories of small businesses from my community whose owners were stuck in limbo waiting for confirmation that they could upgrade equipment, or, worse, of owners who, assuming that, because the government had announced it, it would go through, had made investment decisions without realising that it hadn't passed the houses of parliament and was stuck in the Senate. This sort of uncertainty is anathema to what businesses need in order to make the decisions and the investments that drive the economy, that employ 40 per cent of the private sector workforce and, frankly, that provide the livelihood and opportunities for so many Australians.

It's not just the ATO and it's not just the politicisation of policies here in parliament; it's also that the government and, frankly, the parliament—both this parliament and previous parliaments—have not addressed the major tax reform that this economy needs and that small businesses need. Tax settings are preventing young Australians not only from getting into the housing market but also from getting into businesses. When I talk to the business community, there's a plea: harmonise things like the payroll tax; make it simpler for us. They still don't understand, and I don't either, why there is a tax on employing people in this country. Why is stamp duty holding people back from making efficient economic decisions and proper investment decisions? How can we drive a tax system that actually rewards innovation and investment rather than holds it back?

It's not just the business sector where this matters. This is also in the community sector. This affects young Australians who can't get into the housing market and don't see the prospect of ever owning their own home. Urgent tax reform is needed, and it's much more comprehensive than either of the major parties have contemplated because of their political wedging. It's time for change.

Andrew Charlton (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

The two previous speakers, the member for Bennelong and the member for Wentworth, have both described the important role that small business plays in our economy, and I associate myself with those remarks. Ninety-eight per cent of all businesses in Australia are small businesses, and those businesses employ more than 60 per cent of working Australians and account for 50 per cent of Australia's GDP. The key thing for me, though, is the difference between those last two numbers: they employ more than 60 per cent of Australians but account for only 50 per cent of GDP. The reason there's a difference between those two numbers is that there's a productivity gap between small businesses and large businesses.

Small businesses are on average about 10 to 15 per cent less productive than larger businesses. That means that, per employee, the added value produced by our small business sector is much lower than the added value produced by our large business sector, and that, to me, speaks to an opportunity. If we can lift the productivity of those small businesses up to the national average, we would make a huge difference to our national productivity challenge.

What are the things that are holding back small business productivity? Everybody in this place who regularly meets with small businesses and goes down to visit them in their shops and offices and places of work knows how hard it is to be a small business in Australia. They know the challenge of meeting payroll and the difficulties of managing all of the government regulation associated with employment, compliance, tenancies and occupation. They know the stress that so many small businesses are facing right now, at a time when not only are revenues soft but costs are rising. We talk about the cost-of-living challenge in Australia. So many families are experiencing rising costs, but the small businesses of Australia are not just feeling those rising costs—rising costs of inputs and labour and materials and rent. Unfortunately, they're also feeling the other side of that coin, which is falling sales as the economy softens. Small businesses are caught by both blades of the scissors. That's why now is such a good time to think about what we can do to help small businesses in Australia, not just to help them through a very difficult time in our economy but also to realise that largest of economic opportunities that Australia has: to close the gap between large and small businesses in terms of productivity.

For a long time, many of the drivers of productivity in our economy were the exclusive province of large businesses. Think about big ERP systems, big pieces of digital infrastructure that enabled big businesses to be more efficient, to manage their workforces better and to reach customers more easily. But, today, many of those digital tools which were once the exclusive domain of large businesses are now democratised, available to small businesses. Small businesses can use online platforms to help them manage their payroll, do their accounts and conduct advertising and marketing in low-cost online ways. The fixed costs of becoming a small business have fallen dramatically. If we think about one of the big opportunities to close that productivity gap and to boost our national productivity, it is surely to support small businesses to take advantage of these digital opportunities, to give them the same efficiency tools that big businesses have had for a long time.

As the previous two speakers also said, another important thing we need to do is help small businesses through the tax system. In the previous government, there was almost no reform to our tax system over the course of nine years. There were no changes to superannuation, no changes to many other areas of economic policies, from microeconomics to competition policy to financial services and climate change. Our economy stood still, without being renovated or modernised to keep up with the changes across businesses' experience. That lack of reform has led us to the productivity cul-de-sac that we're in today, where, over the previous decade, productivity declined to near record lows. For this government, returning productivity, both through small and large businesses, is core to our economic agenda.

Marion Scrymgour (Lingiari, Australian Labor Party) Share this | Link to this | Hansard source

The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.