Michael McCormack (Riverina, National Party, Shadow Minister for International Development and the Pacific) Share this | Link to this | Hansard source

I support the member for Petrie's well-considered amendment. The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 is a four-schedule omnibus bill. It contains disparate tax administration and incentives measures. It goes to the core of small business. Small business, as we've heard so often, is the heart of the Australian economy. Bruce Billson was a former small-business minister in a coalition government, and he is now the Australian Small Business and Family Enterprise Ombudsman. The ASBFEO website holds some very good information. Anybody contemplating starting a small business and anybody running a small business ought to go to the ASBFEO website and see what that portal has to offer them to help them wade through the mire of legislation and industrial relations; there are some helpful tips. I admire Mr Billson for his passionate enthusiasm about small business; there has never been a better small-business minister than him.

I did indeed have that portfolio, but the former minister, the now ASBFEO, was next level. Interestingly, I think the figure of those small businesses which fail because of cashflow problems is somewhere in the order of 82 per cent. There is not enough cash coming through the door and they are not able to retain customers. There are myriad reasons as to why small businesses fail. There are record numbers of small businesses failing now because of the policies of the Albanese Labor government. It's tough enough to run a small business—and I know; I've run one.

Elizabeth Watson-Brown (Ryan, Australian Greens) Share this | Link to this | Hansard source

Me too.

Michael McCormack (Riverina, National Party, Shadow Minister for International Development and the Pacific) Share this | Link to this | Hansard source

I hear the Greens member saying, 'Me too.' I know she's an architect, and I know she's run a small business. I say congratulations to her. We need people in this place who understand small business more than ever before. I don't agree with the Greens on just about anything, but, if they've run a small business, well, good on them. I appreciate that they have.

With small business we need to look at some of the figures. I'll get back to the other failure rate, which is extraordinary at the moment. Look at the employment: small business is 42 per cent; medium-sized is 24 per cent; and large is 34 per cent. But for the number of businesses as percentages of overall businesses, small businesses make up 97.2 per cent. So 97.2 per cent of businesses in Australia are small. Medium businesses make up 2.6 per cent; large businesses make up 0.2 per cent. These figures are from the ASBFEO website, so they would certainly be accurate. What you also need to remember is that $500 billion worth of economic activity is being generated by small businesses. They directly employ 5.2 million Australians and they're giving many others the opportunity besides that. They're keeping the wheels of the economy turning—they certainly are. Then you look through at how the Australian economy is operating and you see that, according to the GDP—gross domestic product—services account for 62.7 per cent; construction accounts for 7.4 per cent—I'll come back to that; mining accounts for 5.8 per cent; manufacturing accounts for the same—5.8 per cent; and agriculture accounts for 2.8 per cent.

Now, we once rode on the sheep's back, and our farmers are still critically important because they grow the food and fibre of the nation. They've been cruelled every step of the way by this government and the Greens, who don't even believe in farmers. They like to eat three times a day but they do not believe in farmers.

An honourable member interjecting—

It is true. If you think it's not true, please support and help them with policies that are going to help and support them, because the Greens don't at the moment. So $500 billion of economic activity comes from small businesses. That is just so important.

There are many different methods of determining what a small business is: for taxation purposes, the Australian Taxation Office says that a small business is one that has an aggregated turnover of under $10 million; the ABS says it's one with fewer than 20 workers; and Fair Work Australia says it's one with fewer than 15 employees. But we know, understand and grasp what a small business is. It's a small, often family-run enterprise that's employing people and having a go. Family businesses always put their workers, their entitlements and their superannuation before any consideration of their own. Often, their workers are taking home more money than what the owners of the business are. I see the Greens member nodding—thank you. It's true. Often, those small-business owners don't take a holiday. It's tough. It is so tough to run a small business.

When it comes to construction, it is so tough at the moment. We've got state governments that want to shut down the timber industry. We've got any number of compliance measures that the construction sector has to meet. Then we've got the cop on the beat: the ABCC has been stopped by this government, so we've got unions running rampant on worksites—we do—and it is just so tough. We've got a housing crisis because of all number of reasons. There's record migration. State governments and the Albanese government are stymieing construction every step of the way. We've got a housing crisis—you can't find a house to buy and, if you could, they're that expensive, and then you can't get into the market. We've got mortgage rates going up and up. It'll be interesting to see what the Reserve Bank does on Tuesday week as far as that's concerned.

And then we have rental properties—you cannot get a rental property to save yourself if you are in need of one—and the construction sector is in freefall. Of the 27,000 businesses that have gone bust under this government, the number of construction firms is alarming. It truly is. The December 2024 quarter was the worst quarter for business insolvencies on record—3,852 businesses went to the wall. Let me repeat that: 3,852 businesses went insolvent, went bust, went broke, went bankrupt, call it what you like, in the December 2024 quarter. That was the month before last. That is disgraceful. That is alarming. And if that isn't ringing some warning bells in Treasury, in cabinet, in the Lodge, then I don't know what will.

Staff in Australia have the highest minimum wage in the world. That is a good thing, but it places pressure on people trying to keep the doors of their businesses open. They have overhead expenses and less foot traffic which are making it so hard. There's only so much you can charge for a cup of coffee if you're a little cafe. There's only so much you can charge for a pint or a middy of beer if you're a hotel.

There is a better way. The coalition has got a plan to get the nation back on track. Hopefully we can form government after the next election and be able to do just that. But in that December 2024 quarter and the statistics that come from that, which are on the record for all to see, 57 per cent of business owners reported feeling stressed due to financial pressures. Those financial pressures include the cost of power, the cost of just doing business. But power is a big thing, so we need to have an energy grid and we need to have a power market that is going to enable businesses to feel much more confident than they are now about turning the lights on and opening their doors and trying to do business. At the moment it's overwhelming for them and that figure, nearly 4,000 businesses going to wall in the last quarter of last year, shows that.

Schedule 1 to the bill amends the luxury car tax act by tightening the definition. The bill will change the definition of a fuel-efficient car by reducing the maximum fuel consumption to be considered fuel efficient from seven litres per 100 kilometres to 3½ per 100. I do hope that the off-road fuel standards fuel rebate at the moment is not altered because what we can't do is whack our farmers and our miners anymore. Our farmers and our miners were what kept this country going during COVID. When all the city types, the people in this place who represent city electorates, went home, pulled a doona up over their heads and thought, 'Woe is me,' it was the people in regional Australia who kept this country going. They kept the lights on, kept the balance of payments, kept the exports going, kept food on the table, kept the wheels of the economy turning. Those people in regional Australia, and in your electorate, Deputy Speaker Archer, are the ones who we should praise. We should thank them three times a day every day because they're the ones who put the food on our tables. Our farmers were the champions during COVID and they are always do the right thing by our nation. That is why any fuel rebate, anything they can get as far as being able to ease the cost of living, ease the job of doing business is welcomed and should be continued.

Schedule 2 of the bill denies deductions for ATO interest charges, the general interest charge—GIC—and the shortfall interest charge—SIC. Deductions for interest rates just hark back to the 27,000 businesses that have gone bust under this government. We need to make it easy. We need to cut the red and the green tape that is just enveloping our business owners at the moment. They need encouragement; they need incentives; they need praise; they need to have bureaucracy eased. And yet what we get with this government is they just want to foist more work, more compliance, more paperwork on to them. It's making it more difficult for them to do business, those brave small-business owners.

Schedule 3 of the bill extends from a fortnight to 30 days the period within which the tax commissioner must notify a taxpayer of their decision to retain a refund amount arising from a business activity statement. Keep records, as Mr Billson would say. Keep your tax records and have a good accountant, and you'll get through your BAS. One thing that I always thought about with running a business was that having a busier BAS shows that you're busier running your business. If you're paying tax, you're helping to fund state schools and state hospitals, helping to keep the economy going, playing your part and doing the right thing. It means that you're getting foot traffic through your business and hopefully making a profit. The purpose of extending this period is to combat fraud and reduce the number of fraudulent refunds issued by giving the ATO more time to assess and verify potentially fraudulent BASs.

I'm going to give a little plug here to the member for Whitlam. I know he's a Labor member, but he and I ran a very good scams forum at Wagga Wagga, and I thank him for coming to my electorate. We were very bipartisan. At the end of the day, if it's preventing scams, particularly for elderly people and certainly for businesses, then it has to be seen as a good thing. I thank him again for coming to my electorate and doing that.

Schedule 4 of the bill extends the $20,000 instant asset write-off by 12 months until 30 June 2025. Labor's proposal would limit the instant asset write-off to $20,000 and only provide an initial 12-month extension. Why don't they just put it into perpetuity? I know it's rolled out every budget just to make the government of the day look good, but we had an unlimited instant asset write-off when we were in government. It got more business happening. It was an incentive to businesses. This mob just want to limit it to $20,000—miserable creatures that they are!

Elizabeth Watson-Brown (Ryan, Australian Greens) Share this | Link to this | Hansard source

I rise to speak in support of the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024. The Greens are supporting this bill, as it does two important things. Firstly, Schedule 1 of the bill lowers the fuel efficiency requirements for cars to be eligible for a higher luxury car tax threshold so that only EVs and plug-in hybrids are eligible for the more generous LCT threshold.

In 2008, the Greens and Labor negotiated the higher vehicle efficiency threshold as a design element within the luxury car tax in order to send a price signal to consumers choosing between higher and lower emitting vehicles. That standard was set at seven litres per 100 kays, but, given the natural technological improvements and emissions standards in major global car markets that oblige increasingly efficient vehicles, the current standard has been eroded over time and needs realigning now. The change proposed in this bill will remove internal combustion vehicles and their hybrids from the more generous threshold and refresh the intent of the original 2008 agreement.

Secondly, schedule 2 of the bill will deny deductions on interest payments from ATO debts and, as a result, will correct a deeply regressive element of our income tax system whereby the Australian public effectively subsidises high income earners' debt repayments to the tax office. Currently, people with incomes over $190,000 who have an ATO debt are able to deduct 45c in every dollar paid back on a debt, while a worker earning $45,000 a year can only receive a 16c discount on every dollar of interest paid to the ATO. Someone with a tax debt earning below $18,200 would have to pay the full amount back with no tax deductibility.

The current system is deeply regressive. The current system is open to manipulation by financially literate high-income earners, who can intentionally run up a debt to cover other life costs knowing the Australian public will pick up almost half their tab—almost half of their interest charges. These two changes make the rest of the bill worth supporting because these are not measures that any coalition government, with their affection for higher pollution and economic inequality, would ever pursue.

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

As I rise to speak to the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024, I can't help but be struck by the thought that, yet again, here is another Frankensteinian monster of a bill, one that combines changes to the way fuel-efficient vehicles are treated under the luxury car tax system, provisions that would make the penalties attached to general interest charges and shortfall interest charges non-tax-deductible, an extension of the ATO's notification period for retaining funds from 14 to 30 days and, finally, the long-promised extension of the instant asset write-off for small businesses, which is being moved as an amendment to this bill by the government. Again, there's no logic in this legislation. It couples some pretty ordinary reforms in a way that makes it hard to vote against them, as the overall potential upside probably outweighs the potential downside. But it's still ugly.

Let me explain. If we start at the beginning, in principle, the changes to the luxury car tax are welcome, not the least because these are way overdue. Yet, the changes to the tax deductibility of the ATO penalties are problematic, as they're likely to be yet another measure that will disproportionately affect small businesses who are already struggling. Rather, the reform offered here does nothing to meaningfully assist small businesses to reduce their debts, but it will impact their cash flow. The ATO time extension is probably neither here nor there, although it does seem to prioritise the needs of an agency over all others, while the extension of the instant asset write-off is quite simply something that can't come soon enough and, potentially, hasn't gone far enough in this iteration. In this scenario, the question I have to answer as the member for North Sydney is, 'Which side of the median line does the needle finally land on?'

Speaking firstly to the reform of the luxury car tax, schedule 1 of this bill redefines fuel-efficient vehicles as those with fuel consumption not exceeding 3½ litres per 100 kilometres, which is down from seven litres per 100 kilometres and aligns the indexation rates that apply to the fuel-efficient and other luxury car tax thresholds. While these changes are sensible, they're actually long overdue and not nearly ambitious enough to, in the Assistant Treasurer's words, 'foster a cleaner and more sustainable future'. The introduction of the luxury car tax followed hot on the heels of the GST, and was eventually designed to try to encourage people to consider local cars over high-end imports and opt for the most fuel-efficient models. To encourage the latter, the tax is based on two thresholds in the 2024 financial year: a higher threshold of $91,387 for fuel-efficient vehicles, which are currently defined as vehicles with fuel consumption not exceeding seven litres per 100 kilometres, and a lower threshold of $80,567 for all other vehicles. What this means is that businesses and individuals that sell or import a car pay 33 per cent of the value of the car that exceeds the relevant threshold of the luxury car tax. However, this tax is now largely out of date and no longer incentivises the purchase of the most efficient vehicles possible.

The introduction of the vehicle efficiency standards this year means car manufacturers are finally prioritising the importation of the most efficient vehicles they have in their line. Given this, the current definition allows many models that actually aren't the most efficient vehicles on the market at the moment to take advantage of the tax break. It is time we close this loophole, in my opinion. Additionally, different indexing arrangements for the two thresholds have eroded the price advantage of the so-called fuel-efficient vehicles. These changes are sensible, but the government could have gone further if they were truly committed to driving change. The first thing they could have done was to change the definition of fuel-efficient vehicles under the luxury car tax to 'zero emissions vehicles' rather than the proposed definition of '3½ litres per 100 kilometres'. While that would have been bold, it's a change that would have ensured only the most fuel-efficient models—that is, those without an internal combustion engine—would benefit from the higher concessional threshold. This would have also made the luxury car tax consistent with other federal legislation designed to encourage the uptake of more efficient vehicles, such as the fringe benefit tax exemption—which as of April of this year is available only to zero emissions vehicles.

In making this suggestion, though, I recognise that people living in regional and rural areas often have no choice but to purchase fossil-fuelled or hybrid vehicles, and I would not want to see them disadvantaged by legislative reform. Having grown up in north-west New South Wales in the town of Coonabarabran, I'm incredibly aware that the charging infrastructure for zero emissions vehicles is just not up to scratch in regional areas. So, while being supportive of the introduction of targeted policies to increase clean vehicle uptake, I would argue we need targeted assistance to ensure the transition is equitable and that regional and rural Australians aren't left behind.

The second way to amend the luxury car tax would be to remove the broad exemption for all utility vehicles. As it currently stands, this exemption is offered regardless of the reasons these vehicles are being purchased. Commercial vehicles are defined by the ATO as 'those designed for the principal purpose of carrying goods used for business or trade' and they are not subject to luxury car tax. Yet there's no requirement for someone who either owns or is choosing to buy one of these vehicles to demonstrate that the car is being purchased or used primarily for commercial purposes.

Rather, the accepted test to determine the principal purpose of a utility vehicle rests on whether the passenger-carrying capacity is less than 50 per cent of the load-carrying capacity. According to the Australia Institute, this definition meant that every dual-cab ute on the market in 2024 was exempt from the luxury car tax. With the number of light commercial vehicle sales well outweighing the number of people who are registered as tradespeople nationwide, it's clear that not all purchases are for commercial reasons. While I doubt that what I'm about to say is going to make me popular, I would argue that this loophole should be closed or replaced with a narrower definition of a commercial vehicle. There are simply far too many of these cars on the road in my electorate of North Sydney.

I stress that this is something the Labor government should care deeply about as, under their watch, emissions have flatlined. To June 2024, emissions decreased by a measly 0.7 per cent compared to the previous year. And while emissions reductions were recorded in the stationary energy, agriculture, electricity and industrial process sectors, transport emissions continue to increase. All the modelling supports the supposition that this is due in no small part to the trend towards the purchasing of SUVs, light commercial vehicles and heavy vehicles, which is something that our current tax system encourages. If the government want to get serious about emissions reduction in our transport sector, they need to push for bolder reforms to decarbonise transport. Fixing an inefficient tax that encourages the use of heavier, higher-emitting vehicles for personal use is, I would suggest, a good place to start.

Ultimately, the changes contained in this bill are pretty pedestrian in their ambition, with similar changes originally proposed as far back as 2019 by Independent senator Tim Storer when he was chair of the Senate select committee on EVs, and members of this crossbench have continued to advocate for them during this term. An ambitious transport agender would have included: removing the luxury car tax ute loophole; reforming the heavy vehicle road user charge or the fuel tax credit system; shifting to an equitable, transparent user-pays road charge system; or encouraging active transport through tax deductible ride-to-work allowances for employees. Yet none of these things are currently being pursued by this government. Instead, the changes being proposed here should and could have been made years ago, so it's a bit hard to get too excited by them.

Turning to schedule 2 of the bill, these changes will remove the ability of taxpayers to claim the general interest charge, also known as the GIC, and the shortfall interest charge, known as the SIC, as tax deductions. While this proposal may seem innocuous, I have real concerns about the impacts these changes will have, particularly on small, family-run businesses in Australia. Without transitional or accompanying safeguards, this measure risks being the straw that breaks the camel's back, and I ask the government to think very carefully before they make yet another bureaucratic change without fully thinking through the impact on the end user. In context, the ATO imposes these penalties either on taxpayers who have not paid their taxes on time or where a tax liability has been incorrectly self-assessed, resulting in a shortfall of tax paid. At the moment, if incurred, both the penalties are tax deductible, and some businesses and individuals may actually choose to cop them. Having spoken to people likely to be affected by this change, I know they don't do that lightly but often have no choice as they are struggling with cash flow.

In making these changes, the government argues that penalties for noncompliance should not be tax deductible, and on the surface that seems reasonable. But the reality is far more complex, and whether it is intended to or not, this measure will disproportionally impact small, family-run businesses, who currently owe about two-thirds of the collectible tax debt. As I think everyone in this place knows, these people are already struggling. Recent research from the Commonwealth Bank found that more than half of the small- to medium-size businesses in Australia are feeling the stress of navigating the cost-of-living crisis, with one in two business owners reporting feeling stress owing to financial pressure.

As the member for the third-largest business sector in the country, I hear about their stress every day. Small businesses tell me about the unhelpful and often stressful interactions they have with the ATO or external debt collection agencies. I can't help but feel that, while this change might seem like nothing much to the government, it sends yet another message to small and medium businesses that this government does not understand what they are facing or how they operate. Increasing the cost of tax debt will not help these businesses self-assess their tax liability more effectively. Rather, it risks accelerating the accumulation of tax liabilities on small businesses to unsustainable levels, forcing them to increase their reliance on accountants and financial advisers, which in turn drives up the cost of operating their businesses. While I acknowledge the tax commissioner will retain the discretion to remit the interest charges where they consider it is fair and reasonable to do so—say, in the instance of financial distress, as I've outlined—I don't think that offers adequate protections, particularly in the current uncertain economic environment. To rely entirely on a commissioner's discretion is to leave many Australian families and businesses at the whim of one decision.

With all of that said, I would encourage the government to delay this measure and instead work with the small business community to find a solution that ultimately reduces outstanding debt without accelerating current debts to unsustainable levels. For instance, rather than penalising generally compliant small businesses by denying them a deduction for GIC or SIC, the government could choose to invest more in an organisation such as the Australian Small Business and Family Enterprise Ombudsman, who in turn could deliver better education and other services to help family-run businesses correctly self-assess their income tax liability. The government could choose a carrot rather than a stick. At the same time, the ATO could implement targeted debt collection measures that focus on high-debt accounts.

Sensible recommendations have been made by submitters to the Senate Standing Committee on Economics inquiry into this bill, and they do warrant further consideration by the government. They include clarifying whether the proposal applies to amended assessments issued on or after 1 July 2025 that are referrable to income years beginning prior to 1 July 2025. As many of us know, many people run their tax accumulation 12 months behind. This would create a more level playing field for over- and underpayment of tax and encourage the accuracy and accountability of the ATO, excluding disputed debts subject to a fifty-fifty arrangement made before the announcement of this measure and at the very least retaining the deductibility of the SIC.

Finally, I want to turn to the government amendment that we expect to see as this bill progresses through the House. It's an amendment that would finally legislate an extension of the instant asset write-off for small businesses through to 30 June 2025. While I will certainly be supporting this amendment, the deferral of this measure, including the fact that it was removed from a bill which passed at the end of last year, has left small businesses in an uncertain position yet again. As the CEO of the Council of Small Business Organisations Australia, Luke Achterstraat, has said, many will feel like this is groundhog day—a painful reminder of the last financial year, when the legislation was only passed a matter of days before the window for applications was due to expire.

Ultimately, this government continues to seem to fail to understand that, for this measure to work and be effective for small businesses, they need certainty. It needs to be legislated, not just announced. The fact that the government does not seem to get this point just shows how out of touch they really are with how small businesses operate. I reiterate my previous calls for a permanent, ongoing instant asset tax write-off for small and family businesses with an increased threshold to at least $30,000. For this reason, I will be supporting the member for Warringah's amendment to that effect.

There seems to be no absence of voices in this place for big business. As such, I would suggest many of them currently enjoy favourable operating environments. But if this government genuinely wants small businesses to thrive, making the instant asset write-off permanent and lifting the threshold would be a good place to start. Generally speaking, I would encourage them to stop talking and start listening to this sector so we can get reform that makes it possible to have a successful small-business environment in this country.

Zali Steggall (Warringah, Independent) Share this | Link to this | Hansard source

Today I rise to speak on the Treasury Laws Amendment (Tax Incentive and Integrity) Bill 2024. For many, this is essentially an omnibus bill that brings together a number of schedules covering the very different areas it touches on. The omnibus bill tries to close loopholes and encourage transition to electric vehicles in one of its schedules. It has three key parts. First, it tightens up the luxury car tax rules, but it really does not go far enough. It introduces that only electric and plug-in hybrid vehicles qualify for tax breaks. I will say more on that in a minute, because there is an issue around this remaining area of plug-in hybrids. The second part of the bill removes the ability to deduct interest charges on tax liability. The third schedule extends the ATO's notification period for retaining BAS funds from 14 to 30 days. Some of these changes are necessary and overdue; however, there are concerns regarding unintended impacts, in particular in relation to the second schedule and the impacts on small business.

First of all, on the luxury car tax changes. We know, from a decarbonisation point of view, transport is a low-hanging fruit. It is an area where we can and must accelerate our decarbonisation. The world is transitioning; we do not have a local car manufacturing industry, so we have to, as a matter of urgency, move towards electric vehicles.

There is a lot of misinformation as to the safety and the range of electric vehicles. Much of that comes from those trying to hold back, trying to hold onto fossil fuels and old combustion engines. The reality is a number of players in the field are improving the issue when it comes to access to charging facilities in our regional and urban areas. I know that the NRMA and others are installing a lot of fast-charging facilities.

The reality is most average users do not do a huge number of kilometres, and the range of electric cars is absolutely sufficient. I have, for example, travelled by electric car from my electorate down to Canberra. I've gone to Jindabyne and to the Snowy Mountains. I've done a number of long journeys and there is a really good network out there. This constant misinformation seeks to drive doubt around range and encourages people to think that they have to hold onto the past when it comes to combustion vehicles and needing ongoing reliance on fossil fuels.

We know the Sector Pathways Review and the Climate Change Authority put out sector pathway recommendations, but they're really not sufficient. They're not driving enough ambition yet. We know, when it comes to our transport sector, that we need to get to net zero. We have the ability to do that. The first and easiest way is around passenger vehicles. That fleet needs to get to net zero. I've been on a number of inquiries, and the amount of misinformation that still gets peddled out there is quite staggering really. The reality is the faster we transition to fully electric vehicles, the sooner we cut emissions, and we reduce our reliance on fossil fuels. We really cannot afford to delay.

There is a silver lining to this as well, which is noise pollution. Anyone who has travelled in an electric vehicle will know that respiratory illnesses, noise and all those aspects are improved so significantly. We are developing more solutions when it comes to electrification of heavy transport as well. But this legislation, whilst it is closing a little bit of the loophole around the tax incentives and definitions around electric and plug-in hybrid—as I said, it's keeping this loophole for plug-in hybrids. I know there are regional members of government that have been lobbying to keep plug-in hybrids in this legislation. To me, it stems from that misunderstanding and the lack of experience of driving electric vehicles to understand that they deliver. For example, when it comes to the utes, I met with an Australian company—ironically in the electorate of the opposition leader, in Dickson. The AUSEV company are transitioning and making sure that we have fully electric, heavy-duty utes that can work on mines and other sites. This is an incredibly positive move, but I don't believe they receive support from their local member.

The reality is we still have too many loopholes. There are still too many people using passenger vehicles and utes that aren't always for commercial or trade use. These are heavy, dangerous vehicles on our roads, and are high-emitting vehicles. This loophole for utes that remains in the legislation is bad and needs to be addressed. I urge the government to address this. Stand up and put forward some serious plans to enable the transition to happen and close that loophole, when it comes to that.

The next schedule addresses the extension of the ATO's notification period for retaining refunds relating to the BAS statements in an important measure to combat fraud. With scams becoming more sophisticated, especially through social media, it's even more critical. As I understand it from the minister, the measure will provide the Australian Taxation Office with the breathing room they need to investigate and crack down on fraudulent statements. I support this. This measure appears to be fairly well founded, especially if it supports efforts to uphold tax integrity.

I am concerned, though, around protecting small business. Many in this place talk a big game in terms of small business, but the reality is, both for the major parties in opposition and in government, big business has their ear and all too often small business is mentioned—there's a lot of talk—but very little action occurs when it actually comes to putting detailed proposals that will help small business. With the question around the removal of interest deductibility on tax liabilities, I support improvements to tax integrity, but we must ensure, when we're closing loopholes, we're not in fact making it even harder for small businesses to survive. Through this change, there is a risk of disproportionately impacting small businesses who are already struggling with cash flow. While under this proposal the ATO will retain flexibility to remit in cases of financial hardships, it will require discretion from the ATO, and the feedback I get from small businesses in Warringah is they are not seeing any discretion or flexibility from the ATO. In fact, they are seeing a crackdown that makes it incredibly hard for them to remain operating.

To ensure that we do actually have sensible things that help small business, I have an amendment to suggest to this legislation to improve it. The government circulated an amendment to extend the instant asset write-off until 30 June 2025. We've been having a debate about this instant asset write-off for some two years now, and it's really unacceptable that the delay has meant that small businesses can't rely on it. They have no certainty, and they cannot make investment decisions for their business knowing that this is going to be available because it simply hasn't been. It's on the table and it's been announced, but then the legislation to give it effect isn't there. So a small business struggling with their cash flow cannot legitimately commit to an investment or to spending on the assumption that they may be able to write off that asset, because they might not be able to because the government and the opposition have not come together to pass the legislation necessary. It's really important that businesses get that certainty. This is a measure that was announced a number of years ago, and I have been trying to amend it for a number of years to give businesses more certainty—not last-minute slapdash amendments, especially now when we're looking at it in possibly the last sitting weeks before an election.

I again support the government introducing it, but I think we need to think about the quantum. In terms of investing in their new machinery and things that will actually make a difference, $20,000 does not really support small businesses. They need that asset write-off threshold, and that's why I will be moving an amendment during the consideration in detail stage to increase that from $20,000 to $50,000. That is what they're asking for. They are saying that, for meaningful investment in infrastructure or anything that will genuinely assist with the efficiencies of their businesses, that is where the threshold needs to be. It also needs to be made permanent. They need certainty.

Small businesses are the backbone of our economy. In Warringah alone, we have over 8,000 small business and 12,000 sole traders. They're driving innovation and creating jobs, strengthening our local economy. Last week I met with a group of small businesses and the chambers of commerce, and they are quite desperate. I can't convey that to the government clearly enough. They spoke of the impact these issues and other changes are having on their operations. They're feeling, with the increasing amount of regulation coming through, that the government is making it impossible to run a small business. They don't feel like they are cared for by the major parties or by the government at the moment. There is no assistance provided to help them wrestle with increasing pressures from an unstable economy. Their issues include the cost of compliance, the IR changes—the amount of changes in the last few years has made it impossible for them to keep up—the ATO being tough, the staffing shortages and the changes that have happened around immigration and visas, for example, which have also made it harder for them to sponsor visas. The cost of sponsoring staff to come and fill vacancies to be able to operate is huge. These are all areas that chip away at the viability of small businesses.

The numbers don't lie. In the last financial year, ASIC reported that small businesses in construction, retail and hospitality made up the majority of insolvencies. There have been many discussions, as I said, in this place about small business, but we need to actually get on to action. The Productivity Commission, in their Advancing prosperity report, as well as, increasingly, business groups, have argued that greater productivity measures are needed to help our economy and get small to medium-sized businesses moving. That can be paired with deregulation measures that favour small businesses, such as meaningful taxation reform and simplification on compliance reporting.

Small businesses have also continued to advocate for an increase to the limit of the instant asset write-off. The Australian Chamber of Commerce and Industry have said that a $20,000 threshold does not provide the necessary economic stimulus needed for small business. The National Electrical and Communications Association has argued that the cost of essential technical equipment far exceeds this limit and that an increase of the threshold to $50,000 is necessary. Whilst $20,000 may enable a small business to purchase small, short-lived assets, such as computers for an office, a fridge for the kitchen and those kinds of items, it's not sufficient for meaningful investment into equipment, plant and machinery, which will provide substantial productivity benefits.

Ultimately, we have growing economic uncertainty and we need to get rid of that risk element by making sure there is certainty. That is why making the instant asset write-off permanent is essential. It's so we don't get into political argy-bargy that means it's on again, off again. We know that that is so damaging. Whilst overall I support this legislation, I will be moving amendments to support small businesses in consideration in detail, and I urge the government to close the loopholes in the luxury car tax and get on with incentivising clean, net zero transport. Don't keep room for dirty combustion engines that do nothing to decarbonise Australia.

Terry Young (Longman, Liberal National Party) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024. Last year, there were a record number of small business closures in this nation—over 13,000. There have been over 27,000 since this government was elected. That's more than at any other time, including the pandemic, which is hard to believe. At this most difficult of times for small businesses, this government's response is to impose more pain on businesses, many of which are on the brink of closure. Schedule 2 of this bill proposes the removal of the tax deductibility of interest paid on late tax debts. I've got news for this government: they're late paying the tax bill because they're struggling and their cash flow is tight. Taking away this tax deductibility is like kicking someone when they're down. The other people it affects are the workers in these small businesses. The extra financial burden by removing this tax deductibility from small business means they'll have to take the money from the only controllable cost you have in business: wages. So much for being the party of the worker.

This proposed measure is seen as such a threat to the small-business community that Chartered Accountants Australia and New Zealand, the Institute of Public Accountants, the National Tax and Accountants Association and the SMSF Association made a joint submission calling for schedule 2 to be removed from the bill entirely. Their submission found:

… it is unlikely that increasing the cost of SIC—

special interest charges—

will impact an entity's ability to correctly self-assess their tax liability and the current cost of GIC—

general interest charges—

means that many taxpayers already have a strong incentive to pay tax on time. Making SIC and GIC non-deductible will inappropriately increase compliance costs of honest taxpayers.

… There are already a wide range of targeted measures that the Australian Taxation Office can undertake to improve the collection of tax debt, and the latest annual report indicates that such measures are beginning to make an impact.

Certified Practising Accountants Australia made a similar submission urging the government to reconsider its proposal. CPA Australia says that denying these deductions will create undue financial hardship for small businesses and individuals, exacerbating existing challenges in the current economic climate.

This is an indiscriminate measure that fails to address situations where taxpayers have historically done the right thing or have, through no fault of their own, accrued these charges due to legitimate tax disputes or administrative delays. In the explanatory memorandum, the government points to the ability of a taxpayer to apply for remission of an interest charge—that is, to ask for it to be waived. But stakeholders report the measure comes at a time of long delays in ATO service delivery and inconsistent outcomes on remission requests. Disputing decisions is already time consuming and costly and will become more costly with the risk of non-deductibility if a remission request is denied. These delays from the ATO will now cost taxpayers even more. This government's decision to introduce this measure despite widespread criticism shows that the business community should have no confidence that this government can consult and no confidence this government listens.

The second hit to small business, and to all Australians, is to those who choose not to purchase an EV because there is no EV option to tow their caravan or load up their tools, no charging stations where they live or not enough range. In schedule 1 of this bill, the luxury car tax threshold will be increased to $91,387 only if the vehicle achieves under 3.5 litres per 100 kilometres. This means LandCruisers, Patrols and the like will not qualify for the new luxury car tax threshold—surprise, surprise. Only EVs will qualify—another example of this government trying to force their ideologies on the Australian people, whether those ideologies suit their lifestyles or not. The coalition will move amendments so that Australians who choose to purchase a vehicle that suits their lifestyle will not be discriminated against for making this choice.

When I talk to everyday Australians in Longman, they tell me that if people choose to buy an EV they respect their right to do that if that's what suits their lifestyle. All they expect is that they be shown the same respect when they make a choice to purchase a vehicle that suits their lifestyle. This latest proposed measure, coupled with the first tranche of the much-hated ute tax that came in on 1 January, is simply hitting hardworking Australians when many of them are doing it tougher than they ever have before.

Schedule 3 again punishes small businesses through cash flow. Currently if there is an error in the amount of tax paid through the BAS system, the refund is issued within 14 days. This bill proposes that that be extended to 30 days. The measure is in response to a recent and new practice of fraud through social media. However, as is a practice of Labor governments, the innocent are punished along with the guilty rather than Labor managing by exception and more severely punishing the offenders with stiffer penalties. If we must go down this path, at a minimum, interest should be paid on moneys owed to the entity after 14 days.

Although schedule 4 of the bill, which reinstates the $20,000 instant asset write-off for small business for the 2024-25 financial year, will be welcomed by the small-business community, small-business owners see it for what it is: pure politics leading up to an election. Instead of legislating this earlier in the term because it was the right thing to do to help small businesses, this Labor government will bring this in with the alleged financial impacts to be felt after the election—again, thinking purely of the politics and not of the actual impact this has on small businesses and their workers.

The coalition will move amendments that increase the threshold to $30,000 and make it permanent to give businesses certainty, which they certainly need more of in uncertain times. It's like this government meets every day to try and find ways to punish small businesses and their workers. In contrast, we see them rubbishing the coalition's recent announcement allowing small businesses to claim up to $20,000 for business related meal and entertainment expenses. Labor keep pooh-poohing this, saying that it's free lunches for bosses—what rubbish! The people that will benefit most from this measure are, in fact, some of the lowest-paid workers. It will mean that cafes and others in the hospitality industry that are currently struggling under this homegrown cost-of-living crisis we are currently in will need to increase hours for employees to meet the extra demand. If they can claim the expense, which will be exempt from the fringe benefit tax, it will be the difference for some small businesses between having a Christmas party and not having one. This will boost morale, leading to increased productivity, benefiting the entire country.

I've never seen a government more antibusiness than this one. A recent study by MYOB reports that one-third of small business owners cannot pay themselves due to cash flow issues and a quarter have resorted to their personal savings just to stay afloat. Only the coalition understands what small businesses need, and, if elected, we will ensure that small businesses and their employees will flourish and prosper. It's time to get Australia back on track.

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

I, and other crossbenchers, am getting pretty sick of this kind of behaviour from this government. We're repeatedly presented with these omnibus Treasury bills which package controversial reforms in with policies that are undoubtedly positive. This, we can only infer, is to prevent proper discussion of the issues. The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 has four provisions, three of which are good and one of which is terrible.

The first part of the bill introduces a luxury car tax, which I and many others have been advocating for a long time and is a complete no-brainer. It updates the definition of a fuel-efficient car to 3.5 litres per 100 kilometres from seven litres per 100 kilometres. It also indexes the luxury car threshold in line with regular vehicles, so this amendment to the current luxury car tax is welcome.

The third part extends the ATO notification period for retaining refunds for further investigation and, again, is sensible. The fourth extends the instant asset write-off for small businesses until June 2025—an election commitment and, again, a no-brainer.

But it is the second part of this bill, the chapter that removes deductions for interest charges on GIC and SIC, that is highly problematic. I see this as an unnecessary change that will remove the ability of businesses to deduct their general interest charge and their shortfall interest charge. By Treasury's own admission, this will overwhelmingly impact small businesses that are already doing it tough. This chapter of the bill has been panned by accountant groups and small businesses alike.

Now, I understand that, on the face of this, this measure seems sensible. It creates an incentive to tax on time, which I support. But the timing of this legislation is extremely poor, given the rapid growth of small business insolvencies in recent years, with cash flow described as the No. 1 cause of these insolvencies according to ASIC. There just isn't the evidence that these systems are being exploited by small businesses as a cheap form of credit. The government knows this is an unpopular move, and that is why it has packaged this legislation in with a handful of other measures that are difficult for this parliament not to pass. The government should be focusing on measures that actually make it easier for small businesses to flourish right now.

Last year, I and other crossbenchers wrote to the government and said that IR complexity and regulatory complexity more broadly are some of the biggest barriers to the growth of small businesses. It's one of the biggest reasons that small businesses are not hiring people and in some cases are shutting down. We wrote to the government and argued that they should increase the threshold of the definition of 'small business' in the Fair Work Act from its arbitrary 15 employees to 25 employees at least. If you're a small business and you have, in particular, mainly part-time or casual workers, 15 employees are not very many. You're not going to have all the HR support to be able to make sure that you can still manage all the complexities of the IR legislation. This is what the government should do. This is something that would make a difference to small businesses right now, and the government should be trying to support small businesses, rather than punish them.

Rebekha Sharkie (Mayo, Centre Alliance) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Petrie has moved an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.

Question unresolved.

As it is necessary to resolve this question to enable further questions to be considered in relation to this bill, in accordance with standing order 195 the bill will be returned to the House for further consideration.