Arthur Sinodinos (NSW, Liberal Party) Share this | Hansard source

Without that first budget, there could not have been the second budget, which provides these generous measures for small business. That is the point.

We heard earlier about Labor's love for innovation. Where were they when Chris Bowen emasculated employee share ownership schemes and took away incentives for start-ups? When you have a start-up, you cannot afford to put people on high salaries but you can give them some sweat equity, some hope that, if their ideas succeed, they will get a return. Those ideas, that initiative was crushed by what Chris Bowen did in 2009. Again, in this budget we are taking measures to reverse that damage to employee share schemes. We are taking measures to promote crowdfunding in a responsible way.

What we are also doing in this particular bill before us today is taking a number of measures which will improve the cash flow for small business, reduce red tape and encourage innovation. There are a number of measures here. I will quickly go through them. They are part of a $5.5 billion package. They complement the company tax cut of 1.5 per cent and accelerate the depreciations for small business that were passed by the House in the Senate. There is a further bill to come which will allow small businesses to restructure without incurring a capital gains tax liability, and that is important too because there are too many situations where the operation of the capital gains tax can stop restructuring and then freeze the mobility of resources.

Just as we took measures on capital gains tax when we first came to power in 1996 to support small business, including rollover into retirement funds and the like, we are taking measures which make it easier for small business to restructure. We are allowing the immediate deductibility of professional expenses instead of depreciating them at 20 per cent per annum. With immediate deductibility we are making it easier to get the advice you need to set up a small business. And we are expanding the FBT exemption for work related portable electronic devices because these days we need more and more of these devices and the rules were restricting people in terms of the similarity of the devices and how many multiples of those devices they could have.

So we will provide a five per cent tax discount for approximately 70 per cent of small businesses which are not incorporated. We have cut the company tax rate for those that are incorporated but here we are doing it for those which are not incorporated by providing a tax discount capped at $1,000 per taxpayer per year. This approach means that the benefits of cutting tax are extended to those who are unincorporated. Currently, unincorporated business income is taxed at its owners marginal rate of personal income tax.

A company tax cut will not benefit unincorporated businesses. All those tradies who operate as sole traders, the mum and dad business partnerships and the family business operating through a trust would miss out. This bill will ensure all small businesses are entitled to a tax cut irrespective of how they are structured. And that reflects the new economy that is involving across the country, where people are increasingly doing things from home and so on and so forth. So with a tax cut of up to $1,000 for each business owner, small businesses will have more cash flow. This increased cash flow can be reinvested in the business, helping it to reach its full potential.

I talked about the immediate deductibility of professional expenses for small business. Currently there are some expenses related to starting a business that have to be depreciated at 20 per cent of the original cost over five years. These include professional advice on starting a business such as legal advice or costs associated with raising capital, including those occurred in accessing crowd sourced equity funding. This bill allows these expenses to be immediately deducted instead of depreciated over five years. The benefit here is not just for business's cash flow but for the record keeping—small businesses will not have to track these expenses over five years as previously required. They will now claim the deduction from the entire amount and get on with running their business and growing Australia's economy. This will be available from the start of the 2015-16 income year.

I also mentioned the FBT exemption for all portable electronic devices that are provided for work purposes. This exemption will be available even if multiple devices with substantially similar functions are provided by the employer to their employee for work purposes. As you know, the FBT applies to certain non-cash benefits provided by an employer to an employee. FBT is levied on the employer. The FBT maintains the fairness and integrity of our tax system by taxing non-cash benefits provided by an employer to its employees. It also facilitates the inclusion of fringe benefits in an employee's income for the purposes of means testing benefits such as such as family tax benefits.

These categories apply to portable electronic devices, items of computer software, items of protective clothing, briefcases and tools of the trade. These are the five categories of work related items that are used primarily for their employee's employment. Within the portable electronic devices category, a FBT exemption can currently be provided for more than one device provided the devices do not have substantially similar functions. So what we are doing here is allowing people to have more portable electronic devices so that is not a constraint on their capacity to do their business and expand their business.

There have been many examples of businesses seeking clarification from the ATO regarding whether multiple items can be exempt in the same FBT year. So we are going to simplify the rules, provide employees and employers with more flexibility in the number and nature of items given to employees by disregarding overlaps in the functions of items. I think that is another important red tape measure.

It is estimated that around 30,000 businesses will initially benefit from this measure. Yes, for budgetary measures to support small businesses you create a macro environment to support those small businesses. The years and the decades of 10 and 17 per cent interest rates have to be put behind us forever. We have to create an environment which is favourable on that macro level and also provides supportive measures that continue to reduce red tape.

The government has already had two red-tape days. We have reduced red tape by over $2 billion, and we are also promoting other measures which will involve developing a proper innovation ecosystem. Where we still have a challenge is with venture capital funding. I heard Senator McLucas talk about that before. It is fine to put up the ideas, but in his budget reply Bill Shorten was full of ideas but did not explain how he was going to pay for them, and this is the problem. You can have all the ideas in the world, but when you are the government you are accountable and you have to find a way of paying for them. He did not outline ways to credibly pay for the billions of dollars of expenditure that he was talking about. You have to be able to square that circle if you want to be taken seriously as the alternative government.

We also need to keep doing more to promote collaboration in science and research and in innovation between business, academic institutions and research institutions. It is not good enough. If you go to a country like Germany, someone like the chief scientist or technologist at BMW will also be tenured as a senior professor at the local university. Dual appointments create that physical bridge between business, academia and research institutions. My good friend and colleague Senator Cormann has been chairing the Australia-Germany Advisory Group. He has come back with quite a few ideas. I was speaking to Brian Schmidt, Vice-Chancellor of the ANU who was on the delegation. He is very keen to find ways to promote that collaboration so that we get that translational research going in which we get the good ideas and we find ways to fund them to their commercial potential in Australia. We do not want all of our ideas going offshore. We cannot commercialise them all here as we are not a big enough market, but we can do more to commercialise our ideas in Australia. That is a challenge going forward.

We also need, as a parliament, to confront change in the industrial relations space. There is an interim Productivity Commission report which provides some ideas in that regard. It builds on the commitments we made in the campaign around reinstating a proper building and construction commission and also a registered organisations body to regulate employer and employee associations in a more transparent manner. In the case of industrial relations, it is not about throwing the baby out with the bathwater and saying, 'Everything is perfect, you don't need to change anything'. It is about intelligently debating where there are possibilities for change and recognising, in particular,—if we return to the case of small business—that small businesses do not have the human resource departments and they do not have the overheads to cope with dealing with some of these measures. That is why finding ways in which we can make it easier for small business to be part of the formal industrial relations system means that they resist the temptation to become part of the informal labour market. The more rigid you make the formal labour market the more you create incentives for people to try to do stuff through the informal labour market. We must never reach that stage. We must have a set of transparent, flexible rules which allow small business to meet its obligations in the industrial relations space in a way which also recognises its particular challenges. We also need to protect those people who want to be independent contractors, those who want to be tradies.

One of the biggest challenges that Paul Keating laid down to the Labor Party when he left was to gather unto it all those enterprise workers who he claimed had been created by his policies of opening the economy. And what happened? Labor turned its back on them. And those aspiring workers know that the natural home for them, in the years ahead, is on this side of the House. It is in the Liberal Party. We are the party of aspiration, we are the party of small business and we are the party for all those who want to get ahead.

Honourable senators interjecting—