Scott Ryan (Victoria, Liberal Party, Parliamentary Secretary to the Minister for Education and Training) Share this | Hansard source

I thank those senators who have contributed to this debate. Small business is rightly said to be the 'engine room of Australia's economy'. Small business provides the goods and services that we use every day. It is difficult to count the number of times over the past day or week that you may have interacted with a small business. You might have purchased your morning coffee from a small business, as I am sure we in here all have at Aussies; travelled in a taxi or indeed used Uber, as I first did last weekend; or even had your hair cut. There are more of them than most people take into account: 96 per cent of all businesses are small businesses. These businesses and the people who own and run them serve the community by operating their businesses as best they can, and they do it well. They generate over $330 billion of Australia's economic output each year. However, there are a number of fixed costs associated with running businesses, and small businesses face a higher relative regulatory burden than larger businesses.

This government has announced a $5.5 billion package of measures to reduce the regulatory burden and increase the cashflow of small businesses. The Tax Laws Amendment (Small Business Measures No. 3) Bill 2015 introduces three more measures from this package, and follows on from the 1.5 per cent company tax cut and expanded accelerated depreciation measures for small business that were introduced in the Tax Laws Amendment (Small Business Measures No. 1) Bill 2015 and the Tax Laws Amendment (Small Business Measures No. 2) Bill 2015.

Schedule 1 of this bill will broadly mirror the benefits of the 1.5 per cent tax cut for small businesses. It will provide a five per cent discount for approximately 70 per cent of small businesses that are not incorporated, capped at $1,000 per taxpayer. This measure, along with the 1.5 per cent company tax cut, will ensure that all small businesses will be eligible for a tax cut, no matter how the business is structured. This measure will apply to income from businesses with an aggregated annual turnover below $2 million from the 2015-16 income year and beyond.

Schedule 2 will help to improve the cashflow of small businesses and reduce the regulatory burden imposed on these businesses. It will provide immediate deductibility of professional services for small businesses with turnover below $2 million. The costs of professional advice and payments made to government agencies will be immediately deductible instead of having to be depreciated over five years. This measure will apply to expenses incurred from the 2015-16 income year and beyond.

Schedule 3 of this bill will benefit small businesses by reducing red tape within the fringe benefits tax system. It will expand the FBT exemption for work related portable electronic devices. The government has acknowledged that, with the development of new products and increasing overlaps in function, it is becoming increasingly difficult for employers to determine with certainty which devices can access the existing FBT exemption. With evolving technology being used for work purposes, the legislative provisions that allow for an FBT exemption for portable electronic devices and computer software have not kept pace. The government will remove the uncertainty that is stemming the use and availability of a critical tool of the trade for small businesses—that is, portable electronic devices. Therefore, under this bill, 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 with substantially similar functions are provided by an employer to their employee for work purposes. The new simpler arrangements will be easier for employers to understand, and as a result this bill will reduce red tape and compliance costs within the FBT system. Employers will no longer need to determine whether such items as a laptop or a tablet have substantially similar functions. This benefit will potentially increase in the future as the range of items such as smartphones or smart watches increase in use and function.

This bill reinforces the government's position that the tax system should not impede innovations by companies hoping to grow and to employ people. Reducing red tape and regulatory costs for small businesses is crucial, as they tend to face proportionally higher costs than larger businesses because of their inability to take advantage of economies of scale in understanding and complying with regulation. Moreover, small businesses typically have fewer resources with which to specialise in meeting their compliance obligations. To this end, removing and simplifying the FBT portable electronic devices exemption will provide proportionally greater benefits to small business. This change, which is estimated to initially benefit 30,000 businesses, will come into effect on 1 April next year at the beginning of the next FBT year. It will provide encouragement and certainty for small businesses to provide their staff with all the necessary tools to grow and build their business and to have a go. The government has listened to the concerns of stakeholders and is committed to making it easier to do business in Australia.

I had the privilege of serving as the shadow parliamentary secretary to the shadow minister for small business when the government was in opposition in the last term of parliament. It was an opportunity to travel right around Australia and to understand many of the non-economic factors that are so important to small business. One of the things that are often forgotten in this place is simply observed by going to any suburban sporting ground or any country football club. When you look around the hoardings that make those community organisations so important—it could be a Rotary club, a netball club, a soccer club, a rugby league club, a footy club—what you see are the small businesses of that community; what you see are the people who employ other people in that community. So often for so many of us our first opportunity in work is actually in a small business, as it was for me in a supermarket in Essendon pushing trolleys when I was 15 years old. What makes our community so important are the small businesses that provide local leaders. So often you will find the local country fire authority. You will find the local head of the Rotary club, the school board president. You will often find they are local small business people—male and female.

Small business is not just an economic building block; it is the glue that holds many of our communities together. That is why these measures are so important from a community level. They will strengthen the sector that suffered so much under the previous government. One of the key statistics that is truly shocking from the previous regime is that, when the Howard government left office, more than 55 per cent of employment in this country was in small businesses. When the Abbot government came to office, it was near 45 per cent. That is not just a massive economic transition; that is a substantial social transition where so many fewer people are working for people they know, people they socialise with and friends. We are losing that personal connection in businesses in our community. That is something that this government is committed to turning around and, once again, seeing small business not just provide a first job, a job for our children or our friends but also provide opportunities for people in local communities, and so many of those local leaders.

I might just comment on a few of the observations made by the previous speaker, Senator Lambie. When it comes to special economic zones, they are in essence in Australia, when it comes to the states, unconstitutional. A number of people have proposed these over the years, including some of my friends. I happen to think they are not a very good idea. I do not necessarily like the idea that a government may decide to reduce the tax burden so dramatically in one part of the country. I do not think such powers are a good idea to place in the hands of any minister, lest they be at risk of patronage. But they are unconstitutional, and it is not necessarily possible. It is a bit like trade: it is possible to be better off when you do something small with one nation but it is better to be multilateral in trade outcomes and, where that is possible, that is the desired outcome. However, with special economic zones, there is the risk that you will see misdirected resources and, as I said, the growth of patronage, which is something this side of politics has always been particuarly concerned about. As it is, special economic zones are not an option anyway. They are simply not an option for this parliament to be able to put forward.

When it comes to payroll tax, I agree with Senator Lambie. With the introduction of the GST and the property boom over the last 15 years, all our state governments have seen substantial increases in revenue and substantiation increases in own source revenue. Billions and billions of dollars have poured into state coffers, particularly from the property boom and things like stamp duty and land tax as well as from the GST legislated by the Howard-Costello government.

Sadly, the state governments have not used those increases in revenue to reduce the burden of payroll tax and, in particular, their real challenge with payroll tax in an economic sense is of course the thresholds where it cuts in at certain levels of payroll. If payroll tax was a flat one per cent across the economy, it would simply serve as a flat tax on income paid by the employer. It would not have any employment effect but, as it is structured at the moment where several states have narrowed the base and made it apply upon certain thresholds, it can have that factor. We have remained consistent since the GST was introduced on this side of politics that the states should be using the increases in revenue the GST provides and the massive increases they have had in own source revenue to reduce taxes and disincentives on employment. I note some states have done that more than others, but it is a continuing challenge. With those comments, I commend the bill to the Senate.

Question agreed to.

Bill read a second time.