Sam Dastyari (NSW, Australian Labor Party) Share this | Hansard source

I want to acknowledge the contribution that Senator McKim made. He made reference to Professor Harper's incredible body of work and, in particular, the review that he recently did for the government, which made a lot of interesting suggestions. I note that there is an ongoing debate in the country regarding the value of an effects test and, for those who are interested in the different perspectives, the Harper review provides an insight into the case for one.

Labor welcomes this particular measure, as it will allow small business to restructure with greater ease. The Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 is a good piece of law. It is a piece of law that is worthy of the tripartisan support that I have no doubt it will be get in this chamber. But this bill also highlights what is missing. The issue is not just what is in this bill but, particularly when it comes to small business, what has not been included in this bill. There is a bigger, broader picture regarding capital gains tax that has been ignored by this government—and, I believe, wrongly ignored by this government.

Australians are increasingly aware that an unsustainable budget setting regarding the capital gains tax discount and its interaction with negative gearing is having a detrimental effect on the Australian economy. We know the contribution these settings make to housing affordability—or, more accurately, the unaffordability—particularly for young home buyers. There is a real challenge at the moment in our major cities—places like Sydney—when it comes to housing affordability and how it impacts on younger Australians and young families in particular. There is nothing wrong—and we should certainly be supportive of what has been an Australian ideal or goal—with people wanting to own their own home. It is part of our culture. It is part of our identity. It is very different from, say, the European example where the concept or idea of owning your own home is not really part of the social fabric; but it is part of Australian society. Increasingly, we are finding that it is a goal that has become unachievable, that it is a goal that has become impossible, simply because of the way in which property prices have been rising, particularly in Sydney.

What we are talking about here, and I suppose how all this relates, is the tax distortions and subsidies that already exist. While we are looking at these types of measures for restructuring small business with these tax laws amendments, we also need to be looking at other parts of this that we can and should be including. A Saturday morning in Sydney has become like The Hunger Games,as I said yesterday, where you have families out there, young families in particular in certain markets and in certain circles that perhaps I travel in, competing to buy into the Sydney housing market—a market that, frankly, they increasingly cannot buy into, because these tax distortions have encouraged investors to purchase existing housing stock rather than boosting the supply of new housing stock. This is where I talk about negative gearing and its interaction with capital gains tax. Ninety-three per cent of new investment loans go to people buying into the existing housing stock. The real concern is that we have a fairly grown-up debate here as a nation about what we can do to make sure that the next generation of young Australians are able to afford and buy their own home. I believe the debate around negative gearing is an important part of that. I also want to note it is not the only part of that.

The Senate Economics References Committee recently did some work—and I note, Mr Acting Deputy President Back, that you were involved in a little bit of it—looking at house affordability across the nation. Some fairly big recommendations came from that inquiry. Negative gearing is a very, very important component of that. I think it is big part of that. I think we also have to look at some of the other matters such as right-sizing and making sure that people are moving into appropriate housing—but that is a debate for another day. What I am here to talk about are tax distortions, which, contrary to proclamations made by the Treasurer, disproportionately benefit high-income earners. This is what you have with the negative gearing regime as it currently stands. Seventy per cent of the benefits of the capital gains concessions go to the top 10 per cent of income earners. These capital gains subsidies cost $4.2 billion in 2014, and that is projected to double to $8.6 billion in 2019. The government commissioned its own FSI, Financial Systems Inquiry, and one part of it had this headline: 'Major tax distortions'. It said that the capital gains tax concession was one of them. The inquiry pointed out—and, again, these are not my words; they come directly from the inquiry—that more jobs and more growth would result if the capital gains tax concession was reduced, as capital will become better allocated in the economy. So there are proposals out there to fix capital gains tax concessions and negative gearing, and I think doing so would be an enormous win for Australians and the Australian budget.

What has so far been proposed by the shadow Treasurer, Mr Bowen, in the other place, is a measure that will deliver $32.1 billion over the next decade. The proposal is to halve the capital gains tax discount for all assets purchased after 1 July next year. This will reduce the capital gains discounts for assets that are held for longer than 12 months, from the current 50 per cent to 25 per cent. I want to make it clear that, under this type of proposal, investments made before 1 July 2017 are not affected, and it will not affect investments made by superannuation funds. Also, the capital gains tax discounts will not change for small business assets. This will ensure that no small business is worse off under these changes. I want to stress that previous assets are not going to be affected. It will also mean that, if you currently live in your own home or if you purchase a home before 1 July next year, should you in five or 10 years time choose to move out of your home and move into another property and then negative gear that property, that would be allowed under the proposal being put forward by the Labor Party. It really is a no disadvantage test for those who may have purchased a property under an existing set of rules. The reason for this is fairly transparent, but I think it deserves to be outlined.

What we are saying is that the existing set of laws is a distortion. It is not helping the economy and not serving the purpose that should be being served. That said, we also acknowledge that a lot of people who purchased a property under these rules, with this set of laws in place, are doing the right thing. I come from a growing migrant community in Sydney, and I spend a lot of my time working with migrant communities. It has been a cultural tradition amongst a lot of migrant communities to invest in property rather than in things like shares or businesses or other types of assets simply because of the security of bricks and mortar investments. A lot of people did that to provide for their own retirement. They did that as their own form of superannuation over the years to make sure that in retirement they would have some source of income

We are saying that even though we now believe that the negative gearing structure, as it currently exists, is not serving the purpose that it should be for the overall economy, individual investors who played by one set of rules should not be disadvantaged by the law changing suddenly or radically around them.

Labor strongly believes in giving confidence and certainty to small business and investors, which is demonstrated by this policy. This really does stand in contrast to the failure of the government to provide real tax policy. We had this situation where, over a long period of time, there was a lot of rhetoric coming from the government about all this amazing work and things that were going to happen in relation to a serious tax plan for the future of the nation. There was the process we went through with the tax white paper. We were all told that there would be this detailed analysis and report. The figures are that over $1 million of work was done on it. I believe that there was a team of five people working out of the Treasurer's office just on this paper itself. All of it came to nothing. We had a 'debate' about increasing the GST. Frankly, it was not a proposal that I necessarily supported, but sometimes having these debates as a nation can serve a purpose, if only to highlight why it is a bad idea. But then, in the dead of the night, that was shut down as well.

It really looks like we are heading towards an election without any real tax policy or proposal from the government. Those on this side of the chamber are obviously limited in knowing what is and is not actually going to be taking place. We are not party to some of the more private conversations. But certainly the commentary, including the front pages of the Fairfax papers today, makes for some fairly grim reading about the failure of the government to have any kind of a bold, exciting, innovative new plan for taxation.

So Labor supports Australia's two million small businesses. I want to illustrate further some of the policies to do that. In Australia, 97 per cent of businesses are small enterprises. Labor introduced a permanent instant asset write-off when it was in government to benefit of these small businesses. The record of the coalition shows that it scrapped this measure, only to bring it back as a temporary version in 2015. Another Labor initiative that was dismantled by this government was the loss carry-back measure. That was a measure that allowed companies and businesses that were taxed to carry back losses of up to $1 million to offset taxable income from an earlier year. That was a recommendation of the Henry review—one of the most sensationally well-done, rigorous and broad-ranging tax inquiries—and it was conducted for the previous Labor government.

We are still yet to see any evidence that the current government is serious about rigorous and broad-ranging tax reform, because again we have not seen a proposal. It does not appear that the tax white paper is ever going to be released. We recently heard the head of Treasury say his department were waiting for direction from the government on whether the tax white paper was alive or dead. More recently, it has been given, as I understand, the final nail in the coffin. The little that we do know about the tax white paper process is that we can calculate that it cost over $1.1 million on consultant fees alone—that is not to mention the incredible amount of time from the department staff that gets spent on these kinds of matters. Again, this is something which the Minister for Finance flippantly referred to as 'stationery' in his contribution in this debate.

The government's haphazard approach to reform, coupled with dramatic budget cuts to essential services, really does create a sense of unease for Australian businesses and for Australian families. It is no surprise that confidence has really slumped since the 2013 election. We have seen a slash-and-burn approach when it comes to so many different social policy areas. Yet when it comes to tax policy, closing tax loopholes and addressing some of these concerns, there really has been inaction from the government.

This is a bill that I will be supporting and that Labor will be supporting, but there is an opportunity here to go beyond some of these measures and take the opportunity to help small business and to go further when we look at our tax laws and look at a broader, more wide-ranging approach to taxation in order to address some of the fundamental issues. If we are serious about helping Australian small businesses, it becomes vital that we start to address some of the challenges that are around how international, multinational and larger businesses compete and use our tax laws and tax environment to their own advantage.

Senator McKim gave his views on the importance an 'effects test', which come from a very genuine place. I think there is also an approach in making sure that Australian businesses are not disproportionately impacted by the actions of multinational firms using their tax status and their structures against them. To give you an example, a classic case is an Australian small business and an international business and how they are able to book their actions and events and how that will affect those companies and the tax regimes they fall under. A classic example is the ride-sharing company Uber. The ride-sharing company Uber does not book its transactions as ever having occurred in Australia. So if I book an Uber car today to take me from parliament to the airport, even though the driver may be someone living four streets away and even though I am based here, technically that will be a financial transaction that only ever takes place in the Netherlands. What would happen is that I would be paying the payment to the Netherlands company and the Netherlands company would pay the driver. Putting aside all of the OH&S and other laws that this complicates, what this really means is that that would be a transaction that never took place in Australia for the purpose of taxation.

Let us say there is a small business wanting to do the same thing here in Australia—and, again, let us put aside all our concerns around the taxi industry and this and that, but just run the basic test of an Australian firm doing exactly the same thing: wanting to have a ride-sharing platform—and let us say they want to have a completely online ride-sharing platform. That is not an opportunity that is available to them—or you are simply encouraging them to structure themselves in such a way so as to be competitive, in a way that means they will not be paying taxes in Australia.

That is the really big challenge, I think, in this space. When we talk about competition and the competitiveness of small businesses, I think what we are really also looking at is this. It is not about giving Australian businesses and Australian small businesses an unfair advantage. It is not about putting the thumb on the scales on their behalf. That was perhaps what a lot of the protectionist policies in the past sought to achieve. What we have to do now is to make sure that Australian firms and Australian businesses, especially Australian small businesses that we want to see grow, are not unfairly disadvantaged by being Australian and are not unfairly disadvantaged because of the opportunities and the structures they have before them.

What can be done for small businesses and what can be done for Australian small businesses, in terms of tax laws, on the international front is something that our Senate Economics References Committee, which Senator Ketter now chairs and which I chaired previously, has done a lot of work on. In our final report that will be coming out shortly on international tax minimisation, we will actually be addressing some of the broader concerns about how we create a more level playing field that will better address, fairly, Australian companies.

In conclusion, this is a good bill. It is a bill that is going to allow a restructure to occur for Australian small businesses and it is going to make it a lot more simple. But doing this law and doing this alone does not address some of the major challenges that face small businesses and Australian households.

There are some big areas that can and should still be addressed in the few remaining weeks it appears we have before this double dissolution election which we read so much about, and those are really in that space of multinational tax avoidance, and certainly we should be looking at some of the distortions around the interaction between negative gearing and the capital gains tax.

That being said, I hope that this bill will be able to be passed through this chamber. We will have an opportunity, once it is passed, to see what other legislation and frameworks and issues can really be looked at in the coming weeks. I note the sparse number of bills that appear to be listed at the moment. Perhaps that would give us an opportunity to bring in some new and exciting legislation in the next couple of weeks.