Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Labor is of the view that it will support the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. I want to go through some of the issues that come from this bill. In the other place, the member for Fraser, Dr Andrew Leigh, opened his contribution on the bill by saying that if you ask a psychologist what 'cognitive dissonance' is they will speak of a situation where a person holds contradictory beliefs or ideas, or acts in a manner that contradicts their stated beliefs or values. As soon as you deal with that definition, you know exactly whom the member for Fraser is talking about—it is our current Prime Minister. The current Prime Minister is absolutely inflicted with cognitive dissonance. He actually holds contradictory beliefs to his stated values. The key to a case of cognitive dissonance is a sense of discomfort that comes from contradictory actions or holding contradictory beliefs at the same time. Can you imagine the sense of discomfort that Prime Minister Turnbull has every time he looks at what the far-right of the Liberal Party forces on him, this weak Prime Minister, this Prime Minister with no backbone, this Prime Minister who will not stand up for what he says are his beliefs, a Prime Minister who has sacrificed his values and principles to become the Prime Minister of this country and is now led by the nose by the worst elements of the Liberal Party, the extremists in the Liberal Party.

The coalition has a leader who believes in different things to what he is actually out there talking about. Well, we think that is the position, because do we ever know now what the current Prime Minister believes in. He does not believe in much, except that he had a great belief in becoming Prime Minister. That is where he has headed and he has sacrificed his values, sacrifices his principles, and sacrificed since long-held beliefs to become Prime Minister. He is a weakened person, a weak Prime Minister, and certainly is not fit to be the leader of this country.

This bill clearly demonstrates the coalition's ready embrace of ideas and actions that contradict one another. On this side we welcome the measure as it allows small business to restructure with greater ease. That is why we support this particular bill. Restructuring is important—being nimble. We hear much about being nimble. We hear much about restructuring. We hear much about flexibility. But the Prime Minister we have talks about these things and does nothing. He is all talk and no action. I remember that great saying from former Prime Minister Keating. It is about being all tip and no iceberg. If anyone was all tip and no iceberg it is the current Prime Minister, Malcolm Turnbull.

It would be remiss of me to shy away from condemning this government for its failure to address the broader picture regarding capital gains tax. Again, the Prime Minister stood up and said, 'Look, we don't want to be intimidated by fear campaigns.' He actually knifed the former Prime Minister, Tony Abbott, on the basis that he was negative and could not maintain a polling position in this country. He knifed the former Prime Minister, Tony Abbott, on the basis that he would lead a different government, a government that listened to the public, a government that would treat the public as having some common sense. He said the public debate in this country would change because it would be about facts, that it would be about the issues. He said the public debate would not be about three-word slogans. But what do we have from the current Prime Minister? We have four-word slogans—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Speak English.

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

Order! Senator Heffernan, sit down or get out.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Senator Heffernan, I do speak English. If you want to continue that nonsense, it is pretty typical of the intimidation that you have tried to carry out during the whole of your political career. And I will not be intimidated by you.

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Cameron, resume your seat. Firstly, Senator Heffernan, it is disorderly to interject when you are out of your seat. I can accept some interjections when you are in your appropriate place. Senator Cameron, you should address your remarks to the chair and ignore Senator Heffernan and his interjections.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Thank you, Chair. I will attempt to take your advice and ignore Senator Heffernan, but as you are aware, having been a member of the Liberal Party for many years, ignoring Senator Heffernan is something the Liberal Party has never been able to do. It is something that the prime ministers of this country have not been able to do.

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Heffernan on a point of order.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Senator Cameron is concerned about the flight path for Badgerys Creek going over his home in the Blue Mountains, and that is all he is really worried about.

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Heffernan, there is no point of order. You are not contributing positively to the debate. Resume your seat. Senator Cameron has the call.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Senator Heffernan is exactly right. I am concerned about the flight path for Badgerys Creek airport. I am concerned for my community. I am standing shoulder to shoulder with my community to get a change to the flight path, to get a curfew in Western Sydney, the same as it is in the Eastern Suburbs and the Inner West. It is absolutely no problem. I am glad you reminded me of that issue.

I want to come back to the issue of tax and the issue of the Prime Minister who promised so much and delivered so little, a Prime Minister people are looking at and saying, 'What does this man stand for?'

The answer is that nobody knows. He is a Prime Minister who basically stands for himself, for No. 1. He is a Prime Minister who will do anything to grab and maintain power, who uses language and rhetoric against the former Prime Minister that he now uses in debates against the opposition. And because the opposition have said we do not want the big end of town, the richest people in this country, being subsidised by the ordinary working families of this country when the rich go out and buy four, five, six, seven and eight investment properties, the Prime Minister has now changed his mind about negative gearing. Sometime ago, in opposition, he described it as a tax rort but he now thinks it is fine. Instead of dealing with the facts, instead of dealing with the clear issue that we all need to deal with, that the structural imbalance in our budget, brought about by the worst Treasurer ever in this country, Mr Peter Costello—maybe we are getting pretty close with the current Treasurer—was brought about by bad economic decisions, by profligate economic and fiscal decisions, by the Howard government, this current Liberal government, led by Mr Malcolm Turnbull, want to put the onus on resolving a budget imbalance, a fiscal imbalance, straight on the working class of this country.

The current Prime Minister, Mr Malcolm Turnbull, said in an interview that he supported every element of that 2014-15 budget—that budget that would have ripped the heart out of any type of financial security for working-class people in this country. He supported that. Because it was unpopular, because the Labor Party drove them back on every one of the key elements of that budget, Mr Turnbull used that budget as another example of why he should lead the Liberal Party. And yet major elements of the budget are still there. This is a Prime Minister who has absolutely no claim to being even-handed, no claim to understanding the needs of working class families in this country. How could he? How could this Prime Minister understand the issues facing ordinary working class families in this country? These are working class families who battle every week to pay their bills; working class families who go through the Coles or Woolies or ALDI supermarket checkouts with their fingers crossed that when they put their card through there will be enough money in their account to pay for their food. That is what we have to deal with in this country—more and more inequality. If there is one person in this country who knows nothing about inequality, it is our current Prime Minister, Malcolm Turnbull—he has absolutely no perception. He has a $50 million mansion overlooking Sydney Harbour—

James McGrath (Queensland, Liberal National Party, Assistant Minister to the Prime Minister) Share this | Link to this | Hansard source

This is class warfare.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

It is class warfare! Here we go—the right wing of the Liberal Party says that when you point out that the current Prime Minister has absolutely no idea how ordinary families in this country survive it is class warfare. If it is class warfare to look after ordinary workers in this country, I plead guilty. I am going to put the battle gear on and I will be in that war. That is what we need to do, because the working class people of this country need to be protected from the likes of you lot over there. Those with the power, those with the privilege—

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Cameron, address your comments through the chair.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Chair, you have been around for a long time and you understand as much as I do that the issues of working class families are important. We hear baying from the National Party. The National Party has some of the poorest people in this country in their electorates, and yet they come here—

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

Mr Acting Deputy President, I rise on a point of order. I am pretty confident that the National Party is not mentioned in the legislation before us today that we are debating,

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Do you have a point of order, Senator McKenzie?

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

I ask that the senator return to the topic of debate.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Cameron, you have the call. You understand what the bill is about and I ask you to address the bill.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Yes, thanks very much, I understand what the bill is about—taxation.

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

And not the National Party.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

This is Senator McKenzie, the National Party warrior who lives in Elwood, in inner city Melbourne. She never goes to the bush, she never sees the bush. She lives in inner city Melbourne but is lecturing the Labor Party about country New South Wales. I actually lived in country New South Wales and probably, from what I read about you, Senator McKenzie, for longer than you did. I understand more—

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Cameron, address your comments through the chair.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Chair, I probably understand more about the battles of country New South Wales than Senator McKenzie ever will, given that she is ensconced in her inner-city apartment in Elwood in Melbourne. She comes here lecturing us about country issues when she never goes there. What an absolute joke. When it comes to taxation, working class families need a government that understands what the issues are. If capital gains tax discounts to the big end of town through negative gearing is what this government is all about then we stand up against them

We are in the class war battle against that.

We are going to protect working-class families in this country, because the coalition do not. The coalition have absolutely no perception about the issues for working-class families in this country. They want to distort the tax system so the white shoe brigade in Queensland get all the tax benefits and ordinary working people are paying their full tax whack while their mates who put the money that pays for their campaigns in their electoral accounts get off scot-free. That is exactly what this mob is about.

They are an absolute disgrace with absolutely no comprehension of the key issues for this country. If they had any comprehension of the key issues for this country, they would not be in the chaos they are in now—fourteen ministers in 2½ years have gone down the tube. They are into their second Prime Minister. Prime Minister Turnbull knifed Prime Minister Abbott. What a joke they are! They have the hide to come here and say they look after regional and rural Australia. They have the hide to come here and say they look after ordinary working Australians. Look at taxation and look at what they did in 2014-15 budget and you will understand that they have no idea what the issues are in relation to working people. They look after the big end of town, because it is the big end of town that looks after the Liberal Party. It is a mutual 'look after' society. One looks after the other. That is the problem we have with this mob in the coalition.

We have a bad government with a weak leader. It is no wonder this government is starting to come under pressure. It is no wonder the Prime Minister looks so sick every time he has to go to the despatch box, because they cannot even run an effective fear campaign. One thing about former Prime Minister Tony Abbott is that he knew how to run a fear campaign. The current Prime Minister cannot even get his frontbench, his cabinet ministers, to understand what the fear campaign is about. Prime Minister Turnbull is saying that house prices will drop, and yet the shadow Finance Minister is saying—what is she? I think she is the Assistant Treasurer or the assistant finance minister—

James McGrath (Queensland, Liberal National Party, Assistant Minister to the Prime Minister) Share this | Link to this | Hansard source

Get it right.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

She is so hopeless I am not sure what she is. She says that house prices will rise. So you have prices rising, prices falling—what is this scare campaign? You do not even know how to get it right. You are so incompetent as a government that you cannot even get your lines right amongst the cabinet ministers. At the same time, when Prime Minister Turnbull is talking about these house prices falling, go out to the western suburbs of Sydney, go out to Parramatta, and look at a tarted up three-bedroom housing commission house going for $910,000. That is what we have in house prices. If you talk about distortions in the market, what is more distorted than a fibro, tarted up housing commission house in the western suburbs of Sydney costing a person $910,000?

How do young people get into housing? They do not get any housing by the continuation of capital gains tax rorts for the big end of town. They do not get in that way. They do not get any housing under the tax policies that Prime Minister Turnbull has. The government are too busy looking after the investors—the big end of town—with millions of dollars in their back pocket to get up to five, six and seven houses.

James McGrath (Queensland, Liberal National Party, Assistant Minister to the Prime Minister) Share this | Link to this | Hansard source

It is the mum and dad investors!

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

The argument is that it is the mum and dad investors. What a load of rubbish! Here we are again with the coalition having absolutely no understanding. I will tell you who I would rather look after. I would rather look after my grandkids and my kids. I would rather look after the kids around this country who want to get a house—and who want to get a decent price on a house. They are the ones who are important, not the big end of town investors that pay your electoral fees and make sure that you stay on the coalition side. They are the ones that need to go. (Time expired.)

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The Greens strongly support the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. We think it is good legislation that will provide much-needed relief to small business owners to allow them to change the legal structure of their business in a way that provides flexibility and support whilst they are doing so. The current problem is that rollover relief is not available for a company or a small business that wishes or needs to restructure to become, for example a sole trader, a partnership or a trust.

This bill seeks to extend the rollover relief to include the transfer of assets from a company to a sole trader, partnership or trust, as long as it occurs on or after 1 July this year. The legislation allows businesses to defer the gains or losses that would have resulted when the assets were transferred from the old entity to the new entity. Importantly, to be eligible for the rollover, it must be a small business entity in the income year in which the transfer takes place and an entity that satisfies the maximum net asset value test at the time of the transfer.

This bill is designed, and rightfully so, to help small businesses that may have, for example, originally chosen an inappropriate structure—that is, one that does not necessarily suit the small business or the circumstances that exist. It is also designed to help small businesses whose circumstances have changed and, potentially, small businesses who may wish to keep growing and expanding and want to change the structure of their business to enable that growth and expansion. In general terms, it is aimed at restructures where ownership of the business does not change.

It is often said, because it is true, that small business is the engine room of the Australian economy. In our country right now, small business employs around 4.5 million Australians. That is almost half of the Australian workforce. Crucially, small business gives many Australians the chance to back themselves, to take risks and achieve rewards, to innovate and to test new ideas. It is absolutely crucial that our legislative framework provides flexibility for small businesses and the capacity for small businesses to compete with large corporations on a level playing field. Currently, of course, that is not the case; small businesses in Australia do not have a level playing field on which to compete with large corporations.

One of the ways that we could mitigate that situation would be to introduce an effects test, as recommended by the Harper review—one of the most comprehensive reviews of competition policy ever undertaken in this country. An effects test is something the Greens have long supported and advocated and will continue to campaign for in the lead-up to the election later this year, whenever that may be, and beyond that election, until an effects test is introduced in this country so that small businesses can compete with large corporations on a level playing field.

There are two political parties in this place that are on the record as supporting an effects test—that is, the Nationals and the Australian Greens. I should also acknowledge that Senator Xenophon supports an effects test, and there may be other Independents or crossbench members of the Senate who do, too. But, in terms of relatively large groupings of people in the parliament, it is worth pointing out that the Nationals support an effects test—and they are to be congratulated for that—as well as the Australian Greens.

We know that big corporations are currently using their massive market advantages to cut out, and in some cases crush, smaller competitors. We also know there are a huge range of stakeholders that support an effects test in this country. The National Farmers Federation is one of those stakeholders because it has seen the impact on its membership, farmers and primary producers, who too often get screwed because they do not have the protection they need in terms of their contracts with big corporations.

In Professor Harper's review, he recommended clear and, in the main, reasonable amendments that could be made to make our business environment fairer. As the ACCC have repeatedly said, current competition laws are inadequate for dealing with things like strategic land banking, retaliatory threats, capacity dumping and vexatious legal action.

In that context, it is worth members being aware that the second review of an effects test, which was announced by Treasurer Morrison late last year, is still underway but that, as part of that review, the ACCC's submission has been published. It is also worth members being aware that the ACCC say in their submission that there are many ways companies can seek to prevent their competitors from competing on their merits. That is what the Greens want to change. We want to see a level playing field so that companies can compete on their merits and so that small companies are not disadvantaged against big companies merely because of their market power or the size of the business.

The ACCC also say in their submission, referring to the Competition and Consumer Act:

… section 46 does not effectively address a range of anti-competitive conduct …

The ACCC give a number of examples of such conduct that are currently happening but that are unlikely to be deemed anticompetitive behaviour under the act. Those examples include tying up customers in long-term contracts with anticompetitive rebates; freezing out competing suppliers from retail display and demonstration opportunities; joint marketing fees, where dominant retailers ask their suppliers to pay them 20 per cent of the sales price to market those products; retaliatory threats involving businesses trying to lock out other firms from certain markets; and locking up supplies so that a firm can capture 90 per cent of the available supply in the market. Large corporations are engaging in such anticompetitive practices, but our watchdog has not been given the teeth it needs by this parliament to take on those companies through the Australian legal system. Basically, the ACCC has been rendered somewhat toothless in these areas by this parliament's refusal to introduce an effects test.

As I said, there are two parties in this place that support an effects test. There are two that currently do not: the Liberal Party and the Labor Party. The Liberal Party says it will consider its position once the Treasury review has been completed and the government and the relevant minister, the Treasurer, have had an opportunity to consider the outcomes of that review. Now, we thought it was a no-brainer once Professor Harper recommended an effects test in Australia. We certainly believe that Professor Harper's recommendation of an effects test should have been endorsed by the government in Treasurer Morrison's original response to the Harper review. If that had happened, we would now be debating an effects test and how to deliver a level playing field for all businesses in this country. It is very disappointing that we are not doing that.

I do not intend to let the Labor Party off the hook. We heard contributions yesterday from Senator Dastyari and today from Senator Cameron about the nexus between the Liberal Party and the major corporate players in this country. Those comments have merit, and they are based in truth. There is too much power wielded by big corporates in Australia. But the Labor Party itself should stand condemned for its refusal to back an effects test, which comes about because of the strident opposition to an effects test by the SDA, one of the most powerful unions inside the ALP machine in Australia today.

What we are seeing is what former minister for small business Bruce Billson infamously and correctly said about an effects test:

If there is no change then that will be a triumph of lobbying over logic. It would be a triumph of back-room political machinations over good economic policy-making for our country.

Both the Liberal Party and the Labor Party stand condemned for, as Mr Billson said, a triumph of backroom political machinations over good economic policymaking for this country. There are different backrooms, different machinations, different power cabals in those two parties, but, in effect, they are the same. As I stand here today, there is a refusal from both the Liberal Party and the ALP to back an obvious no-brainer of a reform in this country that would let small business compete on a level playing field against bigger business, big corporations and the top end of town. No-one is asking for the playing field to be tilted in favour of small business. What we are asking for is for small business to be given a chance to compete on a level playing field with the top end of town, because, currently, they are significantly disadvantaged by the fact that the playing field is tilted so strongly in favour of large corporations.

The Greens have consistently backed small business in this country, and we will proudly continue to advocate for small business in this country. We took a policy to the last election of a two per cent tax cut for small business. We acknowledge that since that election 1.5 per cent of that two per cent was delivered in the last Hockey budget. However, that still leaves an opportunity for political parties and candidates in the upcoming election to put out a strong small business policy, including potential further tax cuts for small business and also, for example, a stronger, more powerful Small Business Commissioner. An improved Small Business Commissioner would be a more effective representative for the small business community, would provide a brokerage service between small business and large business and would support and encourage research in Australian small business trends to help policymakers better understand the sector. If we legislate for a stronger, more powerful Small Business Commissioner, it would make it more difficult for that position to be abolished in the future.

This legislation is good legislation. It will help small business become more flexible. It will help small business to innovate. It will help small business to grow. It will help so many Australians achieve their dreams of setting up a small business in an area where they have expertise or an interest, where they believe they can make a contribution to our community, where they can be proactive and where they can get in and work the often horrendously long hours that small business owners work. I have been employed by small businesses and I have operated as a sole trader in the past. I know from personal experience how hard many small business owners and employees work. They do not have the economies of scale that large businesses and corporations have, so they have to multitask; they have to work long hours. You spend a lot of time away from your family and your sporting clubs or other organisations in the community that you might volunteer for.

This is why we are supporting this legislation so strongly. It will provide flexibility for small businesses who may have chosen the wrong structure to start with, whose circumstances may have changed, or who simply want to keep growing, expanding and contributing positively to our community, our economy and our society.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to 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.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to make a contribution on the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 and to echo some of the comments made by Senator Dastyari. We understand that this amendment to the capital gains tax regime is helpful, as far as it goes, in terms of allowing small businesses to transfer assets as part of a genuine restructure. Businesses with revenue below $2 million will be able to defer gains or losses that would otherwise be made as a result of transferring business assets from one type of entity to another, so it is a relatively modest change.

It is, nevertheless, a positive step in the right direction. It shows that the government is looking at the issue of capital gains tax at the moment. But I will return to this theme later on.

Whilst the government is prepared to address the capital gains tax issues in relation to this bill, when it comes to other areas it is different. As we know, the Prime Minister has ruled off the table—although there are some differing views about that, but there was an attempt to rule off the table—capital gains tax reform, which is in contrast to the position that Labor has put, where we have a bold policy in relation to reform of negative gearing laws.

The most appropriate structure for a small business may change over time, or a new small business may choose an initial legal structure that it later finds to be unnecessarily complex, so it may be necessary to restructure. Labor understands that, if such a restructure requires a transfer of business assets from one entity to another, such as from a company to a trust, then significant income tax liabilities could arise, creating an impact on cash flow and available capital. So this particular measure will allow small businesses to change their legal structure with greater ease, allowing them to defer gains or losses that otherwise would have been realised when business assets are transferred. We understand that this is important for small businesses for economic growth and for prosperity. And we understand the pressures that small businesses find themselves under when faced with unnecessarily rigid legislative structures. This bill does allow flexibility, and that is why Labor supports it.

This is in keeping with our previous attempts to make life easier for small business. Labor did introduce a permanent instant asset write-off, which benefited two million small businesses, when we were in government.

But what did the coalition do when it came into office? It immediately scrapped that measure and then brought back a temporary instant asset write-off which expires in the middle of next year. There is no sound economic argument for cutting off the instant asset write-off. It is a political not an economic decision.

I want to just return to the efforts by the government to reform the instant asset write-off in 2014. I think this illustrates the extent to which this is a government that does not understand small business. The measures that were introduced in 2014 actually caused the small-business community to be aghast at this government's changes. We know that the government has secured a deal to reduce the small business instant asset write-off from $6,500 down to $1,000 and then, on 9 September 2014, the government announced that it was going backdate that change to January 2014. This led to small businesses facing a tax bill, and we know that Peter Strong from the Council of Small Business Australia was absolutely incredulous that the government could backdate a tax increase. We know that a deal was done with the Palmer United Party and other senators to make those changes. So the thousands of small businesses, which in good faith took advantage of the write-off, were going to then face a tax bill. Mr Strong, in an interview on the ABC, said:

We really did hope that they would keep it in place until the tax white paper came out, which I think is the much more logical approach to this.

They were Mr Strong's comments in 2014. We now know the tax white paper process seems to have been an illusion created by government, which does not know the direction it is heading. It must be incredibly frustrating for small businesses to plan ahead. Mr Strong had other comments to say at the time about this incredible decision of the then Abbott government. He said:

... of course we shouldn't assume that small business people wake up every morning and go and read the latest news from Treasury—they have a business to run. So some of them won't know about this until they visit their accountant.

Mr Strong was also incredulous about the fact that you do not put these changes through halfway through a financial year. He said it was confusing:

… especially when it affects 2.1 million people who employ 4 million or 5 million other people.

Whilst we do understand that this particular measure that we are discussing today is a small and positive step, let us not be under any illusions that this particular measure represents economic leadership, or that it represents an appreciation by the government of what is actually in the best interests of our economy or the small business sector. Mr Strong went on to say:

The mining tax repeal has helped big business and not small business. It's actually confused small business people.

He talked about these things being a very, very poor decision, and he was particular concerned about the fact that he received no explanation from this government about the rationale for the change. This means that it is very, very difficult for business to develop any confidence with their business planning. This is illustrative of this government's short-term approach.

Yesterday I spoke in this chamber of the key ways to promote what is called 'inclusive prosperity' in this country, which is to take a long-term view when making policy. This is the responsible way to demonstrate economic leadership which Labor takes very seriously. When it comes to economic leadership this government's lack of direction is patently obvious for all to see. It is in the mixed messages and the confusion about their policies—they are confused themselves about what their policies do or what they are—combined with their practised skill at saying nothing and then repeating it. It does not fool the Australian people. They know only too well that driving the economy forward is a serious matter. It is not a game as the Treasurer implied in his embarrassing speech, last week at the National Press Club, when he compared forming a tax policy with a test match rather than a 2020 Big Bash. This is not a game, and the way he prodded, pushed and padded away for the best part of an hour without putting any runs on the board proved beyond doubt that this is a government which has no game plan. It has no plan and no policy to deal with the fact that we all agree that tax reform is urgently needed in this country.

In stark contrast to the government, we in the Labor Party have a coherent set of policies for a stronger economy and, as I foreshadowed in my earlier comments, we have presented a detailed plan to roll back negative gearing on investment property and restricting it to new developments from July 2017. It is a specific plan that has been given the seal of approval by independent modelling from the a ANU's Centre for Social Research and Methods, which showed that our plan would generate billions of dollars in revenue with the vast bulk of revenue coming from the top 10 per cent of households who negatively gear their properties. The government's response to that plan has been scaremongering, contradictions and bluster. What the government has not been able to show you is how it proposes to lead the economy, and this is what Australians are desperate to hear.

When it comes to Labor's plans with negative gearing, which also involve a reform of the capital gains tax regime, we know that the commentators are mixed but there is some very interesting support for the proposition that we have put forward. Former Treasurer Hockey, on 21 October 2015, said:

… negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property.

In relation to Labor's negative gearing policy, former Victorian Premier, Mr Jeff Kennett, said:

I'm very disappointed at the way in which my side of politics are arguing against what I think is an eminently supportable concept that's been put forward by the Labor Party in terms of negative gearing.

Mr Kennett certainly understands the issues in relation to long-term change and what is necessary. Mr John Daley, from the Grattan Institute talked about negative gearing as being a policy that ultimately reduces home ownership, costs the Commonwealth a lot of money in terms of foregone tax revenue— (Time expired)