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

I rise to continue my remarks in relation to the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. Labor recognises that some of the sure-fire ways of helping small businesses, which comprise over 90 per cent of all of Australia's firms, include quick and easy-to-navigate licensing and regulatory processes and a mix of legal and competition policy that protect their rights and do not disadvantage them by favouring established players. That is why when we were in government we gave small businesses taxation benefits in the form of the instant asset write-off tax reforms and the tax carry-back reforms. That is why we support the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016, with the proviso that there is a review in two years to ensure its effectiveness.

We are glad to see that the government is looking into this matter of the capital gains tax, as this is a key area of reform that needs to be addressed if we are to address inequality. We recognise that this bill will not make a large dent in the necessary tax reform. But it is a relief to find at least one positive decision from the coalition in the sea of contradictions, vacillations, errors, corrections and avoidance of issues that have marked this government's recent performance. In sharp contrast, Labor has a range of ideas for budget repair. These include tackling the issue of tax avoidance by multinational companies; putting an excise on cigarettes to help defray the drain that tobacco-related diseases has on our health budget; changing the high-end superannuation tax arrangements in the interests of equality; and scrapping the Emissions Reduction Fund, which has taxpayers subsidising windfalls for big polluters. We see no sense of fairness in that. We have done the sums, and the revenue saved by our proposals would be enough to cover needs-based school funding over the decade.

There is no doubt about the need to do something about the housing crisis, and Labor's policies to allow negative gearing in the future only for newly constructed dwellings but to grandfather existing negatively geared properties until those investors' loans are paid off are well considered and responsible proposals that will provide powerful incentives for new construction and increasing housing supply. Leading economists such as Chris Richardson, Saul Eslake and John Daley have endorsed the policy. When speaking on the ABC's AM program on 16 February, Mr Richardson congratulated the Labor Party on a policy that 'has the potential to help provide better outcomes for all Australians'. I note also that former RBA director Mr Warwick McKibbin said:

The question is do you want to avoid the problem now or do you want to wait until the thing just bursts?

We also know that, in the government's own inquiry into the financial system, the report brought down in November 2014, under the heading of 'Major tax distortions', found:

The tax treatment of investor housing, in particular, tends to encourage leveraged and speculative investment in housing.

And we know, of course, that in 2005 the Prime Minister himself acknowledged that Australia's negative gearing settings are amongst the most generous in the world, and we also know that 70 per cent of the benefits of capital gains tax concessions go to the top tenth. We know that these are tax distortions that burn a hole in the budget. Capital gains subsidy cost $4.2 billion in 2014 and is projected to double to $8.6 billion in 2019.

But this government is involved in a scare campaign on Labor's policy to reform negative gearing and the discount on capital gains tax. The Prime Minister forswore that type of behaviour, but now he glibly says, 'Vote Labor and be poorer,' proving that his rhetoric is hollow. Just like the GST muddle, when the Prime Minister and the Treasurer were sending out conflicting messages, they are in such disarray that they cannot even explain what voters should be scared of—rising house prices or falling house prices. Once again the government appears to be hopelessly divided about what action to take on negative gearing, and we note media reports today that government backbenchers are extremely concerned about the inaction and the lack of direction of the government.

While you yourself, Mr Acting Deputy President Bernardi, and other backbenchers want to hold off any action on negative gearing and to concentrate instead on the desperate smear campaign against Labor's proposal, the Treasurer, Mr Morrison, appears to want action on negative gearing—especially on what he calls 'the excess'. But we are not sure exactly what he means by 'excess'. The Abbott government introduced retrospective tax changes which hurt small business, and it appears the coalition is once again flirting with retrospectivity in relation to the capping of negative gearing. That would not be a source of revenue from future investors, as they would have no motivation to buy multiple investment properties, but of course it would impact investors who have acquired property under one tax regime only to find the government has shifted the goalposts to their detriment.

The obvious question is: would the government's policy apply retrospectively to those who currently invest in housing? Labor has asked that question repeatedly, but the Prime Minister has refused three times to tell the Australian people—to confirm or deny as to whether the government will change negative gearing and reduce the capital gains tax discount and, if one of these plans is introduced, whether it will apply retrospectively. How can Australians feel any sense of assurance amidst this arrogant barrage of confusion from the coalition? Good economic leadership requires facing up to issues and making decisions, not contradicting and overriding and otherwise obfuscating. When Mr Turnbull launched his leadership campaign against Mr Abbott last September, he seemed to realise this and said:

Ultimately, the Prime Minister has not been capable of providing the economic leadership our nation needs … We need a different style of leadership.

So I would say that that is an extremely ironic observation.

Just in closing, we note that this is a small and positive step by the government. We support the measure that is before the Senate and note that it complements Labor's comprehensive plans of helping Australian small businesses thrive. However, the government needs a bigger-picture approach to tax reform. Successive prime ministers in the Abbott-Turnbull government have a patchy record on small business policy and on tax policy. Their actions are contradictory and, in conjunction with the continual delay in delivering the tax white paper they promised, all they do is create uncertainty. Perpetual uncertainty will permanently damage any claim the coalition has to being a friend of small business.

Claire Moore (Queensland, Australian Labor Party, Shadow Minister for Women) Share this | Link to this | Hansard source

As Senator Ketter has pointed out, Labor is supporting the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. One of the major issues is our ongoing interest in, support for and consultation with small businesses across this country. I particularly want to put on record the work of people like Gai Brodtmann and Julie Owens, two of our lower house members who have worked extensively over the last several years with small businesses, particularly in their local communities, and listened to them to clearly understand the pressures, the challenges and the concerns that have been raised by small businesses about certainty for their future.

It is particularly important for small businesses to have certainty about the circumstances in which they will operate. It has been a particularly difficult time over the last few years. You would remember, Mr Acting Deputy President Bernardi, some of the contributions in this place during the period of the global financial crisis. Amidst all the debate that was going on about the overall impact in the community and some of the terrible information that was discussed in this place about some of the large companies and their exposure to the international financial markets, one of the clear issues that came out consistently was that small businesses often seem to be vulnerable to all the financial activities that are going on in the community. Small businesses were concerned that their own needs and their own plans were sometimes forgotten by governments who were focused in the large-picture area. We always said, Mr Acting Deputy President—as I hope you would remember—that, in terms of discussing Australia's economic strength and the strength of our wider community, the interests of small business were paramount in terms of local community and interaction.

This particular bill in front of us, while some people would say it is a small measure—I have heard that mentioned a couple of times in some of the contributions on this bill—nonetheless deals with a really important issue: listening again to what small businesses are saying they need to be able to continue to operate effectively. I know other people have put on record what, in fact, the bill does. But, because economics is not an area in which I often contribute, I think it is important that I also look at how this particular bill operates.

We know about the small business contribution in the community, the data around more than two million small businesses in Australia, and the discussions around employment of over 4.7 million people, totally reliant on the effective operation of small business. This bill allows small businesses with revenue under $2 million to defer gains or losses that would otherwise be made when transferring business assets from one type of entity to another. The bill amends the Income Tax Assessment Act 1997 to provide this greater flexibility for small businesses when changing their legal structure. The amendments allow deferral of gains or losses that would otherwise be incurred when the business assets are transferred from one type of entity to another.

The current law under which we operate can create an obstacle to small businesses restructuring, because they may incur a significant tax liability in the process. This has been discussed with us in many of the fora that local MPs have been involved in across the country. This would again be a further impost on small business operators, and a significant tax liability. As people who operate in this area know, any tax liability is difficult. It compounds the complications in this area. The bill would ensure that this tax liability could be removed.

Currently, rollover relief is available in only limited circumstances for business restructures, and these limited circumstances involve great interaction between the small-business owner and their legal representatives—and we know that those costs can grow. For example, rollovers are available for restructures involving the transfer of a capital gains tax asset or all the assets of a business from an individual, trustee or partner to another wholly owned company. However, no rollover is available for a restructure that transfers business assets from a company to a sole trader, partnership or trust. These definitions are incredibly important, and in the legal system there can be some confusion even now about what the particular definitions are.

Under the proposed changes in the bill we are debating today, businesses with less than $2 million in annual revenue would be able to roll over gains and losses arising from the transfer of capital-gains-tax-eligible assets, trading stock, revenue assets and depreciating assets. Rollover eligibility only applies to transfers that do not result in a change in the ultimate economic ownership of the assets. The key aspect here is that there is flexibility to make decisions within the business as long as those parameters are met. The same ultimate economic ownership of the assets remains the important element in legal terms.

The bill sets out a 'genuine restructure principle'—that is the term—which is designed to separate legitimate business restructures from artificial tax avoidance schemes. In this place, over the years, we have had a number of debates about tax avoidance schemes, and I think we as a parliament are committed to ensuring that there is an understanding of what is appropriate in terms of genuine tax minimisation processes. I know the definition of tax minimisation is paying a responsible and reasonable amount of tax without going down the track of artificial tax avoidance schemes. That is important element of any form of tax reform in our country. We need to have a genuine commitment to making sure that there is an understanding of the tax process, and businesses in our country—it does not matter whether you are a small business or a large business—have an absolute commitment to ensuring that they have appropriate, transparent taxation arrangements.

There has been a lot of discussion in the media recently about large, particularly overseas-owned companies and ensuring that there are appropriate tax provisions made for them in the legislation. That has been widely supported by the community. In fact, some of the demand that governments ensure that there is effective tax law in this country has come from the community. Many times over the last years, there have been concerns raised about multinational organisations and the fact that some do not pay appropriate levels of tax. In fact, we are finding out it is more than some. As the cover of secrecy has been removed from a number of these organisations about their tax arrangements in Australia, the community is finding out that a large number of multinational companies seem to have set up processes so they are not paying what many Australians expect would be their fair share of tax. That principle also covers small business, in that there is an expectation from the community that as businesses they have a fair taxation arrangement.

It is very clear that the bill before us is not intended to have any process that would allow artificial tax avoidance schemes to be put in place. As I spelt out, the kind of flexibility in arrangements that could take place in moving capital and cost between different elements will always be allowable. The important thing is that there be no sense that it is an artificial tax avoidance scheme, which means that there would be less commitment to paying appropriate taxation.

A restructure will be considered to meet this genuine restructure principle when, for example, the business continues to operate, following the transfer, through a different entity structure but with the same economic ownership, which must always be the end result; when the transferred assets continue to be used in the business; or the transfer does not represent a divestment or preliminary step to facilitate the realisation of the value of the assets. That is very clear, I think. It is very clear what the intent is; it is very clear what the parameters are as well. The ability of small businesses to be flexible in their arrangements, to not have an unreasonable tax liability and to have minimal intrusion into the process so they can take ownership of their own business affairs and make effective decisions depending on their own economic situation, the demands of the trade, the demands of the business and the demands of the local economy. That will be protected. However, the overriding principle must always be that the business continue to be under the ownership of the original business.

Another element is that, to be eligible for the rollover, both the transferrer and the transferee of the assets must be residents of Australia for tax purposes. I think that we have become very sensitive to these issues, with due cause. The protection elements of the bill in front of us are focused on businesses that are owned or operating in and paying tax in Australia, so this particular piece of legislation could not be seen to be part of any scheme which could be seen to minimise tax payments in Australia. The clause that has specifically been put in the bill would mean that the flexibility arrangements would apply only if both the transferor and the transferee are residents of Australia for tax purposes.

In assessing the transaction that takes place when assets are transferred from one business structure to another, the income tax law will apply as if the transfer takes place for the asset's rollover cost—this is the transferor's cost of the asset for income tax purposes—such that the transfer would result in no gain or loss for the transferor, so that it is clear in the record that there is no gain or loss for the person or entity making the transfer—that is, the transferor. The transferee will be taken to have acquired each asset for an amount that equals the transferor's cost just before the transfer. This is intended to result in a neutral outcome for tax purposes. The interaction between the business and the tax office has to be transparent, and there has to be effective documentation that clearly points out each step of the way, so that the whole history of the process is clear.

Small businesses will continue to incur capital gains tax liabilities if they dispose of assets outside a genuine restructure. Again, in this way an organisation will be able to prove to the tax office that the process of restructuring is genuine and that the activities that have taken place are part of that restructure. Also, assessing the rollover relief at the point of a restructure will not exempt small businesses from future capital gains tax liabilities if those assets are later sold outside the business.

These are the mechanics of the process. They ensure, as I have said, that small businesses can have absolute certainty that their transactions are understood to be part of the restructure that is taking place within their organisation. Within the general debate in the community at the moment it is important that we have the opportunity to work through processes such as we have done to arrive at this piece of legislation—where we can reach agreement on something of concern to small businesses and that has been raised by the Small Business Association in various discussions, make a conclusion and then move on into the wider debate.

I know other contributors to this debate have given information about the general tax environment in which we are operating at the moment. There are concerns that there is no clarity around what the future direction of the government's tax policy is at the moment. This creates uncertainty. It creates worry that other changes that people will not understand will be coming and that there will be things rushed through in the lead-up to an election this year. It is important that when we have the opportunity to come to an agreement in what is a straightforward area that it is it clearly understood and that the people who are involved will understand what is going on. That is a positive result.

Nonetheless Labor has said that, considering that this is a new change and is a dynamic part of our economic make-up, there should be, within a reasonable time, a review of the flexibilities that have been built into this agreement, any documentation that is shared through the process and any case law which develops along the way once this particular change is agreed. I am not exactly sure whether a two-year program in this area is considered to be long enough to ensure that any vagaries in the system could be identified and effective responses built in, but we are saying that there needs to be such a review.

It is my understanding that the government is supportive of a review, because, as we all know, no matter how clearly you think through a piece of legislation, there can always be consequences which may not have been fully understood before the processes were put in place. We are very keen that there is a review built into the process, and I am sure the minister will let us know about that when he sums up the arguments. That is a standard expectation. It does not matter whether it is tax law, social security law—with which I am much more familiar—or anything that impacts on people's lives, there should be an effective review process built into the legislation.

We believe that the capital gains tax rollover provisions in the bill are a small but positive step by the government that will be part of keeping the conversation alive with small business groups across the nation. As I said earlier in my contribution, when citizens are working so hard to ensure a living for themselves, particularly the over 4.7 million people who are employed in this sector, it is very important and valuable that, when they come to their government and say that there is something that they think would be a practical way of achieving a result, the government is then able to say that they have heard them and will make changes that will work effectively with them. That is what we hope to achieve. Certainly, when we were in government, we took our responsibilities to the small business community very seriously and built up a range of communication networks in that space.

In terms of this particular piece of legislation, I am happy to say that we will be supporting it. We acknowledge the work that went into ensuring that it would be as simple as any piece of tax legislation could ever be. We also value the information that we will receive about an effective and engaging review process to ensure that will work as we would hope. The intent is that small business will work effectively, professionally and, I hope, with great profitability in our economy.

Joe Ludwig (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to speak on the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. Labor supports this bill, which amends the tax assessment act 1997. Ostensibly, it enables small business to defer the recognition of gains or losses that may arise from the transfer of capital gains tax assets, trading stock, revenue assets and depreciating assets as part of a genuine restructure of their business. One of the things we will look at is how the coalition will define a genuine restructure of business. We do know that there are many occasions when companies phoenix—when they transfer, when they change. It is very important in this particular area that the government remain very vigilant, that they ensure there are no loopholes created by this legislation, which otherwise is good legislation, and that it is not gamed—not that I think small businesses would willingly do that, but, unfortunately, there are some shonks in the business who may want to. But it does generally provide greater flexibility for small business to change their legal structure without attracting a capital gains tax liability at the time.

That is extremely important for small business. Small businesses, as they grow, as they change and as they meet business circumstances, do not want to be constrained by finding that a change to their structure—from a partnership to a trust, from a partnership to a company or from a company to another entity to create another trading opportunity—means they are penalised or they are constrained from doing that because of the necessity of then finding additional capital to deal with the capital gains tax liability. This is a small measure to facilitate small business in growing, changing and meeting market circumstances. It is designed for businesses with revenue below $2 million, which will be able to then take advantage of this process, defer gains or losses that would otherwise be made as a result of transferring business assets from one type of entity to another. Under the current rules a small business looking to incorporate or a company that wants to become a trust will incur a capital gains tax bill for transferring assets from one business structure to the other.

When you look at this and you go back to the 2015budget, the 'growing jobs and small business budget'—a pretty nice glossy leaflet at the time also highlighted this would be one of their measures in that budget. But since then, what the coalition have been touting is a tax plan. This is not a tax plan for the Australian community. What the government are unwilling to talk about—it really would be helpful if the government, during the summing up debate or during the committee stage, if there is one, addressed this—is to advise the Senate what their tax white paper plan for the future is. Small business is very seriously interested in understanding what the coalition's plan is.

But the government were unwilling to tell people who put their submissions into the tax white paper what they were going to do about tax reform. There was something in the order of 800 submissions made to that tax white paper inquiry, and the government spent millions of dollars of taxpayers' money putting in place the submissions. As I understand it, the Minister for Finance simply does not want to talk about the tax plan. Small business would benefit significantly from not only understanding that they have the support of the coalition for this measure but also what broader measures the coalition intend to promote for small business out of the tax white paper.

But we do know what they ruled out. It really becomes more telling if we recall the coalition provided a scare campaign on GST—they accused Labor of the scare campaign, but ultimately it was the coalition's scare campaign—and then they backflipped. If you recall, what they first of all said was that you should include everything in the tax white paper. They said: 'Things should not be ruled out. We should be able to then have a look at all matters.' Very quickly that became, 'We won't deal with GST; we won't deal with other matters.' Very quickly the coalition started ruling things out. I think what happened was the extreme elements within the coalition attacked mercilessly the moderates within the coalition—and the moderates gave in very quickly! Notwithstanding that, this measure was announced as part of the government's growing jobs and small business package in the 2015 budget. It will come into effect for asset transfers taking place after 1 July 2016. Rather than bring the measure in at an early point, we look like we are going to wait for this measure. I urge the government that if they cannot come up with a tax package, they certainly could bring forward this measure to assist small business.

The new small business rollover is in addition to rollovers currently available where an individual, trustee or partner transfers assets to a company in the course of incorporating their business. The bill applies to transfers that do not result in a change to the ultimate economic ownership of assets. Of course, when you talk about the Jobs & Small Business package where this measure came from, what is very telling is that two million small businesses in Australia benefited from Labor's permanent instant asset write-off when we were in government. The coalition, upon coming into office, junked it immediately—only, of course, to then bring it back, surprisingly.

You do wonder that this government does not have an economic plan for the future. They do not have a tax plan for the future. We are now debating individual measures from the 2015 budget, rather than listening to what this government is going to propose as part of its economic plan and its tax package for the future. This is all in an environment where the economy, under this coalition, is not performing well. Consumer confidence has bottomed out. We have growth down and unemployment up. We have debt and deficit up.

I think you have to put it in a frame when we deal with this bill. This government promised small and medium business—I will get to large business, but they at least promised small and medium business certainty. They promised an economic message that Mr Abbott had somehow fumbled when he was the Prime Minister. We have heard zip from this government since then. We have not seen their economic plan post the demise of Mr Abbott as Prime Minister. Yet it is startling to see that there has been no turnaround in the economy, so we cannot even agree that the coalition and Prime Minister waffling along have managed to turn around consumer and business confidence and unemployment. Whilst the Prime Minister dawdles overseas and dawdles through to designing and developing an economic plan, we have small business waiting for a package such as this.

Labor, as we said, supports the bill, because we understand that small business is a key economic driver of new jobs and a stronger economy in this country. It is a pity the coalition has not heard that message as well and does not want to deliver a tax plan and an economic message that recognises small business as a key driver of new jobs and a stronger economy.

Small businesses are already struggling. They do not need the big tax bills associated with changing their structure as their needs and activities change. However, Labor does not want to see this useful rollover relief measure become another loophole for tax dodging, as I said earlier. That is why we have proposed that Treasury review the change after two years of operation, because I think it should be in the legislation. I think the coalition should put it in the legislation, because this is a coalition that cannot keep its eye on the ball. I am sure, in the summing-up speech, the minister at the table will say that of course the Treasury continues to review these matters all the time. But unless this is given some legislative underpinning, I think that this government, which drifts along without an economic message or tax plan, will not come back to have a look at this to ensure that it operates as it should. Without that discipline, this government will just continue to drift.

We have seen the coalition's record for small business. As I said, they scrapped Labor's permanent instant write-off, only to bring back a temporary version, which effectively only provided a sugar hit for consumption in the 2015 budget but ultimately will run its course. It has not improved small business confidence because they recognise it for what it is—simply a small measure designed to curry favour with small business which does not help them in the longer term.

Small business in Australia must be and should be given the opportunity to grow and adapt. There are over two million small businesses in Australia, employing well over 4.7 million people. This includes employees from local cafes to sole traders running a software business. The reality is that small business keeps our economy ticking over. It lays the groundwork for a $340 billion contribution to the Australian economy. Labor's backing for this bill comes in tandem with our strong suite of policies to support small business and start-ups. These include our plan to offer a start-up year at university to young Australians to look at starting their own enterprise, backing great ideas through co-investment in high-potential companies through a $500 million smart investment fund and improving access to finance for microbusinesses through a partial guarantee scheme. Small business is crying out for assistance to give them a pathway to future growth and development. Labor is providing that. What this coalition is doing today is finalising the budget from 2015 while we wait and see what their May 2016 budget and their tax plan will bring for small business and while we wait and see how their overarching economic message delivers for small business.

The capital gains tax rollover provisions in this bill are a small but positive step by a government with a dubious record for helping small business. It is no secret that the Mr Abbott and Mr Turnbull Liberals are protecting tax loopholes and subsidies that benefit multinationals and wealthy Australians. It is poor form. The coalition do not recognise that small businesses see this. They see the loopholes for multinationals and wealthy Australians and wonder just what this government is doing for them while they are allowing multinationals to not pay their fair share of tax. The government's lack of broader changes to capital gains taxation comes at a time when housing prices are growing at five times the rate of wages. Property is accelerating out of the reach of young Australians.

Labor stands for a strong and sustainable budget so that we can afford to properly fund our schools, universities and Medicare. That is why we have announced the most important structural reform in a decade—Labor's reform to capital gains tax discount and negative gearing—which will improve the budget by $32.1 billion over the decade. Under Labor's capital gains tax policy, changes under which small businesses will be no worse off, the capital gains discount for all assets purchased after 1 July 2017 will be halved. This will reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent to 25 per cent. Investments made before 1 July 2017 will remain unaffected.

Just on that point, you do have this government—unable to put black print out about what its economic plan is or what its tax package reform is—floating out ideas in the news. While we have said that our plan will not be retrospective, one of those ideas out in the ether we hear is that the government's plan is going to be retrospective—which, of course, was strongly criticised by the coalition. I would have thought any retrospective impact by this government in this area of capital gains would be enormously harmful to this area.

You would expect the Property Council of Australia to be saying something about it, but they do not. They remain very quiet on this issue. Perhaps they are concerned about what the coalition will in fact bring to the table when it is their turn, should they get to that point. I do not know whether I have any confidence that the coalition will be able to, in the short time available, gather sufficient information to put a tax plan and an economic statement for all to see.

Our policy changes will not affect investments made by superannuation funds. Labor will also target negative gearing to new homes from 1 July 2017. Consumers have been scared off by this government's economic bumbling. You do reflect occasionally in this place as to why they made the change from Mr Abbott to Mr Turnbull, if it was not only about the polls. They said at the time, 'It's not about the polls. It's about the lack of economic leadership, it's about the lack of economic credibility and it's about the lack of the ability to bring together a plan for Australia.' On this side, we are still waiting to see what that economic plan will be.

I have heard some suggest that their plan will be in the budget. We have got a long way to go to get to that budget. Let's hope that they do manage to provide some sort of clarity, because growth is down, GDP has been downgraded from 2.75 per cent to 2.5 per cent this year and investment is down from 3.25 per cent to 2.75 per cent. Investment is down, business investment fell 6.3 per cent in 2014-15 and the forecasted investment has decreased from minus seven per cent to minus 9.5 per cent in 2015-16. Spending is up: PEFO spending for this financial year was estimated by Treasury at 24.9 per cent of GDP; it is now at 25.9 per cent under the Liberals. Deficit is up: in the 2014-15 budget, the deficit for this year was $17.1 billion; in MYEFO, it is now $37.4 billion. Debt is up: at PEFO, net debt for the next financial year was 12 per cent of GDP; for this year in MYEFO, it is now 18.3 per cent.

If I was the finance minister, I would resign on those figures, quite frankly. They are atrocious and they are appalling. I would certainly be doing more than simply waiting and leaving everybody in suspense as to what this government is going to do about it. This government promised that it would have an economic statement and it promised that it would deal with these figures. It has dealt with these figures: they are now a lot worse than they were when Mr Abbott was the Prime Minister. What the Liberals have not changed is the same plan. They still intend to rip money from health, aged care, job programs, child care and law and order. (Time expired)

Helen Polley (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Aged Care) Share this | Link to this | Hansard source

Labor's position is to support the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016, but this is a bill about economic leadership and we need to speak directly about that issue here today. This bill is a modest reform; but let us not pretend that it in any way constitutes economic leadership, because we know the government of the day has no plan, no vision and no leadership when it comes to the economic future of this country.

Labor will support this bill because it allows small business to restructure with greater ease but it would be remiss in talking about these issues if we did not talk about unfair taxation and did not deal with the question of the capital gains tax discount and negative gearing. We know that Australia has uniquely generous tax arrangements when it comes to negative gearing and the capital gains tax discount. We know that these policies have worked together to make housing increasingly unaffordable for young Australians. Price to income ratios have approximately doubled over the last two decades, and we have seen the share of young Australians owning their own home fall by 25 percentage points in a generation.

For low-income young Australians, rates of home ownership have halved. We now have Sydney as the second most unaffordable city in the world when measured by price to income ratios, behind only Hong Kong, and Melbourne is the fourth most unaffordable city in the world. Yet when faced with these facts, the Treasurer does not talk about acting on negative gearing and capital gains tax to make sure that all Australians can afford their own home. No, instead he is much more interested in protecting tax distortions and loopholes than in good policy.

Labor will always be fair and reasonable when implementing tax reform policies, and Australians deserve nothing less. They also deserve certainty. Our plans for changing the capital gains tax discount and negative gearing demonstrates the importance of giving certainty to stakeholders. But what do we see from this Prime Minister? What do we see from Mr Turnbull? He refuses to do the same. He is the Prime Minister, he has the power, he should have the authority, but he refuses to do the same.

This government is in complete chaos, with the Treasurer is under witness protection. We know that the Assistant Treasurer does not have the facts. We know that the government is at odds with each other. We never know what each minister is going to say about their policies. And we see that this Prime Minister is now trying to make up ground on the run. New economic leadership has turned into blindly throwing darts at a list of vague ideas and the government is now in full panic mode. They do not have a plan. That was the whole basis on which we were told that Mr Turnbull knifed Tony Abbott and became the Prime Minister of this country. It was because he said that he would bring agile, intelligent and adult government to this country, but we have seen nothing. And we should not forget how long this government has been in power—it has been 2½ years. So there is no excuse for their not having a plan.

By not having a plan and not being up-front and honest with the Australian community, the government creates uncertainty and distrust. It shows that this government, which has promised no cuts to health and to education and no changes to pensions, is completely willing to say anything it wants and to completely backflip as they did at the last election when they got into government. It is no wonder that Mr Turnbull is not trusted. It is no wonder that his own caucus is in disarray, because from the top down there has not been any real leadership. It is easy to get up and talk for the sake of talking, but at the end of the day the Australian community wants to know where this Prime Minister is taking this country.

The Prime Minister and the Treasurer have no fair and equitable plans or policies to fix the budget or to fund Australia's health and education services. The government, its Prime Minister and its Treasurer—and we know they already have the world's worst Minister for Finance ever—are aimlessly wandering around, talking and filibustering, but they are totally befuddled and they have no vision. When the government has something serious on the table we on this side of the chamber, the Labor Party, will respond accordingly.

Under Labor's budget reforms the capital gains subsidy will be halved and negative gearing will be targeted to new homes. These are good policies. We, as the opposition, have been putting our policies out earlier than any other opposition has for some decades. We have done the consultation and we have done what we needed to do to be able to fully cost the policies we have already announced. Labor's reforms will strengthen the budget by $565 million over the forward estimates and $32.1 billion over the decade. This has been costed by the independent Parliamentary Budget Office. The savings from these reforms will be used to invest in education and health care and to strengthen the budget. At present, only seven cents in every dollar spent on negative gearing subsidies is directed into new housing stock. Negative gearing on existing properties means no new housing supply and no new construction jobs. Under Labor's reforms, negative gearing will be available only on new homes, creating a powerful new incentive to drive investment in new housing and create up to 25,000 new jobs. That is 25,000 new jobs. Our reforms will mean homebuyers will no longer have to compete against property investors receiving generous negative gearing subsidies from the government. This will help level the playing field so that home ownership is within reach of more working and middle-income Australians. This will allow young homebuyers to enter into the market.

Labor will protect investments made in good faith under the existing scheme. There will be no change for those who are already in that investment market; they will be grandfathered—unlike the whispers that we hear about the proposals that this government is currently discussing. There will be no change to the treatment of any property investments made before 1 July 2017. There will be no capital gains changes on the family home or superannuation investments. Labor will limit negative gearing to new housing from 1 July 2017 and all investments made before this date will not be affected by this change and will be fully grandfathered. This will mean that taxpayers will continue to be able to deduct net rental losses against their wage income, providing the losses come from newly constructed housing.

From 1 July 2017, losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. These losses can also continue to be carried forward to offset the final capital gain on the investment. Labor will halve the capital gains discount for all assets purchased after 1 July 2017. This will reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent to 25 per cent. All investments made before this date will not be affected by this change and will be fully grandfathered. This policy change will also not affect investments made by superannuation funds. The CGT discount will not change for small business assets. This will ensure that no small businesses are worse off under these changes.

As I said, this bill amends the capital gains tax rules applying to small businesses which 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. This measure was announced as part of the government's package for growing jobs and small business in the previous budget and will have effect for assets transferred taking place from 1 July 2016. The new small business rollover is in addition to rollovers currently available where an individual, trustee or partner transfers assets to a company in the course of incorporating their business.

Labor welcome measures that allow small businesses to grow and adapt. That is why we support this bill. We on this side of the chamber understand how important small business is to our economy. You only have to you look at the state where I was elected and that I represent—Tasmania—to see the importance of small businesses. But we also know—as do my colleagues Senator Brown and Senator Bilyk, also from Tasmania—that it is tough going out there for small businesses in the current economy. It is extremely difficult when you have a federal government that have demonstrated no leadership on the economy. They have shown no leadership on taxation reform. They have shown no leadership on real policies when it comes to small businesses in this country.

This bill is a modest reform, but let's not pretend that it in any way constitutes economic leadership because, quite clearly, the government do not have that skill. It is almost like we have Mr Malcolm Turnbull mark 2. We remember when he was previously Leader of the Opposition. He did not then demonstrate the leadership skills to bring the opposition at that time together. Regrettably for the Australian community, he has not demonstrated those leadership skills since he toppled Tony Abbott. People were rather excited and relieved about Mr Abbott being defeated, rolled and knifed because they were hoping that they would have a Prime Minister who, when he got up to speak either at an international forum or at a national forum, they could be proud of.

But, alas, they have been disappointed. They have been very disappointed, indeed. The shine is now coming off Mr Turnbull. We all like to sit and listen to people speak about things they are passionate about. The unfortunate thing is that Mr Turnbull does an awful lot of talking—some might even say an awful lot of waffling—but, quite frankly, he does not say anything important. He has been unable to articulate and demonstrate that he has a vision when it comes to the future of this country. Whether we are talking about taxation or the economy, he lacks the skills. He is now captive to the most conservative elements of his caucus. He is not the real Mr Malcolm Turnbull that people thought they were getting when he rolled Tony Abbott. No, in fact, he is not a man who stands up for his beliefs and principles, because he had to sell them down the river to be the new leader and Prime Minister.

I can understand ambition. I think ambition is something that all of us—including those of us in this chamber or in the gallery today—should have in different doses. But selling out his principles to become Prime Minister has left a shadow of a man, because he cannot espouse the views that he truly holds on a whole raft of ideas. Therefore, he had a Treasurer who went off on his merry way, talking about wanting to implement a GST increase. What happened to him? He was reined in by the Prime Minister. He was reined in because it all became a little bit too difficult. Quite frankly, it was the wrong policy. We would never, ever support an increase to 15 per cent GST on everything across the board, including fresh food. So I can understand why the Prime Minister reined it in, but it was because he did not have the political fortitude.

We all read in the newspapers when former Prime Minister John Howard spoke and tried to give this current Prime Minister a little bit of a nudge and push and a bit of advice about using some of his political capital to stamp his authority on this government and to lead the nation. But I fear Mr Turnbull does not have what it takes. He does not have the leadership skills. Nor does he have the support of his caucus to take the decisions that need to be taken in this country.

That is why we on this side have announced our policies. That is because we have a vision. We have a plan. We have policies that are costed so that when we go to an election, whenever those opposite decide to call it—whether it is a 'double D' or only a half-Senate ordinary election and whether it is in July, August, September, October or November—we will be ready. The Australian people are looking for leadership, and they have been hoodwinked by those opposite. Firstly it was when Mr Abbott went to the last election making hollow promises about not raising taxes, not cutting or changing the pension and not cutting education or health.

In my area of responsibility—aged care—the government have left older Australians on the scrap heap. That is what they have done. They have cut aged-care funding. They have failed those people who work in the sector. Those are people, predominantly women, who are on very low wages. The government have not walked away but run away from them, because they are not prepared to show leadership. They want to outsource it, as the minister said at estimates when questioned about the workforce supplement and what they were doing about ensuring that there was a clear path when it came to aged care in this country. The minister said, 'It's not our responsibility, but we will help the sector.' When the sector are not addressing this and are asking you for leadership and assistance, that is what a good government gives.

There is nothing like leadership. If you want to be the Prime Minister of this country then you have a responsibility to show leadership when it comes to the economy, when it comes to taxation, when it comes to creating jobs and when it comes to creating wealth, so that we can afford the world's best education, so that we can afford the world's best health and so that we can afford to support older Australians—who have built this country, after all—and to give them some respect and give them the opportunity to live with dignity. They are the attributes that you need to have if you are the Prime Minister of this country and, quite clearly, this is not the case with the current Prime Minister. He talks a lot and he talks about all the things that Mr Abbott did not do, and I agree with him on lot of those things, but he has not demonstrated, in the last six months, any of that leadership; none of it.

When we are talking about what this bill will do for small businesses in this country it is a modest reform, and, as I said, we will support it. There are over two million small business in Australia employing 4.7 million people. This bill lays the groundwork for a $340 billion contribution to the Australian economy. Small enterprises make up over 97 per cent of all businesses in Australia. From the local cafe, to the dry cleaner, the baker, the sole trader coding software online and the technician installing ADSL, small businesses keep our economy turning. They deserve more from this government. We will wait for the 2016 budget, even though they toyed with bringing it on a bit earlier over the last couple of weeks. We know they could not do that because they still do not have a plan. I doubt they have even finalised their budget, because they are squirming and worming on every avenue when we talk about taxation reform or when we talk about the economy.

We will wait and see what the benefits are to small business in their 2016 budget. We will also be waiting to see what sort of leadership there is from the Treasurer and the Minister for Finance. We will wait and see whether this Treasurer and this finance minister are outside smoking cigars again—I doubt that they will be. We will wait and see whether there is real reform and whether they have the courage of their convictions to actually reform the taxation system in this country. We will wait and see whether they have the courage and fortitude to address the multinationals who skip out on paying what is rightfully the right amount of taxation in this country. We will wait and see—just as the Australian people will wait and see—whether this government has any courage, whether it has any leadership and whether it will be honest. (Time expired)

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

It is a pleasure to be able to put some remarks on the record with regard to the bill before the Senate this morning, the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016, because it gives me the opportunity to explode some of the mythology that still seems to have a bit of currency with the Australian people that the Liberal Party are actually the party for small business. It was untrue before but it has never been more apparent just how untrue it is since the election of the Abbott government. The Abbott-Turnbull government, in permanent chaos, would be a disaster if it were a small business. There is no teamwork. There is one person trying to lord it over the others at every point of the day. There is no clarity of communication. There is no vision for the country. It is all about saving their own skin. We have seen it manifest itself many, many times in the legislation that they have attempted to push throughout the course of this parliament.

Small businesses across this nation understand that relationships are critical to their success. This government arrived and, with a new Senate, within days tried to force them to make decisions on complex legislation in some bizarre game that they played. It was an absolute abuse of trust. Why do I put this on the record today, when I am talking about small business and this particular piece of legislation, which I do support? I put it on the record because it reveals a government of flawed character. They are a government that tries to pretend to people that it is one thing, but as time passes this government is more and more revealed. They are all about themselves. They are not about small business. They are all about the big end of town, the multinational businesses, and helping them to hide their taxation failures from the public. They are in cahoots with the Greens and doing all sorts of deals that make it more difficult for ordinary Australians to get ahead.

I come as a Labor member from a small business family. I cannot tell you how insulting it is to have people on the other side stand up, time after time, and declare that they are the only people who understand small business. Labor represents people in our communities who own small businesses, and many of us come from families with small businesses or are still operating them. The fact is that there are actually over two million small businesses in Australia and they employ 4.7 million people. That is why what this government does around taxation for small business and what it does more broadly has a massive impact on millions and millions of lives. Small business enterprises make up 97 per cent of all businesses in Australia. They come in a range of sizes. But they all have one need, and that is to communicate effectively with their customers.

Under the leadership of the new Turnbull government—Abbott mark 2, as it is turning out to be—we are seeing the revelation on a broader scale of what has been apparent for a long time to anybody who was watching Minister Turnbull in his prior role as the Minister for Communications. I have a few things to say about the impact of Mr Turnbull's management of that portfolio, and I am not the only one. Today in The Sydney Morning Herald there is an excellent article that I would refer anybody who is interested in the future of this nation to read. It is by Mark Kenny and is entitled: 'NBN: Malcolm Turnbull's 'faster, cheaper' roll-out falters.' We can all remember that language before the last election: 'Malcolm Turnbull, the responsible man, who was from a business background. He'll look after businesses. He'll make sure they get a fair go. He'll make sure they get the right technology to do business into the future.' He has absolutely presided over a disaster, and the secret is out. Materials that have been made available to Mr Kenny marked 'commercial in confidence' and 'for official use only' set out the huge range of problems that are now part of what is Malcolm Turnbull's version—

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Madam Acting Deputy President, I raise a point of order. Could the speaker refer to those in the other place by their correct title or correct name, please.

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

Thank you, Senator. Senator O'Neill, I draw your attention to the proper use of titles.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I am drawing attention to the role of Mr Turnbull, the current Prime Minister, as a supposed supporter of innovation and of small business. We have heard him say, 'There's never been a more exciting time to be Australian,' except if you live on the Central Coast or in the Newcastle area, which is where I come from in the great state of New South Wales, where we have the impact of Malcolm's vision for the country rolling out on the ground day-by-day, in a very, very flawed manner.

Indeed, at a recent hearing, Senator Conroy described how, in the Newcastle area, the quote to get the proper connection of fibre to the premise to a local small business was $10,000. You do not have to trust what I am saying here. If you go onto the nbn co website and click across a couple of tabs at the top, you will find language relating to the dodgy version of what they are trying to call the NBN. I prefer to call it to the MTM: Malcolm Turnbull's mess. That is what they are inflicting on small businesses right across the coast.

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

Senator O'Neill, you do need to refer to the Prime Minister as Mr Malcolm Turnbull. You have slipped up a couple of times, so if you could just be mindful of that, thank you.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

It is the passion for the small businesses in my region, who are the key players, that has distracted me from that very important standing order. I will endeavour to accede to your request little more carefully, Madam Acting Deputy President. The reality is that, on the ground, people are paying the price for decisions made by the man who is now the Prime Minister of this country. He thought it was fair enough to deliver this lemon into the regions of Australia. It was supposed to be cheaper, but $29 billion has turned into $56 billion—it has nearly doubled in price. It is way behind schedule, as is articulated very clearly in this article by Mr Mark Kenny.

In addition to that, if you decide your business is worth investing in and worth growing and you want the new technology that Mr Turnbull decided you did not need, you can pay thousands or tens of thousands of dollars. That is what it says on the nbn co website. Yes, for thousands or tens of thousands of dollars, you can get the basic technology that you need to be a successful business in this country. That is a revelation with respect to what the Liberal government really think about small business in the regions across this country. They do not care that they are putting regional Australia behind the rest of the country. They do not care, because they are quite happy that the big end of town and their mates in the city have got the real deal; they have got the real NBN. It makes a really big difference.

In the middle of Gosford we have a real-life experiment going on. There is a hub where genuine small businesses, innovative and creative small businesses, have the real NBN. They have fibre to their house. Many of them are home businesses. They also have fibre to their premise in the main street of Gosford. There we have a company—you can look them up—called BlinkMobile. They got an international award for innovation in industry as an international business that is in the cloud. The only reason they can do that is that they have got the real NBN. They are employing 30 people—and have perhaps even grown since I was last there—on great wages on the Central Coast, in regional Australia, because they got the real NBN. They got it before Mr Turnbull became the Minister for Communications. As soon as he came in, he decided he knew better. He knew what was best for small business, and he cut it away.

The problem for our small businesses across this country is very, very real. Mr Turnbull's decision making around what Australians need and do not need is shown to be very, very flawed. He cannot run from his shameful record. Again I say: go to the article in The Sydney Morning Herald by Mark Kenny around the rollout that is faltering, the blow-out in costs and the gap-to-target that has increased from 49,000 to 65,000 as at the week ending 12 February. These issues are created by the man who acts as though and talks as though he knows what the real needs of small business are.

This piece of legislation is particularly important for small businesses that find they are growing and that need to make some sort of change to their corporate structure. If the revenue of your business is under $2 million and you want to defer any gains or losses that you might make when you are transferring business assets from one type of entity to another—perhaps you are a partnership, changing to another structure—this legislation deals with some anomalies around that. It is important because, at the moment, a small business that wants to become an incorporated company, or a company that wants to become a trust, pays a capital gains tax bill for transferring assets from one business to another structure. Without the change this legislation allows, a company is forced to stay in a structure that does not allow it to grow and, when a person transfers assets from themselves to themselves, they are forced to pay a capital gains tax—which does not seem very fair and does not really help small businesses grow. That is why this is a sensible piece of legislation. It will indeed provide the flexibility we need to allow businesses to grow and thrive. But Labor have some concerns about this legislation and we think it is important to ensure that it should work in the way that is intended. We propose that there should be a Treasury review of this in a couple of years to make sure it is working the way we want it to.

There are differences between Labor and Liberal with regard to small business. One of those important differences became evident in the very first budget of the Liberal government under Mr Abbott. Labor instituted two really important things. One was the instant asset write-off, to make sure that people who were purchasing something for their business could write that off immediately rather than have to depreciate it, which took away a lot of red tape. When this government came in, they immediately said, 'Small businesses do not need that. We will get rid of that.'

They are so disconnected from the people they purport to support that they did not even check with the Small Business Council about it. The council was outraged by it, and so there was a redress of that. Like Mr Turnbull, these Liberals know better than small business and so they come in heavy-handed, not listening to small business—they know better and so they just do things to small business without proper consultation. Small businesses, which were going to use that instant asset write-off properly, ended up getting a sugar hit of commitment from Mr Abbott, who said, 'We'll do it to two years—just the two years.' Why two years? Because this government is only about itself. It is not about giving business a plan for the future; it is about telling business what they can do and exploiting business by saying, 'We're your friends; 'we're your friends.' I remember the then minister for small business, Mr Billson, the member for Dunkley, was the one charged with telling everyone how good it was. They gave a sugar hit the two years but, when those two years are up, the businesses planning to grow have suddenly lost one of their platforms. Why two years? Because the government cynically manipulates their announcements to time them with what they thought would be their next election.

In their first budget they did a dirty deal on small business and then turned their backs and walk away again. The con-artistry around the Liberal government, which continue to act as though they were the friends of small business, is disgraceful. Day after day we see them come into this place with legislation they put through to protect their friends in multinational corporations at the cost of ordinary working Australians, who show up and pay their taxes every week. We saw a deal in the last week of this parliament between the Greens and the coalition government to make it more difficult for the Taxation Office to show Australians who is paying tax and who is not. They did not protect ordinary Australians, like you and I; they did not protect small businesses; they protected multinationals. I say to any small business person—who is driving in the year ute, working hard for their families, taking on an apprentice and paying their tax—you cannot afford to vote for this Liberal government. You cannot afford to vote for Mr Turnbull, who decided to keep his job as communication minister—the man who made millions out of communication and who should have known better. He was tasked with the job of wrecking the NBN. 'Break it' was his direction from Mr Abbott, and that is exactly what he did. If he gets the chance—if Australian small businesses allow themselves to be conned again by this government—to be re-elected and, in some sort of partnership with the Greens, the coalition will control this chamber and this parliament. They will do to Australians what they tried to do with that 2014 budget—they will try to rip away the fabric of our society.

Support for small business is a game that they play, not a policy that they deliver on. They forget something about small business when they treat it as an economic entity. The small business women and men, who employ local people in my community and across regional Australia, are also the parents of kids in schools. They are also the carers for people who need access to hospitals. Small business people contribute to our local community. When it comes to fetes and supporting local charities, small business is where we go. They are connected to ordinary Australians. Small business believes in fairness; this government does not. Small business people need to know that their children are going to school to get a great education, wherever they walk through the door. Small business people need the Gonski funding, because they need to know that their kids are going to be looked after at school. Small business people need the Gonski funding to go into schools because they want to employ young people who are literate and numerate, who can deal with innovation and who are able to study and work and do well for this country.

Small business people who get sick need one of the 26 regional cancer centres that Labor established when we were in government last, because they can run their business and get their treatment locally. The whole time that Mr Abbott was the health minister and the whole time he was Prime Minister, we did not see investment in health. Instead we saw them rip it away—$57 billion they took away from health across this country. On arrival into parliament, Mr Abbott ripped up national partnership agreements that saw responsibility shared between state and federal governments. He just walked away; he just left people right across this country—small business people, ordinary working people sick people and walked away from that responsibility. This coalition government, which has now joined in with the Greens, do not care about ordinary working people who own small businesses, who do the hard yards, who sit down and do their BAS statement on Tuesday night at 10 o'clock, who contribute to their local community, who believe that education is a right for every child and who understand that we are all connected in this together. This government is for the top end of town, not for ordinary Australians—absolutely not for ordinary Australians and certainly not for small businesses.

It is really important at this time to indicate that we as an opposition can only do so much to protect for people who are in business across this country. When we have the opportunity to review legislation and to speak with experts about it, we listen carefully. The piece of legislation, which I am speaking to today and which I do support, gives sensible and practical assistance to growing small businesses on the coast. But let people across this country make no mistake: if you are a small business or you are pay-as-you-go earner, this government is not supporting you. If they are elected, they will absolutely sweeps through a range of changes. I would not be surprised if the on-the-table off-the-table GST rise, supposedly dead and buried, comes back. What would the impact of that be on small business? Absolutely enormous. The reality is that this is a government that lacks care. Their commitment is to making only the top end of town successful, propping up their mates and looking after one another, and any of the gestures and commentary that they make in support of small business is a con job. They should not be trusted with the government of this nation. Small business should not trust them any more than any of the rest of us do, because small business understands the hard work that goes into developing and securing businesses and, while it will benefit from this change in legislation, it will get smashed on the roundabout of this government going through and taking away from every small business the opportunities that they deserve.

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I rise to add my contribution to the debate on the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. After 2½ years Australia has more debt, more deficits, more issues following the GFC, more taxes, more chaos and more confusion—there is nothing at all from this government that resembles any sort of plan for our economy. They have no plan, they have no policy and they have no vision—no vision whatsoever for the Australian economy.

As we all know, economic policy under this government is a complete shambles. Although we on this side see the Tax Laws Amendment (Small Business Restructure Rollover) Bill as a small step in reform, as Senator Polley mentioned earlier it in no way constitutes economic leadership. So while on this side we support the bill, I do have some concerns with the process and the potential consequences of the bill, which many third parties have raised and which I will come to later. This bill amends the capital gains tax rules applying to small businesses which transfer assets as part of a genuine restructure. Businesses with revenues 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. This measure was announced as part of the government's Growing Jobs and Small Business package in the 2016 budget and, if passed, will have effect for asset transfers taking place after 1 July 2016.

The new small business rollover is in addition to rollovers currently available when an individual, trustee or partner transfers assets to a company in the course of incorporating their business. Labor welcomes measures that allow small businesses to grow and adapt, and that is why we support the bill. There are over two million small businesses in Australia, employing over 4.7 million people. This lays the groundwork for a $340 billion contribution to Australia's economy. Small businesses are the engine room of our economy, with small enterprises making up over 97 per cent of all businesses in Australia. We are talking about things like the local cafe, the dry-cleaner or the bakery. In the case of my own family, my mother ran small businesses for probably 45 years, usually in the local shop type of area, one of my brothers runs a small motors business in the Derwent Valley and another brother runs a furniture removal business. Of course I ran a small business when I worked in the childcare industry for a number of years as well.

As I have said, this bill allows small businesses with revenue under $2 million to defer gains or losses that would otherwise be made when transferring business assets from one type of entity to another. This is important because under the current rules a small business looking to incorporate or a company which wants to become a trust will incur a capital gains tax bill for transferring assets from one business structure to the other. By removing impediments to genuine business restructures, small businesses will be given the flexibility they need to grow and thrive. As with any tax change, however, it will be important to ensure it works as intended. That is why we propose that Treasury review the change after two years of operation. On this side we do not want to see this useful rollover relief measure become another loophole for tax dodging.

These measures have strong support from within the financial community. For example, the Institute of Public Accountants commented on the exposure draft of the bill, and said:

The IPA is generally supportive of measures that reduce complexity and the compliance burden in the administration of taxation law, especially when it relates to small business. The proposed changes are intended to allow the business to develop and grow by allowing the business to change legal entity without incurring significant income tax liabilities.

They go on to say:

Allowing small business to select the most relevant structure to take account of the stage in the life of the business without being inhibited by certain tax costs provides more flexibility. State based taxes such as stamp duty may still be relevant for restructuring from one entity to another.

Currently, CGT roll-over relief is available for individual sole traders, partnerships and trusts that convert to a company structure. The proposed legislation extends the rollover relief to transfers of assets from a company to a sole trader, partnership or trust, occurring on or after 1 July 2016.

It is remarkable how little this government seems to care about small business given its importance to the Australian economy. Labor has a strong record on measures to support small business. On the other hand, the coalition's record since coming to office could be described, being charitable, as patchy. First they scrapped Labor's permanent instant asset write-off, only to bring back a temporary version—Senator O'Neill referred to it as a bit of a sugar hit for consumption—in the 2015 budget. The coalition also rammed back Labor's loss carry-back measure, which did so much to help small business with their cash flow. This measure allowed companies and businesses that were taxed similarly to carry back tax losses of up to $1 million to offset taxable income from an earlier year.

The loss carry-back was a recommendation of the Henry review, a rigorous and broad-ranging tax inquiry conducted for the previous Labor government. Unfortunately, we are yet to see any evidence that this government is serious about rigorous and broad-ranging tax reform, because this government has given no indication of when their promised tax white paper will be released. Recently, we heard the head of Treasury say that his department were waiting for direction from the government on whether the tax white paper was even dead or alive. At the same time the Minister for Finance was seemingly unaware that the Prime Minister had all but junked the white paper process, having indicated any tax plans the government has would be sprung on the Australian public on budget night. The little we do know about the tax white paper process is that the government has spent roughly $1.1 million on consultant fees alone. Over $1 million on a white paper that the Minister for Finance flippantly refers to as stationery.

This government's haphazard approach to reform, coupled with dramatic budget cuts to essential services creates a sense of unease for businesses and Australian families alike. Confidence has slumped since the 2013 election. I gave a speech in this place last year regarding the slump in confidence that has occurred because of the actions of this government. The government has persisted with slashing health and education budgets. Jobs have been slashed and infrastructure spending has fallen off the radar. I am particularly disappointed about the 350 jobs that will be lost at CSIRO and the impact that will have on my home state of Tasmania. It is hardly surprising that consumers have pulled back on spending in such a gloomy climate. Consumer spending growth is currently at a sluggish 2.3 per cent. Less consumer spending hurts small businesses. The Prime Minister's flip-flopping on tax reform creates uncertainty for Australian consumers and small businesses alike. Labor believes in giving certainty to small businesses. We back this bill as it complements our own suite of policies that support the small business and start-up sectors.

Labor's plan includes offering a start-up year at university to young Australians eager to start their own enterprise; creating a $500 million smart investment fund that co-invests in early-stage and high-potential companies; backing the great ideas developed by Australian small businesses; and a partial guarantee scheme that helps to improve access to finance for microbusinesses. Labor's plan will spur a wave of small businesses that may benefit from the measures in this bill.

As small and microbusinesses grow and adapt to their markets they may require a business restructure. We support the removal of any impediments to genuine business restructure. We understand that small businesses need such flexibility in order to grow and survive. Under current rules, if a small business wants to incorporate or if a company wants to restructure to become a trust, the business will incur a capital gains tax bill when transferring assets from the old business structure to the new. This bill allows small businesses with revenue under $2 million to defer gains or losses that would otherwise be made when transferring business assets from one type of entity to another.

The eligibility for this measure will only apply to transfers where the ultimate economic ownership of assets does not change. The genuine restructure principle set out in the bill is designed to separate genuine restructures from artificial tax avoidance schemes. In keeping with Labor's commitment to stamping out tax avoidance, we want to ensure that this useful measure is deployed in the manner for which it is intended. We on this side of the chamber are always determined to ensure changes do not have unintended consequence and do not create loopholes for tax dodging.

Labor proposes a Treasury review in the small business restructure rollover measure after two years of operation. By then, Treasury should have been able to gain an insight into the operation of the measure and evaluate whether the intent of this bill has become a reality. We all know that Mr Turnbull rolled Prime Minister Abbott based on the great promise of new 'economic leadership' and to usher in a new politics, where slogans would give way to advocacy. I think three-word slogans have given way to 300-words slogans, but I have not seen much advocacy and I certainly have not seen much economic leadership. The new economic leadership that we were promised has absolutely failed to appear, and over 160 days later and some 13 or 14 ministers later—I have lost count—this completely dysfunctional government still has no tax policy. Indeed, it has no policies at all to help everyday Australians. The best they can offer is a weak scare campaign slogan on our policy. We are the opposition and we have the policy already. We put it out there and then they came up with this pathetic slogan and a really weak campaign about it, which of course has fallen flat. One reason it has fallen flat is that they cannot even decide which scare campaign they are actually running: are house prices going to go up or are house prices going to go down?

I am still waiting for good government to start I might add. I think we are up at good government 3.0. I have not seen much evidence of it ever having started since the last election. So devoid is the government of ideas and beliefs that they cannot even run a consistent scare campaign. It is not like they do not have the opportunity to outline an economic agenda. They just do not have an economic agenda.

The Treasurer very recently at the National Press Club had the perfect opportunity to outline the government's economic vision. What happened? Mr Morrison gave one of the worst speeches by a sitting Treasurer in living memory. It was 46 minutes long and most people are referring to it as waffle. This was his moment to shine, and what did he do? He absolutely failed. It was his moment to take economic leadership and define how he would make the taxation system fairer for all Australians. He absolutely failed.

In the House last week, Labor moved to suspend standing orders so that the Treasurer and his counterpart on our side, Mr Chris Bowen, would be able to talk about their ideas for 46 minutes each. And what happened? The government squibbed it. They could not even let Mr Morrison stand up in the House for 46 minutes to talk about their ideas. The Treasurer went running off, like one of his little unicorns or pixie horses or whatever he calls them—talk about living in fantasy land—to talk about political numbers, which I think we all know is all he really cares about. But I must get back on track. It seems that the government has realised that its plan to increase the GST is unpopular—because it is so unfair—and just wants the issue to go away for the time being. All that we got were platitudes and meaningless, glib statements.

I have stated on previous occasions how utterly remarkable I find it that just weeks, maybe, or months out from a federal election, the government do not have any plan on taxation. What are they doing over there? They are all scrambling over each other trying to develop a policy, with Mr Turnbull even seeking advice from former prime minister Howard over the weekend. If I remember correctly, that is the sitting Prime Minister who lost his seat. He lost his seat when he was Prime Minister. So I am pretty sure that the people of Australia are not really too interested in what he has to say.

Today we are facing a $37 billion deficit as our economy switches gears and we continue the long climb back from the depths of the global financial crisis. In 2012-13, major companies shifted over $300 billion from their Australian arms to overseas parent or subsidiary companies, but the Liberals just want to let multinationals wash their hands of paying fair taxation. So they do have some views in regard to taxation! Generally, it is just that the multinationals do whatever they want; who cares if they do not pay their fair share of taxation? We want to close the loopholes there that allow multinationals to send their profits overseas. Unlike the Liberals, who want to cut funding to schools and hospitals, we think that multinationals should pay their fair share of tax, and then maybe those areas could be funded appropriately. It really is incumbent on a government nearing the end of its first term to have a plan for taxation. What have they been doing?

In contrast to this government, this excuse for a government, Labor does have a plan. Labor are prepared to progress important reforms to our taxation system because we have a plan which is fair and a plan which helps the nation.

We believe that, when the children of Australia grow up, they should be able to afford to buy a house. I myself have two children, aged 29 and 31. One lives in Sydney. Do you think he is able to buy a home? The deposit he would require is just atrocious, unless he lived close to Yass or somewhere like that and travelled every day. He has a job. He is 31 years old. He has been working for a number of years. He worked overseas for a number of years. He did pay his HECS debt while he was overseas, I might add, just in case anyone was in doubt about that. But he is having trouble to get enough for a deposit to be able to buy a home.

Mr Turnbull seems to think the great Australian dream is helping investors receive a tax subsidy to buy their seventh home. But I know that the great Australian dream for young people is to get their first home. My own children, and their friends, talk to me about how hard it is for them to save for a deposit for a home.

As I said, Labor have a plan to make the taxation system around housing fairer. The negative gearing and capital gains tax changes announced by Mr Shorten and Mr Bowen will deliver the most important structural budget reform in a decade. Why? Because they improve fairness and they make a contribution to tackling housing affordability. On negative gearing, Labor will modify the system so investment losses can only be offset against wage income for new properties. This will help channel investment into new housing supply to improve affordability. Of course, we are grandfathering the clause for anyone who has already purchased a home and is negative gearing; we will grandfather the arrangement for those people. We understand that a strong housing market is central to Australia's successful transition out of the mining boom and that directing investment towards new building starts will boost jobs, investment and growth, all of which are of dramatic importance to get Australia back on track.

Despite Mr Morrison peddling the propaganda used by those who benefit from the current arrangements, the current tax concessions on negatively geared property overwhelmingly go to those on the highest incomes. We know this because the government's own Re:think tax discussion paper tells us that less than one in seven Australians earning a middle income claim negative-gearing deductions— (Time expired)

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

I too rise to speak in support of the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. The bill amends the capital gains tax rules applying to small businesses that transfer assets as part of a genuine restructure. This measure was announced as part of the government's Jobs and Small Business package in the 2015 budget and will have effect for asset transfers taking place after 1 July 2016.

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. Amending the Income Tax Assessment Act 1997 will provide greater flexibility for small businesses when changing their legal structure. The amendments allow deferral of gains or losses that would otherwise be incurred when a business's assets are transferred from one type of entity to another. The current laws create an obstacle to small businesses restructuring, because they may incur a significant tax liability in the process. This is important because, under the current rules, a small business looking to incorporate, or a company which wants to become a trust, will incur a capital gains tax bill for simply transferring assets from one business structure to another business structure. This new small business rollover would be additional to the rollovers currently available where an individual, trustee or partner transfers assets to a company in the course of incorporating their business.

Labor understand that small business is a key driver of new jobs, and we understand the role that small business has in making Australia's economy much stronger. That is why we support this measure. It will make it easier for small business to change their structure, as their needs and activities change, without incurring big tax bills. Without this sort of change we might see that businesses do not take that step because of the risk of incurring additional costs.

We also know that small businesses make up the heart of the Australian economy; there are around two million small businesses in Australia employing almost five million people. Labor want to see small businesses treated fairly and to give them the opportunities and abilities, through these sorts of changes, to make their businesses work, because that paves the way for a $340 billion contribution to Australia's economy.

Labor supports small businesses. We support the removal of impediments to genuine business restructuring. Labor wants small businesses to have the flexibility they need to grow and thrive. In many rural and regional country towns across the country small businesses are at the centre of ensuring that those communities remain viable. Labor wants to see new businesses established. But there is a big financial risk when individuals or families make the decision to establish a new business or expand an existing business.

As with any tax change, it is important to ensure that the change works as intended. That is why Labor has proposed that Treasury review the change after two years of operation. We want to signal to small business that there is certainty in this new change. We also want small business to have certainty in knowing that if it is not working, or if it requires tweaking, there will be a review in two years and that they will not have to lobby or spend their time talking to politicians and lobbying government bureaucracies instead of looking after their businesses.

A review for a change of this sort is required. We do not want to see this useful rollover measure become another loophole for tax dodging. We do not want to see some smart accountant find those loopholes and exploit them, because that is not what is intended by Labor's support for this move. We support the move for genuine reasons. We want to genuinely enable proper businesses—legitimate businesses—in Australia to prosper and grow. We do not want to sponsor anything other than that, which is why that review period is critical.

We know from reports in the media and through the sorts of inquiries we have seen in the Senate that there are currently way too many tax loopholes, particularly in relation to multinational corporations—which are certainly not paying their fair share of tax—with report after report of corporations paying zero tax. The bill sets out a genuine restructuring principle which is designed to separate legitimate business restructures from artificial tax avoidance schemes.

What we have seen in the media is company after company using some currently available loophole to avoid paying tax—never mind them paying their fair share of tax; they are paying zero tax. That is not what Labor is supporting in this move. We want to ensure that a restructure will be considered to meet this principle when, for example, the business continues to operate following the transfer under a different structure but with the same ownership; when the transferred assets continue to be used in the business; and when the transfer does not represent a divestment or a preliminary step towards facilitating the realisation of the value of the assets. Further, to be eligible for the rollover, both the transferor and the transferee of assets must be residents of Australia for tax purposes.

We think that the checks and balances are there in this bill, but the proof will be in the pudding. That is why it is critical that we have a review after two years. If things are going well, business is happy and there has been no rorting through unintended consequences, then that is fine. But review periods are there to make sure that new laws are working as they should—and that is certainly what Labor want to ensure with our support for this bill.

The government's interest in small business is brand new. What we have seen over the past two years is a government that has largely been missing in action when it comes to small business. First, they scrapped Labor's permanent instant asset write-off, only to bring back a temporary version as a sugar-hit for consumption. They also wound back Labor's loss carry-back measures which did so much to help small businesses with their cash flows. That was one of the policy areas that small business welcomed when Labor was in government.

If the government really wants to support small business, they must not go ahead with Mr Morrison's plan for a 15 per cent GST. We have heard Mr Turnbull be a little firmer in saying that it is off the table, but there is such chaos and differences of opinion within the government that you can never be sure. But if you make basic items more expensive for Australian families they will buy less of everything—that is the economics of that—and that would mean far less spending at small businesses across the country. Certainly when the Liberals first introduced the GST some 15 years ago, ABS data tells us the economy shrank in the six months that immediately followed. This mirrors the experience of countries like Japan, which saw its fragile economy slip into recession after raising its consumption tax in 2014.

Labor stand on the side of Australia's small businesses and oppose any increase to the GST. We oppose any moves that are counterproductive for small business. But Labor's backing for this bill comes in tandem with our own strong suite of policies to support small businesses and start-ups. These include our plans to offer a start-up year at university to young Australians looking to start their own enterprises, backing in great ideas through co-investing in early stage and high potential companies through a $500 million smart investment fund and improving access to finance for microbusinesses through a partial guarantee fund.

But Labor, in supporting the bill, recognise that it is modest reform. Obviously we support it, but it is modest reform. Unfortunately, as the government is in chaos, it does not form part of an overall tax package. It is not part of a comprehensive review or a comprehensive overhaul of the current system. It is tinkering at the edges. Fortunately for small business it is a good move, but in terms of a full tax review this is an amendment on its own, out there floating in the void, floating in the ether of the Turnbull government's 'no coherent tax plan'.

Australian voters could be forgiven for thinking that the Turnbull government backbench and the media are running the show; the 44 who did not vote in Mr Turnbull as Prime Minister. The number of backflips and flip-flops from the current Prime Minister surely sets a new record? The old Prime Minister, Mr Abbott: his legacy of broken promises certainly set a record; on and on they went. Those broken promises on his commitments—no cuts to health, no cuts to education, no cuts to the SBS, not cuts to the ABC just to name a few—defined the Abbott government, and the current backflips and flip-flops will define the current Prime Minister and, indeed, the Turnbull government. We have seen backflipping and flip-flopping on the GST, on tax on superannuation and on capital gains tax, and last week what a debacle in the House on negative gearing. They could not even get their ministers on the same page. Allegedly, Labor's policy is going to increase housing and it is going to decrease housing—they are not sure. And today we hear on the news that the backbench again is advising Mr Turnbull on tax policy, particularly in relation to negative gearing. Apparently, according to the backbench, there will be none.

If you follow the Turnbull government you would be more inclined to believe what the backbench say than what either the Prime Minister or his ministers say, because it seems that when the backbench speak, because what they say eventually trickles down and becomes policy of the Turnbull government. We saw that with the GST, where the backbench were in complete revolt around that and so eventually we saw it absolutely—we think; who knows—potentially ruled out by the Prime Minister. And we note that like his predecessor, Mr Hockey, Mr Morrison is now in witness protection, as he should be after that appalling National Press Club speech. He was a Treasurer who really had nothing to say about tax reform or the budget.

On all of those points—the GST, tax on the wealthy and their superannuation, on capital gains tax, on negative gearing—Mr Turnbull, before he became Prime Minister, held the completely opposite view to the one he holds today. Backflipping, flip-flopping: that is what we have seen from Mr Turnbull. He said one thing a year or two ago, just like with marriage equality. Apparently he is a supporter, and yet we are going down this expensive, unnecessary plebiscite, which is going to cost at least $160 million, when his own backbench are out there saying, 'We don't really care if the plebiscite says, "Let's introduce marriage equality", because we're not going to support it.' Again, we have seen the backbench ruling the day. They have made it very clear to Mr Turnbull what their view is.

Obviously the views that Mr Turnbull now holds on those matters of tax are the views of the ultraconservative Tea Party backbench of the government. The only agility we have seen from the Turnbull government, in fact the only agility we have seen from the Prime Minister, is his ability to do backflips and flip-flops. Seriously, he could win a gold medal at the upcoming Olympic Games for the number of backflips and flip-flops that he has entertained Australian voters with. If only it were not so serious; if only the consequences did not then impact on ordinary people and on ordinary families' abilities.

Why would Australian voters trust the Prime Minister to deliver on fair tax reform when we look at Mr Turnbull's record, particularly in relation to the National Broadband Network? Small business of course rely on the NBN. As well as providing a fair framework and a framework on which they can operate and move, they also need to communicate. Certainly we have heard the stories of people in rural and remote Australia, who the Nationals have completely deserted, who have to move into town. They cannot run their businesses from their stations because their current internet service is so slow that they just cannot meet the grade. We have seen no support there.

But let us have a look at Mr Turnbull's record, because people like to stand on their record. I am sure Mr Turnbull does not want to stand on his record as the communications minister because, quite frankly, it is a mess. Despite his backflipping and flip-flopping, there is no way he can move away from taking full responsibility for what is happening with the National Broadband Network across this country. He was given a very important job, a big job, of continuing to roll out Labor's innovative NBN. He has well and truly messed it up. It is on the public record—it is a mess-up. According to a leaked confidential report—another one—which is there for all to see in an article by Mark Kenny in this morning's The Sydney Morning Herald, there is 'a litany of problems'. This is the record of the Prime Minister when he was Minister for Communications on the NBN: 'a litany of problems'. This report relates to the NBN that Mr Turnbull has overseen in his former role as Minister for Communications. The report goes on to say that the NBN 'is facing mounting delays and rising costs'.

No matter how those opposite try to dress it up, they have made one almighty mess of the NBN, and there is only one person responsible for that: the current Prime Minister, Mr Turnbull. He had one job to do: to deliver the NBN in a cost-effective way. We have seen a second-rate system being rolled out. We have seen now, according to this confidential leaked report—obviously someone wants the truth out there—that it is facing mounting delays, as all Australians know, and rising costs.

Now Mr Turnbull, the Prime Minister, the failed communications minister—good heavens, he is running the country! He could not run the NBN and now he is running the country. Is it any wonder that he has been unable to deliver a coherent tax plan or tax policy, a fair policy which ensures that big companies in this country go from paying zero tax to paying their fair share? We have seen in the past the ad hoc way in which Turnbull government has dealt with policy in and around taxation. We saw the dirty deal that the Greens did with the government on part pensions, which is going to put a serious burden on our ability to fund pensions into the future, because more Australians, through the Greens deal with the government, will need the age pension as they retire, thanks to that absolutely short-sighted deal that they did. I said last week and I say it again: the Greens have got their L-plates on and the government has its P-plates on. When you put those together you end up with an absolute mess. We have seen the deal that was done last week which will disenfranchise millions of Australians and potentially give the government control of the Senate. Heaven help us on tax policy then.

Arthur Sinodinos (NSW, Liberal Party, Cabinet Secretary) Share this | Link to this | Hansard source

I rise to sum up the debate on the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. I would like to begin by thanking those services who have contributed to this debate. This bill brings to a close the legislative work of this government to provide taxation support for small business through the Growing Jobs and Small Business package announced in the 2015 budget. The bill amends the tax law to allow small businesses to restructure their business without incurring capital gains tax liability at that time. Small businesses that find themselves within a business structure that does not suit their needs will now be able to change to a different structure without having to consider the capital gains consequences. The government is actively supporting Australian small business owners through the budget package of measures. We know it is important to provide cash flow and simplicity to that part of our economy, which is responsible for employing over 4.7 million Australian workers and producing over $340 billion in economic output. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.