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 consequences 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)