Jane Prentice (Ryan, Liberal Party) Share this | Hansard source

What a delight it is to once again rise to speak about the government's $5.5 billion Jobs and Small Business budget package announced in the 2015-16 budget. Before the winter recess the first tranche of measures was introduced and passed. Those bills reduced the company tax rate from 30 per cent to 28.5 per cent for companies with an aggregated turnover of less than $2 million, as well as making consequential changes to the treatment of franking credits. They also allowed for the immediate deduction of expenditure on each and every item of capital equipment with a value of up to $20,000—and wasn't that well received by small businesses across the community.

These measures are already providing a much-needed boost to the bottom lines of the 13,000 registered small businesses in my electorate of Ryan, and the 780,000 eligible small businesses across Australia. And who could forget Labor's reaction to those bills? Labor claimed to support the bills. But, instead of working with us in the spirit of bipartisanship to inform small business owners of the positive impact of the changes on their business, the Leader of the Opposition rose in this place to attempt to shut down debate. It was not his finest hour, and one that small business owners across Australia would do well to remember when given a chance to pass judgement at the ballot box. Because, for all of Labor's professed support for small business, they are remarkably late converts to the cause of small business tax cuts. Who can forget the member for Oxley's 6 May contribution to the debate in which he described small business tax cuts as 'ham-fisted' and 'against the wishes of Australian business'? Given the member is also the shadow minister assisting    his leader for small business, it is fair to assume that his views represent Labor's thinking on the subject. This makes the Leader of the Opposition's professed support for small business tax cuts all the more hollow. Unlike those opposite, members on this side of the House understand small business. And, unlike those opposite, these bills demonstrate that we have a clear and unambiguous track record of delivery.

This brings me to the substance of this bill, the Tax Laws Amendment (Small Business Measures No. 3) Bill 2015, which is the third of four bills that will constitute the overall Jobs and Small Business budget package. This particular bill helps small businesses by making three substantial amendments. Firstly, it amends income tax laws to provide a five per cent tax offset, capped at $1,000, to individuals who run small businesses. This measure is designed to ensure that tax relief for owners of unincorporated small businesses broadly mirrors recently legislated tax cuts for incorporated small businesses. Secondly, it amends the Income Tax Assessment Act 1997 to allow for the immediate deduction of certain costs associated with starting a business, including government fees and charges as well as costs associated with raising capital. And, thirdly, it clarifies and extends the fringe benefits tax exemption that applies to employer provision of work-related portable electronic devices such as mobile phones, laptops and tablets. This will reduce red tape by eliminating the requirement for employers to demonstrate that devices do not have 'substantially identical functions' in order to qualify for the exemption.

Returning to the first of these changes, the government has committed $1.8 billion over the forward estimates to providing a five per cent income tax offset of up to $1,000 to individuals who run small businesses. The amount of the tax offset is five per cent of the income tax payable on the portion of an individual's income that is attributable to the business. The offset can be claimed from multiple income streams, but the total offset is capped at $1,000.

There is a simple rationale behind this change. The government committed to introducing a 1.5 percentage point small business tax cut from 1 July 2015, with the cut having been legislated and passed prior to the winter recess. However, by its very nature as a corporate tax cut, it only provided benefit to those companies incorporated for tax purposes. Seventy per cent of small businesses are not companies and therefore did not benefit from the tax cut. This tax offset therefore has two purposes. The first is to ensure that unincorporated small businesses are provided with tax relief so that they can employ, grow and prosper. The second is to avoid a scenario in which a company tax cut made in isolation induces small business owners to incorporate where they otherwise would prefer not to do so. It is inefficient practice for companies to go through the red tape and expense of restructuring on the basis of an arbitrary tax change, and the government is keen to avoid this.

One of the most well-received changes introduced in the Jobs and Small Business budget package was the ability for small businesses to immediately deduct from their taxable income the cost of each individual capital equipment purchase up to a value of $20,000. This bill continues the theme of immediate deductibility by allowing for the immediate deduction of the costs of government fees and charges, the costs of obtaining advice on business structure and the costs of raising capital incurred in the starting of a business. Previously, expenses of this nature were deductible over a five-year period. Anyone who has started their own business will tell you that the start-up phase of a business is the most challenging time for cash flows. So it makes sense for the government to return cash to start-up businesses immediately rather than over a five-year period.

The third change introduced in this bill provides greater clarity to fringe benefit tax exemptions relating to the provision of portable electronic devices. The advent of a multitude of new portable devices such as smartphones and tablets in recent years has posed an increasing challenge to existing tax laws. Currently, fringe benefits tax exemptions do not apply to portable electronic devices where the devices have substantially identical functions to a device that has already been provided to an employee. The proliferation of devices has created uncertainty and confusion as to whether, for example, a tablet and a laptop ought to be considered substantially identical for the purposes of fringe benefits tax exemption. The current definition has not kept up with technology and is creating unnecessary red tape for small businesses. This bill provides resolution by removing the so-called substantially identical functions test. This means that small business employers who provide multiple portable electronic devices to an employee can claim a fringe benefits exemption for all of those devices.

There are 2.3 million small businesses in Australia that have less than $2 million annual turnover. However, these businesses provide 43 per cent of non-financial private sector jobs in Australia and around one third of non-financial input. And yet small businesses face a set of additional challenges in competing with larger entities. Economies of scale are not as easily achieved. Access to finance can be more difficult. The burden of red tape and compliance is proportionally greater. As a result the failure rate of small businesses is higher than that of larger competitors. And evidence from research conducted by the Reserve Bank indicates that business conditions in small businesses have become even weaker relative to larger businesses since the global financial crisis.

The Australian Bureau of Statistics reports that of the nearly 300,000 small businesses founded in 2010-11, just half were still operating in June 2014. This is a problem for the economy. Not only is the small business sector a large employer of Australians, it also tends to contain new businesses with new ideas, new concepts and innovations. If the small business sector is not equipped to flourish, Australia as a whole is the poorer for it. That is why the tax relief and red tape reduction contained in this bill will bring such welcome relief to small businesses. For small business owners, these changes mean more money in their pockets, and money in their pockets sooner and with less tax ambiguity. In turn this means more money to reinvest into growing their business and employing more Australians.

The coalition government is all about cutting taxes and red tape to make it easier for small business to succeed. This bill forms part of the coalition's historic $5.5 billion Jobs and Small Business budget package that cements the coalition government's status as a true friend of small business. I commend the bill to the House.

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