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

At the heart of the coalition government's policy approach is an understanding that, when you grow small business, you grow the whole economy. That is why the coalition made an election commitment to lower small business taxes, cut red tape, remove structural impediments, encourage small business finance and change the culture of government so that small businesses can grow and employ more people.

Small businesses account for 97 per cent of all Australian businesses. The small business sector employs more than 4.7 million people through more than two million business entities and makes a substantial contribution to Australia's economy, generating about one-third of our economic output, more than $340 billion of economic output every year. Helping more small businesses become profitable, sustainable and competitive will ensure they are in the best position to hire new employees, including providing more jobs for Australia's youth and older workers.

By making small business a portfolio in the Department of the Treasury with a dedicated cabinet minister, the coalition has put the sector at the centre of all government economic and financial decisions.

I welcome the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016, which contains the final tax measure from the coalition government's Growing Jobs and Small Business package. Introducing this rollover is yet another example of the coalition government reducing the burden of unnecessary red tape on small businesses and aligns with the findings of the Board of Taxation's Review of impediments facing small business: a report to the government.

I congratulate and thank the minister for bringing this bill forward. In doing so, I would also like to thank and acknowledge the member for Dunkley, the Hon. Bruce Billson MP, for his service to Australia as a true champion for the small business sector. The member for Dunkley has played a key role in supporting Australia's small business sector in the wake of the disastrous Rudd-Gillard-Rudd years, and the legacy he leaves will enable long-term growth in our small business sector and the growth in employment that comes with it.

This parliament has already passed legislation for the 1.5 per cent small company tax cut, the unincorporated small business tax discount, the immediate deductibility of assets under $20,000 and the immediate deductibility of professional expenses measures. This bill amends taxation laws to allow small businesses to change their entity structure without incurring a capital gains tax liability at that time.

In effect, from 1 July 2016, any entity that carries on a business where the combined annual turnover of the entity and its affiliates is less than $2 million will be able to restructure and use this rollover if the underlying economic ownership of the business assets remains the same. The small business may be a sole trader, company, trust or partnership, and the transferee entity may take any of these forms. The cost to revenue for this important measure is $40 million over the forward estimates. Combined with other tax measures announced in last year's budget, this will provide more than $5 billion of direct support to hardworking small businesses. This is the biggest small business package in Australia's history.

Most Australians recognise actions and outcomes are a better measure of success and failure. At the heart of the coalition government's Growing Jobs and Small Business package are tax cuts for all small businesses with annual turnovers under $2 million. Small businesses can deduct each and every asset costing less than $20,000 that they buy until the end June 2017. Other small business measures will reduce red tape and encourage entrepreneurship. There are also measures to help employers take on unemployed job seekers and to help disengaged youth become job ready.

The coalition's tax cuts for small business have taken the tax rate to its lowest since 1967, nearly 50 years ago. This is a significant achievement. The coalition has a great story to tell about what it has already done so far for Australia's small business sector in such a short time. Through the efforts of Australia's Minister for Trade and Investment, the Hon. Andrew Robb MP, it is this coalition government that has opened up unprecedented access to global markets for Australia's businesses. By embracing innovation, boosting export opportunities and backing small businesses, we will continue to build a stronger economy with more jobs. Indeed, as the Prime Minister has pointed out, right across the board, every lever of the coalition government is pulling in the direction of growth and jobs.

While most businesses in Australia have their own experience of unnecessary hardship under Labor and their union bosses, let me just recall the macroeconomic indicators. According to global rankings by the World Economic Forum, Australia slipped badly on key competitive measures under Labor. For example, burden of government regulation went from 68th to 128th and the total tax rate went from 83rd to 109th. At a local level, Australia's small business owners will not easily forget the revolving door of six small business ministers in as many years under the Rudd-Gillard-Rudd regime, when Labor tied the economy up in a mountain of red and green tape with the introduction of an additional 20,000 new or amended regulations in just six years.

Labor's consistent response for the small business sector was a never-ending conversation while their union bosses kept their foot on the throat of the small business sector. Under Labor, the number of small businesses was in decline, with the small business share of private sector employment dropping from 53 per cent to well under 50 per cent. The share of small business employment as a proportion of private sector jobs was flatlining, or worse.

After six years of Labor we knew we had to reverse the decline in small business employment by partnering with small business people to support the sector to grow and prosper. As the Prime Minister said, it is a testament to the breadth and depth of the real world experience of our parties, the Liberal and National parties, that we have so many people who have worked in small business and owned small businesses.

This government knows that more small businesses means more jobs. That is why the coalition government will continue to foster an entrepreneurial culture and reduce regulatory barriers so that people can take advantage of the opportunities afforded by a growing, diversifying and adapting economy. It is why schedule 1 of this bill allows small businesses to change the legal structure of their business and have the capital gains tax liability disregarded and deferred until eventual disposal. This is because sometimes a small business will start operating within a legal structure that is not necessarily the best model in the longer term, perhaps because they did not receive the appropriate advice, or because the business developed beyond the original aspirations of its owners.

For small business owners who find that they are running a business through the wrong entity structure, there can be additional administrative burdens and cash-flow impediments. To remedy this problem, a small business owner could choose to restructure their business, but this would require the owner to pay capital gains tax on the assets of the business, even if there was no change in ownership. This aspect of the tax law means that small businesses are effectively locked into the structure they choose at the start of their operations which can turn out to be administratively inefficient.

The Restaurant and Catering Industry Association said the ability to change legal structure without incurring a capital gains liability will represent a significant reduction in red tape for small hospitality operators. They said: 'Restructuring hospitality businesses almost always requires assets to be transferred from one entity to another, attracting significant income tax liabilities, impacting cash-flow and available capital. This discourages expansion, meaning some businesses remain inefficiently small, reducing productivity and dampening additional employment opportunities'.

The National Insurance Brokers Association also welcomed the reforms we are considering today, because there is an ongoing level of merger and acquisition activity in the insurance broking sector. That is why, from July this year, small business owners who find they are using a legal structure that no longer suits their business needs will be able to restructure more easily. This bill will allow small businesses to roll over assets from one entity to another without requiring the payment of capital gains tax if the economic ownership of the assets remains unchanged.

Regardless of the specific type of small business, small business owners considering a restructure can get advice and assistance from the Australian Taxation Office, or by consulting a tax professional.

Before I close, I would like to congratulate Kate Carnell AO on her appointment as the inaugural Australian Small Business and Family Enterprise Ombudsman. Kate has been an active and passionate advocate for small business and is ideally suited to this role. Indeed, this role fulfils our election commitment to establish an independent ombudsman with real powers to act as a Commonwealth advocate for small businesses and family enterprises. A key aspect of this role is making sure that the Australian government and its agencies are fully informed about the needs and aspirations of smaller enterprises, and ensuring these interests are front of mind in policy development, program design and procurement.

Boosting productivity and reducing the burden of regulation is crucial to ensuring Australian businesses, entrepreneurs and workers are better off, while also helping drive down the cost of products and services for both producers and consumers.

I thank the minister for bringing this bill forward today. There has never been a better time to start and grow a business anywhere in Australia and, from here, compete for customers located anywhere in the world. I commend this bill to the House.

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