Thursday, 2 March 2017
Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016; Second Reading
I rise to support the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. This is one of the most important bills introduced into the parliament since the election. This bill delivers on the government's mandate from the election to provide tax relief for Australia small businesses.
This bill reveals a fault line in our parliament between those on this side of the House in the Liberal and National parties, who want to give a hand to small businesses—businesses who work hard and play by the rules, create jobs and grow our economy—and the Labor Party, which has no plan for economic growth, does not understand small business and is happy to see Australia have an uncompetitive tax rate.
The Liberal Party is the party of small business. We have run small businesses and we have come from small business families. We know that lower taxes mean that small businesses get to keep more of their own money. We know that, with more of their own money, small businesses can grow and employ more people. We know that, without this bill, Australia's company tax rates will be increasingly uncompetitive with the rest of the world. This is a particular danger for us in an age where there is a truly global market for both labour and capital. We should remove as many disincentives as possible for Australians to start a business and, as that business succeeds, have it remain based in Australia. And, unlike Labor, we know there is a difference between income and profit. That is why we know that restricting these measures to small businesses with only a $2 million turnover will not have the economic impact that our measures seek to create.
There are many virtues of starting a small business. As the son of a small business accountant, I see small business as a virtuous activity. Entrepreneurial Australians who start, run and grow our small businesses take responsibility for themselves and are not dependent on others. They take calculated risks and back themselves. They in turn provide employment for other people and give those people opportunities. Finally, small business owners create a legacy for their family and the country, and that is why small businesses play such an important role in the life of our nation.
To give an outline of this bill, it reduces the company tax rate for small businesses from 28½ per cent to 27½ per cent. By 1 July 2026, the corporate tax rate for all companies will fall to 25 per cent. This lower rate will apply to all companies with an annual turnover of less than $10 million. Since 1 July 2016, unincorporated businesses with an annual turnover of less than $5 million have been able to access an increased unincorporated tax discount of eight per cent—that is an increase of three per cent—capped at $1,000. The discount will increase to 16 per cent by 2026-27. Businesses with an annual turnover of less than $10 million will be able to access many small business concessions that were previously only available to businesses with a turnover of less than $2 million, including access to immediate deductibility for assets costing less than $20,000, until 1 July 2017, as well as simplified stock-trading rules, simplified methods of calculating PAYG instalments by the ATO, and the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO. All these measures are helping small business and boosting the broader economy.
Australia's international tax competitiveness is vital to the success of the economy. Businesses shop around for lower tax jurisdictions to headquarter their operations. If you do not think this is the case, look at one of Australia's great global business success stories, News Corporation. For years it had its base and held its AGMs in Adelaide, but in the mid-2000s it moved to Delaware, in the United States, to take advantage of a more generous corporate tax regime.
In 2001, during the Howard years, Australia had one of the lowest corporate tax rates in the world. Australia's corporate tax rate is now uncompetitively high—currently the sixth highest in the OECD. Australia's corporate tax rate is currently at 28½ per cent. To compare this with other countries, the United Kingdom has a tax rate of 20 per cent; Canada, 26½ per cent; China, 25 per cent; and Korea, 24½ per cent. The EU average is 22.09 per cent, the OECD average is 24.81 per cent and the global average is 23.62 per cent. Our tax rate is currently around five per cent higher than the global average.
This bill is part of a broader small business agenda. Ask any small business owner about completing their BAS, and they will tell you that it is taxing not only in a literal sense but also in the time it takes to complete their paperwork. New, simpler reporting arrangements will be rolled out to all small businesses from 1 July 2017. This will free up time for business owners to invest in and employ additional staff, as well as take some well-deserved time off.
On this side of the House we understand the importance of reducing the paperwork burden for small business more broadly. That is why we have already delivered $4.8 billion in red-tape savings in our first two years in office. That is more than double our election commitment. Now we are broadening the regulatory reform agenda to focus on regulation reforms that directly enhance innovation, competitiveness and productivity. The government will simplify business reporting of tax and superannuation with the implementation of single-touch payroll, giving employers the ability to automatically report their pay-as-you-go withholding to the Australian Taxation Office.
On this side of the House we understand that small business needs access to affordable finance. As an emerging funding source, crowdsourced equity funding has the potential to spur innovation and complement the emerging peer-to-peer lending market that is giving small business greater borrowing choice. That is why we are removing regulatory obstacles to businesses using this source of funding.
The government's enterprise tax plan will have a positive impact on Berowra businesses. There are almost 15,000 small businesses in my electorate. From the thousands of examples, let me give you a few in the retail, manufacturing and services sectors which help illustrate how the enterprise tax plan will help Berowra's small businesses.
Pennant Hills Dry Cleaners is run by Berowra locals Tony and Joanne Fajloun. They know the positive impact of the enterprise tax plan. Recognised by Rotary with a Pride of Workmanship award, Tony and Joanne run one of the best dry-cleaning businesses in Sydney. Tony and Joanne represent everything that any Australian should aspire to. They are second-generation dry cleaners who have worked in the industry for over 15 years. They get up and go to work every day. They work hard, pay their taxes and put food on the table for their family.
I spoke recently to Tony and Joanne about the challenges they face in running their small business, as well as what a tax cut would mean for them. Tony and Joanne face increased power bills because of the increasing cost of electricity. They say their power bills have grown four times over the last 10 years. They have installed a gas system to try and reduce future costs, but a tax cut would obviously help them to reduce costs. A tax cut would give Tony and Joanne the ability to re-invest in their business and hire additional employees. A tax cut would allow them to employ someone so they can spend more time with their family. It is a rare occasion when Tony and Joanne are able to enjoy a weekend off. With tax relief, they would have more time to spend with their son, who works in construction.
Another great Berowra business success story is WashBox. WashBox is a product manufactured by Arcadia-based company GeoSentinel. WashBox is used on construction and industry sites where wet trades need to clean up. A WashBox at a location can save up to 3,000 litres of water a week, as tools are washed and the wastes are extracted from the water and not flushed into sewers or discharged elsewhere. Trades such as painters or plasterers can clean their tools and brushes in the box, which has several environmental benefits, including reducing the fresh water used by up to 90 per cent; eliminating stormwater, sewer and groundwater pollution; reducing trade waste to landfill; and 100 per cent recycling of liquid waste.
I asked Andrew Kenyon from GeoSentinel what a tax cut would mean for his business. Mr Kenyon told me that the benefits of the government's enterprise tax plan will allow GeoSentinel to continue growing and expanding their business. He said:
At the moment we're really focussed on international expansion. More assistance in the innovation space would be helpful, it is challenging to get private funding sometimes when you're a business like ours. Further tax concessions and cashflow support would really assist us in that capacity.
Ray Becchio runs a successful business in the construction management industry—Becchio Pty Ltd. Ray is from Hornsby but works all over Sydney with his son, who is a carpenter. Ray told me that the tax cuts proposed by the government will go a long way to helping small businesses like his across Berowra and Australia. Ray emphasised that, by having more money in his pocket at the end of the day, he and other small business owners will be able to reinvest in their business and hire more staff. This is exactly the kind of activity we need to be supporting—giving the Australian people the freedom they need to create more jobs and contribute to the overall economy.
A new business in my electorate is the Steam Yard Cafe. The Steam Yard Cafe is a small family business that has been operating for just over eight months in Galston village. Brigette and George Nader, along with their five sons—Jacob, Luke, Ben, Zack and Daniel—run the popular new cafe. I have to add that they make a great coffee and breakfast. The family have a couple of other employees, but they are working flat out to keep the doors open seven days a week. I asked them what a tax cut would mean to them. Brigette was thrilled to hear this was going to be spoken about in parliament today and she said that this would make a huge difference. She told me that the family would be able to put more money back into the business and help it grow. They would also be able to put more staff on and reach their goal, which they say is servicing the entire local community.
The final Berowra business I want to speak about is Julianne's Kitchen. Julianne Lever is another outstanding small business owner in my electorate. I am so proud of her success. Just a few years ago Julianne, a highly experienced chef, started her delicious range of handmade terrines, pates and fruit pastes out of her basement in Westleigh. The business quickly expanded and now operates out of a factory in Hornsby and sells products all over Sydney. Julianne's Kitchen is a husband-and-wife team. Julianne and Zlat employ four local residents and are constantly looking to expand. On what the proposed bill means to her, Julianne said:
I'm a very hands-on business owner. For us to grow our business I need to be able to get out on the road, increase sales and grow the business. We can grow our business and employ more people. These tax cuts are very important for what we plan to be doing this year.
Those were just a few of the 15,000 small business success stories in Berowra outlining why a small business tax cut is so important.
What are the alternative policies to our enterprise tax plan? Labor incorrectly believe that businesses with a turnover—not profit—of more than $2 million are large businesses. Such a position underscores how little Labor understand small business. Such microbusinesses are not large global corporations. Many are family businesses where mum-and-dad operators do not even pay themselves much of a salary in order to meet the payroll and expenses of their business. Labor's alternative is higher taxes for hardworking Australians and Australian small businesses. Labor's motto is: 'We put people first'—a very nice sound bite, but a horrific deception of the Australian people. By their actions Labor demonstrate that they do not understand small business and they do not understand the economy in general.
Labor are a threat to our AAA credit rating with their higher taxes, higher debt and higher deficit. Labor's policies would add $16.8 billion in higher deficits to the budget—with no plan for budget repair. Labor reject our enterprise tax plan. They want to deny small businesses more growth. They want to deny them access to further investment and growth opportunities. But this was not always the case. Labor used to support lower company tax rates. In 2011 the Leader of the Opposition said:
Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.
In 2013 the shadow Treasurer wrote:
It's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.
But that was then and this is now.
In conclusion, former Prime Minister of Australia John Howard epitomised the Liberal Party's strong philosophical and practical support for small businesses. As the son of a small business garage owner he was committed to the principle that by helping business, whether small or large, we are helping people to look after themselves, to look after their families, to look after their employees and to make a contribution to the entire country. At the Council of Small Business Organisations of Australia conference in 2004, Mr Howard said:
… in the long run what is required is for a government and a country to give a climate which is conducive to hard work and risk taking and business enterprise, and also to produce an economic environment that encourages all of those things …
This is exactly what the Turnbull government is doing. Through this bill, through our National Innovation and Science Agenda, through our crowdsourced funding legislation and through a raft of other policy measures we are backing those Australians who want to back themselves and to turn good ideas into successful businesses that employ staff, create new products and services and make a huge contribution to our economy. It is with great pleasure that I commend the bill to this House.