Wednesday, 21 June 2017
Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017; Second Reading
That all words after ''That'' be omitted with a view to substituting the following words:
''The House declines to give this bill a second reading and calls on the Government to explain why it is desperate to legislate additional tax concessions for large businesses while pursuing a $50 billion tax cut for big banks and multinationals.''
Last week, gross debt crashed through half a trillion dollars. For the first time in Australian history, the amount of gross debt on issue exceeds $500 billion. This is an extraordinary thing given that this is a government lead by a man who once described projected gross government debt of $300 billion as being frightening, gigantic and an almost inconceivable level of debt. He was then describing debt projections. If we take debt projections today, the government budget papers put them not at $500 million but at $725 billion in 2027-28—and only then peaking because that is when the numbers stop. We have from this government extraordinary hypocrisy on debt. Projected debt is now twice what it was when the member for Wentworth described the debt projections as frightening, gigantic and almost inconceivable. Indeed, if they were driving debt trucks around then, they would need debt road trains today to depict the true level of debt being racked up under this government.
This government is not racking up debt because the global economy is going to hell in handbasket. There is no doubt, of course, that Australia took on debt during the global financial crisis, as, indeed, most developed countries did. We did so to put in place a response package which, as my friend and colleague the member for Rankin has pointed out, was described by Joseph Stiglitz as probably the best-designed stimulus package of any other advanced industrial countries in size, design, timing and how it was spent. But, as the member for Rankin has noted recently in an article for Crikey, IMF forecasts for the year ahead are relatively healthy on a global level—3.5 per cent for this year, 3.6 per cent for 2018—and so there is no excuse for the fact that gross debt is now increasing more rapidly under the Liberals than it did under the Rudd and Gillard governments. Under the Rudd and Gillard governments, gross debt grew by $226 billion in 69 months. Under the Abbott-Turnbull government, almost as much, $220 billion, was added in 44 months—as the member for Rankin points out: in less than two-thirds of the time.
The rate at which gross debt is growing is now $55 million a day quicker under the Liberals than it was under Labor. Indeed, were I to use my full time, then there would be another million dollars of gross debt added to the Australian credit card over and above the rate at which that was increasing during the global financial crisis—that is how fast debt is increasing under this government. They used to talk about debt and deficit disasters and talk about their superior economic management, but you do not hear much talk of that now, because of the rapid rate at which debt is increasing. That is why we, on this side of the House, have had to make some tough and responsible calls when it comes to tax measures. That is why we, on this side of the House, oppose the government's $65 billion tax cut to big business.
Now, it is certainly true that in the past there have been Labor governments that have supported the company tax cut but, given the debt position that Australia now finds itself in, it would not be responsible for Labor to support a measure of that kind. It is why Labor has taken the tough decision to say that we support extending the current tax rate for top income earners. If you listen to those opposite, they would have you believe that the earth will stop spinning if we continue taxing those earning over $180,000—which, of course, includes everyone in this House—at the rate at which they have been taxed for the last two years. Labor does not believe that; Labor believes a 49.5 per cent top marginal tax rate was appropriate for the last two years and, with debt increasing so rapidly, continues to be appropriate today.
That brings me to the bill that we are debating today. This bill has revenue implications, and that is why Labor will not be supporting schedule 2 of the bill. We have said that we will support schedule 1, which has a small but unquantifiable cost, but schedule 2, costing $80 million over the forward estimates, will not be supported by Labor. In good fiscal times—if we had the rivers of gold that flowed during the Howard and Costello years, in which there were a series of fiscally profligate decisions made by the Liberals—maybe you could give an argument for supporting this. Labor believes we have to carefully scrutinise any widening of corporate tax concessions. Treasury were unable to offer guidance on the medium-term fiscal impact of this measure. Stakeholders consulted felt the changes were benign, but Treasury, despite our requests, has not published in full the submissions that were made to it through the consultation process. In the absence of a compelling policy case, Labor's view is that fiscal considerations should take precedence. We do this with some regret, but it is necessary for us to make these tough fiscal calls.
I go now to a little of the detail of the schedules for this bill. Schedule 1 deals with the fact that currently a company is entitled to use past year losses to reduce taxable income, provided the company maintained the same majority ownership from the time the loss was made until the time it is utilised. This is called the continuity of ownership test. In the event that majority ownership has changed, past year losses may still be accessed, provided the company passes the same business test. But this test has been interpreted very narrowly. It has been held that 'same' does not mean 'similar', which means the test is quite restrictive and, potentially, one that stifles innovation. The measure originates from the Labor-commissioned 2012 Business Tax Working Group. It was raised again in submissions to the Re:think tax discussion paper. Treasury expect this measure will primarily benefit small and medium-sized enterprises seeking to expand or diversify by bringing in new equity partners.
Schedule 2—which, as I have said, Labor will not be supporting—gives taxpayers the choice to self-assess the effective life of certain intangible depreciating assets rather than using the statutory effective life, in working out decline in value. The effective life of an asset is used to calculate the decline in value of the intangible asset, and this bill applies to assets such as patents, copyrights and licences, and only applies to assets the taxpayer starts to hold on or after 1 July 2016. The argument that has been made for this in submissions to the Re:think tax discussion paper is the way in which such intangible assets are depreciated in Britain and the United States. But Labor does not feel that a sufficiently strong policy case has been made for the measures in schedule 2. Were the government to split the bill, Labor would be pleased to support what is currently schedule 1, but we cannot support schedule 2.
As I have said, the government has overseen Australian debt passing half a trillion dollars for the first time. We on this side of the House have a series of constructive measures that would deal with this. I have mentioned already our view that the top tax rate should continue at 49.5 per cent. As the shadow Treasurer noted in his MPI speech, there is no reason that the harsh measures in the 2014 budget which affect payments to low-income earners should be permanent while the tax cut to high-income earners should be temporary. Labor has also announced that we would cap deductions for managing tax affairs. This reflects the fact that in 2014-15 there were 48 people who earned more than $1 million but paid zero tax, and that 19 of these people claimed an average of $1.1 million in deductions for the use of their lawyers and tax advisers. According to our estimates, there are some 90,000 people who would be affected by capping 'managing tax affairs' deductions to $3,000 under a Shorten government. This is a deduction principally used by those at the top of the distribution. They will continue to be able to spend what they wish on lawyers and tax advisers, but only the first $3,000 of what they spend will be tax-deductible.
Labor has announced a package of measures to crack down on tax havens, which we know are one of the reasons why Australia is bleeding revenue to overseas jurisdictions. Tax havens have been estimated to hold $7.5 trillion of the world's financial wealth and to cost the global economy $200 billion in lost taxes every year. Labor's eight-point plan to tackle tax havens will add to the budget bottom line. Labor has also announced that we will pursue the closing of debt-deduction loopholes in a multinational tax policy. The government refuses to close debt-deduction loopholes, costed by the Parliamentary Budget Office at nearly $6 billion over the medium term at the last election. Labor continues to be committed to closing multinational tax loopholes—something which the government stubbornly refuses to get on board with.
Labor has also announced that we are committed to tax fairness through providing additional resources to the tax office, where it needs those resources. We will crack down on dodgy directors, to ensure fairness in business and to ensure that taxpayers are not done out of revenue due to directors being able to burn one company and start another in so-called phoenix operations. According to one expert, it is so easy you can almost register your dog as a company director. That is why Labor has called for a Director Identification Number, a straightforward measure that ensures that we see less phoenixing activity. That is, of course, good for businesses and workers, but it is good for tax revenue is well, because when dodgy directors trash their businesses and take the assets it is taxpayers who miss out.
Labor is not simply criticising the government for trying to blow holes in our tax net. We are also coming up with constructive solutions in order to tackle the unprecedented debt blow-out that we have seen under this government. It is absolutely vital that this government gets debt under control. But you do not do that through measures that widen tax loopholes, and a strong public policy case has not been made for such measures. Labor will support schedule 1 of this bill and oppose schedule 2. The bill is not split; we will oppose the bill in its entirety.
The original question was that this bill be now read a second time. To this the honourable member for Fenner has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.
I am not surprised at all that the member for Fenner wants to oppose schedule 2, because he knows, as does the Labor Party, that the measures under schedule 2 predominantly assist companies that are not unionised. This is a typical Labor approach—unless it supports the union movement and helps gather more union fees to be paid into the coffers of the Labor Party, then they simply will not support such measures. So there is no surprise there at all.
What does surprise me is the member for Fenner continuing to stand in this House and purport to be on the side of fiscal responsibility when Labor's only plan is higher taxes. And he has confirmed it again today. The only plan the Labor Party has is to have higher taxes for businesses—businesses that create jobs. But, again, in the same speech, the member for Fenner has also confirmed that the Labor Party also believes in higher taxes for individuals. They are a high-taxing party, and that is their only plan for government.
Interestingly, in order to spread the wisdom of the Labor Party policy platform, the member for Fenner also talks about multinational tax avoidance and cracking down on phoenix operations—two things that the coalition are already taking a lead with. Now, we welcome the Labor Party free-riding on our policies. We have no problem with that. And so they should, because ours are the policies that the Australian people know work to drive the economy and, in turn, attract investment, which, in turn, create jobs. But what I do find reprehensible is the suggestion by the member for Fenner that the action already being taken on multinationals, the task force that is already looking into phoenix operations, is somehow a Labor Party idea. My hope is that the next time the member for Fenner stands in this House he will have an original idea from the Labor Party beyond higher taxes.
But we are here today talking about the Treasury Laws Amendment (2017 Enterprise Incentive No. 1) Bill 2017. This bill is part of a suite of measures reflecting this government's core commitment to the future of Australia's smart economy as contained in the National Innovation and Science Agenda. That agenda embraces a future of immense technological change and entrepreneurial innovation. By fostering culture and capital through tax breaks, incentivising universities and industry to collaborate, supporting talent and skills and making it easier to do business with government, the National Innovation and Science Agenda provides the blueprint to support investment and growth in innovative Australian businesses—investment which will underpin the Australian economy. It is a commitment which will support a smart future and turn around Australia's international competitiveness as a smart economy.
Australia slipped nine places, to 18th, in the overall IMD world competitiveness ranking in the five years from 2011 to 2015. In 2016 we gained a spot to 17. However, there remains great scope for improvement. In the latest The Global Competitiveness Report 2016-17, the IMD World Competitiveness Centre recognises Australia's strong macroeconomic and labour market position but warns:
Innovation represents Australia’s challenge and imperative in the face of low commodity prices ...
Furthermore, Australia's chief economist, Mark Cully, said in the Australian Industry Report 2016:
Competitive economies are ones that are open to the world, attracting investment and people. They have high levels of innovation and business start-ups ...
The National Innovation and Science Agenda responds to this challenge, and this bill is key to that commitment.
The bill introduces two measures designed to allow the tax system to further support innovative and groundbreaking businesses by encouraging a culture of calculated risk-taking and investment. These measures provide greater flexibility when dealing with company losses by relaxing the current same-business test and increasing depreciation benefits through the self-assessment of intangible assets. These changes will make a real difference to businesses—in particular, to Australian businesses at the forefront of our smart economy. Those who deal with intangible assets, such as patents, copyrights and the like, as well as those who are pushing the boundaries of entrepreneurial innovation, will be welcoming these measures.
Unlike Labor, who considered similar changes as part of the 2011 business working group, this government, the Turnbull coalition government, is acting to implement these reforms. The Turnbull government is again getting things done. We are making real changes in support of the business tax system to increase productivity and deliver flexibility to struggling businesses. We are a government that believes in supporting business, fostering entrepreneurship and driving growth to generate real jobs. Associated measures with this bill include: changes to tax laws to encourage angel investors and venture capital investment by providing tax incentives for early-stage investments; changes to extend the GST on low-value imported goods to level the playing field for Australian businesses against large international online sellers; changes to ensure global entities are unable to avoid their tax obligations by diverting Australian profits offshore; and changes to ensure the Tax Commissioner has the tools needed to impose penalties on those who breach their tax reporting obligations. These measures reinforce the Turnbull government's commitment to getting the balance right. Beyond these measures, the coalition government will go even further to hit the accelerator on innovation and jobs.
The bill before the House today is labelled the 'Enterprise Incentives No. 1' bill, but there is also a No. 2 bill that we shall be debating shortly which will reform Australia's insolvency laws to further stimulate entrepreneurship and innovation, helping to reduce the stigma associated with business failure. Let me outline bill No. 1, which we are debating today, in a little bit more detail. This bill includes a measure to increase access to a tax offset where a loss is made in one year and can be carried forward to offset future profits. It does so by relaxing the existing 'same-business test' and introducing a far more flexible 'similar-business test'. Rules that utilise losses are important and, frankly, necessary. They maintain the integrity of the tax system by preventing companies trading in losses. However, the current law is being interpreted too narrowly. At least that the Labor Party agrees with. It is considered restrictive and it is stifling innovation and investment in our economy. Businesses have been prohibited from using their past years losses where they have entered into new types of transactions or business activities. This only inhibits growth and investment and discourages businesses which have made losses from seeking new investors or exploring new profit-making activities because they may be denied the ability to leverage past years losses.
The change from same-business test to similar-business test allows businesses to be more agile and adapt to new opportunities without restrictive tax penalties. This is especially beneficial to start-ups, who may have accumulated tax losses in their early years and will now have a greater ability to adapt their business to a changing environment by seeking new and diverse business opportunities without jeopardising the use of those losses. Importantly, the new similar-business test will apply from 2015-16 and future income years, allowing businesses to immediately benefit from these changes.
The second measure outlined in the bill, which the Labor Party disagrees with, makes changes to the depreciation of intangible assets by allowing business owners to self-assess the life of these assets. This complements the similar-business test by providing further flexibility to one's business strategy and investment. It recognises that innovative businesses are more likely to hold a high proportion of intangible, knowledge based assets, such as patents and copyrights—assets that are sometimes referred to as intellectual property.
In fact, a recent research paper issued by the Office of the Chief Economist in 2016, 'Australian geography of innovative entrepreneurship', found that high intellectual property generation goes hand in hand with entrepreneurship. In other words, intangible, knowledge based assets are intrinsically linked to innovation. That is why allowing businesses to self-assess the life of these assets to align them to the actual number of years that the asset provides an economic benefit will increase depreciation benefits and decrease the cost of investment in these assets. It also encourages the transfer of these assets between businesses to better leverage and commercialise them. The proposed law also allows for a recalculation of this effective life in later years should circumstances change. These are essential changes to encourage investment, innovation and entrepreneurship on the front line of the Australian economy.
This bill reflects the Turnbull government's continued investment in the future of Australian businesses and the many millions of jobs they create and sustain, an investment which recognises the changing nature of the global business environment and encourages businesses to take calculated risks, test new markets and grow Australia's smart economy. These and other measures supporting the government's National Innovation and Science Agenda are making a real difference to the ability of Australian businesses to respond to new markets and changing global pressures, and increase Australia's global competitiveness. That is good news; that is good news for all Australians. It is for that reason that I commend this bill to the House.
This is the Treasury Laws Amendment (2017 Enterprises Incentives No. 1) Bill 2017, and it forms part of this government's—wait for it—innovation agenda. This is what should really be talked about as the government's 'Seinfeld innovation agenda'; it is the innovation agenda you have when it is an innovation agenda about nothing. It is sort of like a Clayton's innovation agenda, you see, because, for a government that loves to come in here and talk the talk of innovation, what is it actually doing to deliver on innovation?
Let us just run through some of the things that this government likes to do when it comes to innovation. Let us start with, let's say, NBN. That sounds like a great way of bringing forth innovation in our economy: giving everyone access to high-speed broadband internet. Well it turns out that, under this government, it is anti-innovation, because instead of using some of the best technology that good taxpayer money could buy, like optical fibre to the home, what do we have? Copper. It is great to use 19th-century technology when it comes to our high-speed broadband internet. Thank you very much, government!
In fact, it is working so well that the ACCC has to come and do an inquiry. It has to get people out there testing that the speeds are actually matching what they are being sold as. That is how innovative this government is with their agenda. But then you think, 'You know what would be great? If we made sure the people of this nation, the people we want to encourage into innovative enterprise, are well educated and supported as they go through school and university.' But no. What this government has decided to do is—despite its claims and despite its promises that there would not be a dollar difference between what the previous Labor government had proposed, when it came to education, and under that new government there—come into this place and say, 'Here's our new education agenda. We're going to give an increase of funding on top of the cuts we have already delivered,' which will deliver to our schools $22 billion less than what they would have had under the plans of the previous Labor government. That is how much they like to support innovation.
And then you think, 'Where do we see that really come forward next? Universities!' Universities should be centres of innovation, but when we turn and look at the policy for universities, we see more cuts from this government. That is what they have delivered on, when it comes to innovation. Then I thought to myself, if we want to look at the innovation agenda of the Turnbull Liberal government, where would we see that innovation really thrive? Where would we see the research, the development, the looking at how we can do things in new ways to bring forward new economic growth? It is that centre of excellence that has delivered us great technology, such as wi-fi and so many other great advances, to not just our nation but the global economy: the CSIRO. And Lo and behold, the innovation agenda of the Turnbull Liberal government delivers whopping big cuts to the CSIRO, the centre of science and innovation in this nation. That is the great innovation that this government is bringing forward for our nation. It is sucking us backwards when it comes to innovation. It is an innovation policy of nothing. It is the Seinfeld innovation policy.
Meanwhile, you have to contrast that with Labor's approach, which was to bring forward a proper-functioning national broadband network that would have delivered fibre to the home, fibre to the premises, fibre to business. I had a local business come to me just the other day and tell me how they had to go and fork out themselves to deliver fibre to the premises because not only were they never going to get fibre under the NBN but also it was taking so long for the copper NBN fibre to the node to come to their street, and it was inhibiting their business. In other parts of my electorate, such as Thornleigh and Armadale, we have areas that not only are having to wait for NBN but also are so far away from the exchange they cannot get ADSL. To make matters even worse, there are mobile black spots, so they cannot even get wireless internet. That is how much this government supports innovation. And then they rip $22 billion out of our education system that is supporting all our kids to really drive forward the future of the economy. I mean, what sort of innovation is that?
Then we come to—as the previous speaker was remarking—schedule 2 of this legislation, which will give taxpayers the choice to 'self-assess the effective life of certain intangible depreciating assets rather than using the statutory effective life in working out the decline in value'. If anyone is still awake after I explained what schedule 2 does, let me take you back to a little lesson that I learnt as a baby lawyer. When I was doing a thing called the articles training program one of the things they like to teach you as a lawyer—not many lawyers remember this for much longer into their career, I have to say—is a little bit about accounting, a little bit about how to read financial statements, what to look for and things you need to be aware of. One of the things that I have always kept in my head from those lessons is that, when it comes to looking at financial statements, it is really important to look at how a business is depreciating its assets, because you can hide all myriad of things in the depreciation of assets.
That is why we have some pretty strict government regulation—the law—around how we depreciate assets, particularly intangible assets. It is quite important that we do that because people like to play around with them. At the end of the day, there can be—I acknowledge—reasons that the rate of depreciation on certain assets, tangible or intangible, can differ, given the conditions and circumstances of a particular business. However, what the government have not done; what they have, in fact, completely failed to do, is explain to us here, Her Majesty's loyal opposition—hopefully not Her Majesty's for too much longer!—how much this is going to cost. How many businesses are going to make use of this? What is going to be the economic benefit of making this change? The previous speaker said this is going to unlock investment from the private sector into growing businesses that—presumably—will employ hundreds of thousands of people. But we have seen no evidence of that from the government. They have not been able to provide any briefing, any example or any evidence that it is going to do that. At the end of the day, I have this sneaking suspicion that a business invests in and create intellectual property and other intangible assets because it is good for their business. It is the thing they invented—it is how their run their enterprise. They do not do it because they might be able to get some tax advantage on the way through.
At the end of the day, the government have come forward with a piece of legislation. Schedule 1 looks great, but they have come forward with schedule 2 and said: 'We want you to agree to people being able to self-assess the depreciation on intangible assets. We can't really tell you what the effect of that is going to be, but we know it's definitely going to increase debt. We know it's going to cost the government bottom line.' Let us just think about that. Let us just reflect, when it comes to impacts on the bottom line of the budget under this government. The coalition has been in government for four years—four years way too long. In that time, they have managed to more than double the gross debt of this nation. In four short years—though they seem very long—they have more than doubled it, so that we have now gone over the half a trillion dollar mark. Mr Deputy Speaker, I just used the word 'trillion' with reference to the national gross debt. That is how bad things have got under this government. This is the government that said that there was a budget emergency—but then they come into this place with legislation where they say: 'Look, we really need to pass this tax change which is going to cost the budget bottom line, but we can't actually tell you what benefit it's going to provide to the community.'
We on this side just ask for a few simple things when it comes to giving our support for taxation legislation: 'Can you show us that it's going to be a good idea?' would be the first thing. The government has failed to deliver on that. But they dress it up as an enterprise incentive, as part of their innovation agenda—an agenda that has delivered precisely diddly squat for this nation. And that basically sums up the entirety of the agenda and the outcomes of this government.
It is good to follow the member for Burt, who has obviously become quite emotional about some of these issues in his remarks. What I might do is work through the specific benefits in this bill for the business community, and, indeed, for the broader Australian community. The Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017 operates, as you know, Deputy Speaker, within the environment of the broader National Innovation and Science Agenda of the government. The agenda is very broad, and one of the things that the agenda had to do, unfortunately, was clean up the problems that were left behind by the previous government. Nowhere was this more clear than in the area of employee share schemes. Basically, the idea with an employee share scheme is you say to somebody: 'My small business might not be able to pay you as much as perhaps a big business down the road. We can't afford to pay you as much, but I will tell you what: we will give you an incentive through the issuing of share options to you so that one day, if the business works out well and everything is successful, those shares could actually be worth some money. That's a reason for you to come and work for our small company.' When you get employee share options, Deputy Speaker, you do not get any benefit until you actually sell them or exercise them. In many cases, that benefit never comes about, because the business perhaps does not go as well as hoped and the benefit is just not there. The logical thing to do is that the person is joining the business should only pay tax when they actually make that benefit—when they actually sell those options. When they crystallise, they make a profit.
Under the previous government, when share options were issued to a new employee that created a tax event on that day. So you had this absurd situation where share options which had no practical value because they could not be sold or otherwise crystallised had to have tax paid on their perceived value on day one. That basically meant that for small businesses that were trying to compete with big businesses and were saying 'Take the lower salary, get the share options', those share options were actually, if anything, a disincentive because you had to pay an up-front tax on something that you may not, in fact, ever realise any gain on.
It was an important part of the Innovation and Science Agenda to fix that and to ensure that tax is only paid in employee share schemes when a benefit actually accrues. That is self-evidently how it should have been from the start. Unfortunately, because of the incompetence of those opposite, the Treasurer, as he then was, and others created a very difficult situation for Australian start-ups. To the credit of the opposition, they did acknowledge this when we fixed this problem back in 2015. It is a very important part of the innovation agenda.
In terms of the Innovation and Science Agenda under this government, we have seen an extraordinary boom in the Australian venture capital industry. Venture capital in Australia has typically been a much smaller part of our economy than it is in similar Western democracies, and that is a problem. We want to have an innovation nation. We want people taking risks, creating new companies and generating all the benefits that flow for the country from so doing. For various reasons, historically, we have had a small venture capital industry. Having been involved in it from as far back as 1999, I have a good understanding of the constraints on that industry.
In 2015, under the Innovation and Science Agenda, the Prime Minister said that investments in small start-up companies, small angel investments, would be free of capital gains tax and also that there would be a tax offset of 20 per cent for those investments. In addition, early stage venture capital limited partnerships—a bit of a mouthful—would receive a 10 per cent tax offset for investment in start-ups. We have seen a huge boom in Australia of venture capital investment in recent years, so much so that in the last three or four years the industry has more than tripled in size. It is still too small relative to the size of the economy; we want it to be bigger. It has gone from being, frankly, a cottage industry in this nation in 2013 to something that is now quite substantial and has a significant number of professionals focused on the task of identifying and supporting early stage Australian investment—so important as part of the Innovation and Science Agenda.
This bill is important for a number of reasons. One is the change in relation to the same-business test for accessing prior year losses. This means that when a company loses money, in subsequent years it can claim those losses as an offset against future profits. But, historically, if that company has changed or evolved in any way, the capacity to claim those prior year losses has not been there. So the ability to access those losses is lost and that creates a range of difficulties because effectively those previous losses are just trapped in the company. This new measure will relax the operation of the same-business test to allow entities to seek out new capital and new opportunities in order to return to profitability. When they conduct the same business, irrespective of whether they have entered into transactions which change the legal status of the company, if it is effectively the same business they can claim those losses. There is a qualitative test as well, which is that a similar business means a similar business. So you cannot turn around and do something completely different and claim those prior-year losses, but you can claim those prior-year losses so long as the new activity is substantially similar.
This is a really important change. It is going to enable businesses to more easily pursue change, to pursue new opportunities, without the fear of, 'If we go down that path we are going to lose access to the ability to claim those previous-year losses.' At the moment, there is a strong disincentive to do that, so businesses tend to be wrapped into a fairly tight spot. This is because if they change their activities or structure too much they are not able to claim those prior-year losses. So it is very important to proceed on this measure.
The other measure in this bill concerns the depreciation schedules. The member for Burt was making some fairly wild remarks about the horrible things that might ensue from allowing businesses to determine the time period over which they depreciate assets, but it is really very simple. Basically, at the moment, if you have an intangible asset, like intellectual property or a whole range of other things, there is a schedule. That schedule might say you should depreciate the value of that thing over a certain time. That time might be five years or 10 years and will vary from case to case.
But just say that in your business you believe that that particular asset is going to be completely used up within three years. Maybe it is a brand that you have developed. You have developed intellectual property in that but you believe that in three years you will have moved on to something else. You will be able to depreciate that over a shorter period. And that is a good thing. It basically says let's let the businesses who are the owners of these assets determine their useful life, not an arbitrary number selected by some accountants. And it is very important to understand that simply being able to change the period over which an asset is depreciated does not change the value.
If the value of the asset is $1 million—I can allay the member for Burt's fears—the total amount that businesses will be able to depreciate against the value of that asset is still $1 million. They are not going to be able to go off into a dark corner and come up with some other number. It is just that they will not have to depreciate it over a period of time that may be inconsistent with the time that the asset will operate for.
It is a very important change because, as the economy changes, the ability for schedules that are arms length and not related to a particular business to determine how long an asset will be valuable for, really, goes away. This is because business is changing, every business is different, and the notion that we can apply a one-size-fits-all solution is wrong. And that is going to distort commercial decisions. If people say, 'You know what? I've got to depreciate this asset over 10 years, even though it only has three or four years useful life,' they are going to be less likely to invest in that asset. The reason they will be less likely to invest in it is that they are only going to be able to claim the value of it over a really extended period. That is a mistake.
This change covers a range of assets, including intellectual property such as patents, designs, copyrights, licences and so on, other licences that apply to spectrum and data casting, rights to telecommunication assets and software that has been developed in-house as well. This is a really important initiative. But it all does exist in the whole area of promoting innovation and investment. I know that is something you feel very passionate about, Mr Deputy Speaker Hogan.
It is important, as always, to contrast these sorts of important measures with the short-sighted ideas of those opposite and really important, in particular, to focus on the impact of tax on small business. As you know, Mr Deputy Speaker, many small and medium sized businesses are struggling. Many of them, frankly, do not make a whole lot of money. And the more that government takes, the harder it is for them to invest back into their businesses, employ more people and so on.
There is a massive contrast on this point. Earlier this year the Senate, to its credit, supported the government's legislation to reduce the rate of company tax for companies with a turnover of between $2 million and $50 million. It is important to note that a business that turns over $2 million does not make $2 million. It probably actually makes a tiny fraction of $2 million. There are lots of small businesses in Australia that would be very happy to make five per cent on turnover. If they are turning over $2 million and making five per cent, that would be $100,000. That is not much more than the average household income. Those are the sorts of businesses we are talking about here.
Over the decade the benefit to those small- and medium-sized businesses of these tax cuts is about $25 billion. It is very important to note that those opposite do not support those legislated tax cuts for businesses with a turnover of between $2 million and $50 million. They say that these businesses are multinationals and evil corporations that need to be restrained. We say that businesses with a turnover of between $2 million and $50 million are actually small- and medium-sized businesses. About 113,000 of these businesses in Australia will benefit from the government's tax changes. The total benefit to those businesses over the decade is about $25 billion.
Let us look at the actual benefit to these businesses over the decade and at what those opposite will take away because they oppose this legislation. It is impossible of course to oppose legislation and then say, 'But we won't change anything.' They oppose it. If the changes do not go through—and they will not if those opposite are elected—the average cost to those 113,000 businesses is over $200,000. What those opposite are saying effectively is that they would like to impose an average tax increase of over $200,000 on small- and medium-sized businesses in Australia. That is pretty extraordinary when you think about it. It is very important that they are held to account on this. They voted against this measure because they think a business with $2.1 million in revenue is a huge multinational at the big end of town that needs to be kept down. But these are small- and medium-sized businesses that employ millions of Australians. The average tax increase that they will impose is over $200,000 across that range of businesses.
There are really different approaches on innovation. There are important changes in this bill, which I very much commend to the House. It is so important that we as a nation stay focused on innovation and on entrepreneurs and give them the tools they need to succeed.
I follow the speech of the member for Banks. It is the case that Labor do not support the big corporate tax cuts that this government is offering. We do not support the big banks and the big mining companies getting a massive tax cut when the average Australian hardworking family will pay more tax under this government's budget. Nonetheless, the proposal to cut corporate taxes will also take $65 billion out of the revenue measures for a government in the future. You talk about properly funding education, Medicare and health care. The budget simply cannot afford at this time to be cutting corporate taxes for the wealthiest multinational corporations, many of which send their profits overseas, whilst at the same time making the average worker and their family, on $60,000 a year, pay $325 a year more in tax. That is unfair. Of course, Labor will oppose reforms such as that.
Labor supports the changes in the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017. This bill amends the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to supplement the same-business test with the similar-business test. The similar-business test improves access to losses for companies and certain trusts that have changed ownership. The similar-business test also applies in working out whether a debt is written off as a bad debt or can be deducted in an income year and whether tax losses of listed widely held trusts can be used. The measure's origins are from Labor's commissioning in 2012 of the Business Tax Working Group and were raised again in submissions to the 'Re:think' tax discussion paper.
Schedule 2 of the bill amends the Income Tax Assessment Act to provide the choice to self-assess the effective life of certain intangible depreciating assets the taxpayer starts to hold on or after 1 July 2016 rather than using the statutory effective life currently specified under the law. The bill only applies to some assets—for example, some patents, copyrights and licences—and only applies to assets the taxpayer starts to hold on or after 1 July 2016. The new law also allows the taxpayer to recalculate the effective life in later income years if the effective life the taxpayer has been using is no longer accurate because of changed circumstances relating to the nature of the asset's use.
Under this government, we have seen a blow-out in the debt and deficit of the Commonwealth budget and, for the first time ever in Australia, the government has allowed gross debt to reach the dizzying heights of half a trillion dollars. This is an astounding figure and an indictment on the economic credentials of the Abbott-Turnbull government—particularly when you consider the pace at which they have managed to accumulate such a crippling debt. Despite the government's constant blame-shifting, the figures speak for themselves, and the figures show that the Abbott-Turnbull government has been racking up debt much faster than Labor did when we were in government. In fact, the coalition is racking up gross debt at $1.66 billion a month faster than Labor did when we were in government, and, when it comes to net debt, $511 million a month quicker. No matter which way you carve it, the numbers do not lie. Gross debt has grown by $381.7 million a week or $54.5 million a day quicker under the Liberals, and net debt has blown out by $118.2 million a week or $16.9 million a day faster on the Abbott-Turnbull government's watch.
In their May budget, the government confirmed their deficit for the coming 2017-18 year will be 10 times bigger than was predicted in their first budget, and gross debt equivalent to $20,000 for every man, woman and child in Australia. Compared to last year's budget, GDP growth is down, employment is down, wages growth is down and unemployment is up when you look at the forecasts of this government. And they are forecasting 100,000 fewer jobs.
Given the debt blow-out under the government, Labor cannot support an expanded corporate tax concession that costs the budget over $80 million in the forward estimates. Labor is also committed to ensuring that Australia is a country of innovation but one that lives within its means, and not long ago this was a bipartisan goal. In 2015, Malcolm Turnbull and the Liberals were waving their arms around, telling everyone who would listen that they were all about innovation, but no sooner had they begun to spruik their new-found path to becoming a more nimble and agile nation, they fell silent. The Prime Minister worked out and was advised that this new notion, this new message, was not working for him, and they quickly backed off on that message. This actually pleased some members of the government. It pleased some members on that side, with Tony Abbott quoted as saying: 'It's good that we are no longer talking about innovation and agility.'
Labor believes, as stated by the shadow minister for the digital economy and the future of work, that, if we are not talking about a smarter nation, we are not going to do the things that make us a smarter nation. For this reason, we would introduce the smart visa targeting science, medical, academic, research and technology skills that are in short supply here. We would allow internationally recognised specialists to collaborate with Australian universities, researchers, scientists and start-ups to help get the right balance. We want to make sure that the sector can move ahead whilst ensuring that Australians do not get left behind. The Abbott-Turnbull government, on the other hand, is a government that has slashed support for innovation, degraded science and research, and made deep cuts into programs that had been working successfully with Australian businesses to create more jobs.
In conclusion, we will not be supporting tax cuts for corporate businesses in Australia, particularly those big businesses that include the banks and big mining companies. We will seek to keep that revenue within the budget to properly fund education and to properly fund health, research and medical science, and to support Medicare. We will properly fund a TAFE system that delivers proper vocational education and training for Australians. We will support apprentices in our nation. We do support measures that do improve the efficiency and effectiveness of the tax system. That is why we do support some of the measures that have been adopted in relation to this series of bills. But we do not support moves that do take close to $80 million out of the budget on the basis of what we believe is a miscalculation. In light of the nation's current fiscal situation and the government's total inability to explain the case for schedule 2 of this bill, Labor will not be supporting it.
Can I just acknowledge the words of the previous speaker, the member for Kingsford Smith, and state: the hypocrisy of the Labor Party knows no bounds. To sit here in this parliament and talk about a deficit—the deficit that was created by the Rudd-Gillard-Rudd years and the member for Lilley, Wayne Swan, who was the Treasurer during that time. They took the nation from the world owing us money to we owing the world money. What a disgrace—to sit in this parliament and to throw such virtues around this place with no foundations.
Opposition members interjecting—
It is great to see those opposite wanting to interject. It obviously hits a chord to understand that their lunacy during the years of the reign of that Labor government has taken us from a place where the world owed us money to, now, we owing the world. What a disgrace to come into this parliament and to try to sit here with some virtues and then, to overlay that, to try to tell the people of Australia that they understand small business and that they understand the engine room of this nation.
Let me tell you about small business. I am fortunate enough to have been a small-business owner. I am proud to say that I am a small-business owner. In fact, I can go further than that. I was formerly in the finance industry where I supported a lot of small businesses that helped, particularly, regional and rural Australia employ people. You have to understand how small business works. You have to understand the economic impact that they bring to regional communities, but also to metropolitan communities—the bricks and mortar that people are prepared to invest. The capital that people are prepared to invest in our communities to employ people is significant. For the Labor Party to come into this place and to oppose legislation that will support small businesses that are doing the heavy lifting in this economy—they are not like the union hacks that sit opposite and that want to drive up costs for businesses and drive up those impediments for business to be able to do the things that they need to do—and to come in here to put another shackle around the small-business industry is appalling. But it is something that we have become used to.
What this bill is doing is allowing small businesses to be able to increase their access to losses. We have to understand that small businesses do not always have an easy cash flow ride. There are times when that cash flow does hit a heavy wall. We have to be pragmatic and we have to be supportive to ensure that we put a framework and an environment around small business to ensure that we: let them ride through those tough times; simplify the tax losses; allow them to change their ownership and be agile. We talk about an agile world. Well, it is an agile world as a small-business owner. As a small-business owner, I can tell you that you have to be agile. The market is forever changing. You forever have to be at the forefront of not only technology but the marketplace. You actually have to have a government that is prepared to put an environment around you and that understands the challenges that you will face as a small-business owner. If you do not, we will go back to what I talked about before in terms of unemployment. In my home town of Warwick, retailers employ one in seven people. It is a significant employer in my local community. Without them—that backbone—being part of our local economy, I can assure you that we will not have a small regional community like Warwick.
But that is something you would not expect the Labor Party to understand. That is something that the latte-sipping set from that side, that very rarely get outside Melbourne, Sydney or Brisbane, would hate to understand and to get an appreciation of—that is, what small businesses are like in rural and regional Australia. It is simple for them to sit in their latte sets, to be able to sit where they are and not have an appreciation of what is driving this nation. If you have a strong regional Australia, you have a strong nation.
But there are also some very important measures around this. It is about the flow of capital. You would not expect those opposite to understand that flow of capital. The only way that they understand that is more debt. Thanks to Wayne Swan's years, his legacy lives on. And, yes, our debt has lifted. There is a legacy from Wayne Swan and Kevin Rudd and Julia Gillard. They have left a legacy to every Australian child for years to come, thanks to the decisions that they made—and what decisions were they? They were Pink Batts and school halls. Even as I get around my electorate now, it is quite interesting. I was at a school hall that Kevin Rudd helped build that now has to be repaired. These mindless decisions that were made in haste by the Labor Party are affecting our economic credentials now, so that we are now going back to ensure that we are pulling economic levers that will drive our nation's economy, that will drive us forward.
We are pulling the economic levers that will make sure that our nation rebuilds from the legacy of Wayne Swan and his time as Treasurer of this nation. It may not be attractive to everybody, but this is the heavy lifting a government has to do which is responsible for how we are going to take this nation forward to repair the economic vandalism that took place by the Labor Party over those long years—those long, dark years, where this nation went from having the world owe us money, to us owing the world money. It is still taking a significant toll and effort by us to ensure that we get those settings right, that we put the environment around a small business economy that will ensure the growth of our nation.
Capital is important and, if we do get that setting right, it is important to ensure that we have—I think they call it—a similar test, a qualitative test, to ensure that new transactions allow for that generation of new income sources, for capital to flow into small businesses. Capital is one of the hardest things for a small business to achieve. As a former banker, I can tell you, capital is king. If you cannot get capital you do not grow. This tax measure, these incentives that we are putting in place, are ensuring that we are putting an environment around the growth of small businesses in regional and rural Australia—and even in the latte-sipping sets of those opposite who only care about metropolitan Australia. But they do not seem to care, they want to come in and oppose everything.
This mantra of bipartisanship goes missing very quickly from those opposite when it becomes politics and they can see a cheap political point to be made out of nothing. But this is at the expense of the good men and women who are across our nation and employing millions of young Australians. The 25,000 small businesses in my electorate of Maranoa—that goes across 42 per cent of this state—are the ones who the heart and soul of my electorate. They are the ones who are doing the heavy lifting—not the union thugs of those opposite that they support. This is about real measures, real economic decisions that will make sure that we have a future for those men and women not only in the metropolitan areas but in regional and rural Australia.
I think the other important facet of this bill is around this self-assessment of the effective life of depreciable intangible assets. We are now moving into intellectual property and intangible assets, and allowing greater ability around the depreciation of those assets. As we move in to a more nimble environment globally, it resonates locally. I can give you a couple of examples—particularly from my electorate of Maranoa—one where innovation has been at the forefront since Federation. In fact, our national airline carrier was formed in my electorate because of innovation that had to happen. The airline industry in Australia was created in Longreach, in my electorate. Qantas, our national carrier, was formed there through necessity, through innovation of those of yesteryear that saw the ability to innovate their business, to take it forward. But they needed an environment around them that the government set to ensure that survival—and look at them today. But fast-forward to our present day, when, only in the last three months, we were fortunate enough to have the Governor-General visit my electorate and open a vinegar factory.
It is the first vinegar factory in Australia's history. An entrepreneur has come to Stanthorpe in the Granite Belt and created a new industry through innovation, with his intellectual property and with the tangible assets that he has. He has come into that small community to employ 10 people and is looking to expand further and to employ up to 30 people. That is an exponential increase in the population of the community of Stanthorpe. That is about a government putting in an environment around a business to ensure that they have the ability to prosper and to grow and to actually undertake the development of that intellectual property they hold. That is intellectual property that is world's best, that has now been recognised internationally around the world by the standard they have set. But the environment that we have set as a government is there to allow them to do it, and that is what this bill will undertake. But I won't just stop there.
Let me talk about the Queen Garnet plum, also developed in my electorate. It is a plum that has the highest amount of antioxidants and anthocyanins in the world. In fact, it has had trials on rats that have seen the transformation of heart disease and diabetes, and there are now moves toward human trials. The opportunity sits because of that intellectual property that was allowed to grow and be fostered by a government, and this bill will continue to allow it to be fostered. It would allow putting in an environment to allow that innovation and to see 75,000 trees produced and picked, as we speak. It is something that we as a nation should be proud of.
We as a nation and as a government set the environment around those people who are prepared to take those risks, to step forward, to put their capital up and to take the risks that we ask them to do. They should not be hamstrung by a government that wants to hold them back, that wants to be the holder of all authority and all power and all centralisation. Our job as a government is not to get in the lives of those we represent, but to get out of their way. We should allow them to innovate, to actually grow and prosper, to give them that environment and to ensure that they attract the capital they need to be able to do the things they have to do. That is what a government should do, not take the heavy-handed approach that we have seen over the decades of the Rudd-Gillard-Rudd years, that have seen us go into record debt levels, the legacy of which we are trying to move.
While the former speaker, the member for Kingsford Smith, talked about an $80 million hit to the budget, let me tell you that this will have exponential benefits through the environment that we have set around the people that we believe in. The people that we believe in, in this nation, will take our nation to the next level. We have faith in the Australian people. We have faith that they will take our nation forward, and our job is to set that environment around them. We should not think that government can do it better but that people can do it better if we get out of their way. If we set that environment and are able to support them then we will ensure that this nation prospers. Not only will it prosper with the best science and innovation in the world but also with the best prosperity in the world. That will give younger Australians, the next generation of Australians, the ability to have a job not just in metropolitan Australia but also in electorates like mine in Maranoa. That is what this government needs to do.
While we talk about bipartisanship with those opposite, it goes missing when the heavy lifting has to happen. That is the sad fact of what happens with those opposite. If we are genuine we will walk into this place with our heads held high about what we are trying to do for the Australian people. We will walk out and put forward an environment that allows them to prosper. We are investing $80 million in those people we believe in, and we are complementing that with tax measures to ensure those multinational companies out there are paying their fair share. That is the right thing to do by the Australian people, to ensure that those companies that want to come in and take advantage of the Australian public and the Australian marketplace do pay their fair share of tax. I do not think there is anyone that would say they should not. That is the responsible measure, and it is a responsible measure that this government has undertaken. We undertook it because we saw the necessity to do it, to support our own and to support the Australian people that need the environment around them to go forward.
I am proud to say that we are now going to ensure that those multinational companies around the world that are in our marketplace will pay their fair share. This will support our nation going forward and give us the opportunity to take these measures. But those opposite seem to think that it is better to support those multinational companies around the world rather than our own companies. This is about taking our nation forward with a measure that is pulling an economic lever that will take us to the next level. This is doing the heavy lifting to pay back the legacy of Wayne Swan, who, as the Treasurer of this nation, destroyed our economy to the point of putting us on the brink. We are now taking this nation back. We are taking steps to ensure that Australia goes forward in the direction that it deserves. I am proud to say that our government is at the forefront of that. Our government is standing up, and I say to those opposite: put away the hypocritical virtues and come with us on this journey, because Australia will be better for it.
I am very happy to rise to speak on the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017. This is about supporting small business. This is another key plank, another key part, of this government's plan for jobs and growth, and it sits very comfortably side by side with some of the other key planks of our plan, such as the government's enterprise tax cuts for small and medium businesses. It sits very comfortably side by side with our multinational tax avoidance laws, which, sadly, those opposite opposed, but which, nonetheless, have clawed back almost $3 billion and counting so far in tax from multinationals. Of course, we are talking here about tax which always should have been paid. And this sits very comfortably side by side with our innovation agenda.
I stand here, in this parliament, of and from Australia's small business middle-class. This is, significantly, as a result of the economic plan that this government took to the last election, at which I was elected to ensure this government could pursue this economic plan. When it comes to the government's innovation agenda—and I see these amendments as central to our National Innovation and Science Agenda—the programs it contains, the funds it distributes to help commercialisation and the reforms it has made to turbocharge our start-up sector are all great, but what is especially exciting about this government's innovation agenda is that, for the first time in many years, it puts the concept of innovation, of start-ups, back at the top of the national conversation. It has caused so many Australians to sit up, take notice and think about that little business idea that they have had niggling away in the back of their minds—that great app, that great commercial idea, that interesting thing that they have been sitting on. It has incentivised them to think about it more and, hopefully, to get out and try to make something of it in an enterprising way—to risk their ideas, to risk failure and to take our country into the future.
I will turn now to the specific aspects of this bill. This bill contains two schedules. The first schedule of this bill is about access to company losses. This measure will relax the small-business test for accessing past years' losses as current year tax deductions and introduce a new similar-business test. The new law will allow access to past year losses where a company maintains the same business but also enters into new business or transaction types. Additionally, that similar-business test will be introduced so businesses can access losses where a business conducts similar activities to that operating when the change in ownership occurred.
The second schedule of this bill is about the self-assessment of the effective life of depreciable intangible assets, and this is quite important. This measure provides taxpayers with a new option to self-assess the taxable effective life of intellectual property and other intangible assets with a statutory effective life. While the taxpayer still has the option to depreciate the asset according to the statutory depreciation schedules, self-assessment will better align the depreciation life with the actual number of years that an asset provides an economic benefit to the business. That is going to lead to better economic decision-making.
The new law also allows the taxpayer to recalculate the effective life in the later income years, if that effective life the taxpayer has been using is no longer accurate such as changed circumstances relating to that asset's use. These amendments are necessary, because of changes in the global economy. We are talking globalisation, digitalisation, trends and forces which Australia cannot and should not attempt to hold back. This is about updating our regulatory environment so that our local businesses can remain as competitive and flexible as they need to be. These trends have elevated the importance of intellectual property and other intangible assets. Brands matter. IP matters. The current taxation arrangements for these assets might distort the investment and the holding of intangibles in Australia, and hinder Australia's competitiveness as a place to do business.
Unlike tangible assets, currently, depreciable assets cannot be self-assessed to bring their tax life into line with their economic life. The statutory effective lives of these assets might not reflect the period of time that the asset really is providing use to the taxpayer. One example is that for software, typically covered by copyright, a depreciation life currently applies of 25 years, and so the mismatch of effective and depreciable life can lead to decisions being made for tax purposes rather than for commercial purposes—the sorts of reasons that will lead to more efficient outcomes, if we can allow that to happen.
The current treatment of various intangible assets and complex depreciation rules is discouraging the holding of these sorts of intangible assets in Australia. Not being able to properly depreciate what are potentially very large investments in these assets is a brake on us having a more entrepreneurial business culture in Australia. And so we are trying to provide flexibility to taxpayers in how they can depreciate these sorts of assets. We are encouraging innovation. We are encouraging the expansion of businesses, particularly for start-up enterprises, in line with our National Innovation and Science Agenda.
As I said, this is another key plank of this government's plan for jobs and growth. As I have said, it sits very comfortably side by side with our innovation agenda. It sits very comfortably beside our multinational tax avoidance laws and it certainly sits very comfortably side by side with this government's enterprise tax cuts.
I want to focus on those tax cuts just for a moment while I have the opportunity. We will all remember some of these great quotes. Here is one:
Any student of Australian business and economic history since the mid-80s knows that part of Australia's success was derived through the reduction in the company tax rate.
That is what the Leader of the Opposition, Bill Shorten, said in March 2012 when he was in government.
Here is another quote:
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—
another quote from the opposition leader in 2011.
You see, it used to be for a very long time a bipartisan position in this parliament that we all aspired to cut Australia's corporate tax rate. The current shadow Treasurer Chris Bowen knows it. He said:
… Keating knew that the corporate tax rate needed to be cut to make Australia competitive, that capital and investment would flow to tax-competitive nations and that this was an important job-creation move. Today capital is even more mobile than it was then and it is important that our corporate tax rate is competitive.
I could keep throwing quotes out there: Rudd, Gillard, Rudd again, Latham, Crean, Beazley, Keating, Hawke—the list goes on. They all agreed. Even the member for Lilley, who is sadly overseas at the moment, promised to cut the corporate tax rate—although, admittedly, he promised it around the time that he also promised this country four economic surpluses that never quite eventuated either. The point is that some of the most eloquent arguments that have been made in this place for cutting taxes in the way that the government just has were made consistently over all of those years by the Labor Party, but they have now walked away from that consistent legacy spanning decades. I think it is really important for us to reflect not only on the motives of an opposition leader who would say one thing when they were a minister with real responsibility and another thing when they are then in opposition and presumably digging for votes. I think it is important for us to reflect on the significance—what it really means—when one of Australia's major political parties just decide to crab-walk away from what has been a longstanding and bipartisan principle. They are walking away from what has always been a key plank of Australia's economic plan, a bipartisan key plank. They have already walked towards populism and the sort of class warfare politics that was supposed to be eradicated when the Labor Party reformed itself in the eighties and tried to make itself fit for office again.
We all paid close attention, I am sure, to the words and the language used by members opposite when they talked about tax in the debate that this parliament has just had. The catchcry was '$50 billion of handouts to big business and multinationals'. Those were the words they used. Of course, now that the debate has been going on for a little while, they have upped that amount to about $60 billion, counting over the forward 10 years, and they continue to roll that crazy phrase out. I think they even did it in question time today. So I am happy to once again rise and really bust the sensationalist lines that the opposition has been using with respect to tax reform.
I can break the silly phrase down word by word and expose the mistruths behind it. First and foremost let us take that term 'handouts'. As I said, I come from a small-business family. Tax cuts are not handouts. It is not a handout to let hardworking small-business owners out there keep more of their own hard-earned money. It is not a handout; it is their own money. In relation to that $50 billion, or now $60 billion, claim that they are using, as I mentioned, they are using the 10 years of budgetary impacts, but let us talk about what it really means. We are achieving this for small businesses—and small businesses only, I should add, growing to medium businesses and aspirationally, hopefully, to all businesses. But what we have legislated in this parliament is for small and medium businesses only—for them to get to keep about $1.6 billion of their own money in this financial year. We have achieved small businesses keeping $2.3 billion of their own money in 2017-18. That rises to $2½ billion, approximately, in 2018-19 and then to $2.8 billion in 2019-20 and so on.
Just in passing, I might mention—in despair, I suppose—how easily the word 'billion' rolls off the tongues of Labor politicians these days. When I first started paying attention to politics, many, many years ago, there would be an audible hush and amazement if any government programs involved amounts of the magnitude that they talk about. Now—thanks, I suppose, to that terrible legacy that was left behind after those Rudd-Gillard-Rudd years—Labor do not even blink about $1 billion or $1 billion there. I fear that they have even made the punters out there as numb to the significance of $1 billion as they are themselves.
But back to dispelling that line: I mentioned that the tax cuts that this government has managed to achieve are not going to big businesses and multinationals; they are going to small businesses. I am very proud to say that, given my small-business background. They are only going to small businesses this year and next year and for the whole term of this parliament. As I said, we do want to legislate a longer term plan that would let the entire economy benefit from better competitiveness. Over time, we would seek to bring all of the remaining medium and then large businesses into the fold too. That used to be the bipartisan aspiration of this place, after all. I can tell you certainly that the people of Brisbane who work or want to work in medium and big businesses also deserve more hours, more jobs, more opportunities and more opportunities for promotion.
Of course it goes without saying that everybody on this side of the House would love to turn all of our small businesses into big businesses over that sort of time frame. But if Labor does not like that approach, that is really easy. There are going to be two elections between now and when any tax cuts could be achieved for big businesses. If they are so sure of their own position, they can take a policy to either or both of those elections. They can make it their policy position maybe to increase taxes again for small and medium businesses, which I presume is now their position, or they can get in there and make the roll back complete, I suppose. They have been through roll-back policies in the past. It did not work particularly well for them then and I do not think it would work particularly well for them in the future. That, I suppose, would be a contribution that they could make and it would certainly be better than just mouthing repeatedly the words 'trickle-down economics'. It is not trickle-down economics to give assistance directly to small businesses. Small businesses are the backbone of our economy and the base of our economy; it is precisely the opposite of trickle-down.
It is a big night in football tonight, as the member for Shortland spoke about earlier today in his 90-second statement. It was a very good 90-second statement, even though the wrong side won last time. It is a big night in football tonight. I will be hugely disappointed, if you do not know, Mr Deputy Speaker Hogan, that it is State of Origin.
Everyone knows we are great at footy, but did you know that it was a couple of Aussie blokes that codified a kicking-ball game? Way back in 1858, Aussie Rules football was born when Tom Will and Henry Harrison nutted out 10 rules which formed the basis of AFL, and predated those of other kicking-ball sports like gridiron and soccer. From the world's first torpedo to the first electric drill to the electric pacemaker, the Hills hoist, the Victa mower and Mortein, these are all great Aussie inventions. We are definitely a talented lot here in Australia. But ideas are easy. Making them work, taking an idea and turning it into a viable business is something altogether different.
The Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017 is yet another way the federal government is backing Australians. The Minister for Foreign Affairs said earlier this week that she found it confronting to read a recent PricewaterhouseCoopers report that warned that Australia, currently ranked the 13th largest economy, would be lucky to remain in the top 30 countries by 2050—me too, this is definitely confronting. The opposition may be happy to remain entrenched in the past, but the federal government is committed to ensuring we move with the times. We know government does not create jobs; businesses do. That is why we will throw our weight behind them every day of the week. The treasury laws amendment bill has a couple of schedules. Schedule 1 increases access to losses. Schedule 2 is a self-assessment of the effective life of an intangible depreciable asset of acquired intellectual property. We all understand very well how depreciation works, especially with access for those businesses with up to $10 million in turnover with the instant asset tax write-off that they can all take advantage of before 30 June this year as well as next year. This bill also allows acquired intellectual property to be able to depreciate those costs as well. At the moment, depreciation is limited under the act to certain years. But the company has borne the cost of buying that intellectual property. They should be able to depreciate it more quickly or over a longer time, if required. Copyright software, for example, can be depreciated over 25 years, but that seems like quite a long time. If they need to depreciate that more quickly, they should be able to. In countries like the USA and the United Kingdom they are able to.
I think of local businesses that I have had a bit of experience with up in Brisbane—companies like Tanda. About five years ago, a group of young university students started the company, which is now turning over in excess of $2 million a year. This would enable them to make their business worthwhile, with some of the products that they sell and some of the intellectual property that they have. I mentioned before the report by PricewaterhouseCoopers: in a global economy, it is really important that Australia remains cutting-edge and a really attractive place to invest. That is very important, and we need to do everything that we can to enable companies to do that.
In a global environment, it is necessary to make these changes. Assets covered would include things like a standard patent; an innovation patent; a petty patent; a registered design copyright, except copyright in film; a licence, except one relating to a copyright in in-house software; all in-house software; a spectrum licence; a datacasting transmitter licence; or a telecommunication site access right. Those are some of the items that this will cover. What will it cost? The impact is not huge. It was announced in the 2015 Mid-Year Economic and Fiscal Outlook that the measure was estimated to cost $80 million over the then forward estimates. But I say to those opposite: do not look upon every business as wanting to rip off the taxpayer, wanting to somehow move away from that. There are a lot of businesses that pay legitimate tax and that do the right thing, and we see that on a daily basis, which is really important. Considering that most people are employed in the private sector, it is very important.
The coalition government has a solid plan which will ease the pressure on Australian families and will protect businesses and those that they employ. Our plan will ensure we do not lumber our children with the burden of the opposition's fiscal ineptitude. Our plan is built on careful and considered analysis of our position and on sound, strategic planning that will shore up the future of this great nation, Australia. It supports and advances some of our best and our brightest.
I am pleased to rise to speak on the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017. A little over 75 years ago—in fact, on 22 May—Sir Robert Menzies gave his famous 'The Forgotten People' speech. We need to put that speech and the messages in that speech into some context. It was only earlier that year, in February, that Singapore had fallen. Darwin had been attacked. The speech was given two weeks after the indecisive Battle of the Coral Sea. At the time the speech was given, the Japanese were planning an attack on Sydney Harbour. That is the historical background that these magnificent words of the 'forgotten people' speech were made. Sir Robert Menzies finished with the words—
Mr Conroy interjecting—
I see the member for Shortland is sitting at the table, and I hope that he listens and might learn something from these words. Sir Robert Menzies, to finish his speech, said:
Individual enterprise must drive us forward.
And he concluded with this last paragraph:
… what really happens to us will depend on how many people we have who are of the great and sober and dynamic middle-class—the strivers, the planners, the ambitious ones. We shall destroy them at our peril.
That is a warning that we all must be constantly aware of. Yet, sadly, we have seen in this parliament one side of the House determined to make it harder and harder for those strivers and planners—those who are prepared to take the risks, those who will drive our economy forward. Everything the Labor Party does drives those people out of business and destroys them. What they don't understand is the importance of incentives in the economy.
There are three dangerous factors, and the first is our nation's corporate tax rate. We simply have to have an internationally competitive corporate tax rate. We have had that in the past and wise leaders like Peter Costello understood that when he reduced Australia's corporate tax rate from 36 per cent down to 30 per cent back in the year 2000. Previous to that, even Paul Keating understood the importance of having an internationally competitive tax rate. As other members have noticed, previously Labor members understood and agreed with our proposition.
We face an international environment today where our major competitors have understood this and have lowered their corporate rate of tax. We see that the UK has plans to lower their corporate tax rate to 20 per cent and reduce it even further, because they understand that, if you lower that corporate rate of tax, you attract investment, you end up with more jobs and, at the end of the day, you end up with more government revenue. It is exactly the same in the USA, where President Trump has promised to reduce their corporate tax rate to 15 per cent. We have seen our Kiwi cousins over the ditch reduce their corporate tax rate to 28½ per cent. New Zealand is an interesting example to learn from. They lowered their corporate rate of tax—and guess what happened to taxation revenue? It was not a giveaway to big business, as members of the opposition like to say. At the lower rate of tax, New Zealand actually got more government revenue.
We do not have to look as far as New Zealand, we only have to look at our own history and we see that every single time from Paul Keating's time when he lowered the corporate rate of tax to increase our international competitiveness to Peter Costello's decision, we got more revenue flowing into the government. We grew the size of the economic pie. We created more jobs, we created more wealth, we created more prosperity. As a government, we had more revenue flowing in to pay for all the social service programs that all of us so desperately want to provide. Knowing the importance and knowing the history, we still have the Labor Party trying to block reductions in the corporate rate of tax. I would like to ask members of the Labor Party: how do they think our nation is going to compete in the years ahead if we are stuck with a 30 per cent rate of corporate tax and the US is at 15 per cent? What damage will that do to our economy?
The second important thing that we must look at is the highest rates of the personal marginal tax rate. If the Labor Party had their way, they would set the highest rate of personal marginal tax rate at 49½ per cent—effectively 50 per cent. What that would mean is that, when someone reached $180,000, if they decide that they want to take a bit more of a risk or if they want to work longer hours or if they want to try a new business idea, the government would take half of whatever income they earned. If they go and spend the half that is left, another 10 per cent would come out in GST. That becomes a disincentive for those strivers, those planners, those ambitious ones whom, as Sir Robert Menzies advised, we must always strive to protect.
There is also the issue of the international competitiveness of our highest personal rate of marginal tax. If one of the countless bright young ambitious Australians that we have went to Singapore, they would pay a personal rate of tax of around 15 or 17 per cent, yet in Australia it is effectively 50 per cent. How many great young Australians will take the opportunity to move overseas?
The third area that threatens to undermine those strivers, planners and ambitious ones is the cost of energy in this nation. It used to be our nation's competitive advantage. We have the coal-fired power plant right next to the coalfields close to the transmission grid close to the city so we in Australia can generate electricity cheaper than anywhere else in the world. That underwrote thousands and thousands of jobs—thousands of jobs in our aluminium industry and in countless other industries. That was our nation's competitive advantage.
Like in life, if you get a competitive advantage, you guard the thing with your life. If you are running a business or a corporation and you are able to develop a competitive advantage, you fight every single day to maintain it. Yet we have seen members of the Labor Party prepared to surrender our nation's competitive advantage purely on an ideological basis. They like the look of wind turbines. They think the wind turbines are wonderful. They very well may be and some people may like them, but they are undermining our nation's competitive advantage. They are destroying jobs today. They are white-anting our nation's economy.
We have seen the evidence from South Australia. We have seen how the South Australian Labor government have almost destroyed their economy. I see the member for Hindmarsh over there. He must apologise. He must see the pain that it is causing constituents in his electorate and he must see the pain it is causing industry. Yet where is the highest unemployment in the nation? South Australia. What do the Labor Party want to do? They want to copy exactly Labor's 50 per cent renewable energy target. You could not think of a policy that could damage our nation's competitiveness.
In a very small way this bill is important, because it helps those strivers, planners and ambitious ones. We understand and we want to give them every encouragement to go out into the marketplace, risk their capital and test their ideas. We know that most of them will eventually fail—that is the reality—but we need to give them the incentive to get out there and give it a go. If we fail to do so, we will simply go backwards as a nation.
Let us look at the measures in this bill. Firstly, schedule 1 increases access to losses. This measure was announced as part of the government's National Innovation and Science Agenda. It will relax the same-business test for assessing prior year company losses to other financial years and introduce a similar-business test. We want to encourage businesses to go out and try new ideas. If they try them and incur a loss, which many of them will do when they are experimenting, we want them to be able to carry that forward under the same business if they are doing something similar in the same business. That is a very simple thing.
In today's economy, when innovation is moving quickly and when we are seeing companies needing to be agile, mobile and able to change track quickly, we need to have the same-business test changed to a similar-business test. It may be only a few words, but it is a very important amendment because it allows the operation of the same-business test and allows loss-making entities to seek out new capital and new opportunities to, hopefully, eventually return to profitability. It proposes two elements.