Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

The Greens, also, will be supporting this package for small business, and this is a very good opportunity to remind the Senate and the Australian people that the Greens went to the last federal election with a very clear policy for a two per cent tax cut for small businesses with a turnover of under $2 million. This was debated amongst the Greens' membership and was supported across the board as an initiative that our party should be leading on—and I do believe that we have led on this tax cut for small business. Along with Labor, we are very involved in negotiations around the mining tax measures which support small business not just in terms of the instant asset write-off but also loss carry-back provisions and other measures.

We have always supported stimulating small business. We recognise the importance of small business not just to the economy—the two million small businesses and the contribution they make to employment—but also for there contribution to communities, to states such as Tasmania, where I am very proudly from. Dynamic small business is absolutely critical to our communities as well as to our economy. It gives people the flexibility to control their own destiny. It is hard work and often leads to higher risks. You are risking your capital and your time, without any guarantee of success, often in a very competitive industry. It is a segment of industry in this country that we should be supporting. Small businesses in my state of Tasmania—and I know the statistics are quite alarming right across Australia—have very high failure rates in the first three or four years of establishment. It is tough. It is hard. To give them a bit of a leg-up—whether it is through a tax cut or through other concessions such as the instant asset write-off—is the right thing to do. But we need to be very careful about how we do that.

We took our guidance on the instant asset write-off from the Henry review, which recommended a $10,000 cap on asset depreciation in perpetuity. We support that; that was our policy. But we do have very real concerns, which we have expressed in the media and to our members, about what is essentially a two-year stimulus package for small business. I have asked Senator Cormann these questions in detail at Senate estimates. We have concerns that capping the time frame on this to two years will lead to unintended consequences—and, standing here now, I would even say they are entirely predictable consequences. We will see a surge, a rush, to get access to these deductions in the next two years, especially for this tax year. That might bring expenditure forward, which is going to have budgetary implications. More importantly, it takes away certainty for small business in how they plan for the future. As I said, they have very high failure rates when they initially set up in business, so perhaps encouraging them to overspend in a two-year period could be counterproductive. We feel that, rather than having a lumpy item in their cash flow and in how they manage their cash flow, it would be better to give them an ongoing instant asset write-off so they can better plan for the capital that is required for their business.

I also want to make it very clear here today that if we do care about the sustainability of small business and want them to employ more Australians and grow our economy then they should be expecting a return from every single dollar they put into capital in their business. We do not want to see them going out and buying equipment that they do not necessarily need. For example, if you are a sole trader or in a partnership, it might be something that you want for your utility at home, it might be something that you want that you can write off against your income. It is absolutely critical that every dollar directed towards the instant asset write-off, towards capital in their business, needs to have a productive purpose. Otherwise, we are not going to achieve what this package should be setting out to do, and that is to put small business in this country on a long-term sustainable footing.

From the moment this measure was announced on budget night, it looked to me like a stimulus package. Forgive me for being cynical but, the week before this package, we had also had data suggesting that investment spending in this country was falling off a cliff. Investment spending is of course a critical component of gross domestic product; economic growth comes out in the national accounts. Investment spending was falling off a cliff for a number of reasons that are well understood, including the wind-back in the mining boom. This cannot be a short-term package simply to stimulate investment in this country to make the accounts look good. It has to be to put long-term businesses on a sustainable footing. It must address the issue of helping businesses survive those critical periods when they are at high risk of closing down and allow them to invest in their business not for one or two years but for five or 10 years.

We also believe this package should have included the loss carry-back provision. Senator Collins has made it clear this morning that the Greens and Labor, as the previous government, did have a package in place for small business. We had a $6½ thousand instant asset write-off threshold per item and a loss carry-back provision. A loss carry-back provision also helps small businesses manage their cash flows, and it is something that is missing from this package. It is actually very important. If you are going to be encouraging up-front spending in capital via a much larger instant asset write-off threshold of $20,000 it is especially important that you include loss carry-back provisions so if businesses do not get it right, if they do overspend, they have the potential to go back to previous years where they made profits and paid tax and get compensated for that. That is a really important part of this package that is missing from this.

The Greens would like to have seen the $20,000 limit for capital expenditure as a cumulative measure; we would like to have seen that as a cap across all asset classes, not $20,000 per item. I can speak from personal experience. My wife has a medical practice in Launceston, where we live. She employs 15 people. We have been looking at buying a laser for her business—the Clerk is looking at me, so I have to declare a conflict of interest. We will, no doubt, use this $20,000 provision for my wife's business. We have been looking at buying a laser for scar surgery, especially for breast cancer patients that we deal with. My wife's business turns over slightly less than a seven-figure sum; it is not a high-margin business. For my wife's business, $20,000 is a lot of money. We have been looking at this for seven months. We have not committed to it yet, but we will do so under this package. For a business our size—we are not quite a medium sized enterprise; we are a larger small business—$20,000 is a lot of money, even for one item. But to have no cap in place—so that business can go out and spend $200,000 or $300,000 on different items—is a real concern. We would like to have seen a cap but, to compensate small businesses, we would like to have seen it in perpetuity, we would like to have seen the figure extended into the future.

Senator Cormann, in estimates, did give the impression that the government might review this measure after two years. That would be a sensible thing to do given the concerns we have about small businesses overspending in the short term. But it would also be worth reviewing because it might be something that needs to be extended into the future beyond those two years. So, apart from the budgetary implications, the clear message today is that this package has to encourage productive spending. We do not want it to be just a stimulus to help Harvey Norman and the other retailers—and, incidentally, most of that money will probably go directly overseas to the exporters of goods and services to this country. We actually want the money to stay in this economy and we want businesses to be very careful about how they plan for their capital.

It is widely acknowledged that proprietary limited companies are not the largest component of small business in this country. Therefore, when sole traders and partnerships can write off these kinds of deductions against their other income it presents the potential for rorts of the system. I have gone through in a lot of detail the measures in place to prevent that, and I am still concerned. I can still see some very valid scenarios where someone who is a sole trader—it is very easy to set it up: you go and get yourself a tax file number or an ABN and set up a partnership—could set up a business, buy $100,000 worth of capital over one or two years and then, after three or four years, say, 'I didn't do my business plan well enough. Sorry, I'm going to have to close my business down.' They are then left with items that they can sell or that they can use for themselves. There are a lots of situations I can see where that would be very realistic within the guidelines and within the rules. So we have to be very careful that the system is not rorted and ensure that this money is used for productive purposes.

In terms of the tax cut, we would like to have seen a bigger tax cut for small business. We did get the Parliamentary Budget Office to cost a tax cut of five per cent across the board, as the Leader of the Opposition, Bill Shorten, outlined in his budget in reply speech. But that would cost $6 billion in the forward estimates. In the end, we felt that the other provisions that were in place—the instant asset write-off and the loss carry-back provisions—were more important for businesses across the board so they should come as a package. A tax cut to small business is something that the Greens Party have led on. We have been very engaged with Labor to support small business in the last five years.

I must point out how cynical it is that this government took away the package to small business last year and then, 12 months later, gave it back, albeit with a few small changes. There are some other good things I would like to acknowledge in this small business package such as the laws around franchising, and I commend Minister Billson for his work on this. But how cynical it is that the government took away packages for small business. When they brought down the axe on the mining tax, they brought down the axe on small business. That led to considerable uncertainty for small businesses in terms of how they go about planning their future. And now the government are trying to claim credit via a $25 million advertising campaign on national TV for a small business package that in dollar terms is exactly the same as the package put in place by the Greens and Labor. The government took away $5.4 billion from the budget last year and they have brought back $5.4 billion in a package this year.

Small businesses should be aware that they have been supported previously by the Labor-Greens government just as they are being supported by this government. Let's make that very clear. Politics is very cynical and it is very ruthless, but this package we are seeing here today, in dollar terms, is almost identical to what was taken off you last year by the very same government. It is good that we have tripartisan support—or wider than that if we include the crossbench—for stimulus for small business for productive investment and giving small businesses a leg-up with a two per cent tax cut to proprietary limited companies and a five per cent deduction for other entities. It is good that this country has come together to help support the small business sector, but we have to be very clear here today that all of us have contracted to helping small business in this country. If you want to be entirely correct about this, then you would say that small businesses are just as well off today as they were 12 months ago when this government axed the benefits that were provided under the mining tax legislation. Senator Cormann, would no doubt say that that was not properly funded and that that was a reason to take them away. But we argued at the time that they could have been well funded if we had just actually fixed the mining tax.

I learnt at university—and I used to teach my students this—that a good tax system taxes bad things such as pollution and health risks. A good tax levies taxes fairly across common pool resources that are owned by all of us such as superprofits on minerals. If necessary, and if it can, a good tax reduces tax on the good things such as work and effort. And that is what this is; this reduces a tax on the work of small business. What the Greens have always stood for is a very simple and basic philosophy that is well understood and well accepted by most economists: tax the bad things, the common pool resources, and reduce taxes on work and effort were possible. Of course, we also have the issue of bracket creep, which no doubt will need to be addressed by Senator Cormann in future.

This is the kind of thing we should be doing for small business. I would like to make it really clear here today that while we do have concerns—concerns that I would like to get on the record—around the $20,000 per item for only two years, we will be supporting the package. If we had had our way, we would have seen this capped at $20,000 per business, not per asset, and we would have liked to have seen it in perpetuity. We would also like to have seen a package in place—which I hope Senator Cormann will consider after two years—which helps small businesses have certainty, which helps them plan and which helps them get a productive return on their capital so that they can employ more Australians and create more wealth and prosperity, especially for our small communities, such as the one where I live in Tasmania. The Greens will be supporting this package.