Michael Hatton (Blaxland, Australian Labor Party) Share this | Hansard source

I am happy to follow the shadow minister, the member for Grayndler, in regard to the Tax Laws Amendment (2006 Measures No. 7) Bill 2006. The member for Grayndler has quite rightly pointed to the fundamental inadequacies over the past 10 years in this government’s approach to national infrastructure. It has been almost entirely absent during that whole period of time. Throughout the first and second parliaments from 1996, I was the chair of our caucus regional committee. I travelled the length and breadth of the country and I spoke to local councils in depth about their fundamental problems in terms of infrastructure.

Over that six-year period, the government simply did not address—except in the most partial way—any of their fundamental problems. Why they chose not to do so is very simple, and it is laid out in their first audit in 1996. The government do not see themselves as an active interventionist government trying to fix our fundamental infrastructure problems. They do not see themselves as a participant in that. It is always someone else’s problem, someone else’s activism—all they have to do is audit or benchmark it.

For more than 10 years, country Australia has been crying out for the kinds of funds that would boost its local infrastructure on a sustainable and sensible basis. The member for Grayndler is absolutely right: we need this kind of long-term investment to continue to bolster Australia, and that capacity should be there through not only direct investment in infrastructure but also support through our taxation system. What we find is that the government that came to power in 1996 have a mindset that their only job is to be like a mob of accountants from KPMG: just tick and cross things that are done and not done and whack the back of the hand of state governments or councils because they have not been undertaking their fundamental responsibilities. That mindset has linked in with the general mindset that has taken hold at state level—that, in order to get anywhere at all, you have to make cut after cut after cut in expenditure. We know the disciplines that had to be imposed on the states; they were imposed by the last Labor government. That actually changed the approach that many states took to their expenditure, and we did get some fundamental efficiencies out of that.

But it has become effectively a mindset in which an ideological approach virtually drives it. Coming from New South Wales, I have seen the disasters that have been caused by public-private partnerships. Travelling Australia, I have seen the disasters that will have an impact over the decades to come because state and federal governments and local councils have walked away from their fundamental responsibilities. It is not really bright not to maintain your infrastructure. It is not just about water infrastructure in the capital cities—something that has happened because of the impress of budgets at state level—but also about the manner in which this Commonwealth government has withdrawn support from the states and the notion that it is somebody else’s problem to fix up this area or that the whole thing should be privatised and then the problems will go away.

Our national infrastructure has been falling to bits or simply sold off into the care of someone else to be broken up into whatever constituent elements they like, and this federal government has led the way in abrogating its responsibilities with regard to it. The next Labor government, in setting up Infrastructure Australia, will understand that you cannot have a piecemeal approach to this. You cannot have an approach where you walk away from fundamental responsibilities and desert the Australian people in terms of things that no-one else will do—not even at what people might take to be a reasonable profit; they would want big profits to do a number of these things.

The simple fact of the matter in terms of public-private partnerships is that they are generally not a really good go. Why? Because governments can borrow at extremely good rates; there is not all that much premium. We have a AAA rating, and the economy has been running extraordinarily well. Why? Because a fundamental foundation was laid by the former member for Blaxland, my former boss Paul Keating, who had the courage to confront problems and deal with them. We faced cataclysmic change in 1985-86, and modern Australia is built on the foundations of the fundamental, bold and brave changes that Labor made. This mob have slid along on the top of them and taken the benefit of those fundamental changes, but they will not make the core ongoing changes that are needed. They will not invest in Australian infrastructure, and they will not encourage state governments to do the right thing and renew their water infrastructure properly—they will not even think about addressing the problem. But if you look at water you need to look not just at the irrigators down in the Murray-Darling; you need to look at water usage Australia wide in our capital cities and at the infrastructure in Sydney. It is not just road and rail; water infrastructure needs a dramatic amount of money to be expended on it if we are to get the efficiencies we need in order to survive.

I turn now to the more specific matters of this bill. It is an omnibus bill. Assistant treasurers always come in with a whole stack of things that need to be done. What is the motif of these? Most schedules of the bill reduce compliance costs for taxpayers, increase certainty for taxpayers—two things that we say would be reasonable to do—increase the availability of capital gains tax concessions for small business and increase the integrity of the tax laws. There is nothing there that you could gainsay, nothing where you could not say, ‘Those things are reasonable aims.’

Let us look at some of the practicalities in terms of what is being done. In general, in particular with the first one, one of the areas I am interested in is what is being done in small business. Almost all the schedules involved here arise out of a 2005 review by the taxation board, and all but one, I think, of their recommendations have been taken up by the government. What they have suggested, particularly in the small business area, is to look at small businesses and their capital gains tax treatment, in particular in the first schedule, in a different way. Instead of looking at just a mum and dad business, where currently you have to prove a series of different things, one of the things you have to do in order to gain the concessions is to have a 50 per cent controlling interest. Normally this is a partnership of two; there are two people who have 50 per cent. That is the model in front of us in the current legislation. The only area where you can have less than that is if you have a controlling partner with 50 per cent. A spouse can simply have a one per cent interest in the entity and that spouse will be covered by it.

These changes recommend a 20 per cent significant interest instead of a 50 per cent controlling interest. When you first look at that, you may think: why, if it is a small business where it is a straight-out partnership—that is clear and reasonable—are we down to just a 20 per cent participation made up of indirect and direct percentages? If you put the spouse aside, why are up to eight people going to be part of this? I think it is recognition that the nature of a lot of small businesses has changed. It is not just traditional partnerships; there are a number of entities, including in my electorate of Blaxland, where there is multiple ownership. Within the current law, they are not able to access any of those concessions whatsoever; it is reasonable that they should be able to do so. This is not only a clarification of the law but also a sensible set of steps.

Small business is not the engine room of change in the economy, because, as my former boss was wont to say, although it is 60 per cent of the economy, it exists on the margin of that engine room. The economy’s engine room will always be our major businesses, and the small and medium enterprises will come in after that; that is the core of the activity. But employment in Australia is largely within those small businesses. Running them effectively and properly under the aegis of the taxation law is something we can do efficiently. If we look at this generally, the amendments are supportable; they finetune the application.

These amendments do not raise the net asset threshold, though, from $5 million to $6 million. That is something that has been announced and will have to be done later. As the shadow Assistant Treasurer, the member for Prospect, pointed out, there was a bit of press release stuff in here. It was announced that in the 2007-08 income year there would be an increase in that threshold. That will have to be dealt with in some other way, but there is no fundamental problem with that. Likewise, the other tests—the 15-year test and the rest of them—have been adjusted.

I want to broaden this debate a bit to look at the impact of this on small business. It is a very significant sector of our economy. It is extremely important and, despite the admonitions from the member for North Sydney over many years, it is one in which a number of people on this side have experience—either themselves directly or, as with the member for Hunter, in their families. In my family, there is a history and a combination of people either managing or giving their labour to others primarily in a small business context. For 25 years, my mother ran the Bambi Day Nursery, a child-minding centre in Bankstown. She had worked for others previously and she has a wealth of experience. I have a fair amount of experience—I was unpaid labour when I would help out after school.

I have a fairly good insight into not only the compliance problems but also other issues. As one of the very early settlers in the area, my grandfather on my father’s side had a small business selling fruit and confectionary in Bankstown before 1920. He then changed to a very significant business supplying building materials—concrete, coal, ice runs, you name it—post World War II. Throughout my family there is small business experience. Virtually all of my uncles are involved in small business. My uncle John is a carpet layer. My uncle Eris owns his own furniture shop in Armidale; it is a very significant business there.

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