Chris Hayes (Werriwa, Australian Labor Party) Share this | Hansard source

Most small businesses want to see the cutting of red tape. I challenge the opposite side to see how many of their members come from a small business background, because we have been challenged to do so. As I said, I am one of them. I know personally the problem of red tape for small business. This government made a promise back in 1996 to do something about cutting red tape. They even introduced the $50 million Regulation Reduction Incentive Fund to streamline for small business the red tape at local government levels.

Mr Deputy Speaker Scott, you will no doubt recall that in the lead-up to the election in 1996 the then opposition leader made the bold promise that he would cut red tape by 50 per cent upon taking office. In coming to office, he engaged Charlie Bell, who ran a McDonald’s at that stage, to lead a task force to look at the methods that could be put in place to cut red tape and seemingly make the plight of small business a little easier. Of course, the government did not manage to do that. I do not think they ever really had any intention of doing that. It was just something they wanted to say to small business operators, who are a growing part of our community. It is something they have put out, once again, just before an election.

The Prime Minister made big promises to help out small business operators but, quite frankly, those big promises did not ever seem to materialise. In a sign of absolute arrogance, this government have now decided to repeat the promise to cut red tape by 50 per cent some 10 years later. They commissioned Gary Banks, the head of the Productivity Commission, to once again go through and do what Charlie Bell did and give us a heads-up on what we can do to reduce by 50 per cent the red tape that affects small business. They did not keep their promise the first time; why would we think they would keep it this time? On both occasions, this promise was only rolled out in the lead-up to a federal election.

I mention this broken promise, and the government’s repeated disingenuous commitment to small business, in the light of the tax bill we have before us today, which purports to implement some simplicity, improvements and assistance for small business operators. Before members opposite take me to task, this bill does that to a degree. To the extent that those improvements are made, the bill is certainly welcome and will be supported by Labor.

The Tax Laws Amendment (Small Business) Bill 2007 implements the tax arrangements announced in the budget by the government. Under the existing tax law, there are a number of special arrangements for small business and each of those concessions has its own set of eligibility criteria. It seems a little nonsensical but that is the procedure which was in place. Of course, the multiple eligibility criteria for small business concessions is not only legislatively confusing; it is also confusing for small business operators. To date, I have found six different definitions for small business contained in various Commonwealth acts, let alone the definition in the Workplace Relations Amendment (Work Choices) Act which refers to small businesses as employers of anywhere from nought to 100 people. That is not an issue that I want to dwell on in the debate today, but I think it is certainly worthy of some further investigation to find a true definition of a small business operator.

The bill before us today seeks to overcome the confusion and complexity of the eligibility of small business for various concessions. Different definitions under the simplified tax system are used to determine eligibility for concessions for the GST, the capital gains tax, the fringe benefits tax and the pay-as-you-go instalments. And people wonder why small businesses complain about the complexity of red tape. Under the framework introduced in this bill, all of these eligibility tests will now become one. Small businesses will be able to access their concessions provided that any additional criteria that relate to the specific nature of the concessions are satisfied. Their entity is considered a small business if it is defined by the criteria that (1) it carries on a business and (2) it satisfies a $2 million aggregated turnover test.

Meeting these requirements will become known as satisfying the small business entity test. That is good stuff. I support that and I know that it will make a significant difference for a lot of small businesses operating in my area. However, satisfying the aggregate turnover test is a little more complex. There are three ways to satisfy the $2 million aggregated turnover test: firstly, that the entity’s aggregated turnover for the previous income year was less than $2 million; secondly, that the entity’s aggregate turnover for the current income year is likely to be less than $2 million, calculated as at the first day of the income year; or, thirdly, that the entity’s actual aggregated turnover for the current income year was less than $2 million, calculated as at the end of the income year.

In order to arrive at the aggregated turnover, the entity must first calculate its annual turnover, which is the total of ordinary income that the entity derives in the income year in the ordinary course of carrying on a business. There are a number of complexities in this calculation in relation to the consideration of wages and salaries, and dealings with associates not considered to be at arm’s length from the entity. The entity must then determine whether the turnover for the year needs to be aggregated with the turnover of other entities to arrive at an annual turnover for the test entity.

I would suggest that for many small business operators this is starting to get relatively complex, and this is after we have tried to demystify the laws to make them easier. Some would have accountants on board for this. And I suppose in ordinary circumstances an accountant would not be considered necessary in a small business; that they would be able to work their way through this. But for the average small business, I think this area will prove to be complex.

The test goes on. If they do have another entity, it must be added to the first to form the test entity. If an individual or a company is an affiliate of the entity where the individual or company’s business acts or could reasonably be expected to act in accordance with the entity’s directions or wishes, it then must be treated in concert with the first entity.

I thought this was all about trying to make the lot of small business easier. There must be a more reasonable test of small business. There are about six separate definitions of small business in Commonwealth legislation and the overarching definition is provided by Work Choices—that is, a small business will be any organisation of less than 100 employees. That is 98 per cent of all Australian companies. This is why small business is actually reeling. Small business really does need some assistance in streamlining the red-tape and making it more comprehensible so they can actually take care of their business as well as satisfy the reporting obligations of the Commonwealth.

That is why I support the amendment moved by the member for Rankin which states:

whilst not declining to give the bill a second reading, the House calls on the Government to implement Labor’s BAS Easy option for simplifying GST bookkeeping requirements on small business with an annual turnover of less than two million dollars.

That is a sensible proposition being advanced by the shadow spokesman for small business and independent contractors.

In moving that amendment, the member for Rankin certainly draws the attention of the parliament to the real concerns that affect the genuine small business operators in this country. The BAS Easy proposal would provide a simpler and faster way for small business to be able to estimate their GST obligations. It would leave more time for small business to do what they do best: concentrate on their businesses and take what steps they can to grow and mature within their market. Rather than spending hours and hours fulfilling their reporting obligations, this proposal would reduce the time required to minutes.

In the south-west of Sydney—and I am not sure whether you are aware of the demographics of the seat of Werriwa, Mr Deputy Speaker Scott—independent contractors is a large and growing group. They are small business operators that cover a range of industries, including truck drivers and whole host of things. A lot of people work from their homes or from small business locations and they are a growing part of the economy of south-west Sydney. That is why I am very conscious of the position of independent contractors when we have a debate concerning small business owners. It is beyond doubt that independent operators form the majority of small business operators in my electorate of Werriwa, and I am sure that would be common in most of the electorates of members of this House.

A lot of the reporting required of independent contractors, whether they be owner-drivers or just a small family business, actually falls to women to undertake. Wives and mothers take care of a lot of the microprocessing from home based operations. I am not being demeaning of truck drivers in this regard. Owner-drivers are out there driving their vehicles and unfortunately, in many cases, it is their spouses and the mothers of their children who are taking the time to comply with the Commonwealth’s BAS reporting requirements. That is a significant burden. I do not care what anyone in this place says, if you have gone through the rigours of completing these BAS requirements—as I have done, as a small business operator—you would not say that this is just a simple, non-time-consuming exercise. Most of us retain accountants to fulfil a lot of that reporting, but I am sure that those organisations that have not done that or cannot do it would understand what I am saying. If those opposite talked to small business people, they would know that what I am saying in this respect is right.

The steps that have been advocated in the amendment by the member for Rankin, in BAS Easy, try to make the lot of small business more manageable in terms of reporting requirements. This will give them the incentive to sharpen their edge, doing what they do best—that is, serving their communities and producing the goods and services they do in running their businesses. I think the government should have a very clear look at BAS Easy. This could be something that would assist the government in terms of making it look more palatable to small business. (Time expired)

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