Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The Labor Party will support the Tax Laws Amendment (Simplified GST Accounting) Bill 2007, and we are happy to expedite its passage through this House and the other place. We are happy to do that because this bill largely represents the implementation of Labor policy. This bill extends simplified GST accounting methods to more small businesses: those that have an annual turnover of less than $2 million and that make a mix of taxable and GST-free supplies or that acquire a mix of supplies that are taxable or GST free for the suppliers—that is, the vast majority of small businesses in this country.

Labor particularly supports the bill because it, in principle, implements the BAS Easy proposal that the Labor Party recently adopted. This is yet another example of the government adopting Labor policy. We have seen quite a bit of that this week. We have seen the introduction of the International Trade Integrity Bill 2007 implementing Labor’s policy to align the definition of ‘facilitation payments’. We have seen the government attempt to catch up with Labor’s policy on broadband—although ‘attempt’ is the relevant word; there has been failure in both policy and political terms. And, of course, last week we saw the Treasurer taking up Labor’s policy of a formal investigation into petrol prices in this country—although, yet again, he has adopted ‘Labor lite’ and, instead of a permanent and indefinite reference, has adopted a temporary inquiry. Nevertheless, we do recognise that the government has adopted Labor’s policy in principle. The detail is different but it has adopted in broad terms Labor’s policy in respect of reducing red tape for small business and reducing, in particular, the red tape that is associated with the business activity statement.

Labor have been calling for a ratio method for some time. We have been calling for it recently; we have renewed those calls. But we also took a simplified BAS policy to the elections in 2001 and 2004. Our policy was to use a ratio to calculate GST obligations. BAS Easy gives all mixed small businesses under the $2 million revenue threshold the capacity to use simplified accounting methods. BAS Easy was very well received when we announced it, as you would expect, because it involves a reduction in GST paperwork of 85 per cent. This is what COSBOA, the Council of Small Business Organisations of Australia, had to say:

For all small businesses working under a revenue threshold of 2 million dollars a year the BAS Easy system is a simple and practical answer to the current BAS red tape.

Taking an opt-in approach will allow those businesses that are working with few or no staff to adopt the new BAS Easy system and save time and effort should they so wish.

It is singularly unsurprising that small business would welcome Labor’s BAS Easy proposal. A special survey on red tape released by MYOB in January this year found that over two-thirds, or 68 per cent, of the respondents reported the bookkeeping requirements of the BAS as being the most onerous red tape burden that they face. It is more onerous than every other red-tape burden facing small business. It is more onerous than occupational health and safety, superannuation, workers compensation, the various council requirements put on them, and payroll tax, which, thankfully, most small businesses are exempt from. More onerous than all of those requirements is the BAS paperwork. So it is little wonder that small business embraced Labor’s policy and it is little wonder that the government is attempting to play election year catch-up.

The Banks task force highlighted evidence from NARGA, the association which represents small grocers and small supermarkets in this country. It found that the GST compliance costs as a percentage of GST collected were 1.25 per cent for large businesses, 13.3 per cent for medium sized businesses and a staggering 28.5 per cent for small businesses—small grocers, small mixed businesses and small and independent providers, which are important in our economy and in communities around this country. That 28 per cent is a massive burden on these small businesses. So it is little wonder that these businesses were very happy with Labor’s policy when it was announced in recent months and it is little wonder that the government has attempted to catch up.

The government have attempted, dare I say it, to walk both sides of the street on this issue. They have said on the one hand that they do not support the ratio method. On the other hand, they have said that they are doing it and that they adopt Labor’s policy. I was drawn to the article in the Australian Financial Review on 26 April headed ‘Costello sour on Labor’s BAS sweetener’. In it the Treasurer firstly said: ‘We have already done that. We have already got, in effect, BAS Easy. The Labor Party do not know what they are talking about.’ Then he criticised the policy. But the Financial Review made a salient point. It stated:

The point of difference in Labor’s plan is extending the accounting arrangements to include other types of small businesses involved with medical, health, education, religious and non-profit charitable services.

That is the difference. The government’s original plan only applied to a small number of businesses, a small category of businesses: retailers selling food. Labor’s plan extended it broadly, and the government have caught up and extended theirs broadly.

It is not the first time that the government has commented on Labor’s plan. In 2004 the then minister for small business, who is now the Minister for Employment and Workplace Relations, told the parliament that the two biggest issues raised with him, as minister for small business, were the national economy and:

Many small businesses in particular said, ‘Can you do something about the paperwork associated with the BAS?’

That is what they said to the then minister for small business, three years ago. Three years ago the minister for small business highlighted that the biggest issue affecting small business was the paperwork associated with the BAS. Now, a couple of months before an election, after the Labor Party releases its BAS Easy policy, the government adopt a version of the BAS Easy policy and promote it as their answer. This is three years after the then minister for small business said that this was the biggest issue facing small business and many years after the introduction of the GST in the first place, when this burden was placed on small business.

The GST act allows the commissioner to determine simplified accounting methods for retailers who sell both taxable and GST-free food and have an annual turnover that is not more than the relevant threshold—that is, $1 million or $2 million, depending on the method used—or entities that make supplies that are GST free under the GST concession for charities. Currently, the commissioner can only determine the simplified accounting methods for retailers that sell food or who make supplies that are GST free under the GST concession for charities. Retailers that sell food include supermarkets, convenience stores, restaurants and cafes. This bill extends to all small businesses and other entities the range available for eligible businesses for whom the commissioner can determine simplified accounting methods. So it now applies to individuals’ trusts and partnerships et cetera, rather than just to retailers with an annual turnover of less than $2 million that either make mixed supplies or have mixed inputs. The commissioner can determine the simplified accounting methods for retailers and charities on an ongoing basis, as you would expect. This constitutes a large broadening of the eligibility for simplified accounting methods for GST to all businesses and entities that deal with GST mixed supplies and inputs with an annual turnover of less than $2 million.

It goes without saying that many businesses buy and sell products that are taxable as well as products that are GST free. Others buy taxable and GST-free products and sell only taxable products. Accurately identifying and recording GST-free sales separately from those that are taxable can be difficult, which makes accounting for the GST complicated. It is way overdue that those businesses get some relief from the burden of the BAS, which 68 per cent of businesses said was the biggest of all the red-tape burdens on their time, and which, as evidence that has been provided shows, can constitute in compliance costs for small businesses up to 30 per cent of the GST revenue collected.

The commissioner can currently determine simplified accounting methods for retail businesses that sell food, taxable and non-taxable, to make it easier for them to account for the GST. The commissioner has so far developed five simplified methods to choose from, depending on the annual turnover, the nature of the business and the nature of the point of sale equipment, as set out in the ATO GST guide. These methods are: the business norms method, the stock purchases method, the snapshot method, the sales percentage method and the purchases snapshot method. They are set out in that guide.

Under the business norms method, the standard percentages are applied to sales and purchases. Under the stock purchases method, businesses take a sample of the purchases and use this sample. Under the snapshot method, businesses take a snapshot of sales and purchases and use this. Under the sales percentage method, businesses work out what percentage of GST-free sales is made in a tax period and apply this to the purchases. Under the purchases snapshot method, businesses take a snapshot of purchases and use this to calculate the GST credits. The methods avoid the need for eligible retailers to identify and separately track GST-free and taxable sales. They will be able to calculate the percentage of their turnover that relates to taxable sales and will be able calculate the GST on that basis.

I note that there are currently no accounting methods specifically for charities. A retailer is defined as somebody who supplies goods. Consequently, a charitable institution, a trustee of a charitable fund and a gift-deductible entity that make non-commercial supplies of goods may be able to take advantage of the GST simplified methods, but there is no particular determination that applies to them. I understand that negotiations between some of the larger charities and the ATO are underway. I hope that this is implemented quickly.

The GST has now been operating for more than six years and yet the government has failed to significantly reduce the GST compliance burden on small business. The failure to reduce GST red tape is part of this government’s red-tape problem. This is a government which said when it was running for office that it would reduce red tape for small business by 50 per cent. I have said in the House before that I have yet to find a small business which thinks that its red tape has been reduced by 50 per cent over the last 11 years. There might be one out there. I have not come across one. I doubt there is one in the member for Cowan’s electorate. I doubt he has found one. I doubt you have found one, Mr Deputy Speaker Jenkins. I have not found one who says, ‘Over the last 11 years my red tape has been reduced by 50 per cent.’ I just do not think one exists—because it has not been reduced; it has gone up. I would not like to put a percentage on how much it has gone up by. I would not like to begin to imagine what the percentage would be for the red-tape burden on small business under this government over the last 11 years.

I must say that the government have been very good at implementing reports and calling for reviews. When they came to office we had the Bell review. Just recently we had the Banks review. Both dealt with regulation. The Bell review dealt with it particularly in relation to small business. The Banks review dealt with it more generally. The government have been very good at reviews but not so good at action. I got out the Bell report the other day, for some light reading, and I read the Bell report, having read the Banks review when it was released. When I was reading the Bell report I thought: ‘Some of this sounds familiar. I’m sure I’ve read this before. I’m getting a sense of deja vu.’ But of course I had not; I had read the Banks review.

Eleven years after the Bell review was released, things that had been recommended for change have not changed. Of course the Banks review had to come along and recommend the same things! I found, for example, that the Bell report recommended exempting car parking and taxi travel from fringe benefits tax, and there was a very similar recommendation in the 2006 Banks report. I found other recommendations in the Bell report that were repeated in the Banks report.

What we need is a coordinated government effort to reduce the red-tape burden on small businesses. Some people like to talk about small business. Some people like to say, ‘We’re the friends of small business.’ Some people might even say, ‘We’re the best friend that small business has ever had.’ But, when you talk to small business, you will find that what they want is somebody to reduce the paperwork burden on their time, their money and their resources. It is not just federal government paperwork—of course it is not. It is federal government paperwork, it is state government paperwork, it is local council paperwork: it is the combination of all the paperwork. Small business are looking for somebody to show leadership when they say: ‘Rid me of this paperwork, or at least rid me of some of it. Don’t say you will rid me of 50 per cent because I do not believe that you will achieve it. Just rid me of some of it.’

The Labor Party have a comprehensive plan which deals with the BAS and also with other matters. We have announced a one-in, one-out system for regulation. Importantly, we have announced a system based on the national competition model of payments to the states to harmonise and reduce regulation. As I say, it is not all about the federal government. What we need is a federal government that shows some leadership and says to the states, ‘Let’s work together.’ Some of those recommendations I talked about from the 1996 Bell report were about the lack of harmonisation across the states. There is a choice. You can play the blame game and say: ‘It’s up to the states to fix. The states should be getting their regulations harmonised. The states should worry about that.’ Or you can show some leadership and actively work to reduce the lack of harmonisation across the states. That is the choice that Labor have made.

We have said we will have a superannuation clearing house, which has been very warmly received by small business. The government have not pinched that one yet. They have not taken that one up. They have made no moves for a superannuation clearing house—I suspect because the Assistant Treasurer raced out a very misleading press release and talked about the superannuation clearing house in factually incorrect terms. Now they are in a position where they cannot adopt it, because the Assistant Treasurer did that. And, of course, there have been the FSR reforms, the financial services regulation reforms, and the reduction in disclosure burdens. These are matters for small business. These are matters that big business are very interested in, but they are also matters for small business. I have had small financial services providers in my electorate go out of business because the paperwork burden was just too high.

We do welcome this legislation. It does largely implement Labor’s policy. There are some differences at the detailed level, but it does largely represent the government’s response to the Labor Party’s policy position on BAS Easy. We do have some concerns about how this will be implemented in detail and we will be monitoring that closely. My colleague the shadow minister for the service economy, small business and independent contractors, the member for Rankin, will be moving a second reading amendment which will deal with those concerns, and which I endorse, during his contribution to this debate. Those concerns go to ensuring that this legislation works as intended. Those concerns go to ensuring that the ratios provided to small business are realistic and provide a real attempt to encourage and assist small business onto this simplified method. This is the response of a party which actually listens to small business and has not had a tin ear to their concerns for the last 11 years. The then minister for small business said, ‘The biggest issue that small business raises with me is the BAS,’ and the government did nothing about it. This is not the policy of a party that has had a tin ear for 11 years and then, a couple of months before an election, discovers BAS Easy and discovers the burden of BAS paperwork, and does something about it.

I am sure we are going to hear a lot of rhetoric from government members. We are going to hear the member for Indi say that this government is ‘the best friend that small business has ever had’. We are going to hear the same old tired rhetoric from the government. We are not going to hear the government telling the truth and saying, ‘Yes, the Labor Party have been calling for a ratio method—actually, they have been calling for it for the last six years—and now we’re going to get around to doing it.’ That is what we are not going to hear from that side of the chamber, but I suspect we will hear it from this side of the chamber because small business knows and understands that, when it comes to the BAS and when it comes to the red tape and paperwork, it was this government that delivered it. This government delivered the BAS and the paperwork burden that goes with it, and they suspect, perhaps quite rightly, that it will take a Rudd Labor government to reduce the burden.

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