Kevin Hogan (Page, National Party) Share this | Hansard source

It is never more interesting than to hear a Labor MP talk about small business, because it highlights their lack of understanding and, indeed, a great dichotomy that has occurred in Australian politics in recent times. As you would well know, Deputy Speaker Georganas, there has been a general belief on both sides of politics now for three decades about the importance of small businesses and making them competitive, because both sides of politics, up until now, have realised that every single taxpayer dollar that we need for health, every single taxpayer dollar that we need for education, every single taxpayer dollar that we need for welfare, every single taxpayer dollar that we need for defence, or any other thing that the Australian federal government needs to spend money on, comes from the private sector.

From the ramblings of the other side, you would believe that the more you tax them the better, because we are going to get more money out of them. That has not been a belief on both sides of politics for about 30 years, because what Bob Hawke and Paul Keating realised was that we needed a competitive and vibrant private sector, and it began with them. It began with the Labor Party who cut taxes not just for small business but for all businesses, including big business. Why did they do that? They did that because they knew that we needed to have a competitive tax structure that made us competitive with other countries throughout the world, because we cannot take our bat and go home—we are playing in a global economy and all our industries need to be competitive on the global scale. So Hawke and Keating cut taxes. They knew that was the way you had to go, and they did it. And they did not just cut them— they slashed them. It continued under the Howard-Costello governments, where we continued to move tax rates for companies and small businesses down.

If you were to believe the Labor Party right now, you would say 'What happened? We started getting less money, did we, in corporate and company tax collections?' No, that is not what happened. Because when you lower tax rates it encourages small businesses to develop, it encourages the cash flow of small businesses, and it encourages more businesses to establish and come here. What happens has been statistically proven by the ABS—and I wish I had brought the figures in. I will talk about the accelerated depreciation for small business in a minute, but I did not know I was going to talk about company tax rates. I feel as though I need to, though, given the dismal contribution from the previous member. What happens—every time we have done that since the 1980s—is this: when you cut company tax rates ,within two or three years—guess what?—you are collecting more money. You are collecting more money from companies than you did previously. That is not only because the economy is growing. It actually improves and is bigger—the actual tax collection as a percentage of the total size of the economy increases.

That was believed by everybody until populist Bill Shorten arrived as opposition leader and felt he needed to oppose small business and company tax rates. This is going to put us in a perilous position if we do not keep up. Deputy Speaker, I am sure you are aware that Britain's company tax rate is below 20 per cent, the US has proposals to drastically reduce their company tax rates, and within the OECD, which is not competitive by a world standard, we are near the top of the list. I think we are about sixth or seventh in the level of our tax rates. If you were to look more widely around the world, especially within our region, we are even more uncompetitive with our tax rates. The good member who just spoke talked about start-ups. I tell you what: when you have the choice, as a start-up, of opening up in Australia with high tax rates or going to a country close by with a lower tax rate, guess what? You do not go to the higher tax rate. He can talk about start-ups all he likes; if we do not have a competitive structure that is ongoing—if it is just for a few years—they will not do it.

I leave this part of my contribution on tax rates to say—and we say it all the time, but I say it for the benefit of the other side of politics—unfortunately, you cannot tax your way to prosperity. However, we can certainly help our businesses, our small companies and, indeed, our large companies to be competitive and to compete on a world scale. The more we encourage and help them and the easier we make it for them, the more successful they will be. And then, not only that, we will get more money from them to fund all of our public measures.

There is another measure that I am very happy to talk about in relation to the Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017. You would remember, Mr Deputy Speaker Georganas, that this accelerated depreciation measure was introduced a number of years ago. I cannot walk the streets of any of my towns without someone in a small business saying, 'This is one of the best things they have ever seen.' They like the tax cut, but I think they would put this measure up there as an equal. You know how it works, Mr Deputy Speaker. If you are a small business—and it has double whammy effect for some—you get a tax write-off on any capital purchase of less than $20,000. This obviously encourages you to go out and spend, and it improves your cash flow situation. A lot of businesses benefit not only from that measure but also from people coming to buy things from them, with the idea of getting the tax write-off. When this measure was first announced, some of the businesses I spoke to in the agricultural sector—businesses who sell machinery to farmers, such as big ride-on mowers and that type of stuff—they said that sales of those types of items just went through the roof straightaway. For some businesses, it is a double whammy. They get the tax write-off when they buy something and then they have people coming to them to buy something. Their business has expanded and boomed because of this injection to their cash flow.

It was most unfortunate that in my region in the last two months—on 31 March, in fact—that the CBD of Lismore was flooded. It was a devastating blow. I recall the images of the flood from when I was walking around the town. The levee over topped in the very early hours of Friday morning. The place was literally flooded for two days. You could not get into the CBD until the Sunday. I will always remember that Sunday, walking the streets of the CBD as all the owners went into their outlets to clean up. For many it has been a huge blow, because in some cases they had six foot of water and even higher come into their shops and destroy a lot of things. Some people had time to put things up; some people did not. Not that it is important for me, but my own office also flooded. The floods have caused great havoc for small businesses in the town of Lismore.

A couple of things have happened from that. The Lismore Chamber of Commerce and Industry did a great job. We had a meeting just a few days after the flood. We were applying for category C funding. The chamber got very mobilised. We got a lot of forms to small businesses at this public meeting, which was on, I think, a Thursday morning at the university. We had 600 people fill out this form and return it to us. Within two weeks of the flood, we had category C funding declared and a grant for small businesses to help them go out and recapitalise. It was a $15,000 grant, which for some was great, for some it helped and for some it will not go close enough to helping but at least it has assisted in a way. That has been a great help, and so is the depreciation on the purchase of capital goods helping them. Not only are they getting a grant; but they know that when they go out and spend the money it is tax deductible. They can write it off their taxable income straightaway. We need every bit of help we can get in order to get the economy and the people out there turning things over again.

I will just to go through some of the specifics of the legislation. We know that, based on current lodgements of 2015 to 2016 tax returns, 220,000 businesses have reported that they have used this measure and claimed nearly $2 billion in deductions. I actually think this number will get even bigger. I am still a little bit surprised. I go to a lot of business chamber meetings and talk to a lot of tax accountants especially in my region, and some of them are still unaware of this—not so much the tax accountants, but certainly some of the small businesses. In fact, I was doing a radio interview this morning and someone asked me about this and how it worked, and I was explaining to them what it was. They had read about the fact that we were doing it in 2017, and I told them we had been doing it for a number of years.

A key benefit of the $20,000 threshold, as we know, is that it encourages businesses. The whole idea of this is to give economies a boost, and it brings forward any type of capital investment that people have been thinking of making, because previously, as you know, if you bought something, although you could depreciate it, you could depreciate it only over time, at a certain percentage, depending on what it was, over a number of years. The fact that we have said that they can write it off straightaway has significantly brought forward capital investment, and that was the whole aim of this.

Another thing obviously has been very beneficial, and here I want to talk about pooling. Accelerated depreciation has two arms, the immediate depreciation for an asset less than the threshold but also the pooling of assets costing more than the threshold. The pooling arrangements are available to small businesses to provide greater simplicity for their tax affairs, as the pool depreciates all assets in the same way—15 per cent in the first year and 30 per cent each year after that. So, if you have a good that is worth more than $20,000 you can start to pool the goods together, and, again, it is an accelerated depreciation. Also, if the small business is registered for GST, the exclusive amount is taken to be the cost of the asset when calculating the depreciation amounts, and the immediate deductibility threshold is $20,000 exclusive of any GST. Where the entity is not registered for GST, then the GST-inclusive amount is taken to be the cost of the asset in the depreciation calculations and the immediate deductibility threshold of $20,000 inclusive of GST.

I want to give some examples so that people understand exactly what you might be able to do and what you could buy. Some of my neighbours have done this. For example, if you are a courier service then obviously you can go out and buy yourself a van. Neighbours and friends of mine who are farmers have gone out and bought themselves a secondhand ute, the sole use of which is for their farming activity. A book retailer could go out and buy things like bookcases or any capital equipment that they might need. Or it could be flooring—if you have to put new flooring into your retail outlet—or refrigeration or cooling equipment, or you could get a car in addition to a ute, if it is less than $20,000. Restaurant and cafe owners have so much capital equipment, and, as I said, a lot of this has been damaged recently in Lismore. You could go out to buy ovens, dishwashers and those types of things. And the great thing is that it is not capped at $20,000, so if you were to go out and buy an item, as a lot of local cafes and restaurants in Lismore are doing at the moment, such as a refrigerator for $15,000, you might also go out a bit later and buy an oven for another $15,000. It is not capped at $20,000. You can keep this. As long as the capital item is less than $20,000, it is not limited as to how much you do that, which, again, has given a great boost and brought forward many capital purchases.

So, again, I think this government understands small business. There are many people I know on this side of politics who have run a small business, and that is why we understand small business. I think one of the flaws of the other side of politics, with all due respect, is that there are not enough people over there who have run a small business, who understand small business. It is a cellular thing, when you wake up in the morning and you know not only that you have to pay or make your own salary from the activities but that you potentially have to do that for other people. At a cellular level you understand what it means to make a small business successful and the challenges you face when you run a small business.

We on this side of politics understand small business. The other side, unfortunately, do not. The previous speaker spoke about an economist who did not think the small business tax cuts were a good idea. I am an economist. I do not always advertise it; I do not necessarily treat it as a claim to fame. But I do treat as a claim to fame the fact that I have also run a small business. And while they may well find economists who do not think this is a good idea, I would say, with all due respect: go and find me an economist who has run a small business who would think this is not a good idea. And I think they would be struggling to do that. While they may well find economists who think this is not a good idea, there is not a small business in this country that does not think the instant asset tax write-off is a good idea—and the tax cut that the previous member said is not a good idea. Small businesses know it is good for them, our country and our economy and, therefore, good for the public services that we can provide if we encourage small businesses to succeed.

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