Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

Labor will be supporting this Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018, and I foreshadow that I will move a second reading amendment later during my comments.

The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018 extends for another year a measure first introduced in the 2015 budget which allows small businesses to deduct immediately purchases of assets they start to use, or install ready for use, that cost less than $20,000. The measure applies to businesses with a turnover of up to $10 million. Over the forward estimates, the measure will cost $350 million to the budget.

Labor supported the initial measures, which went from 12 May 2015 to 30 June 2017, and Labor supported the measure when it was extended for another year, to 30 June 2018, in last year's budget. Of course, we should all remember that the accelerated depreciation, or the ability to deduct assets, particularly in the first year of an asset's life, was originally an initiative of Labor. Labor originally recognised the value of an increased immediate deductibility threshold for small business entities. It was Labor that increased that threshold from $1,000 to $6,500 as part of a broader package of reforms contained in the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011.

Labor subsequently opposed the Abbott government's decrease in that threshold from $6,500 to $1,000, which they announced in the 2014-15 budget. We all remember that horror budget. It came in the wake of the election of the Abbott government. The then Leader of the Opposition, Tony Abbott, said there would be 'no cuts to health, no cuts to education, no cuts to the ABC or SBS', and then proceeded in the first budget to do exactly that. They undertook massive cuts to health, education and, of course, the ABC. And they're doing that again. We learned what they really think about the ABC on the weekend, when the federal conference of the Liberal Party voted to privatise Australia's national broadcaster. Nonetheless, I digress.

When the Abbott government did reduce that threshold from $6,500 to $1,000, making it more difficult for small businesses to use the ability to write off those assets, it was Labor that actually opposed it. For that measure, it was Labor that was standing up for small business in the wake of this government attempting to make things more difficult for small businesses in this country by reducing that threshold from $6,500 to $1,000 dollars.

But then we saw the government change its tune. Thanks to the good lobbying of the Labor Party, and indeed many in the community, in the 2015 budget they changed their tune. Labor has supported the government's measures since that time. We all know that these types of measures provide tangible benefits to businesses and their investment plans. Many Australian businesses, operators and their advocacy groups, the peak bodies, have actually indicated that these types of measures are more effective and have broader support than the proposed company tax cuts that the government is looking to get through the parliament. That is because these provide tangible and real benefits that are immediate to a small business.

We all know that the great benefits of the company tax cuts flow to foreigners compared to Australians, because of the operation of dividend imputation. The real beneficiaries of the company tax cuts, which the government is proposing will take $80 billion out of the budget—and bear in mind that the government is cutting funding to hospitals, schools, TAFE, the ABC and other organisations—will be overseas investors, because they're not affected by dividend imputation.

Labor has proposed a very different option to what the government is proposing in terms of relief for small businesses in particular. We have said we will support the government's tax cuts for small businesses up to a threshold of $2 million. But we won't proceed with the corporate tax cut that the government is proposing, the $80 billion corporate tax cut, which applies to all businesses, including the big mining companies and, indeed, the big four banks, who have done such a wonderful job in representing the interests of their customers and acting in their best interests over the course of the last decade! But Labor has come up with an alternative, which is based on our consultations with the small business community and their requests for relief, and we're calling it the Australian investment guarantee. This will allow all businesses to immediately write off 20 per cent of all new investments in tangible and intangible assets in the first year. The balance is then depreciated in line with normal depreciation schedules for the rest of the period in the life of that particular item. It's a real boost to the cashflow of small businesses, helping improve the prospects of the marginal projects that may otherwise be struggling to get up.

Our investment guarantee is an accelerator for small business growth in Australia, driving new investment in essential plant, machinery and equipment. It is also a measure to help the development of knowledge assets supportive of new investments in our economy which embody innovation and human capital. From firms expanding the capacity of their factories in outer metropolitan areas to farmers wanting to buy the most sophisticated trucks and machinery in regional areas and advanced manufacturers wanting to upgrade their computerised technology in Australian cities, Labor's policy supports all of those businesses and provides them with instant relief and instant encouragement for investment in small pieces of machinery and capital.

Let us also be clear that our support for this measure does not in any way influence Labor's position on the government's company tax cuts. As I said earlier, we remain opposed to the government's proposed corporate tax cuts for the big end of town. Unlike the government's company tax plan, Labor's Australian investment guarantee will provide targeted tax relief for businesses that invest in Australia and in Australians. It's part of our economic plan for our nation, which includes properly funding schools, universities and TAFE; boosting apprenticeships; building a better NBN; and investing in job-creating infrastructure. Our responsible economic plan will grow the economy, create jobs and improve the budget bottom line.

I want to detail for the House some examples of businesses that would benefit from Labor's investment guarantee. A food manufacturer operating in regional Australia may be looking to spend $6 million upgrading to new energy-efficient freezers to ensure it can store its growing stock of food. Labor's Australian investment guarantee would help deliver the investment because it would deliver an immediate cashflow of $1.2 million to the manufacturer. That money could then be used to hire new employees and continue their business development and expansion plan in key markets in the Asia-Pacific region. As part of Labor's measure, the food manufacturer gets both the benefit of the instant cashflow through the write-off and the improved energy efficiencies from the new freezer equipment. More efficient equipment can help to reduce the carbon emission intensity of the production processes and, of course, produce significant savings in energy costs each year.

Labor's Australian investment guarantee would significantly boost business investment in energy-saving projects, lowering energy bills, cutting carbon pollution and growing jobs. While the Turnbull government tries to talk up their commitment to improving energy productivity, the fact is that Australia's performance has been dismal in recent years in this area. We only need to look at the latest report card on national energy productivity, where it's revealed that energy productivity growth has fallen from a long-term average of 1.7 per cent per year to just 0.4 per cent in the last year. This poor performance puts a break on business and jobs growth. It also amplifies the effect of energy price hikes under the Turnbull government and makes cutting industrial carbon pollution harder.

The case for backing Labor's Australian investment guarantee is clear. Along with energy efficiency benefits, recent modelling by the University of Victoria shows that, compared to straight-out company tax cuts, an investment concession like Labor's investment guarantee can produce up to three times more effective stimulus to investment. And Labor's plan is permanent. The Australian investment guarantee won't be subject to annual budget cycles like the government's instant asset write-off and like this particular bill here. This is the reason we need to update this once again; it's reviewed every year by the government. Labor's investment guarantee, if we are elected at the next election, will be permanent. Of course, the government's corporate tax cut does not guarantee any new investment on each dollar spent. It's a clear contrast to what Labor is proposing. The corporate tax cut can go directly to paying for share buybacks or dividend increases here and offshore, and not to new investment. Labor's plan guarantees that the government is supporting investment in Australian businesses, and we all know that there's been underwhelming performance when it comes to business investment in this country.

There's broad support for the measure that Labor is proposing. The Australian Chamber of Commerce and Industry in its prebudget submission called for more incentives exactly like the one that Labor is proposing, specifically arguing:

… the government should adopt the Opposition's proposed enhancements to accelerated depreciation.

That's from the Australian Chamber of Commerce and Industry. James Pearson, the CEO of the Australian Chamber of Commerce and Industry, said:

Business welcomes this commitment from the Opposition—it's good policy … What's particularly positive is the proposal to make this a permanent feature.

This is important as policy certainty and policy consistency is critical for business.

Innes Willox, the AIG chief executive, said:

The Investment Guarantee would provide a significant boost for businesses to invest particularly for longer-lived investments.

The proposed measure comes at a time when business investment, and particularly non-mining investment, has been slow to recover in recent years.

As a measure designed to lift investment, the Investment Guarantee would increase the stock of invested capital, boost the quantity of capital per worker, raise productivity and underwrite an acceleration of real wage growth.

The Energy Efficiency Council said:

A new Federal Labor policy that gives an immediate tax deduction to businesses that invest in energy saving equipment would help slash energy bills …

Ken Morrison from the Property Council of Australia said:

… the Australian Investment Guarantee would be a powerful tool for accelerating energy efficiency gains across different industries, but especially in the built environment … We welcome Federal Labor's announcement of this policy and the potential it has to help reduce costs for consumers.

Finally, Peter Strong from COSBOA, the small business advocacy group in Australia, said:

Labor's announcement is a welcome one as it would make it easier for Australian businesses to invest and grow. The fact that this measure is available to all businesses, big and small, is also very positive as it will help small businesses directly as well as encouraging larger businesses to invest in the products sold by small business.

So there's the voice of industry. That's what small business representatives, medium business representatives, bigger business representatives and the peak industry bodies in this country are saying about Labor's proposed Australian investment guarantee. It's clear that the investment guarantee really is about jobs, growth and rewarding businesses that make new investments in Australia.

While our plan guarantees that new investments in Australia are made in Australia, the Liberals' $65 billion tax handout will only guarantee windfall profits and windfall advantages for foreign shareholders and bigger executive bonuses. Labor's tax relief is targeted and affordable, and it works. That's why I move the following second reading amendment:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House notes that unlike the Government's company tax cut plan, the Opposition's Australian Investment Guarantee will provide targeted tax relief for businesses that invest in Australia and Australians, and guarantees new investment".

I commend that second reading amendment to the House.

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