Terry Young (Longman, Liberal National Party) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023. It has been said by many colleagues on both sides of the House that small business is the lifeblood of our economy, and I couldn't agree more. But, yet again, the small-business community has been let down by a Labor government. Unfortunately, Labor governments really don't have much of a clue when it comes to small business.

Let's look at the different components of this bill that are meant to help small business. When you're in small business, cash—and cash flow—is king. You need it to invest, you need it to put on more staff, and you need it to buy equipment. As governments, it's our responsibility to make sure that businesses have as much cash as possible so they can invest in their business. First, we have the reinstatement of the coalition's instant asset write-off initiative for purchases of equipment with a value of up to $20,000. The only issue with this figure is that the coalition introduced the same figure in 2015, and I reckon that what you can buy for twenty grand in 2024 is probably a little bit different to what you could buy for 20 grand in 2015. As far as I'm concerned, there should be no limit on the instant asset write-off for small business, because it helps cash flow, and I want to take the time to explain why I know this would benefit our country.

Many people who aren't in business or haven't been in business simply don't understand what an asset write-off is, which is fair enough because it doesn't affect them—they don't think it affects them, but it does affect them indirectly. A business that buys a piece of equipment for that business has to depreciate it over a certain number of years. In most cases it's four, but, depending on the industry and the equipment purchased, it can be up to 10 years. To put it in layman's terms, this is akin to a wage-earner who has to buy tools or clothes for work, which they can claim as a legitimate deduction at tax time. Say you bought goggles and tools for a thousand bucks. If you were a small business, under the small-business rules you would have to depreciate that. In other words, of the $1,000 you outlay this year, you would be able to claim $150 the first year and then, for the next three years, you would be able to claim up to $300. It would take you four years to get that tax benefit, even though you'd actually outlaid the $1,000 this year. That's what small businesses have had to endure for years in this country. It seems unfair, right? That's because it is.

It also affects the economy in general because many small businesses operate through a trust. A lot of the time it's a husband-and-wife operation and they pay each other equally, which is fair enough because they put in an equal effort. The problem is that, say the trust earns $200,000 in a year, they have to pay tax on that $200,000 whether or not they take it. I can tell you from personal experience that, as a small-business owner, you don't take that money out of there. You take enough to live on and you leave the rest in there because you know that, ahead, you might have to buy equipment, you might want to expand your business by putting on new staff or you might need to soften the blow next time there's a Labor government in power. Because they are not able to write off the entire amount immediately after making the purchase, small businesses put off making large purchases until they know they have some type of cushion.

The problem is that, when the Treasury or the PBO give advice to the government of the day, they only talk about the immediate effect on the government. In only allowing small business to depreciate the purchase of assets over four years, instead of all in one year, they are concerned about the cash flow deficit to the Commonwealth, and I get that. However, they don't factor in that, if you allowed small businesses to write off the entire amount immediately, they would make larger purchases more often. The government would collect GST on that. The businesses supplying the goods would make a profit on those goods and pay taxes on those profits. They'd need to employ more people to meet the extra demand of businesses purchasing extra equipment, and those employees would pay personal income tax. All of that would more than make up for the cash flow issue created by the instant deduction.

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