Tuesday, 19 June 2007
Tax Laws Amendment (Simplified GST Accounting) Bill 2007
Debate resumed from 13 June, on motion by Mr Dutton:
That this bill be now read a second time.
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.
What a farcical performance from the young and inexperienced member for Prospect. I can understand why some small businesses, when listening to his words, would say, ‘Where has this silly young boy been?’ I rise to support the Tax Laws Amendment (Simplified GST Accounting) Bill 2007, not because the coalition is the best friend that small business has ever had; it is the only friend in this parliament that small business has had. Why? We only need to look at Labor’s record. We have had past leaders of the Labor Party saying, ‘We don’t even pretend to be the party of small business’—their own words. We have had the Deputy Leader of the Opposition defaming and inaccurately condemning a small motel business only in the last two weeks, ruining a very successful family business and causing it much havoc by incorrectly making claims in this chamber about its workplace relations affairs. And there was no apology. That is the sort of relationship that the Labor Party has with small business.
Small businesses cannot be fooled. They have seen what the Labor Party does. They remember interest rates of over 20 per cent. In the heyday of the Keating government, some were paying 24 per cent. Small businesses in rural and regional Australia remember that. Small businesses are the backbone of rural and regional Australia. They also remember that this party has said it is not the party of small business—they have never pretended to be, although under Kevin Rudd they pretend to be everything. They are such a confected and false party and they are trying to hoodwink the Australian electorate with their thin veneer of care and concern. That is all on the record.
My comments on the bill will be brief. The bill makes important refinements to the taxation system as it stands for small business. This bill foreshadows a suite of measures to make life easier for small businesses in meeting their tax obligations. It amends the GST legislation to allow simplified accounting methods for more Australian small businesses and other entities, thus allowing them to reduce compliance costs, red tape and bureaucratic inefficiencies.
Through this legislation, the government will again assist the small business sector to reduce business compliance costs and will assist industry to better comply with their obligations under the GST. In fact, this is an extension of the range of entities and businesses that have been able to access simplified accounting methods. The measures announced in the budget included an increase in the GST registration turnover threshold to $75,000, which means that, from 1 July 2007, businesses with an annual turnover of less than $75,000 will not be required to register for GST purposes. In addition, the legislation increases the GST threshold to $75 before the requirement that businesses obtain a tax invoice to claim an input tax credit for a purchase kicks in. This threshold currently sits at $50.
Importantly, the bill expands the simplified accounting arrangements for GST to extend them to more small businesses. Entities with an annual turnover of $2 million will be able to access such concessions. It will allow them to use the simplified method of GST calculation should it suit their requirements. As we know, small businesses make up 95 per cent of all Australian businesses. They are the engine room of the Australian economy, generating growth and employment opportunities for Australians. They have been at the forefront, assisting the reduction of unemployment—most recently to record lows of 4.2 per cent and, in Indi, to under five per cent. As the product of a small business family and environment myself, I know how important this sector is in my own electorate, across the country and in regions in generating income and opportunities for Australians.
We remember the Labor Party’s form and their attitude to small business and we remember a former Leader of the Opposition who said—and let us not allow the opposition to forget the immortal words of one of their former leaders—that the Labor Party had never pretended to be a small business party. Can it get any simpler than that? No, it cannot. An even more recent Leader of the Opposition said that he could legislate the GST out of Australia. The current Leader of the Opposition spoke of the introduction of the GST as a ‘fundamental injustice’ back in 1999, in one of those ridiculous, gobbledegook, theoretical speeches that did very little to contribute to law-making and the development of policy in this place.
Talk to the states and territories, who are swimming in record amounts of GST. I am sure they will be queuing up before the Leader of the Opposition in the event that he is elected as Prime Minister of this nation. If he is elected, I am sure they will be begging him for more money and perhaps even begging him for an increase in the GST threshold. That would be possible in a situation where you have wall-to-wall state Labor governments and a national Labor government. In that instance, the leader of the Labor Party will be played like a very fine fiddle. He will be played like a patsy by the state Labor leaders because of his inexperience and he will not be able to say no to them. He wants to be everyone’s friend in every single circumstance—unless the cameras stop rolling and we really get to see the sort of person he is.
I note the astonishing and quite extraordinarily claim made by the member for Prospect, who spoke before me, that the legislation is an adoption of Labor’s policy. What an absolute joke. This is the party that refuse to release a tax policy before the election. They claim not to be the party of small business yet now claim credit for this package of measures to assist small businesses to meet their GST obligations. We cannot take them seriously—not the member for Prospect nor any of the other members. In the same vein, they claim credit for all the positive economic indicators that have recently increased and become more apparent in the last few months. They claim in fact that former Labor Prime Minister Mr Paul Keating is directly responsible for these outstanding economic figures. They just cannot bring themselves to admit what everyone in Australia knows, which is as plain as can be—that the hard economic decisions of reform undertaken by this government have ensured an environment within which small, medium and large businesses can operate and create jobs. But then again, Paul Keating, their hero, was also the man who said that if you were not living in Sydney you were camping out. So much for a positive message to businesses in rural and regional Australia.
Everyone knows that the opposition are an economic rabble. They will return this country to the bad old days of mismanagement. Australia cannot afford a Labor government led by an inexperienced theoretical novice who cannot stand up to vocal state premiers. If his speech in reply to the budget is anything to go by, the Leader of the Opposition only believes in a tax cut for foreigners. He announced a $15 million tax cut in withholding tax for foreigners which would actually cost $100 million. That is all we have heard from the Labor Party on tax reform—certainly nothing for small business, which this legislation importantly addresses.
I commend the Treasurer for this bill, the announcement of which was made in this year’s budget. These are sensible and effective measures to improve Australia’s taxation system. They are reasonable, and it is a commonsense approach to enhance the tax regime and compliance, particularly as they impact on small business. I commend the bill to the House.
Labor support the Tax Laws Amendment (Simplified GST Accounting) Bill 2007 because it adopts Labor’s policy. I was interested to hear the member for Indi, who just spoke, berating the Labor Party for our approach to small business. This is what we have been recommending should be made available for small business since 2001. This is something the government has consistently said is not necessary and has now adopted. So of course we support the bill. Interestingly enough, we have been accusing the government of a lot of quick fixes in the lead-up to the election. This is no fix; this is sound policy and it is based on something we have been arguing for some time. And it is certainly not quick, as I have just indicated, because we have in fact been making the point, ever since the GST was introduced, that a simpler method of enabling small businesses to collect the GST must be developed to ensure that they are not burdened by being unpaid tax collectors for the government, and the government has found a more effective way for small businesses to collect that tax.
Interestingly, I also note that, as recently as three weeks ago in this chamber, on 28 May, Labor proposed an amendment that would have seen the effect of this legislation being implemented if the government had adopted it. On that occasion, the government voted against that second reading amendment to the bill. So it is an interesting change of heart on the part of the government. It is something they have rejected for six years, it is something they rejected as recently as three weeks ago, and now they introduce it as if it is some new policy thought on their part.
The point I would also like to make is that the government do not really believe this is necessary. We know that from what the Treasurer has said in the past. They are doing it because they are coming under pressure from the small business community, which is burdened by red tape. They know they have to move. They have heard the calls from small business, who have said, ‘Labor are putting forward a perfectly reasonable solution; why don’t you adopt it?’ to which the government have consistently said: ‘No, you don’t need to do what Labor is talking about. It’s not necessary. This is a simple new tax.’ They have resisted these measures until now. They have never believed in them, so why should the electorate believe the government when they say they will do it now? In our view, this is just something to get them through to the next election and, if they succeed, do not be surprised if we see them abolish the process.
I remember the Treasurer railing forth against this chamber on a number of occasions when he has talked about ‘their policy’, ‘their initiatives’ and Labor adopting ‘their solutions’. He proceeds on the basis of saying: ‘Trust the authors of the document, not the imitators.’ I might say, he himself does some very keen imitating of a former Treasurer in this place—the person whose name was just mentioned by the member for Indi—Paul Keating, because this is what he as Prime Minister said of the then opposition, the Liberal Party: ‘Believe in the authors, not the imitators.’ These words rebound on the Treasurer because the authors of this piece of legislation are the Labor Party—the authors who have put this forward for over six years, who have believed in it and who have prosecuted the case against a government who have consistently said, ‘It’s not necessary.’ Labor are the authors and it is in Labor that people should place their trust in relation to this particular initiative.
As I said, Labor have proposed a simplified method of collecting the GST since 2001. At the time we announced it, the Treasurer ridiculed it. He has consistently ridiculed it. When we proposed the ratio method for collecting the GST, a simplified method for its collection, he basically said—and this is a shameless piece of doublespeak—that such an initiative would cost business more and, in the same breath, said it would cost revenue more. How can it do both? It cannot be an additional cost to business and an additional cost to revenue. If there are savings it is certainly a cost to revenue, but it cannot cost business any more to do it. It is just like when the Treasurer shamelessly argued—in relation to their recently announced broadband proposal and in criticising Labor’s proposition to connect the nation—that not one cent of government money has to be spent to implement the government’s proposal, that it would all be done by the private sector. What is the billion dollars that the government has just rolled out of taxpayers’ money if it is not public resources? That is just the doublespeak of the Treasurer.
I remind the House also of the government’s promise prior to the 1996 election. Eleven years ago they said, in the words of the then Leader of the Opposition, Mr Howard, that they would have a commitment to ‘cut red tape for small business by 50 per cent’. That was their promise back in 1996. What have we seen since then? We have seen the review by the late Charlie Bell of small business and the cost impost on them. He did a very good job on reporting to the government. We saw a launch of that report. We saw a lot of words spoken about how the government were going to honour their promise. Then there was no action. Not one iota of change was introduced to lift the burden on small business.
Of course, there was a very important policy implementation in 2001—the GST, which Labor opposed. We said at the time that, if we did not succeed in our opposition to the GST being implemented, we could not unscramble the eggs. But we made a commitment to seeing it made a fairer tax and a simpler tax to collect. What this government did, rather than ease the burden on small businesses, was introduce the mother of all compliance mechanisms, the GST, which has since swamped small businesses in a mountain of paperwork. They have become unpaid tax collectors for the government. They are having to spend inordinate amounts of time, instead of with their families or building their businesses or doing the sorts of things they want to do, sitting down and doing endless amounts of paperwork to comply with the government’s requirements.
The fact is that the government has not reduced red tape by 50 per cent. It has not reduced it at all. It has in fact increased the red tape for businesses. If anyone wants any evidence of that, I refer them to the Productivity Commission research paper which talks about the potential benefits of the national reform agenda. It had this to say about regulatory developments in Australia:
While not all regulation is enshrined in legislation, it still imposes obligations and costs on business.
It goes on to say:
One crude measure of this increase is the growth in the volume of regulation. For example, between 2000 and 2004, as many pages of Commonwealth Government legislation were passed as during the period 1901 to 1969 …
In other words, in four years under this government it passed more pages of legislation and regulation impacting on business than in the 68 years from 1901. This is the government committed to reducing red tape? Give us a break! The same document says:
The Regulation Taskforce noted that there are more than 1500 Commonwealth Acts of Parliament and around 1000 statutory rules in force, as well as an unknown quantity of Commonwealth ‘subordinate’ legislation …
It goes on to say:
While reforms have generated net benefits to the community … the resulting regulation has sometimes been complex to administer and comply with …
And here is the real rub:
The cumulative impact of the growth in regulation is that businesses are subject to a vast and complex assortment of regulation, with a potentially considerable regulatory burden. This burden tends to fall more heavily on Australia’s many small businesses which have less capacity to deal with it. Regulatory burden also imposes broader costs on the government and the economy…
That is what the Productivity Commission’s research paper found, yet this government has ignored those findings.
I said before that we proposed at the time that, if the GST were passed, we would make it both fairer and simpler. We proposed initiatives back in 2001 to address the fairer side of it—to ease the burden in relation to small business. We proposed the ratio method for the collection of the GST. Essentially, it would not be compulsory; it would be an option that small businesses could exercise. It would be an exercise based on their past history of GST remittances. That would determine the ratio required to be used in the calculation. That ratio would then be applied to the quarterly turnover of the business. That is important, because that would take account of seasonal fluctuations in the way in which the business was operating.
This was a simple process. Two boxes only would have to be completed—one box with the ratio in it, based on past history, and the other box with the accurate detail of the turnover for the quarter. You would do the calculation and submit the remittance. You cannot get simpler than that. We said that there would be no requirement for a reconciliation at the end of the accounting period. We also said that the threshold that this approach would apply to would be businesses under the $2 million threshold.
Interestingly, the government ignored that proposal. They ridiculed it. Subsequently, they sneaked into the system their own variant of a simplified accounting method, but it had a very limited application. They introduced what were referred to as SAMs—simplified accounting methods. They were not ratios based on the individual business’s history; they essentially were schedules determined by the tax office.
We supported the introduction of these SAMs at the time but criticised the fact that they were limited in their application because, in essence, the methods could only be applied to businesses within mixed food retailing—in other words, small grocery stores, corner stores, fish and chip shops and bakers. ‘If you are going to introduce the principle of a schedule that businesses with those occupations could adopt,’ we asked, ‘why not any other business?’ It was a perfectly legitimate question, but we never got the answer. We asked the government why they would not extend it. The government commissioned another report. This was the Banks report, and it said, ‘Let’s extend it to other food businesses—restaurants, cafes and catering businesses.’ We asked the question again: why not to all small businesses?
In essence, this legislation does extend the methods to all small businesses. So the fact is there has never been a problem with doing what Labor proposed. The problem has been that the government refused to do it. There is nothing wrong with what we talked about. There was no technical problem, as this legislation now demonstrates, but rather a government refusing not only to honour their commitment to cut red tape but to embrace a solution for a tax they were responsible for introducing, which was not even around at the time they talked about the reduction in the red-tape target.
It is interesting, in relation to the simplified accounting methods that they have adopted, that they have also picked up an initiative which the member for Rankin talked about some years ago—enabling a snapshot method as well as a schedule method to calculate the ratio that small businesses would rely upon. We welcome that but we again pose the question: why not extend it? Why did they not extend it earlier when we were calling on them to do so?
I make the point that the ratio method is still an option we would like the government to consider because it gives choice and it gives opportunities to small businesses in the community. We want to make it as simple as possible for them to comply with the requirements under the legislation but then get on with the business of running their business or looking after their families. We still say that business should be given the opportunities that we have talked of in the past. We have argued consistently that there can be a more simplified method. The government rejected it. We say that the proposals that we have been talking about should be fully embraced by the government, even though we welcome this significant expansion and extension of the simplified accounting method to all small businesses.
I conclude where I began: this is Labor policy. This is something that should have been done six years ago. This is something that this government has been dragged kicking and screaming to embrace. It is something that they have rejected in the past without any valid explanation; it was simply the arrogance of the Treasurer, who did not believe that small businesses needed to have a mechanism for a simpler collection. He was contemptuous of those suggesting simpler ways for small businesses to calculate their taxes. He has been forced to embrace Labor’s proposal in relation to the thresholds, Labor’s proposal in relation to the norms method and a snapshot method, and Labor’s proposals in relation to the expansion of the simplified accounting methods.
When small businesses in this country finally get the opportunity to have a simpler way of paying the GST, they should not thank the government; they should thank the Labor Party. It is the Labor Party that has been arguing for this system despite the fact that we opposed the introduction of the GST. That tax having been legislated for and passed, we then set about the task of ensuring that the method of its collection was much more simplified to assist small businesses. So, when the small businesses of this country find that they have a much simpler way for remitting the GST, thank the Labor Party; do not thank this government. We support the legislation. We support the legislation because it is Labor’s policy.
Labor support the Tax Laws Amendment (Simplified GST Accounting) Bill 2007 because it is Labor policy. It is astonishing that previous government speakers have challenged that very proposition, that fundamental truth. Not only do we support this legislation; we are proposing a second reading amendment which says:
“whilst not declining to give the bill a second reading, the House calls on the government to assure Australian small businesses that it will not instruct the Australian Taxation Office to issue unfavourable GST ratios to businesses that apply for them, thereby negating the benefits of BAS Easy”.
Why would the Labor Party express concerns through a second reading amendment as to the true intentions of this government? The answer is: the government has form. Whenever it is in the shadow of a federal election, it changes its tack. In areas where Labor has called for reforms, the government steadfastly refuses to implement them, but, as it approaches an election, under political pressure—which seems to be the only pressure to which this government responds—it changes its position.
That is why we doubt the bona fides of the government. We are concerned that, if this government were re-elected, it might well seek to negate the very intent of this legislation based on Labor policy because it has opposed Labor’s ratio method and BAS Easy for five years. In the shadows of the election, going down the straight, as it approaches the post, suddenly there is a conversion. Suddenly the government is saying this is all its idea; it had nothing to do the Labor Party whatsoever—but in fact it is implementing Labor policy. We do remain sceptical. We remain cynical about this government’s motives and because it only seems to respond to political pressure.
I will give some background as to what the legislation actually involves. The GST was implemented in July 2000. The law, even at that time, enabled the Commissioner of Taxation to offer what are called ‘simplified accounting methods’ for use by eligible businesses. These are businesses that must be in the simplified tax system. They are essentially small businesses. Over time, from July 2000, the availability of these simplified accounting methods has been extended to include a wider range of eligible businesses. Simplified accounting methods are now available for eligible food retailers, including supermarkets, convenience stores, restaurants, cafes and caterers.
A brief history, therefore, is that the simplified accounting methods, which essentially are modelled on Labor’s ratio method, did apply from July 2000 to a very narrow range of businesses. Those businesses were identified—specified businesses operating as mixed food retailers. By ‘mixed food retailers’, I mean retailers of food that had a mixture of GST and non-GST sales and/or GST and non-GST purchases. But it was a very limited class of small businesses that could avail themselves of this shortened, simplified method of calculating their GST obligations. The Banks committee report recommended an expansion of the eligibility of businesses for these simplified accounting methods, and the government did decide to expand its coverage to further food retailers, including restaurants, cafes and caterers—another good development.
The purpose of this legislation is to answer Labor’s question: why not extend it to all small businesses? And that is what this government is doing in this legislation, because from 1 July this year the Commissioner of Taxation will be able to determine, in writing, simplified accounting methods for businesses, or other entities such as charities, that have a turnover of less than $2 million and have a mixture of taxable and GST-free supplies or make acquisitions—that is, purchases—of supplies, some of which have GST on them and others of which do not. So the government is embracing Labor policy.
I have here a document that exposes the incorrect assertions on the part of the government that this legislation did not have its genesis in Labor policy. This document is a departmental brief to the minister for small business back in 2001. The heading of the document is ‘Ratio method for GST’. This is the ratio method that the member for Indi and other government speakers said never existed. This document is not a fabrication; it is a leaked document from the department. And I can tell you who leaked it: the minister. The minister gave it to AAP. He thought he was on to something really big, because there were some caveats put in this document by the department as to our ratio method. But fundamentally it said this, under the heading of ‘Comment’:
A ratio times turnover method is a reasonable option for calculating GST, as long as the ratio continues to be an accurate reflection of the net GST position of the business. As the actual turnover figure in a quarter is the basis for the calculation, it can be a sound means of reflecting seasonal or abnormal fluctuations, provided the basic composition of the business’s trading circumstances does not change.
That is an endorsement of Labor’s ratio method, an endorsement of a method that the member for Indi and other speakers said never existed. They said that this was not based on Labor policy. Well, it was. And I would add that the qualification that the department made in saying ‘provided the basic composition of the business’s trading circumstances does not change’ is a situation which Labor had anticipated under the ratio method—that is, if the nature of the business did change then there would be a new ratio. Even that qualification was well anticipated under Labor’s ratio method.
In his National Press Club speech of earlier in 2007, the Labor leader, Kevin Rudd, announced that, if we were to be elected to government, Labor would implement an option called BAS Easy. The name is simple; the method is simple. It essentially would pick up on the simplified accounting methods, which themselves are based on the ratio method. There are two different types of rules under the simplified accounting methods. One is called the business norms method, and the other is called the snapshot method. Under BAS Easy, Labor proposed that the snapshot method apply to small businesses—that is, businesses with a turnover of less than $2 million. The way it would work is that the small business would take a snapshot of its GST transactions for one month, twice a year, and then apply the resulting ratio to its GST transactions for the rest of the year. That means that it would only have to do GST bookkeeping for two months out of 12 months, saving most of the bookkeeping time and effort that is currently devoted to being unpaid tax collectors for this government. That is what the Labor leader announced at the National Press Club. He also said that the other option would be a business norm—that is, the tax office would issue a ratio to the eligible small business, and that ratio would then be applied. Does that sound familiar? It should—it is the ratio method. It is BAS Easy, and it is this legislation: the Tax Laws Amendment (Simplified GST Accounting) Bill 2007.
Should Labor be happy? Yes, we are happy that the government has finally recognised that the GST bookkeeping burden is the No. 1 bugbear of small business in Australia. How do we know that? Because an MYOB survey, a special survey on red tape, was conducted in January 2007. The issue that came up time and time again in that survey as the No. 1 problem was GST bookkeeping.
I spoke of the political motivation of the government. Members who were in the parliament in 2001 will recall that the government was in a lot of political trouble, having slid dramatically in the opinion polls, and was facing defeat in the Ryan by-election. There were two problems: high petrol prices—and after the Ryan by-election the government abandoned the indexation of petrol excise—and the unbelievable complexity of the business activity statement and the GST bookkeeping requirements. After the Treasurer said in January of that year, ‘No more amendments—we have got it right this time’, the government belatedly said, ‘We will simplify the BAS process. We will simplify the GST bookkeeping requirements.’ Since that time the government has steadfastly maintained that there is no problem. If there is no problem, why do we have this legislation in front of us? The answer to that question is that there has always been a problem.
Any good representative of his or her constituents would know from speaking with small businesses and independent contractors that doing the GST bookkeeping drives them nuts. It is an issue that goes beyond just spending a bit of time after work. It is an issue that goes to the heart of what was once described by the Prime Minister as the big barbecue stopping issue of our time, and that is the balance between work and family life. The reason I say that is this: very often the spouses of tradespeople or independent contractors do the GST bookkeeping. It is the spouse who is stuck at home or has to go into work to do it, taking time away from caring for children and from working with their partners to expand the small business. This is a human issue. The Prime Minister talks about the human dividend from economic growth. What about the human cost of being burdened with this inordinately and unnecessarily complex GST?
At the time the government introduced the GST in 2000 the Treasurer of Australia repeatedly described it as a new streamlined tax system for a new century. Streamlined! It was inordinately complex and the government amended it so many times we lost count. But they did not fix the BAS burden. This legislation goes some way to improving the situation for small business of GST bookkeeping. It picks up on Labor’s BAS Easy proposal, as unveiled formally by Labor leader Kevin Rudd. The Council of Small Business Organisations of Australia, under the heading ‘BAS Easy Looks Good to Small Business’, said in response to Labor’s BAS Easy proposal:
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.
Mr Stevens was obviously praising Labor’s BAS Easy. He was also pointing out that it is an option. Small businesses that have got used to the current BAS bookkeeping requirements and wish to stay with them are free to do so under BAS Easy. I also point out that they are free to do so under this legislation—and so they should be. Mr Stevens, in response to the foreshadowing of BAS Easy—separately to what he said to the Australian Financial Reviewsaid, ‘It’—BAS Easy—‘looks like a positive thing for small business and particularly for very small business.’ Hear, hear!
Labor conceived of these ideas almost six years ago. I remember, as you would, Mr Deputy Speaker, sitting in this parliament while, at that dispatch box, the Treasurer ridiculed the ratio method. The Treasurer said that the ratio method would either cause small businesses to pay too much in GST or cause revenue to suffer because small businesses that were better off under the ratio method would opt for it, and those that were not better off would not. The Treasurer’s attack came from both sides—either small businesses would pay too much or they would pay too little. If that criticism, which he launched time and time again, was valid then it applies to the Tax Laws Amendment (Simplified GST Accounting) Bill. How can the Treasurer have it both ways? It does not automatically follow that small businesses would pay too much or too little. If the Treasurer truly understood the complexity of the BAS he would understand that many small businesses would rejoice in not having to do all the GST paperwork. We come into this parliament and hear coalition members saying that Labor has no experience with small business. I wonder whether the Treasurer does. Does he not understand that small businesses could save time and money by not having to do the complex GST paperwork? He certainly has not understood that through most of the period since 2000, but apparently he now does.
So, if Labor is so happy about the government introducing the amendments for which we have been calling for so long, why would we move a second reading amendment? The reason is we do not believe the government has its heart in this. Labor believes that the government has done this only under political pressure, just as it rolled out its own broadband idea yesterday in response to the political pressure from Labor and just as it has said it is going to have an inquiry into petrol prices in response to the political pressure from Labor. Whenever there is some political pressure, the government responds—and the government is responding today. If this legislation were implemented properly, in good faith, then it would be a very good piece of legislation. The problem with it is that in the end it only allows eligible small businesses to approach the tax office for a discussion. They can go to the tax office and ask for a ratio to be issued. The tax office will decide, firstly, whether a ratio will be issued to the particular small business and, secondly, what the ratio is.
A tax office, under the instruction of a treasurer who did not believe in any of this but just wanted to cover a political base, could well either refuse to issue a ratio or issue a ratio that is so blatantly unfair and so blatantly unfavourable to the applying small business that the small business owner would throw up his or her hands and walk away. It sounds to us that that is just as the Treasurer would want it. So we will move a second reading amendment to indicate our concerns about the bona fides of the Treasurer and about whether—if the Howard government were re-elected—this would in fact be put in place in good faith, because the Treasurer has never believed in the ratio method and has never believed in the BAS Easy proposal. Indeed, the Treasurer said to the Australian Financial Review after BAS Easy was released that he did not support Labor’s BAS Easy proposal. In the story, which was headed ‘Costello sour on Labor’s BAS sweetener,’ he condemned our proposal. But, as the Australian Financial Review pointed out, the difference between Labor’s plan and what the government had already done was that the plan extended it to all eligible small businesses. That is what this legislation does. We support the legislation, and we call on the government to declare its bona fides in this matter, because it does not have a very good track record. I move the 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 calls on the government to assure Australian small businesses that it will not instruct the Australian Taxation Office to issue unfavourable GST ratios to businesses that apply for them, thereby negating the benefits of BAS Easy”.
Mr Deputy Speaker, you can forget superannuation paperwork, you can forget the payroll tax and you can forget trying to understand the complexities of the government’s handling of the industrial relations debate: the bane of small business people, quite frankly, is without doubt the GST. You know that, Mr Deputy Speaker, I know that and anyone that truly gets around their electorate knows that. Six years after its introduction, the GST remains the biggest headache for many small businesses throughout this country. That is not just me saying that as a Labor member; that is the claim that is being made by small business operators everywhere. In a survey conducted by MYOB, and released in January this year, of some 1,400 businesses, the No. 1 red-tape burden for many businesses was BAS reporting. BAS reporting ranked in the top three of red-tape burdens for 68 per cent of the small businesses surveyed and featured as the No. 1 issue for a third of them.
After six years of reporting drudgery for small businesses, the government has finally decided to act. Mind you, before you get carried away, Mr Deputy Speaker, this government’s action was not the result of a particular concern for the lot of small business operators; the government was not responding to their concerns. This bill before us, the Tax Laws Amendment (Simplified GST Accounting) Bill 2007, is nothing but the manifestation of a government’s poll driven response to the fact that small businesses are concerned about GST reporting, given that this government is very concerned about how it might be travelling in the polls. So, much as with the so-called ‘fairness test’ introduced into Work Choices and the two-tiered broadband approach announced yesterday, this government has rushed to follow Labor’s lead when it comes to reducing the small business GST compliance burden. Sadly for small businesses, the government has once again introduced a poor facsimile of a Labor plan, but I will come back to that a little later.
The bill before us will allow the Commissioner of Taxation to determine simplified accounting methods for certain small businesses and other entities. The bill will allow for simplified accounting methods to be applied to small businesses and other entities, with an annual turnover of less than $2 million, that make a mix of taxable and GST-free supplies or that acquire a mix of supplies that are both taxable and GST-free for suppliers. Currently, the taxation commissioner can only determine simplified accounting methods for retailers who sell food or who make supplies that are GST-free under the GST concessions for charities. This bill extends the range of eligible businesses for whom the commissioner can determine simplified accounting methods to all small businesses, not just retailers, individuals and entities such as partnerships and trusts, the criteria being that the annual turnover of the businesses is less than $2 million.
This constitutes a large broadening of the eligibility for simplified accounting methods for GST to all business entities which deal with mixed supplies and inputs and with an annual turnover of less than $2 million. More importantly, this is long overdue. Quite frankly, it is particularly overdue as a recognition of the burden that the BAS reporting system has placed on small business entities throughout this country. In the MYOB special survey released in January this year the main reason given for ranking BAS reporting as their biggest red-tape burden by the 45 per cent of respondents who did so was the time it took to fill in returns. Completing BAS returns takes time. Certainly the measures introduced in the bill will help alleviate some of that in terms of the reporting of BAS returns. However, there are other opportunities that this government should have taken. As a matter of fact, they should have gone further.
When it comes to red-tape reduction, Labor has led the way and this government have again followed. The bill and the announcement of the changes in the budget were another example of this government playing catch-up. We have seen that in education recently. We have seen it in terms of petrol pricing. Only yesterday we saw it again when the government rolled out its two-tiered broadband policy. When it comes to playing catch-up politics—when it comes to this government trying make up for 11 years of neglect and when it comes to this government yet again adopting versions of Labor policy and trying to pass them off as its own—this government fails to deliver. The member for Macarthur got it right when he was recently quoted in the Australian newspaper. I forget the date of that article, but I am sure it can be accessed. He was reported as bemoaning the fact that the public has given up on listening to this government on the big issues. As the member for Macarthur knows, the people have switched off when it comes to listening to this government. He knows that what has been happening in the last few months is that Labor identifies the issues, Labor comes up with the solutions and the coalition adopts a poor facsimile of those solutions and makes some half-hearted attempt to pass it off as fresh thinking. The member for Macarthur acknowledges the shortcomings of this government. Quite frankly, this has been going on for some time. I have to say that he is right: the people have given up on listening to this government on the big issues confronting society at present. The process of implementing poor facsimiles of Labor policies has not changed when it comes to this bill either.
Labor have consistently supported a simple ratio based method of calculating GST liability. We took a simplified BAS to the 2001 and 2004 elections. At the National Press Club in April this year the Leader of the Opposition, Kevin Rudd, announced that a Labor government would address red-tape compliance burdens associated with BAS reporting. At that stage, he announced BAS Easy. This is a very good policy, I have to say. As someone who has worked in small business, I can see the value of that policy as it would apply to small businesses—particularly those operating in my area. Under BAS Easy all mixed businesses with a turnover of less than $2 million would be given the capacity to use simplified accounting methods. Under a Labor government, small businesses eligible to obtain a ratio from the tax office would be given a ratio for the purposes of calculating their GST obligations. It is a very straightforward approach. I am sure that members opposite would applaud it for its simplicity—and its ability to be easily understood and to make GST reporting one of the least difficult things that a small business operator has to contend with when running a business. BAS Easy would reduce GST bookkeeping by up to 85 per cent. No doubt this would please the 68 per cent of the respondents to the MYOB survey who listed BAS reporting among the top three red-tape burdens for their businesses. In fact, you would probably be safe in saying that there would be very few people who would object to it.
I know that the Council of Small Business Organisations of Australia has said, and I quote, ‘For all small businesses working under a revenue threshold of $2 million a year the BAS Easy system is a simple and practical answer to the current red tape.’ COSBOA went on to say, ‘Taking an opt-in approach will allow those businesses that are working with few or no staff to adopt the new BAS Easy system to save time and effort should they so wish.’ While many agree with that approach—including, as I indicated, many of the businesses operating in my electorate of Werriwa—there are some who do not. While adopting more a position of opposition for the sake of opposition, the Treasurer certainly did not take to the Labor Party’s BAS Easy policy. In fact, in an article in the Australian Financial Review he was described as being very sour on Labor’s plan. I can only think that the primary reason the Treasurer did not like the plan was that he failed to come up with it himself. After six years of living with the GST, having been responsible for its introduction and responsible for making every small business operator in this country an unpaid tax collector for his government, this Treasurer has paid little attention to the problems that BAS reporting has caused small business—so much so that he cannot see that the solution to this problem would be to have a single ratio approach to GST reporting.
Opposing it in the national newspaper is not the only time that the Treasurer has adopted an approach of opposition to BAS Easy for the sake of opposition. The government voted against Labor’s BAS Easy second reading amendment to the Tax Laws Amendment (Small Business) Bill debated in this place recently. Following his strident criticism, instead of accepting Labor’s superior BAS reporting policy and adopting it in full, the Treasurer announced in the budget what I can only describe as the ‘BAS sort of easy’ approach. This ‘BAS sort of easy’, a policy introduced through the bill before us, is the BAS Easy policy that you have when you will not introduce BAS Easy, even though you agree with it. Surely the government cannot be that out of touch that they cannot see that BAS Easy would be of significant assistance to every small business operator in this country. Simply because the government did not come up with it, perhaps by embarrassment they cannot bring themselves to introduce a simple ratio system for small business operators to make it easier and to relieve some of the compliance burdens currently foisted on small business operators in this country. I can only imagine that this ‘BAS sort of easy’ is the policy that stems from the fact that the coalition only sort of cares for small business and is only sort of interested in trying to help them cut their compliance burden.
You would be hard-pressed to find anyone who denies the fact that the impact of red tape is felt most keenly by small business operators. Unlike larger organisations, small businesses do not normally have the resources needed to comply fully with the reporting and paperwork that is necessary, and a lot of their time and effort is taken up in complying with red tape. I know that in my electorate the compliance burden of many of these small or home based businesses falls on the partners, the husbands and wives—the spouses. These business operators try to balance their work and home lives while trying to comply with the reporting responsibilities to the Commonwealth.
Contrary to the feigned protests of the members opposite, Labor does understand the needs of small business. Labor is in touch with small business. Labor understands that small business is the employment generator for this nation. We need to do more to assist small business in what they currently do and also give them the opportunity to expand, grow and employ more people throughout their operations. Unlike members opposite, who see the solution to everything in the business world only through the guise of Work Choices, Labor understands business needs and wants businesses to achieve growth and competitiveness within the economy through means other than simply slashing wages. For this reason, Labor has adopted a sensible ‘one in, one out’ approach to regulations, which means that the red-tape burden will not gradually increase over time.
As the MYOB survey indicated, three-quarters of the respondents considered time saving as the main advantage to their businesses from a reduction in red tape. Additionally, one in 10 businesses that took part in the MYOB survey indicated that solving the red-tape burden would allow them the opportunity to expand and grow. As I indicated, on our side of politics we look to give small businesses the opportunity to grow with a view to employing more Australians. Reducing the time that small business operators spend dealing with red tape—for example, GST compliance—results in more time spent working on their businesses, growing them, planning for the future and generating jobs and in less time filling in paperwork.
Small business operators should be mindful of this government’s record when it comes to implementing real and serious solutions to cutting red tape. Do not forget that, back in 1997, it was this coalition government that gave a commitment to reduce red tape by up to 50 per cent. Yet what we have seen, particularly over recent years, is that the burden of red tape has grown substantially and disproportionately affects the operations of small business operators throughout this country.
For six years, this government has opposed GST simplification through the use of a simple ratio method. Not only has it opposed it in the media; it has opposed it in the parliament and actively campaigned against it during the 2001 and 2004 election campaigns. Small business should not be fooled come the next election; they should see the pattern that has been adopted by this government. Before the next election, unless this government adopts Labor’s ‘one in, one out’ approach, small business operators should know that this government’s pattern of behaviour in looking after the interests of small business and relieving the red-tape burden can only be measured against the commitment that this government made back in 1997 and failed to deliver on. Small business operators, their partners, their families and their friends should remember that this government has had 11 years to take real steps to address the red-tape burden on small business, and yet it has done virtually nothing.
In contrast, Labor has proposed a simple approach—one in and one out. For each new regulation proposed for implementation, another regulation will have to go. The bill before us is poll driven; everyone knows that. It is a reaction to the problems rather than a real attempt to address the real issues confronting small business operators at present.
Labor supports this bill, but I draw the attention of the House to the second reading amendment moved by the member for Rankin. Anyone who supports small business should be supporting that amendment. Labor’s second reading amendment is aimed at addressing the concern that the tax office could be directed to issue unfavourable ratios in the implementation of this plan which would negate any benefit derived from the simplification of BAS reporting. It is important that this government provides that commitment so that small businesses are not deprived of the opportunity.
I, too, rise to speak in this second reading debate on the Tax Laws Amendment (Simplified GST Accounting) Bill 2007. The bill provides much needed relief for small business by simplifying our tax system. The purpose of the bill is to extend simplified GST accounting methods to a larger number of small businesses.
Business regulation in this country has certainly started to spiral a bit out of control. Business regulation is stifling small businesses’ drive to be innovative, to move forward and to grow. Labor supports this bill. We support it because it reduces the red tape for small business. But most importantly we support this bill because it mirrors the principles that Labor attempted to implement at the 2001 and 2004 elections. Labor proposed a simple BAS at these two elections that used a ratio to calculate GST obligations.
It is great to see, once again, that this government is so clearly out of ideas that it has to steal them from Labor! Over the past few weeks we have seen this ageing government playing catch-up on Labor policy. The government has been playing catch-up for a while now. They are playing catch-up on climate change. The Prime Minister just woke up to the problem this year after 10 years in hibernation. Who is leading, and who has led for many years, the policy debate on climate change? Labor has.
Then, only last week, the Treasurer finally decided to take up Labor’s plans to inquire into petrol prices. Motorists in the Ballarat electorate are now paying $700,000 extra per week at the petrol bowser compared to what they paid in January this year. The last thing motorists need is to be getting ripped off at the petrol bowser.
Yesterday we saw the government playing catch-up on broadband policy. After 11 years of waiting for ADSL broadband, communities in my electorate have found out that they will be relegated to a second-class service. What next? We might even hear the government finally start talking a little bit more about fairness within the workplace. I doubt that that is going to occur.
But this bill is a start. This bill will provide all mixed business with an annual turnover of under $2 million the ability to obtain a ratio for calculating GST obligations from the Australian Taxation Office. This is welcome news for the 16,000 businesses in the Ballarat electorate, many of whom continue to tell me that they are burdened by excessive red tape. An example of this excessive red tape was recognised in the Banks task force report on business regulation. The report showed that it costs small retail grocers 28.25 per cent of their GST collections just to cover GST compliance costs. These small businesses pay over one quarter of their GST collections on compliance.
Craig Emerson and Labor released a statement on our BAS Easy option on 19 April this year, and we received strong support for our initiative from the peak body of Australia’s small business, the Council of Small Business Organisations of Australia. The Council of Small Business Organisations recognised that our approach was a simple and practical answer to reducing the current level of red tape. The Council of Small Business Organisations backed Labor’s BAS Easy, and finally the government is also coming up to speed.
Small businesses want a reduction in red tape. Labor wants a reduction in red tape for small business. And this government now, in the shadows of an election, wants to adopt Labor’s small business policies, because it now realises that much of the burden of the GST needed real fixes some time ago. Labor’s BAS Easy proposal would have reduced GST bookkeeping for small business by up to 85 per cent. Had the government acted more quickly on our previous proposals, small business could have saved valuable time—valuable time that has now been wasted on GST bookkeeping.
Small business would have saved time because Labor’s plan let small businesses complete BAS paperwork in only a few minutes, not in the hours that is currently required. At present it can be tough for small businesses to spend so much of their time calculating the GST implications on their total sales or total purchases. This bill will enable small business to use a simplified GST accounting method and apply a single ratio to total sales and purchases. This is a common-sense approach. This is the ratio method. It is, in fact, BAS Easy, and it is good Labor policy.
Interestingly, the Treasurer has not been a strong supporter of Labor’s policy in relation to this area in the past. The Treasurer attacked us on our ratio method in the past two parliamentary terms. The Treasurer condemned this proposal and said that it would not work. Labor welcomes the Treasurer’s backflip, and we are happy that he has decided to support Labor’s ratio method.
At present, the GST act firstly allows the commissioner to determine simplified accounting methods for retailers that sell both taxable and GST-free food and have an annual turnover that is not more than the relevant threshold. Secondly, the act allows the commissioner to determine simplified accounting methods for entities that make supplies that are GST-free under the GST concession for charities. So currently the GST act gives the commissioner powers to determine simplified accounting methods for retailers who sell food. These retailers may include supermarkets, convenience stores, restaurants or cafes.
The changes in this bill now increase the number of businesses eligible to use simplified accounting methods—from food retailers, to all small businesses. All small businesses that have an annual turnover of less than $2 million that have mixed supplies or mixed inputs are now eligible. This is belated but good news for the majority of businesses in my electorate that are currently burdened by this tedious red tape. The reality is that many businesses in the Ballarat electorate and across Australia buy and sell products that are taxable and buy and sell products that are GST free. Some businesses buy both taxable and GST-free products, but only sell taxable products. The problem is that recording GST-free sales separately from taxable sales can be a tough task. GST bookkeeping is time consuming and businesses are wasting their already precious time with GST calculations.
The advantage that small food retailers have when calculating GST, compared to other businesses, is that they have access to five simplified accounting methods issued by the Australian Taxation Office. At this point, I would like to express my support for the second reading amendment moved by the member for Rankin in relation to the Australian Taxation Office not being able to issue unfavourable GST ratios to businesses that apply for them, thereby potentially negating the entire effect of BAS Easy. The Australian Taxation Commissioner determines these five simplified accounting methods and makes GST accounting much easier for food retailers. The five methods developed by the commissioner that these businesses have to choose from depend on annual turnover, the nature of the business and the nature of the point-of-sale equipment. Similar methods will now be able to be applied to many more businesses throughout my district. This bill will result in the commissioner releasing similar simplified accounting methods for all small businesses.
There is of course a lot more that needs to be done to support small business in this country. Small business still faces many challenges. There is still a long way to go before businesses in Australia and in my region are relieved of the current stranglehold of regulation, especially GST compliance. This stranglehold of regulation on business was recently confirmed by a special MYOB survey on the red-tape burden on small business. MYOB found that GST paperwork requirements were the No. 1 red-tape burden for small business.
Australian businesses need a plan to reduce red tape not just for GST requirements but for all business regulations. The Leader of the Opposition and the Australian Labor Party are continuing to set the challenge for this government in relation to regulation and small business. The Leader of the Opposition has outlined a coordinated national strategy to reduce the regulatory burden on productive Australian businesses, and Labor has a plan to further reduce business regulation. Labor will set a national objective in partnership with the states and territories to harmonise key regulations imposed on businesses operating across jurisdictions. This includes OH&S regulation, administration of payroll tax, building codes, and trades and professional body recognition.
Labor will further reduce business regulation by commissioning the Productivity Commission, through the COAG reform council, to be responsible under statute for estimating the costs and benefits of harmonisation in each of these areas. Labor will provide a financial incentive to reward state and territory governments that implement these regulatory-reducing reforms. A federal Labor government will reward results, using a model similar to that which existed under the national competition policy reforms. Labor will put in place a system that will protect small business from any new regulation. Labor will introduce a rigorous regulatory impact statement process. This process will be reviewed through our decision to have a Small Business Advisory Council, and the council’s comments will also be published in the regulatory impact statements.
This bill may reduce regulation, but the Howard government continues to add more regulations than it actually removes. Labor is going to reverse this trend. A Labor federal government will adopt a ‘one in, one out’ approach to all new Commonwealth regulations. Under Labor, if a new regulation is introduced that impacts on small business then an old regulation must go. Labor has already outlined real action to reduce the red-tape burden for Australian businesses, especially small businesses. Labor has other initiatives to reduce red tape and tackle the many problems that Australian small businesses face. For example, Labor proposes to give small businesses the option to make payments into a central superannuation clearing house, free of charge, consequently reducing the form-filling and checking and the costs and legal liability associated with the government’s choice-of-super legislation.
Labor also proposes to cut red tape in financial services by introducing a simple, standard disclosure form for financial service products. Labor’s three- or four-page disclosure forms are in clear contrast with the government’s financial disclosure regime, which has resulted in some consumers being issued with 100-page complex documents that are an administrative nightmare for consumers and businesses.
The concerns of small businesses do not end with red tape. The government still needs to address the national skills shortage, fairness in the workplace, overall economic productivity, cashflow problems from late-paying government departments and, especially, offer real broadband solutions for regional and rural small businesses like those in the electorate of Ballarat.
Labor supports this bill because it reduces red tape for small business. The government must also tackle the other issues that small businesses are faced with. Streamlining GST calculations is a start, but it is now time to tackle the national skills shortage and assist businesses to find skilled labour by introducing trades training schemes into schools. This is just one way that Labor will address the current national skills shortage.
This bill, in the shadows of an election, may reduce red tape, but what about bringing fairness back to our workplaces? Labor has a plan for fairer and more productive workplaces and believes that our economy can go forward with fairness. What about improving innovation, competitiveness and productivity in Australia? Small businesses do not just need a bill on simplifying the GST burden; they need Labor’s plan to meet the huge challenges of overcoming decades of skills shortage as a result of being in a more intense and competitive market—resulting from our regional trading partners like China and India—and the ageing of our population and decline in the size of our workforce. Labor will boost productivity by investing in business, investing in creativity and knowledge generation, investing in new technology, supporting foreign investment in Australian R&D, investing in innovative Australian firms and strengthening the skill base for innovation, including maths, science and engineering.
With GST calculations, many small businesses struggle to find time. But they also struggle with cashflow as a result of late payment by federal government departments. Labor also proposes to tackle the burden on business by paying small businesses on time. Labor will give small business the right to charge Commonwealth government departments and agencies interest on bills not paid within 30 days. Labor understands that late payments result in significant cashflow problems for many small businesses. This problem needs to stop.
Small businesses are struggling to compete in the global market, as their overseas competitors already have access to reliable, fast and affordable broadband. Only Labor’s broadband plan will slash telephone bills for small business as well as provide other opportunities such as more accessible teleconferencing and videoconferencing. The Howard government’s broadband policy is really just a political quick fix. It is not about delivering for regional and rural Australia or for the future of our small business community.
I support this bill because it is important that simplified GST accounting methods are accessible to all small businesses. It is important to reduce the existing regulatory burdens that impact heavily on small business. For small business to prosper, they need support and reform from a federal government—and Labor has plans to achieve this. This bill will reduce the red-tape burden on small business. The bill is much needed, as this government has waited too long to combat the GST’s regulatory burden on small businesses.
in reply—I thank the members who have contributed to the debate on the Tax Laws Amendment (Simplified GST Accounting) Bill 2007. I will begin by providing a couple of words in response to the second reading amendment moved by the honourable member for Rankin. It must be difficult, if not embarrassing, for members of the Labor Party to talk about small business and to put themselves forward as a legitimate alternative. This is a country which has now paid off Labor’s $96 billion of debt. We have moved small business in this country from a situation under Labor where they were paying over 20 per cent on their overdraft, where they had unions breathing down their neck and where unions were involved in workplaces and determining bad outcomes for small business.
The Labor Party stand in this chamber today saying that they want a return to the days of bad times for small business. Not one small business person I speak to in my electorate or as I go around the country thinks that the Labor Party would be good for small business in this country. Small businesses have been and remain the backbone of the Australian economy. They are great employers. They are people who risk their capital. They provide good opportunities not only for themselves but also for the future of their families, their local economy and the national economy. To hear the Labor Party in this chamber tonight talk about trying to provide a fresh alternative for people in small business is laughable. It must be embarrassing for them to stand here with a straight face and put that proposition.
This bill enables the Commissioner of Taxation to determine an appropriate simplified accounting method under the business norms method. This will include the commissioner determining the appropriate portion of sales or purchases that represent GST-free supplies. The member for Rankin has raised a concern via his second reading amendment that the government will direct the commissioner to only offer rates that are of no real benefit or are of limited benefit to small business. That is a nonsense. I deal with lots of legislation in this chamber—this portfolio has a large legislative load—and I have never seen such a ridiculous amendment moved by the Labor Party as that moved by the member for Rankin in relation to this bill. The government is a true friend to people in small business and would not be taking the time to make these changes that benefit small businesses if we did not want to see them implemented to the benefit of small business.
Imagine for a moment, please, if you would, how ridiculous this proposition is that is being put by way of amendment by the member for Rankin. This amendment not only is ridiculous but also makes small business understand just how irrelevant the Labor Party are to small business. They are a party of ex-union bosses. They govern for the unions and are governed by the unions. At every opportunity they walk in the way of people in small business, and this parliament today should recognise that. The parliament has given the Commissioner of Taxation the administration of Australia’s taxation laws, and neither I nor any other minister can intervene in that administration. Since the introduction of the GST, the commissioner has implemented a number of simplified accounting methods to the satisfaction of small business. The commissioner is best placed to determine, in concert with small business, what is an appropriate simplified accounting method.
As announced in the 2007-08 budget, this bill will expand the existing GST simplified accounting arrangements, reducing red tape and compliance costs for Australian small businesses. During the course of this debate, opposition members, including the member for Rankin and the member for Prospect, claimed that the government is adopting Labor’s policy in this area. I note that the changes in this bill expand on the government’s idea that has been in place since the inception of the GST. So let us dismiss all of this nonsense talk from the member for Rankin and the other members of the Labor Party who have taken part in this debate that somehow this idea about simplifying arrangements for small business is their idea and theirs alone. When in government, and since they have been in opposition, the Labor Party have done everything to stand in the way of small business, and tonight has again been a demonstration of their ignorance of what is good for small business.
Since the GST began in July 2000, the GST law has enabled the Commissioner of Taxation to offer simplified accounting methods for use by eligible businesses. Over time, the government has expanded the availability of these simplified accounting methods to include a wider range of small businesses. From 1 July 2007, the simplified accounting methods will be available for businesses or other entities, such as charities that have an annual turnover of less than $2 million and that make either a mix of taxable and GST-free supplies or that have acquisitions of taxable supplies and GST-free supplies.
The government has always recognised that small businesses make a substantial contribution to our economy and to Australia and are a vital source of jobs, export and innovation. The government is firmly committed to ensuring that enterprising Australians can create a business and prosper. The measure in this bill is a part of this commitment to helping the small business sector. The government has significantly reduced business compliance costs, including the costs of complying with their GST obligations. The changes in this bill are in addition to other measures announced in the 2007-08 budget which will increase the GST registration turnover threshold for businesses to $75,000 and increase the GST-exclusive threshold to $75 before businesses will need to obtain a tax invoice to claim an input tax credit for purchases.
With small businesses making up 95 per cent of all Australian businesses, this bill ensures that more small businesses in Australia will be able to benefit from applying a GST simplified accounting method to reduce their GST compliance costs. In particular, some of the types of businesses that are expected to benefit from this initiative include small businesses that export goods or services, optometrists, retirement village operators, childcare operators, chemists, educational institutions, travel agents and health retailers. This bill implements positive improvements to Australia’s taxation system. I commend the bill to the House.
The original question was that this bill be now read a second time. To this the honourable member for Rankin has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.
Question agreed to.
Original question agreed to.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.