Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to make a contribution on the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 and to echo some of the comments made by Senator Dastyari. We understand that this amendment to the capital gains tax regime is helpful, as far as it goes, in terms of allowing small businesses to transfer assets as part of a genuine restructure. Businesses with revenue below $2 million will be able to defer gains or losses that would otherwise be made as a result of transferring business assets from one type of entity to another, so it is a relatively modest change.

It is, nevertheless, a positive step in the right direction. It shows that the government is looking at the issue of capital gains tax at the moment. But I will return to this theme later on.

Whilst the government is prepared to address the capital gains tax issues in relation to this bill, when it comes to other areas it is different. As we know, the Prime Minister has ruled off the table—although there are some differing views about that, but there was an attempt to rule off the table—capital gains tax reform, which is in contrast to the position that Labor has put, where we have a bold policy in relation to reform of negative gearing laws.

The most appropriate structure for a small business may change over time, or a new small business may choose an initial legal structure that it later finds to be unnecessarily complex, so it may be necessary to restructure. Labor understands that, if such a restructure requires a transfer of business assets from one entity to another, such as from a company to a trust, then significant income tax liabilities could arise, creating an impact on cash flow and available capital. So this particular measure will allow small businesses to change their legal structure with greater ease, allowing them to defer gains or losses that otherwise would have been realised when business assets are transferred. We understand that this is important for small businesses for economic growth and for prosperity. And we understand the pressures that small businesses find themselves under when faced with unnecessarily rigid legislative structures. This bill does allow flexibility, and that is why Labor supports it.

This is in keeping with our previous attempts to make life easier for small business. Labor did introduce a permanent instant asset write-off, which benefited two million small businesses, when we were in government.

But what did the coalition do when it came into office? It immediately scrapped that measure and then brought back a temporary instant asset write-off which expires in the middle of next year. There is no sound economic argument for cutting off the instant asset write-off. It is a political not an economic decision.

I want to just return to the efforts by the government to reform the instant asset write-off in 2014. I think this illustrates the extent to which this is a government that does not understand small business. The measures that were introduced in 2014 actually caused the small-business community to be aghast at this government's changes. We know that the government has secured a deal to reduce the small business instant asset write-off from $6,500 down to $1,000 and then, on 9 September 2014, the government announced that it was going backdate that change to January 2014. This led to small businesses facing a tax bill, and we know that Peter Strong from the Council of Small Business Australia was absolutely incredulous that the government could backdate a tax increase. We know that a deal was done with the Palmer United Party and other senators to make those changes. So the thousands of small businesses, which in good faith took advantage of the write-off, were going to then face a tax bill. Mr Strong, in an interview on the ABC, said:

We really did hope that they would keep it in place until the tax white paper came out, which I think is the much more logical approach to this.

They were Mr Strong's comments in 2014. We now know the tax white paper process seems to have been an illusion created by government, which does not know the direction it is heading. It must be incredibly frustrating for small businesses to plan ahead. Mr Strong had other comments to say at the time about this incredible decision of the then Abbott government. He said:

... of course we shouldn't assume that small business people wake up every morning and go and read the latest news from Treasury—they have a business to run. So some of them won't know about this until they visit their accountant.

Mr Strong was also incredulous about the fact that you do not put these changes through halfway through a financial year. He said it was confusing:

… especially when it affects 2.1 million people who employ 4 million or 5 million other people.

Whilst we do understand that this particular measure that we are discussing today is a small and positive step, let us not be under any illusions that this particular measure represents economic leadership, or that it represents an appreciation by the government of what is actually in the best interests of our economy or the small business sector. Mr Strong went on to say:

The mining tax repeal has helped big business and not small business. It's actually confused small business people.

He talked about these things being a very, very poor decision, and he was particular concerned about the fact that he received no explanation from this government about the rationale for the change. This means that it is very, very difficult for business to develop any confidence with their business planning. This is illustrative of this government's short-term approach.

Yesterday I spoke in this chamber of the key ways to promote what is called 'inclusive prosperity' in this country, which is to take a long-term view when making policy. This is the responsible way to demonstrate economic leadership which Labor takes very seriously. When it comes to economic leadership this government's lack of direction is patently obvious for all to see. It is in the mixed messages and the confusion about their policies—they are confused themselves about what their policies do or what they are—combined with their practised skill at saying nothing and then repeating it. It does not fool the Australian people. They know only too well that driving the economy forward is a serious matter. It is not a game as the Treasurer implied in his embarrassing speech, last week at the National Press Club, when he compared forming a tax policy with a test match rather than a 2020 Big Bash. This is not a game, and the way he prodded, pushed and padded away for the best part of an hour without putting any runs on the board proved beyond doubt that this is a government which has no game plan. It has no plan and no policy to deal with the fact that we all agree that tax reform is urgently needed in this country.

In stark contrast to the government, we in the Labor Party have a coherent set of policies for a stronger economy and, as I foreshadowed in my earlier comments, we have presented a detailed plan to roll back negative gearing on investment property and restricting it to new developments from July 2017. It is a specific plan that has been given the seal of approval by independent modelling from the a ANU's Centre for Social Research and Methods, which showed that our plan would generate billions of dollars in revenue with the vast bulk of revenue coming from the top 10 per cent of households who negatively gear their properties. The government's response to that plan has been scaremongering, contradictions and bluster. What the government has not been able to show you is how it proposes to lead the economy, and this is what Australians are desperate to hear.

When it comes to Labor's plans with negative gearing, which also involve a reform of the capital gains tax regime, we know that the commentators are mixed but there is some very interesting support for the proposition that we have put forward. Former Treasurer Hockey, on 21 October 2015, said:

… negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property.

In relation to Labor's negative gearing policy, former Victorian Premier, Mr Jeff Kennett, said:

I'm very disappointed at the way in which my side of politics are arguing against what I think is an eminently supportable concept that's been put forward by the Labor Party in terms of negative gearing.

Mr Kennett certainly understands the issues in relation to long-term change and what is necessary. Mr John Daley, from the Grattan Institute talked about negative gearing as being a policy that ultimately reduces home ownership, costs the Commonwealth a lot of money in terms of foregone tax revenue— (Time expired)