Wednesday, 5 December 2018
Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017; Second Reading
As we have conveyed publicly and to the government, we support the first schedule of the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017, a bill that has sat in the Senate for 18 months. Labor notes the government has circulated an amendment to remove schedule 2, stopping an $80 million hit to the budget that was given no policy justification. Labor will support the amendment and the bill.
Firstly, I'd like to thank those senators who have contributed to this debate. The government's National Innovation and Science Agenda is driving the smart ideas that create business growth, local jobs and global success. The passage of this bill will improve the tax system for innovative businesses by better aligning the corporate tax regime with a culture of business investment and development. Improving the tax system for businesses will allow them to grow and become more productive and create jobs.
We are improving the way the tax system applies to innovative companies by changing the test which can deny these companies tax deductions when they have new investors and change aspects of their business. This bill amends the integrity rules which apply when a company has had a change of ownership and wants to use past year losses as a deduction to offset current year profits. The current same business test is overly restrictive and can prevent businesses from remaining agile and acting on emerging changes in the business environment out of concern that they may lose access to tax deductions. The new similar business test relaxes the restrictions and makes it much easier for businesses to change as their environment changes. It encourages innovation by enabling start-up companies to identify new uses for their products and to seek to diversify and grow their income streams. The new test will apply to losses made in income years commencing on or after 1 July 2015.
Tax shouldn't be a consideration when businesses seek to innovate and bring new products to market. It's not in our interests for these businesses to feel prevented from taking new opportunities simply because the tax system will penalise them for it. It distorts decision-making. Loss integrity rules remain important. The new test will not permit trading in losses in circumstances where companies buy up companies which have ceased trading and seek to use their losses as shelter from taxation. The similar business test will still require some continuity between the business carried on in the previous year and in the current year. The new arrangements will assist businesses, particularly smaller businesses, seeking to address problems which have led to losses by removing tax penalties which can arise when these businesses seek to restructure their businesses, ending loss-making activities and adding new profitable ones. The current test acts as a disincentive to change and grow, to take risks and harness new opportunities. These amendments ensure that Australia's tax system supports entrepreneurs and encourages agility. I commend this bill to the Senate.