Mr FITZGIBBON (12:30 PM) —That was not a bad speech by the member for Curtin, but it was a bit long on rhetoric, sometimes bordering on irrelevance to the New Business Tax System (Simplified Tax System) Bill 2000. She might want to do her homework on Ireland. I commend the Irish government, as well, for the wonderful work they have done in economic terms, but the member for Curtin might want to check the amount of EU and IMF assistance that nation had in achieving those goals. I could not agree more that, increasingly in this internationally competitive environment, our taxation system similarly needs to be competitive if we want business and small business to grow in that environment.

I found her speech a little more interesting than the contribution of the member for Moreton, who basically made the same speech he made in this place yesterday on the Taxation Laws Amendment Bill (No. 3) 2001. It was the same speech and the same rhetoric. Yesterday, I accused him of being in denial with respect to the impact of the GST on small firms. Well, he clearly showed today that he is still in denial, but I was pleased to hear him acknowledge that small business is suffering change fatigue. If members want to check the Hansard, they will find that he clearly acknowledged that.

This bill inserts a new division in the Income Tax Assessment Act—the so-called simplified tax system. I suggest that a better name would have been `simpler but not enough', given the change fatigue the small business community is experiencing as a result of the GST. The changes are based on the recommendations of the Ralph Review of Business Taxation. Most businesses with an average annual turnover of less than $1 million will be eligible to join this new system. The opposition will be supporting the bill but has taken the opportunity by way of an amendment moved by the shadow Assistant Treasurer to highlight the way in which the government has failed the small business sector.

The so-called simplified tax system has three key elements. The first element is cash accounting. Under this method of calculating taxable income, businesses will in general recognise income when it is received and deductions when expenses are paid. The second element is simplified depreciation. Assets costing less than $1,000 are immediately deductible under the new scheme. Assets costing $1,000 or more and with effective lives of less than 25 years can be pooled and written off at 30 per cent each year. Assets costing $1,000 or more and with effective lives of 25 years or more are pooled and written off at five per cent each year. The use of pools removes the need to keep detailed asset schedules.

The third element is simplified trading stock. Under the trading stock provisions, simplified tax system taxpayers will no longer have to account for changes in trading stock of less than $5,000. I must say that I am concerned that this may expose some small firms. I suggest that the only way you can be certain that that variable has not been any more than $5,000 is to do a stocktake. The alternative is to take a guesstimate, and I feel that this might expose some small business operators to penalties as a result of an audit taken on their decision to use that method.

The new tax system and prepayments measures included in this bill will apply to assessments for income years commencing on or after 1 July 2001. I note that the bill differs from the original exposure draft in the following ways: the depreciating assets threshold for eligible businesses has been increased from $2 million to $3 million; the requirement to account for the change in value of trading stock on a cash basis has been removed; and the control tests to avoid inadvertent grouping have been relaxed.

The opposition support these changes which flow from, as I said, the Ralph Review of Business Taxation. Indeed, it is well known that we have supported all the changes recommended by that committee and adopted by the government. That is why I find it disappointing that National Party backbenchers, in particular, have been in their electorates making spurious claims about the opposition's position on entity taxation or, indeed, Ralph's recommendations on entity taxation. Let us take an honest look at the history here and what has occurred since those recommendations. As a result of those recommendations, the government produced an exposure draft on entity taxation, which I had been warning for months was full of flaws and was going to have unintended consequences for small business people, including farmers, who use trusts as legitimate investment and business vehicles. Thankfully, in February this year the Treasurer backflipped—again—and finally saw sense and announced that he was withdrawing that legislation. But what he also made quite clear is that the government will be revisiting the issue by way of another exposure draft. Again, the opposition will be happy to have a look at that new legislation and, if we decide it is effective in attacking rorts in the trust environment while at the same time ensuring that there are no unintended consequences, or indeed intended consequences, for the genuine users of those vehicles, we will be happy to support it. Likewise, if the government fails to do so before the next election, in government we would also be looking to ensure that trusts are not being abused as vehicles.

Many small peak bodies have expressed a view to me that the threshold for the new system may be too low. I have some sympathy for that view. We now have too many thresholds, another aspect of change fatigue and another threshold that could act as a barrier to growth. Some small firms—for example, those operating on a turnover of just under $1 million—might be very reluctant to go through all the transitional work to move back to cash accounting. They will fear going through that transitional work once again as they go through that $1 million threshold. This is a big issue for small firms. I doubt if it is something the government has taken into account in considering these changes and I appeal to the government to take another look at it. Certainly Labor in government would be having another look at that threshold measure to ensure that it is sufficient to pick up as many small businesses as the government claims this new system will provide an option for.

I note that the Minister for Small Business is once again absent from this debate, although I do welcome the member for Cook. The member for Cook, the member for Moreton and I seem to be in synchronisation on these bills which are so important to small business. I wonder where the small business minister is in this debate. This is the minister who, as I pointed out to the House yesterday, said this of the GST:

because of the BAS—

The minister said the government `was sorry for foisting such an “undue burden” on small business'. He said:

I understand that the Minister for Small Business has joined the bandwagon and is out there assisting the government in their attempt to spend something like $20 million of taxpayers' money each month selling bipartisan messages to the electorate in a desperate attempt to pull themselves out of the very deep political black hole in which they find themselves. I think that `Opening doors' was the suggestion for the name of the video the Minister for Small Business is out there making. I will be very interested to see that ad. I hope it is a bit better than the `Unchain my Heart' ads, where we saw people from all walks of life, including small business people, breaking free from all of life's constraints as a result of the introduction of the GST.

This is a very disappointed small business community, a small business community that, contrary to government promise, has had its cash flow reduced, has had its profitability reduced and, as I said earlier, is suffering a great deal of tax change fatigue. This is a small business community that was looking for initiatives in the budget to make up some of that lost ground, but a small business community which remains very disappointed.