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Friday, 15 June 1984
Page: 3117


Senator JACK EVANS(11.46) —The Loan (Income Equalisation Deposits) Amendment Bill and the Income Tax Assessment Amendment (Income Equalisation Deposits) Bill are very important Bills. They will have the effect of destroying the concept of the income equalisation deposits scheme. The concept, originally introduced, as I understand it, for drought assistance, has certainly been very beneficial and valuable to some people in the farming community for a variety of reasons. Those reasons are known to all Australians. People in farming communities suffer from cyclical and seasonal changes. As a result of drought or other disasters they can find that one year they pay massive taxes at the top tax rate and the following year have absolutely no funds left in the kitty to survive. The concept was, I believe, well thought through. I understood that it had the support of all parties at the time.

It gave the opportunity to farmers to defer their tax liabilities in a good year and to use their surplus funds so that they could be averaged out with their bad year returns. The scheme became the epitome of a tax averaging system which could have been spread right across the business community. In fact, in the past the Australian Democrats have recommended that such tax averaging provisions should be spread to all small businesses. I think that it needs to be recognised that the limits that are set on the scheme do now advantage small farmers and do not provide for a tax rort for the larger St Georges Terrace or Pitt Street farmers.

I put the proposal to the Government that it is time for all Australian small businesses to have the opportunity of sharing the benefits of tax averaging. A classic illustration of the unfairness of the Act as it now stands is that people in the same community, the same farming town and district, are treated differently. One, a farmer, gets tax averaging benefits, but people servicing that very same farmer do not get the benefits. The people providing transport services, machinery, grain and vehicles and many other small businesses, even the local delicatessen, the grocer and other suppliers in that area, suffer when that region suffers. They may have been through their good times in the same way that the farmers have in previous years, but they have had no opportunity to be part of the tax averaging system which this legislation provides.

The Australian Democrats will propose amendments to this legislation to allow small businesses to participate in the tax averaging system. This will provide a massive benefit, not necessarily massive to individuals, but right across Australia it will give small businesses a breath of life when they bump into a cyclical, seasonal or economic downturn, provided they have made that provision when things have been good for them.

Tax averaging has cash flow benefits. Obviously there are benefits in terms of tax payments. Businesses would pay an average amount of tax over a period of years rather than high taxes in some years and lower taxes in other years but perhaps still have to pay taxes in those years when they are having a bad time. Tax averaging will have the effect of alleviating a lot of the liquidity problems of small business. Liquidity and financial problems are endemic in small business simply because, as a general rule, such businesses do not have massive assets behind them against which they can borrow. Even if they do have some assets they lack the leverage to obtain low interest loans.

I am appealing to the Senate to support the Australian Democrats' proposal to help to save a lot of small businesses by giving them the opportunity to participate in Australia's tax averaging system-the income equalisation deposits system. This proposal will not just save jobs-it will have that effect-but overall it will assist the general economy. It will even take out some of the highs and lows for government because it will have the effect of averaging out government's tax revenue. Instead of all revenue being collected in the good years, government in turn will benefit from having its revenue averaged out over a period to a greater degree. The extension of the system of tax averaging to small businesses has obvious benefits for small businesses. I believe that those benefits will flow on to the whole of the Australian community because of increased stability in small businesses. Small businesses that are not constantly at risk will be able to reduce prices to consumers. Of course, there will be a higher degree of competition if more businesses stay in business and this will help to reduce prices paid by consumers. I appeal to the Senate to support the Australian Democrats in this proposal. I appeal to the Government to take our proposal on board and to accept that it is time for small businesses to be allowed to participate in the tax averaging system which exists in Australia today.