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Small business
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LI BERAL

The Fightback ! Plan for Small Business

SUMMARY

We will have a small business lead recovery. Small business must be restored to its proper place in Australia as the prime generator of jobs.

The Coalition has launched a fourteen point plan to restore confidence to small business and to create jobs in the small business sector.

We will create jobs for small business:

through our accelerated depreciation

through our $3 billion Rebuild Australia Fund

with lower real rates of interest

through voluntary employment agreements

by contracting out many government services

by doubling funding for the Export Access program

Moreover, we will:

abolish capital gains tax for many small business owners

cut $30 per week from the cost of running a delivery van or business car

abolish tax on the purchase of business vehicles

cut personal tax rates by 25 percent

reduce government regulations on small business and insert sunset clauses where appropriate in new regulations

set up an Office of Small Business in government

appoint a Cabinet Minister with responsibility for small business

put a small business representative on our Board to implement the GST

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INTRODUCTION

Small business is the backbone of our economy and our prosperity.

Small business is the greatest generator of jobs in our community - the sector of opportunity for our unemployed.

Small business is where customers receive personalised treatment and where staff members are friends and colleagues rather than just names on a payroll.

Successful small businesses already embody a special relationship between owners and workers, managers and staff, which must characterise the whole economy if we are to prosper.

Yet small business has been decimated by ten years of Labor - first by sky high interest rates and then Labor's recession.

And, small business was neglected completely in Labor's economic statement earlier this week.

Labor says the economy has improved in the last ten years. Small business people know better. Since the middle of 1983 more than 135,000 small businesses have disappeared, which adds up to hundreds of thousands of Australians who have lost their jobs, their savings and their hope.

There are about 800,000 small businesses in Australia - making up 95 percent of all Australian firms. They employ half of the private sector workforce and contribute 30 percent of the Nation's Gross Domestic Product.

If every small business takes on just one extra employee, Australia's unemployment problem would virtually be solved.

Small business covers the economic spectrum : manufacturing, farming, building, printing, high technology, tourism, retailing, and the professions.

Despite this, small business is ignored by Labor. It does not fit the Labor "Big Brother" mould.

By contrast, the Coalition is committed to giving small business a fair go. We recognise that a vigorous, healthy and competitive small business sector is vital to the creation of new jobs, a growing economy and better living standards.

Fundamental to this commitment is the recognition that small businesses are different to big business - they have different needs, different capabilities and different markets - and that they should be treated accordingly.

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NEW STRATEGY

The Coalition believes that a healthy economy - an economy in which long-term planning and investment decisions can be made with confidence - is the key to the success of any small business.

Capital Gains Tax

Labor's Capital Gains Tax has helped to crush small business' entrepreneurial spirit, restricted the growth and expansion of small business and become a serious brake on investment.

We will introduce a Capital Gains Tax roll-over so that small business proprietors can invest the proceeds of the sale of one business into another "like" business without any Capital Gains Tax liability.

We will exempt from Capital Gains Tax all gains of less than $3,000 made in any year; exempt proceeds of the sale of a small business (up to ten times annual average earnings) from Capital Gains Tax where these are used for retirement support; and provide owners with the option of paying Capital Gains Tax at a flat

rate on nominal gains on assets held for 5 years or longer.

Replacing Sales Tax

Labor's decade has been marked by explosive growth in tax laws and a maze of red tape. Reporting requirements, record keeping obligations and timing for payments have been changed and changed again and have imposed new and heavier burdens on all business - but especially on small business.

Economies of scale mean that small firms have less financial and manpower capacity to meet the same demands made of big business.

Hence, the Liberal and National parties will introduce simpler, lower taxes.

We will replace the archaic Wholesale Sales Tax system with a fairer and more efficient Goods and Services Tax.

Every advanced industrial country in the world has a GST-type system - except the US and Switzerland which have a retail sales tax, which is a form of tax on consumption.

The GST is totally refundable to business and is not charged on exports.

The Coalition's personal tax cuts and increases in benefits will ensure that consumers will have more in disposable income - which means more spending power in the community and a big boost to small business.

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In replacing sales tax with GST the Coalition will cut small business costs by abolishing:

Petrol tax

Payroll tax

Training tax

and by halting Labor's planned rise in the superannuation tax to 9 percent by the year 2000.

The training levy, fuel excise, payroll tax, customs duty and the compulso ry superannuation levy add directly to small business costs and generate extra paperwork and compliance responsibilities.

They impose an indirect burden on small firms because their cost is built into the prices of all the goods and se rv ices which small business consumes.

In particular, abolishing fuel excise means that business buyers will save 26 cents a litre on petrol. An average business car or delive ry van will cost about $30 a week less to run.

The Coalition knows the impact which monthly sales tax payments have on business cash flow.

We will allow most small businesses to collect GST once every six months (or quarterly for medium sized businesses) which is an extension of up to five months on the current monthly sales tax collection time.

The GST reporting requirement will be a simple one page sheet summarising business costs and sales.

The goods and se rv ices tax will not adversely impact on the existing accounting arrangements of most businesses. Nevertheless the Coalition will provide for income tax deductibility of additional capital equipment needed to accommodate the GST.

So, for up to six months, until it is actually forwarded to the Tax Office, small business (rather than Government) will have the benefit of GST receipts.

To further assist businesses with an annual turnover of less than $1 million, a Coalition government will allow cash accounting for GST. Businesses with an annual turnover of less than $50,000 will be able to opt out of the GST system altogether.

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Accelerated Depreciation: A Tax Break for Small Businesses

A Coalition Government will introduce a simple 1/3/5/10 year depreciation schedule effective on the date of our election for investment for plant and equipment. This schedule builds on the old 3/5 depreciation schedule of the mid-1980's, with the addition of a category for very long life items. The proposal is:

Effective Life of Taxation Life for

Asset in Years Straight Line Depreciation

in Years

<3 1

3<5 3

5<30 5

> 30 10

The Coalition would consult with industry about retaining the declining balance alternative as an option

The Tax Office would redraft and update a recommended categorisation of plant and equipment by the new four depreciation categories. Normally, businesses would adopt the Tax Office guidelines, but would have the right to use a different classification for well argued different circumstances.

All plant and equipment, regardless of the particular month in which it is installed, would be given a full year's depreciation claim in the initial year.

It is proposed that existing plant and equipment be brought into line with the new schedule. This would provide many small businesses with additional cash flow.

Rebuild Australia Fund

A Coalition Government will allocate $3 billion to enable large infrastructure projects of national economic merit, that would not be undertaken by the private sector in current circumstances, to go ahead quickly. This will provide opportunities and jobs for small businesses, especially as sub-contractors and in supplying larger

companies engaged on large projects.

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Industrial Relations

We will allow workers and managers in small businesses to enter into - if they wish - their own Voluntary Employment Agreement, subject to specified minimum conditions.

This will give small businesses and their employees, in particular, the freedom and protection to increase productivity, profits and take home pay.

Contracting Out

Contracting out some Government services and responsibilities will open up new business opportunities.

To ensure that small business can take full advantage of this, we will retain and improve the Government Purchasing Gazette to advise of all up-coming contracts, tenders and other opportunities to supply plus keep the annual "Meet the Buyers" day.

Ministerial Arrangements for Small Business

A Hewson Government will appoint a Cabinet Minister with responsibility for small business, with a portfolio Minister to assist in that task. This will ensure that the interests of small business will be taken into account at the core of government decision making.

To end Labor's piecemeal approach to small business, we will merge the existing Small Business Unit and Small Business Research Unit into a single Office of Small Business.

Our decision to rationalise and strengthen these two independent and fragmented offices reflects our belief in the importance of small business sector and our commitment to achieving meaningful reform.

In addition, the Office will also conduct inquiries on specific issues of relevance to small business and what Government can do to help.

To cut red tape quickly, the Office of Small Business will help implement a faster, wider program of rationalisation and reduction of business regulation.

Existing regulations will be retained only when the benefits to the community outweighs the cost to business. Where appropriate, sunset clauses will be inserted in new regulations.

Small business has branded filling in Australian Bureau of Statistics forms as one of their most tiresome burdens - which often means working late at night or on Sunday afternoons.

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Small firms are subjected to a multitude of survey forms as often as once eve ry six weeks seeking details on eve ry aspect of their operations, ranging from employees wages to production levels to the volume of investment.

We will ask the Office of Small Business to assess the need for statistical information and recommend ways in which the number of surveys can be reduced.

To enable small business to have its say, we will provide a toll-free 008 number so that business proprietors more easily point out the regulations they find most r ritJc•1II^

Because many of the regulations imposed on small businesses originate at the State and local government level, we will hold a special Small Business Ministers' Conference to reduce the burden and t ry to establish fewer but uniform rules.

A Boost to Exports

Many small businesses have the product, initiative and drive to export, but lack of knowledge of foreign markets hold them back.

Accordingly, we will double funding for the small to medium enterprise Export Acce ss Program. This will cost $4.1 million in 1993/94 and $2.6 million in 1994/95.

Authorised and printed by A Robb, Liberal Party, Cnr Blackall & Macquarie Sts, Ba rton 2600

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