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Monday, 2 May 2016
Page: 4014

Mr CRAIG KELLY (Hughes) (16:46): It gives me great pleasure this afternoon to speak on the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016. Over recent weeks, there has been a lot of debate and discussion about putting more money into education and hospitals and into roads. But what we really need to understand is that the only way we can truly do so is if we have an economy that is creating additional wealth. We in the government do not have any money or resources ourselves. The only way that we in government can get those dollars to put into all those social services—to pay for our pensions, to put more money into education and health and towards kids with disabilities—is to have an economy that is growing and creating wealth. The only way to do that is by having the economic settings that have incentives for risk-takers to go out there and start up new businesses, to experiment with new ideas and to look at their existing products and take them to new markets. That is what we have done with the free trade agreements. We need to remember that 98½ per cent of the world's economy lies beyond our shores.

Another way that we get innovation—the creation of new products and services—is by encouraging businesses, companies and individuals to go out and take that risk. The third way that we get innovation is to do the things that are currently being done in a more efficient manner. There would be hundreds of thousands of companies out there today, no matter what goods and services they supply, who would have thought: 'What are we doing? How can we do that in a more efficient way?' All of that takes experimentation and risk. We know that most of those experiments to get those new products, to break into those new markets and to work out a way of doing things more efficiently will fail—but there is nothing wrong with that. That is how the history of innovation has always been. All the great inventors did not just sit down and come up with one brilliant idea. For every brilliant idea, they would have had hundreds of ideas that failed.

Most successful entrepreneurs have had many ideas that have failed. In fact, when you look at the tech start-ups in Silicon Valley in the USA, you are not considered experienced unless you have had several companies or several ideas that have failed. That is the type of culture which we need to imbue our society with. We need to engrain it in our schools. We need to engrain this culture of entrepreneurialism and risk-taking, because, at the end of the day, that is the only way that we can get this economy to grow, that we can see jobs created, that we can see more wealth created and, ultimately, that we can give whoever is in power here the resources to fund all of the things that we so desperately want to fund. If we are going to encourage that entrepreneurial culture in our schools, we should be telling the stories of entrepreneurs and their successes, as well as the failures that they have had in the past.

On Friday of last week, I was most fortunate to be invited to an event to celebrate the 100th anniversary of the birth of the creator of the Lamborghini motor car, Ferruccio Lamborghini. His story is one that we should be telling in schools if we are going to encourage an innovative and entrepreneurial culture. Lamborghini, whose background was humble, was born in Italy on 28 April 1916. He survived the Second World War in Europe. He was captured by the British and made a prisoner of war. After the war, he was released. At the end of the Second World War, he noticed that the Americans had left behind an enormous quantity of used military equipment. They had simply dumped it, because it was too expensive for them to ship it back to the states. He saw this surplus, which was for all intents and purposes useless military equipment.

With his engineering background and his entrepreneurial skills, he realised that he could convert that excess military equipment into tractors and use it for agricultural production. So he got some of that old military equipment and converted it into a tractor to use on his farm. Other farmers saw how successful this was and they wanted the same thing. This greatly improved the productivity of his region. It created wealth and prosperity. He went on to build a factory called Lamborghini Tractors, and his tractors were exported throughout the world.

The story goes on. After being successful, he looked for another area to go into. That was in his love of motor cars. The famous story is that he bought a Ferrari for himself, but he thought that the Ferrari motor car was not good enough. He thought he could build a better car. It is said that when he went to Enzo Ferrari he sat down and explained the problems with this car. Enzo Ferrari famously brushed him off. He summed up Lamborghini. The quote attributed to him was him calling out, 'Hey Ferrari. Your cars are rubbish.' So he put his money where his mouth was. He set up a factory to build a car in competition with Ferrari, because he thought he could do it better. That was in 1963. Today, the Lamborghini motor car is one of the most famous and prestigious motor cars in the world. That is the type of story we need to be imbuing in our kids and teaching them at school, rather than some of the other rubbish that we have seen.

The specifics of this bill are simply aimed at encouraging greater start-ups and to encourage venture capitalists to put their money into Australian start-ups. We need that because in Australia we have a corporate tax rate of 30 per cent, and that makes us uncompetitive when we compare that internationally—one of the highest tax rates in the OECD. When we compare it with our near neighbours, across the ditch in New Zealand or in Singapore or in Hong Kong, where the corporate tax rate is 15 and 17 per cent, or even in the UK where they are lowering their corporate tax rate down to 20 per cent, our corporate tax rate at 30 per cent is uncompetitive. As the years go on, the gap between Australia's corporate tax rate and corporate tax rates in the rest of the world will continue to expand, and we are at risk of losing venture capitalists investing in Australia.

This particular bill provides a 20 per cent tax offset of up to $200,000 for investors who invest in what is called early-stage investment companies. There are a few limitations on what classifies an early-stage investment company: they must be less than three years old, they must have income for the current year of less than $200,000 and they must have incurred expenses of less than $1 million in the previous year. Providing that, someone who invest in those companies as a venture capitalist gets a 20 per cent tax offset, plus they get a 10-year exemption on capital gains tax if they keep those shares for 12 months or more. This is an important thing that we need to do.

It was pleasing that we heard support for this bill from the Labor Party. It was pleasing to hear the member for Chifley and the member for Perth come into this chamber and talk about the importance of entrepreneurship, start-up businesses and innovation. Although it is great to have their support on this bill, everything else that we have heard from the Labor Party today has been to the contrary. Everything that they are doing with their pernicious policies is damaging entrepreneurs. It is putting a 'disencouragement' to start-ups, and has an adverse effect.

Just look at negative gearing. You cannot have it both ways. If someone invests in an income-producing asset and they are getting a positive cash flow and they are getting a profit from that, that profit should be taxed, which is simply positive gearing. If that investment is losing money, they should be able to take that loss and offset it against other income. The plans to get rid of negative gearing mean that you cannot take the loss and offset it against other income. This becomes a disincentive for investment and a disincentive for innovation, yet this is exactly what we are seeing proposed.

Then, there is the other plan we hear of about changes and increases to the capital gains tax. This bill provides a 10-year exemption from capital gains tax to someone who holds their shares for 12 months in an eligible early-stage investment company. Yet we are seeing proposals from the Labor Party to increase capital gains tax by 50 per cent in this country, giving us one of the highest rates of capital gains tax anywhere in the world. I think one of the few places where the capital gains tax is higher than what is proposed by the Labor Party is Venezuela. And we have seen what has happened there.

If we are going to encourage start-up businesses in Australia we have to make sure we are giving them low-energy costs, because low-energy costs equal jobs. Low-energy costs encourage investment. But what we are seeing are pernicious policies, put up by the Labor Party, doing exactly the opposite, with their reintroduction of the carbon tax—call it an ETS or whatever you like—which will only push up electricity prices. That becomes a discouragement for investment and innovation in Australia.

We on this side of the chamber understand that the only way we can get more government resources into the education sector, into the health sector and into the disability sector is not through higher taxes or through putting greater penalties on people. Instead, it is to grow the size of the economic pie. It is to create more wealth. It is to free the hands of entrepreneurs in this country to give them the incentive to get out there and to have ago. That is exactly what this bill does.

I commend the Treasurer for his work in putting this bill together, for working with the start-up community and for giving those venture capitalists greater incentive to invest in Australia. Currently, there are many disincentives in this country. One is our high corporate tax rate. The other is the threat and the risk of the Labor Party of Australia ever coming to take these Treasury benches. That is the greatest risk that we have to this country. That is the greatest risk. Anyone who wants to risk their capital has that fear in the back of their mind—should the Labor Party ever sit again on this side of the chamber.

With that, this is a good bill. This bill will encourage entrepreneurs to invest and to take more risks to get more innovation and to grow the economic pie of this country. I commend it to the House.