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Monday, 29 February 2016
Page: 1245


Senator LUDWIG (Queensland) (11:15): I too rise to speak on the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. Labor supports this bill, which amends the tax assessment act 1997. Ostensibly, it enables small business to defer the recognition of gains or losses that may arise from the transfer of capital gains tax assets, trading stock, revenue assets and depreciating assets as part of a genuine restructure of their business. One of the things we will look at is how the coalition will define a genuine restructure of business. We do know that there are many occasions when companies phoenix—when they transfer, when they change. It is very important in this particular area that the government remain very vigilant, that they ensure there are no loopholes created by this legislation, which otherwise is good legislation, and that it is not gamed—not that I think small businesses would willingly do that, but, unfortunately, there are some shonks in the business who may want to. But it does generally provide greater flexibility for small business to change their legal structure without attracting a capital gains tax liability at the time.

That is extremely important for small business. Small businesses, as they grow, as they change and as they meet business circumstances, do not want to be constrained by finding that a change to their structure—from a partnership to a trust, from a partnership to a company or from a company to another entity to create another trading opportunity—means they are penalised or they are constrained from doing that because of the necessity of then finding additional capital to deal with the capital gains tax liability. This is a small measure to facilitate small business in growing, changing and meeting market circumstances. It is designed for businesses with revenue below $2 million, which will be able to then take advantage of this process, defer gains or losses that would otherwise be made as a result of transferring business assets from one type of entity to another. Under the current rules a small business looking to incorporate or a company that wants to become a trust will incur a capital gains tax bill for transferring assets from one business structure to the other.

When you look at this and you go back to the 2015 budget, the 'growing jobs and small business budget'—a pretty nice glossy leaflet at the time also highlighted this would be one of their measures in that budget. But since then, what the coalition have been touting is a tax plan. This is not a tax plan for the Australian community. What the government are unwilling to talk about—it really would be helpful if the government, during the summing up debate or during the committee stage, if there is one, addressed this—is to advise the Senate what their tax white paper plan for the future is. Small business is very seriously interested in understanding what the coalition's plan is.

But the government were unwilling to tell people who put their submissions into the tax white paper what they were going to do about tax reform. There was something in the order of 800 submissions made to that tax white paper inquiry, and the government spent millions of dollars of taxpayers' money putting in place the submissions. As I understand it, the Minister for Finance simply does not want to talk about the tax plan. Small business would benefit significantly from not only understanding that they have the support of the coalition for this measure but also what broader measures the coalition intend to promote for small business out of the tax white paper.

But we do know what they ruled out. It really becomes more telling if we recall the coalition provided a scare campaign on GST—they accused Labor of the scare campaign, but ultimately it was the coalition's scare campaign—and then they backflipped. If you recall, what they first of all said was that you should include everything in the tax white paper. They said: 'Things should not be ruled out. We should be able to then have a look at all matters.' Very quickly that became, 'We won't deal with GST; we won't deal with other matters.' Very quickly the coalition started ruling things out. I think what happened was the extreme elements within the coalition attacked mercilessly the moderates within the coalition—and the moderates gave in very quickly! Notwithstanding that, this measure was announced as part of the government's growing jobs and small business package in the 2015 budget. It will come into effect for asset transfers taking place after 1 July 2016. Rather than bring the measure in at an early point, we look like we are going to wait for this measure. I urge the government that if they cannot come up with a tax package, they certainly could bring forward this measure to assist small business.

The new small business rollover is in addition to rollovers currently available where an individual, trustee or partner transfers assets to a company in the course of incorporating their business. The bill applies to transfers that do not result in a change to the ultimate economic ownership of assets. Of course, when you talk about the Jobs & Small Business package where this measure came from, what is very telling is that two million small businesses in Australia benefited from Labor's permanent instant asset write-off when we were in government. The coalition, upon coming into office, junked it immediately—only, of course, to then bring it back, surprisingly.

You do wonder that this government does not have an economic plan for the future. They do not have a tax plan for the future. We are now debating individual measures from the 2015 budget, rather than listening to what this government is going to propose as part of its economic plan and its tax package for the future. This is all in an environment where the economy, under this coalition, is not performing well. Consumer confidence has bottomed out. We have growth down and unemployment up. We have debt and deficit up.

I think you have to put it in a frame when we deal with this bill. This government promised small and medium business—I will get to large business, but they at least promised small and medium business certainty. They promised an economic message that Mr Abbott had somehow fumbled when he was the Prime Minister. We have heard zip from this government since then. We have not seen their economic plan post the demise of Mr Abbott as Prime Minister. Yet it is startling to see that there has been no turnaround in the economy, so we cannot even agree that the coalition and Prime Minister waffling along have managed to turn around consumer and business confidence and unemployment. Whilst the Prime Minister dawdles overseas and dawdles through to designing and developing an economic plan, we have small business waiting for a package such as this.

Labor, as we said, supports the bill, because we understand that small business is a key economic driver of new jobs and a stronger economy in this country. It is a pity the coalition has not heard that message as well and does not want to deliver a tax plan and an economic message that recognises small business as a key driver of new jobs and a stronger economy.

Small businesses are already struggling. They do not need the big tax bills associated with changing their structure as their needs and activities change. However, Labor does not want to see this useful rollover relief measure become another loophole for tax dodging, as I said earlier. That is why we have proposed that Treasury review the change after two years of operation, because I think it should be in the legislation. I think the coalition should put it in the legislation, because this is a coalition that cannot keep its eye on the ball. I am sure, in the summing-up speech, the minister at the table will say that of course the Treasury continues to review these matters all the time. But unless this is given some legislative underpinning, I think that this government, which drifts along without an economic message or tax plan, will not come back to have a look at this to ensure that it operates as it should. Without that discipline, this government will just continue to drift.

We have seen the coalition's record for small business. As I said, they scrapped Labor's permanent instant write-off, only to bring back a temporary version, which effectively only provided a sugar hit for consumption in the 2015 budget but ultimately will run its course. It has not improved small business confidence because they recognise it for what it is—simply a small measure designed to curry favour with small business which does not help them in the longer term.

Small business in Australia must be and should be given the opportunity to grow and adapt. There are over two million small businesses in Australia, employing well over 4.7 million people. This includes employees from local cafes to sole traders running a software business. The reality is that small business keeps our economy ticking over. It lays the groundwork for a $340 billion contribution to the Australian economy. Labor's backing for this bill comes in tandem with our strong suite of policies to support small business and start-ups. These include our plan to offer a start-up year at university to young Australians to look at starting their own enterprise, backing great ideas through co-investment in high-potential companies through a $500 million smart investment fund and improving access to finance for microbusinesses through a partial guarantee scheme. Small business is crying out for assistance to give them a pathway to future growth and development. Labor is providing that. What this coalition is doing today is finalising the budget from 2015 while we wait and see what their May 2016 budget and their tax plan will bring for small business and while we wait and see how their overarching economic message delivers for small business.

The capital gains tax rollover provisions in this bill are a small but positive step by a government with a dubious record for helping small business. It is no secret that the Mr Abbott and Mr Turnbull Liberals are protecting tax loopholes and subsidies that benefit multinationals and wealthy Australians. It is poor form. The coalition do not recognise that small businesses see this. They see the loopholes for multinationals and wealthy Australians and wonder just what this government are doing for them while they are allowing multinationals to not pay their fair share of tax. The government's lack of broader changes to capital gains taxation comes at a time when housing prices are growing at five times the rate of wages. Property is accelerating out of the reach of young Australians.

Labor stand for a strong and sustainable budget so that we can afford to properly fund our schools, universities and Medicare. That is why we have announced the most important structural reform in a decade—Labor's reform to capital gains tax discount and negative gearing—which will improve the budget by $32.1 billion over the decade. Under Labor's capital gains tax policy, changes under which small businesses will be no worse off, the capital gains discount for all assets purchased after 1 July 2017 will be halved. This will reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent to 25 per cent. Investments made before 1 July 2017 will remain unaffected.

Just on that point, you do have this government—unable to put black print out about what its economic plan is or what its tax package reform is—floating out ideas in the news. While we have said that our plan will not be retrospective, one of those ideas out in the ether we hear is that the government's plan is going to be retrospective—which, of course, was strongly criticised by the coalition. I would have thought any retrospective impact by this government in this area of capital gains would be enormously harmful to this area.

You would expect the Property Council of Australia to be saying something about it, but they have not. They remain very quiet on this issue. Perhaps they are concerned about what the coalition will in fact bring to the table when it is their turn, should they get to that point. I do not know whether I have any confidence that the coalition will be able to, in the short time available, gather sufficient information to put out a tax plan and an economic statement for all to see.

Our policy changes will not affect investments made by superannuation funds. Labor will also target negative gearing to new homes from 1 July 2017. Consumers have been scared off by this government's economic bumbling. You do reflect occasionally in this place as to why they made the change from Mr Abbott to Mr Turnbull, if it was not only about the polls. They said at the time: 'It's not about the polls. It's about the lack of economic leadership, it's about the lack of economic credibility and it's about the lack of the ability to bring together a plan for Australia.' On this side, we are still waiting to see what that economic plan will be.

I have heard some suggest that their plan will be in the budget. We have got a long way to go to get to that budget. Let's hope that they do manage to provide some sort of clarity, because growth is down, GDP has been downgraded from 2.75 per cent to 2.5 per cent this year and investment is down from 3.25 per cent to 2.75 per cent. Investment is down, business investment fell 6.3 per cent in 2014-15 and the forecasted investment has decreased from minus seven per cent to minus 9.5 per cent in 2015-16. Spending is up: PEFO spending for this financial year was estimated by Treasury at 24.9 per cent of GDP; it is now at 25.9 per cent under the Liberals. Deficit is up: in the 2014-15 budget, the deficit for this year was $17.1 billion; in MYEFO, it is now $37.4 billion. Debt is up: at PEFO, net debt for the next financial year was 12 per cent of GDP; for this year in MYEFO, it is now 18.3 per cent.

If I were the finance minister, I would resign on those figures, quite frankly. They are atrocious and they are appalling. I would certainly be doing more than simply waiting and leaving everybody in suspense as to what this government is going to do about it. This government promised that it would have an economic statement and it promised that it would deal with these figures. It has dealt with these figures: they are now a lot worse than they were when Mr Abbott was the Prime Minister. What the Liberals have not changed is the same plan. They still intend to rip money from health, aged care, job programs, child care and law and order. (Time expired)