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A better plan for small business.

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A Better Plan For Small Business

  • Labor's plan to reward small business
  • John Howard's attack on small business
  • Broken promises
  • Goods and Services Tax - Bad for Small Business
  • Labor's initiatives
  • Smal l business and taxation
  • Rewarding Small Business Compliance Activity
  • Small business outreach program
  • Enterprise Improvement
  • Incentives and support for venture capital
  • Increase in R&D tax concession
  • Fair trading and misuse of market power
  • Tendering
  • Oil Code and Deregulation of the Petroleum industry
  • Franchising
  • Costing

Labor's plan to reward small business

Labor recognises the vital role small business plays in the economic and social well being of Australia.


Labor understands that small busines s operators are concerned about many issues including:


  • Taxation, especially provisional tax;
  • the looming GST;
  • unfair trading conditions;
  • unfettered competition; and
  • access to finance.


Labor's Better Plan for Small Business addresses these issues.


I n Labor's plans to generate more jobs and make existing jobs more secure, small business will play a major role as a generator of employment throughout the country.


Over the past 10 years, Australia's small business sector has generated nearly 800,000 new jobs, plus 140,000 extra self employed operators.


Labor's policies for small business will directly assist the sector to operate more efficiently and profitably. This will then encourage small business to employ more people, and will make existing small businesses more secure.

The advantages to the economy and to the community of a growing and prosperous small business sector are numerous, but the most important ones are the employment performance of the sector, and the fact that small businesses exist in every town and every community. Small business is one of Australia's main avenues for growing jobs and reducing unemployment.


In Australia small business covers all manufacturing businesses with less than 100 employees and all other non-agricultural businesses with less than 20 employees. In addition, there are very small businesses, known as micro businesses which employ less than 5 people.


There were over one million small private sector businesses in Australia in 1996-97, employing some 31/2 million people. Small businesses account for approximately 97% of all private sector businesses, and more than 50% of all private sector business employment (including self-employment).

The Government's Attack On Small Business

Broken Promises


John Howard, Prime Minister:

Failed to make good his 1996 election promise to halve the burden of paperwork and instead announced a GST which he had previously said would "never ever" happen.


Peter Reith, Minister for Small Business:

Walked away from his own backbench Fair Trading Inquiry report which recommended the introduction of a Uniform National Retail Tenancy Code.


John Moore, Minister for Industry:

Oversaw a reduction in research and development tax concessions and the consequent reduction in private sector spending on R&D.


David Kemp, Minister for Employment:

Abolished the CES and then made it too expensive for small business to use the new government employment agency, Employment National.


Rod Kemp, Assistant Treasurer:

Created confusion over so-called "choice of super fund" requirements for small business employers.


Daryl Williams, Attorney General:

Introduced the new copyright laws which will destroy independent small business music retailers across Australia.


Geoff Prosser, Former Minister for Small Business:

Unceremoniously dumped as the Minister for Small Business because of an apparent conflict of interest over his own business interests.

Goods and Services Tax - Bad for Small Business

Labor believes that a GST is the worst possible new tax to impose on sm all business. The introduction of a GST means that all small businesses become tax collectors on behalf of the Commonwealth. Presently, about 75,000 businesses have sales tax collection responsibilities. Under John Howard's GST all 1.3 million small business operators will assume responsibility for collecting the GST and dealing with the Tax Office. More time, paperwork and resources will be tied up in meeting new GST related administrative obligations.


"All small businesses need to document their trade, for most of us it [a GST] will just mean more paperwork."

Collette Dinnigan, Small Business Show, 24 May 1998


  • According to the National Tax and Accountants Association (NTAA), a typical small business will spend at least 228 hours and $7,000 in the first year to set up the required accounting and taxation systems to comply with a new GST.
  • The Howard Government's totally inadequate compensation package for the initial compliance burden of a GST offers a one-off amount of less than $500 per small business.


"The GST will no doubt require more complicated systems than before. SMEs [small to medium enterprises] must be recognised in their role as unpaid tax collectors. The Government has to ensure they are not out of pocket."

Ian Langford-Brown, Institute of Chartered Accountants, AFR, 3/3/98


  • A GST will erode the competitive advantage for small business because they do not have the resources of big business to absorb the additional costs .
  • The cash flow advantage which the Howard Government has promised a GST will deliver, will be an illusion for most small businesses who do not enjoy the economies of scale to invest the GST on the money market in between quarterly remittance times. Under a GST, big business will have the capacity and resources to gain a cash flow advantage and therefore a competitive advantage over small business.


"And more importantly, we won't be able to invest the money like the big guys. The major retailers, the major big firms, can put their short-term money market money there. We've got to have five thousand dollars on an average, before we can go into the short term money market and if you're turning over two hundred million dollars a year, that's twenty million dollars, sitting on the short term money market, making four or five per cent every day.

Jonathon Fowler, Small Business Association, Sky News Australia Television News 8.00am 11th August, 1998


  • A GST is likely to reduce the cash flow for some sma ll businesses as they may be forced to pay the GST on items for which they have not yet received payment. For example, an invoice for a job worth $10,000 will attract a $1,000 GST which will have to be paid to the Howard Government, regardless of whether o r not the $10,000 has been received by the small business. Many small businesses will be forced to operate on a credit basis, borrowing money to pay the new GST.
  • Of the 3.2 million people working in small business in 1996-97, 42 per cent were women. Small business can offer flexible and satisfying employment for many women, often in self-employment. A GST is yet another example of how the Howard Government's Tax Plan discriminates against women who want to work.
  • A GST will increase prices. Small business will bear the brunt of consumer dissatisfaction caused by the increased prices and by the fact that the GST will not be shown on the shop dockets.


"Some small businesses would suffer in the initial throes of a GST, especially services such as cafes which had not been indirectly taxed before."

Mr Curt Rendall, Institute of Chartered Accountants, AFR, 19/8/97

A GST is unfair and anti-small business


"A GST is a recipe for disaster for small business that will increase bankruptcies. There is nothing in it for small business."

Ray Regan, President National Tax and Accountants Association The Canberra Times 19 January 1998

Labor's Initiatives

Small Business & Taxation

When Kim Beazley launched Labor's Tax Reform Policy he committed Labor to not introducing a GST.


Kim Beazley also declared that a Labor Government will make the following reforms to business tax:


  • abolish Provisional Tax;
  • introduce new Australian Business Number (ABN) and Pay As You Go (PAYG) arrangements to streamline and un ify tax payment obligations;
  • abolish the existing PAYE, PPS and RPS systems, and replace these with an integrated withholding system; and
  • reform the company tax payment arrangements.

Rewarding Small Business Compliance Activity

Labor will provide $400 m illion over three years to reward small businesses for the work they perform as tax collectors.


In moving to the new Australian Business Number (ABN) and Pay As You Go (PAYG) arrangements, a Labor Government will take the opportunity to formally recognise and reward the role of small business employers for the work they perform as tax collectors.


Businesses have an obligation to collect and remit taxation from their employees to the Commonwealth. Up until now, government has not recognised this role. Now Labor will reward small businesses for their efforts in complying with their collection obligations in relation to their employees.


The Labor Government will provide a payment, akin to a commission, for the collection of PAYE-style tax instalments.


Labor's payment will commence in 1999-00, and will be set at the rate of 5 per cent of amounts of tax withheld from employees (up to a maximum of $1,000), in order to compensate for the inconvenience that may arise from the introduction of the ABN system and preparation for the start-up of PAYG arrangements.


For 2000-01 and subsequent years, the benefit will be 2.5 per cent (up to a maximum of $500) of amounts of tax withheld from employees.


It is estimated that around 75 per cent of employers under the current PAYE system will benefit from this new system, which will reward employers who remit up t o $25,000 per year in PAYE instalments. This means around 550,000 small businesses, amounting to almost all businesses which employ five employees or fewer.


Total collections from these employers are estimated at between $4-5 billion in 1999-00 and the subsequent years, leading to a cost in 1999-00 of $200 million and $100 million in each subsequent year.

Small Business Outreach Program

Labor will commit $5 million each year (commencing in 2000-01) to ensure that small businesses in regional Australia hav e direct and personal access to Government programs.

Using mobile advisers, Labor's Outreach Program will have two functions:


·  Disseminate information and explain government programs to small business; and

·  Act as a feedback mechanism to the Federal Government.


The mobile small business advisers will be located in Broken Hill, Orange , Bega, Lismore, Alice Springs, Longreach, Charters Towers, Mt Isa, Cairns, Whyalla, Clare, Launceston, Burnie, Bendigo, Geelong, Moe, Margaret River, Albany, Broome and Esperance.

Enterprise Improvement

Labor will provide $40 million for small-scale, locally delivered enterprise improvement programs through a two-tiered Enterprise Improvement Program.


Small business will be assisted either through direct grants or thro ugh the establishment of locally based enterprise improvement centres.


Labor expects that up to 13,000 firms will be assisted each year to:


  • Develop businesses plans;
  • Become export ready;
  • Implement advanced manufacturing technology;
  • Put in place a qual ity assurance program; and
  • Implement other management and organisational improvements.

Incentives and support for Venture Capital

The Labor Government will put in place a series of measures to encourage more venture capital investments in 'start-up' and early stage enterprises.


Australians are good at innovation, especially small and micro-businesses, but less successful at building on that innovation to create new wealth-generating industries.


Issues needing to be addressed include the shortage of in vestment funds, the lack of fund management expertise, the reluctance of investment funds to focus on the start-up and early stage end of the scale, and their reluctance to look for opportunities outside the major capital cities.


Labor's Tax Reform Plan outlined our response to these issues, including:


  • allowing a limited capital gains tax exemption for foreign fund investors; and
  • revised arrangements for the Innovation Investment Fund program.

Increase in Research & Development (R&D) Tax Concession

Labo r will provide a new 150 per cent R&D tax concession to small and medium enterprises.

Firms with fewer than 500 employees will be able to seek access to the R&D concession through either:


  • submitting a business plan to the IR&D Board outlining their R&D co mmitments; or
  • being part of an industry which has agreed on a Strategic Action Plan with the Government.

Fair Trading and misuse of market power

Labor will implement the recommendations of the House of Representatives Report into Fair Trading to ensure small businesses have legislative protection against unfair conduct. We will legislate to introduce the term 'unfair' into the Trade Practices Act to enable small business to utilise the term in seeking redress.


Labor will move to reduce the size of government contracts in order to ensure that small business has more opportunities to tender. This measure will be implemented through the public interest test for future outsourcing proposals.

Oil code and Deregulation of the Petroleum industry

Labor will also work to protect service station sites and jobs in rural and regional Australia by:


  • keeping the existing Sites and Franchise Acts, until effective arrangements are made to protect those who work in the service station industry.
  • developing, as a matter of urgen cy, a strong, enforceable Oil Code to give security to small businesses operating service stations.


By contrast John Howard's plans to deregulate the petrol industry is a gift to the major oil companies.


Labor will continue the development of a workable code of conduct for the franchising sector. Labor will also conduct a yearly review of the Code of Conduct in regards to franchising in consultation with industry, particularly franchisees.

Costing Of Labor's Initiatives







Rewarding small business compliance activity*






Small business outreach program






Enterprise improvement**






Venture capital*






R&D tax concession*



238 .0



Fair trading and misuse of market power












Oil code and deregulation of petroleum industry



















* These measures were included in the Tax Reform Policy. 
** This measure was included in the Industry Policy.


Authorised by Gary Gray, 19 National Circuit, Barton ACT 2600