HANSARD EXTRACT
| Tax Laws
Amendment (2006 Measures No.7) Bill 2006: Second Reading |
| 7 February 2007 |
Mr HAYES
(Werriwa) (10.38 a.m.)—I speak
today in support of the measures contained in the
Tax Laws Amendment (2006 Measures No. 7) Bill
2006.
I cannot speak in favour of all of those measures, particularly
those in schedule 2, as I feel that further consideration really is
required to examine the full impact of those changes. While I
believe that schedule 2 does require additional thought—and I think
that the new shadow Assistant Treasurer adequately outlined Labor’s
position in that regard—the provisions of the bill that I want to
focus on, particularly in relation to the interests of people within
my electorate of Werriwa, are those involving changes to the capital
gains tax concessions for small business operators. Accordingly, I
will make those the focus of my comments.
The rapid rise of small business operators over the last decade has
resulted in quite a phenomenal transformation of the Australian
economy and Australian society. As I have noted before, there are
not many times that you can look through the classifieds in the
Sydney Morning Herald on the weekend and see vacancies for
plumbers, carpenters, painters, builders et cetera who do not hold
ABNs. Essentially, those positions in those trade groups are very
much in a small business category. My son is included in that. One
of my sons being a carpenter, I know full well how he has to access
his work as a small business person operating in my electorate.
Labor supports small business. While the Prime Minister and members
opposite have gone to great lengths in this chamber trying to make
out that Labor does not support small business and is its enemy,
nothing could be further from the truth. That has never been the
case and never will be the case. It is because Labor supports small
business operators and because Labor supports real and genuine
improvements to our system of taxation that Labor will support the
amendments contained in schedule 1 of this bill.
There can be no doubt, when it comes to interpreting the existing
capital gains laws in relation to small business, that you really do
need a clear head and a willing mind, as you need to steel yourself
against a battle with what can only be described as the most complex
tax law. According to the view of an accountant operating in my area
whose clients include many small businesses, capital gains
concessions provisions on the sale of a small business, for
instance, are the tax law equivalent of the Enigma code—virtually
indecipherable.
While the code and the tax laws surrounding capital gains tax on the
sale of a small business may have been unclear to all but the most
expert in their fields, the impact of the law on small business
operators is very real. As I mentioned earlier, over the last decade
or so there has been a rapid and noticeable growth in the number of
small business operators, particularly in the outer metropolitan
areas, of which Werriwa is obviously one. Prior to these structural
changes in the economy, these small business operators and
independent contractors were largely employees. They knew their
trades, they knew their jobs, and they worked hard. Their status,
for various reasons, has changed, but their attitude to work has
not. They continue to work hard to support their families. As their
businesses grow, they quite possibly employ others. They do what
most employees do—that is, build a retirement nest egg.
Consequently, the impact of the capital gains tax levied on the sale
of a business becomes extremely significant to these people, as
often the proceeds of small business sales form a considerable part
of the retirement savings of small business owners and operators.
For this reason, among others, the changes before us today have a
significant impact on the estimated 16,000 small business operators
in the electorate of Werriwa and no doubt the many millions of small
business operators throughout this country.
Changes that break the Enigma code, the complexities of our current
regime, are particularly welcome. I would like to briefly refer to
the comments made by the new shadow minister for service economy,
small business and independent contractors. I believe that what the
member for Rankin said about the recently released MYOB assessment
of red-tape compliance is accurate. Quite clearly, when I talk to
people in my electorate, two of the biggest things on the minds of
small business operators are the BAS reporting and the allocation of
GST on a daily transaction basis. These are very much the burdens
which have been foisted upon small business operators to comply with
and which have made life very complex for them.
It was only last week that one small business operator came to talk
to me about issues of taxation in that regard. He has had some
difficulty with the taxation office. He thought he was doing the
right thing only to find that the way he was conducting his
reporting was incorrect. Obviously I could not give him tax advice,
but at least I could be sympathetic with this bloke. He certainly
was making a genuine effort to comply, or he thought he was. This is
a one-man operator in a small business looking after his family. He
is taking significant time out simply to try to deal with the
compliance issues now faced by that business.
The changes in the bill to the capital gains tax concessions for
eligible small businesses include changes to the maximum net value
assets criteria, the 15-year exemption, the retirement exemption,
the small business rollover provisions, the changes to the active
assets tests and changes to the significant individual test that
will no doubt increase the availability of small business capital
gains tax concessions. While the bill before us contains a number of
good measures in relation to small business capital gains tax
concessions, there is one notable exception. You will recall, Madam
Deputy Speaker, that in last year’s budget the Treasurer announced
that the value of the maximum net value of assets test would be
raised from $5 million to $6 million. This is an important change
for many small business operators because of the significant impact
it could have on what an owner ultimately keeps from the proceeds of
the sale of a small business.
When the Minister for Revenue and Assistant Treasurer delivered his
second reading speech on 7 December last year, he was silent on the
extension of this threshold. I note that he did mention once the
change to the maximum net asset value test as part of a list of
amendments that were contained in the bill, but at no time did he
seek to explain why the provisions announced about the threshold
extension had not been contained in this bill. I can only conclude
that this notable absence from the bill may mean that the government
intends to go back on the promise it made in the budget. Along with
the many business operators who have made the decision to delay the
sale of their businesses until the passage of this bill, I hope that
that will not be the case. I hope the extension of that threshold
will be promptly dealt with by the government.
This government has often promised but seldom delivered when it
comes to cutting red tape for small business. This is something that
was recently asserted by the member for Rankin, our new shadow
minister for small business. But this is not just a matter of
political hype. You simply need to speak to any small business
operator in each electorate to know that that is the case. That is
very much their view, and the view comes from the impositions they
have seen foisted upon their businesses. This government went to the
last election promising small business that it would do a number of
things to cut red tape. Apart from giving the green light on
industrial relations to unscrupulous employers to cut take-home pay
and conditions, it has not done all that much to improve the lot of
small business operators. This government has made many high-level
promises but, when it comes to reducing red tape, its performance
has been lacking.
The Prime Minister has previously given a commitment to cut red tape
by 50 per cent. He said that he would do it in his first term of
office. I do not know the exact level of success in this endeavour
but, if I can judge success through the prism of those who have to
deal with the federal government’s paperwork and regulation on a
daily basis or through the experience of the many business operators
that I speak to in my electorate, I would have to conclude quite
frankly that it looks like this government has not applied itself to
what must be regarded as a core promise. It presented itself at a
federal election, claiming that one of its key provisions was to
motivate and develop small business by cutting red tape in the order
of 50 per cent. That clearly has not occurred.
It has been some time since the Treasurer announced that the
government would introduce the Simpler Regulatory System Bill. In a
press release on August 15 last year, the government announced its
response to the Banks task force report on reducing regulatory
burden on business. The Treasurer went to great lengths to outline
the government’s commitment to reducing regulatory burden on
business. He said:
The Australian Government is leading the way in reducing the burden
of red tape to improve the economic environment further so that all
businesses, large and small, can prosper and grow.
It is disappointing that these big claims have yet to be backed by
action.
The Simpler Regulatory System Bill, which is to introduce the
changes aimed at decreasing the regulatory burden on business, is
yet to be introduced, though I note that it is set down for
introduction sometime this session. But I have to say that the fact
that it is not here now indicates the order of priority that this
government gives to reducing the regulatory burden on businesses.
Once again it seems that the government is willing to talk tough on
cutting regulation and is willing to promise much but, sadly for
business operators, particularly small business operators, who are
willing to do everything they can to produce for our economy and are
waiting for their compliance burden to be eased, this government has
been, quite frankly, very tardy in delivering. In fact, based on the
track record of this government, much like it has done with tax,
this government continues down the path of increasing regulation
rather than cutting it, which adds impediments for businesses,
particularly small business.
While the small business capital gains tax concessions contained in
this bill are welcome, there is no doubt that, when it comes to the
complexity of Australia’s taxation system, a lot more can be done.
Angela MacRae—someone with whom I am sure that most members opposite
would be familiar, as she was a member of the government’s task
force on reducing regulations on business—said last year at a
seminar for Standards Australia:
Our tax act is the second-worst in the world behind the USA.
They were very strong words. That view was expressed by someone who
is well versed in tax issues, given that she was the former tax
director of CPA Australia.
While many in the government continue to crow about the achievements
of this government when it comes to tax reform, in truth it is much
ado about nothing. This government continues to introduce
taxes—including the ‘never, ever’ GST. The shadow minister for small
business was quite correct when he said that that is a federal tax.
There is no point trying to run the very tired argument that the GST
is something other than a Commonwealth tax. It is a Commonwealth
tax. This government has made itself the highest taxing government
in Australian history. The GST has added to the burden of compliance
and regulation that faces small business operators every day and has
done nothing more than make every business operator—from the corner
store through to Australia’s largest companies—tax collectors.
Labor knows how important it is to have a competitive business
environment. Labor knows and understands how important it is to
encourage efficiency in our business community and to make
Australian businesses as competitive as they can possibly be both
domestically and internationally. Labor also knows that a key part
of creating a competitive business environment is creating an
internationally competitive tax system. Going back to Angela
MacRae’s comments, she—as a former director of CPA
Australia—indicated that we have the second worst tax system in the
world, second only to that of the USA. So it could hardly be the
case that we have an internationally competitive tax system at
present. Ongoing business and personal tax reform is important in
improving the barriers to investment, boosting workforce
participation and rewarding effort. Unlike the government, Labor
knows that it is important to build a tax system based on long-term
goals rather than rushing in and introducing ad hoc changes to tax
law.
I welcome the provisions of this bill, particularly those that will
improve the tax environment for small business operators. The Board
of Taxation noted in its October 2005 report on the
post-implementation review of the effectiveness of small business
capital gains tax concessions that the tax environment for small
business could be improved by providing ‘incentives to small
business generally to invest their capital to maximise employment,
investment returns and innovation’. I could not agree more. The fact
that the government accepted all but one of the recommendations of
the board’s report was welcomed by small business
operators—particularly the recommendation in relation to capital
gains tax concessions. As I noted earlier, it will have the dual
effect of increasing the availability of small business capital
gains tax concessions and reducing the compliance burden on small
business.
It is disappointing, however, that the government has not seen fit
to include in this bill the extension of the maximum net value asset
test from a maximum of $5 million to $6 million as announced in the
budget. (Time expired)
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