HANSARD EXTRACT
| Tax Laws
Amendment (Small Business) Bill 2007: Second Reading |
| 24 May 2007 |
Mr HAYES
(Werriwa) (1.11 p.m.)—I can
indicate to the member for Mitchell that, prior to coming into the
parliament, I was a small business owner and operator, so I have a
great fondness and appreciation for small business operators,
particularly those who operate in my neck of the woods in the
south-west of
Sydney.
I do not need to take a walk around my electorate to talk to small
business owners; I know on a first-name basis the ones who beat a
path to my door as they try to work through the various regulations
of this government as they continue to produce the goods and
services ever so necessary to the proper functioning of our economy.
Small business is a critical section of our economy. It is the
employment generator. In the south-west of Sydney I have never made
any bones about the fact that employment generation will come
through expanding the role of small business and providing suitable
incentives for them to invest further funds to grow their
businesses. Through such measures in our suburban communities, local
jobs and economies grow, which is obviously a very good thing for
those local economies and for the economy generally.
It
is easy for members of this House to stand up and profess their deep
and abiding affection for small business operators, and we have seen
much of that so far in this debate. But, quite frankly, it is a lot
harder to back those words up with action that really does assist
the lot of small business. Over its 11 long years in office, this
government has often professed its affection for the entrepreneurial
spirit of small business operators but has systematically failed to
back that up. It has left many small business operators shaking
their heads and calling for a little less conversation and a little
more action when it comes to dealing with their concerns in running
their businesses in the community.
From the outset, I would like to make it clear that Labor is
supporting the amendments to the tax laws contained in the
Tax Laws Amendment (Small Business) Bill 2007.
Labor supports improvements to the relative position of small
business operators because Labor support small business. I also
support the amendment proposed by the shadow minister for small
business, the member for Rankin, and I will speak more about that
amendment later. But let there be no confusion: Labor has always
supported small business. Labor knows how important small business
is and is willing to take appropriate steps to assist it—not the
half-hearted steps that occur around election time. And what are
seeing here? Once again we are seeing steps being taken by the
government around election time.
This government’s position on small business has been all about
industrial relations so far. The one big thing that small business
people locally constantly say to me is that they take umbrage at the
fact that, as small business operators, they are now classified by
this government as employers of anywhere from zero to 100 people.
That is something that this government has brought on small
business. It has used small business as the stalking horse for the
GST and as a Trojan horse for industrial relations. It surprised me
to hear that one of the main spokespeople on the industrial issues
facing small business was Peter Hendy, the once personal adviser to
the former minister for industrial relations, who runs the largest
employer based organisation in the country. He has a vested interest
in small business industrial relations laws because he knows that
employers of from one to 100 people covers 98 per cent of all
Australian companies. That is why this bogus position has been put
out by small business operators. Everyone spoke about small business
in terms of industrial relations except nobody really took the time
to talk to small business.
Interjection
Mr Ciobo—What
do you think the number should be?
Continue
Mr HAYES—There
is one small business issue that keeps coming through. I am sure the
member for Moncrieff has heard this in his local community, provided
that he walks around that community.
Interjection
Mr Ciobo—Regularly.
Continue
Mr HAYES—Most
small businesses want to see the cutting of red tape. I challenge
the opposite side to see how many of their members come from a small
business background, because we have been challenged to do so. As I
said, I am one of them. I know personally the problem of red tape
for small business. This government made a promise back in 1996 to
do something about cutting red tape. They even introduced the $50
million Regulation Reduction Incentive Fund to streamline for small
business the red tape at local government levels.
Mr
Deputy Speaker Scott, you will no doubt recall that in the lead-up
to the election in 1996 the then opposition leader made the bold
promise that he would cut red tape by 50 per cent upon taking
office. In coming to office, he engaged Charlie Bell, who ran a
McDonald’s at that stage, to lead a task force to look at the
methods that could be put in place to cut red tape and seemingly
make the plight of small business a little easier. Of course, the
government did not manage to do that. I do not think they ever
really had any intention to. It was just something they wanted to
say to small business operators, who are a growing part of our
community. It is something they have put out, once again, just
before an election.
The Prime Minister made big promises to help out small business
operators but, quite frankly, those big promises did not ever seem
to materialise. In a sign of absolute arrogance, this government
have now decided to repeat the promise to cut red tape by 50 per
cent some 10 years later. They commissioned Gary Banks, the head of
the Productivity Commission, to once again go through and do what
Charlie Bell did and give us a heads-up on what we can do to reduce
by 50 per cent the red tape that affects small business. They did
not keep their promise the first time; why would we think they would
keep it this time? On both occasions, this promise was only rolled
out in the lead-up to a federal election.
I
mention this broken promise, and the government’s repeated
disingenuous commitment to small business, in the light of the tax
bill we have before us today, which purports to implement some
simplicity, improvements and assistance for small business
operators. Before members opposite take me to task, this bill does
that to a degree. To the extent that those improvements are made,
the bill is certainly welcome and will be supported by Labor.
The Tax Laws Amendment (Small Business) Bill 2007 implements the tax
arrangements announced in the budget by the government. Under the
existing tax law, there are a number of special arrangements for
small business and each of those concessions has its own set of
eligibility criteria. It seems a little nonsensical but that is the
procedure which was in place. Of course, the multiple eligibility
criteria for small business concessions is not only legislatively
confusing; it is also confusing for small business operators. To
date, I have found six different definitions for small business
contained in various Commonwealth acts, let alone the definition in
the Workplace Relations Amendment (Work Choices) Act which refers to
small businesses as employers of anywhere from nought to 100 people.
That is not an issue that I want to dwell on in the debate today,
but I think it is certainly worthy of some further investigation to
find a true definition of a small business operator.
The bill before us today seeks to overcome the confusion and
complexity of the eligibility of small business for various
concessions. Different definitions under the simplified tax system
are used to determine eligibility for concessions for the GST, the
capital gains tax, the fringe benefits tax and the pay-as-you-go
instalments. And people wonder why small businesses complain about
the complexity of red tape. Under the framework introduced in this
bill, all of these eligibility tests will now become one. Small
businesses will be able to access their concessions provided that
any additional criteria that relate to the specific nature of the
concessions are satisfied. Their entity is considered a small
business if it is defined by the criteria that (1) it carries on a
business and (2) it satisfies a $2 million aggregated turnover test.
Meeting these requirements will become known as satisfying the small
business entity test. That is good stuff. I support that and I know
that it will make a significant difference for a lot of small
businesses operating in my area. However, satisfying the aggregate
turnover test is a little more complex. There are three ways to
satisfy the $2 million aggregated turnover test: firstly, that the
entity’s aggregated turnover for the previous income year was less
than $2 million; secondly, that the entity’s aggregate turnover for
the current income year is likely to be less than $2 million,
calculated as at the first day of the income year; or, thirdly, that
the entity’s actual aggregated turnover for the current income year
was less than $2 million, calculated as at the end of the income
year.
In
order to arrive at the aggregated turnover, the entity must first
calculate its annual turnover, which is the total of ordinary income
that the entity derives in the income year in the ordinary course of
carrying on a business. There are a number of complexities in this
calculation in relation to the consideration of wages and salaries,
and dealings with associates not considered to be at arm’s length
from the entity. The entity must then determine whether the turnover
for the year needs to be aggregated with the turnover of other
entities to arrive at an annual turnover for the test entity.
I
would suggest that for many small business operators this is
starting to get relatively complex, and this is after we have tried
to demystify the laws to make them easier. Some would have
accountants on board for this. And I suppose in ordinary
circumstances an accountant would not be considered necessary in a
small business; that they would be able to work their way through
this. But for the average small business, I think this area will
prove to be complex.
The test goes on. If they do have another entity, it must be added
to the first to form the test entity. If an individual or a company
is an affiliate of the entity where the individual or company’s
business acts or could reasonably be expected to act in accordance
with the entity’s directions or wishes, it then must be treated in
concert with the first entity.
I
thought this was all about trying to make the lot of small business
easier. There must be a more reasonable test of small business.
There are about six separate definitions of small business in
Commonwealth legislation and the overarching definition is provided
by Work Choices—that is, a small business will be any organisation
of less than 100 employees. That is 98 per cent of all Australian
companies. This is why small business is actually reeling. Small
business really does need some assistance in streamlining the
red-tape and making it more comprehensible so they can actually take
care of their business as well as satisfy the reporting obligations
of the Commonwealth.
That is why I support the amendment moved by the member for Rankin
which states:
whilst
not declining to give the bill a second reading, the House calls on
the Government to implement Labor’s BAS Easy option for simplifying
GST bookkeeping requirements on small business with an annual
turnover of less than two million dollars.
That is a sensible proposition being advanced by the shadow
spokesman for small business and independent contractors.
In
moving that amendment, the member for Rankin certainly draws the
attention of the parliament to the real concerns that affect the
genuine small business operators in this country. The BAS Easy
proposal would provide a simpler and faster way for small business
to be able to estimate their GST obligations. It would leave more
time for small business to do what they do best: concentrate on
their businesses and take what steps they can to grow and mature
within their market. Rather than spending hours and hours fulfilling
their reporting obligations, this proposal would reduce the time
required to minutes.
In
the south-west of Sydney—and I am not sure whether you are aware of
the demographics of the seat of Werriwa, Mr Deputy Speaker
Scott—independent contractors is a large and growing group. They are
small business operators that cover a range of industries, including
truck drivers and whole host of things. A lot of people work from
their homes or from small business locations and they are a growing
part of the economy of south-west Sydney. That is why I am very
conscious of the position of independent contractors when we have a
debate concerning small business owners. It is beyond doubt that
independent operators form the majority of small business operators
in my electorate of Werriwa, and I am sure that would be common in
most of the electorates of members of this House.
A lot
of the reporting required of independent contractors, whether they
be owner-drivers or just a small family business, actually falls to
women to undertake. Wives and mothers take care of a lot of the
microprocessing from home based operations. I am not being demeaning
of truck drivers in this regard. Owner-drivers are out there driving
their vehicles and unfortunately, in many cases, it is their spouses
and the mothers of their children who are taking the time to comply
with the Commonwealth’s BAS reporting requirements. That is a
significant burden. I do not care what anyone in this place says, if
you have gone through the rigours of completing these BAS
requirements—as I have done, as a small business operator—you would
not say that this is just a simple, non-time-consuming exercise.
Most of us retain accountants to fulfil a lot of that reporting, but
I am sure that those organisations that have not done that or cannot
do it would understand what I am saying. If those opposite talked to
small business people, they would know that what I am saying in this
respect is right.
The
steps that have been advocated in the amendment by the member for
Rankin, in BAS Easy, try to make the lot of small business more
manageable in terms of reporting requirements. This will give them
the incentive to sharpen their edge, doing what they do best—that
is, serving their communities and producing the goods and services
they do in running their businesses. I think the government should
have a very clear look at BAS Easy. This could be something that
would assist the government in terms of making it look more
palatable to small business. (Time expired)
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