House of Representatives

Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017

Second Reading Speech

Mr McCormack (Minister for Small Business)

I move:

That this bill be now read a second time.

Today I rise to introduce another bill which backs small business.

We know small businesses employ almost half of our country's workforce.

We know our economy grows when the small business sector is strong.

And we know every small business starts as the spark of someone's idea, someone's dream, with hard work and dedication to see it become a reality.

So, if you are an Australian in small business, this is the bill to back you.

This bill amends the tax law to help small businesses to invest and grow. It builds on the plan for jobs, for growth and for opportunities through small business tax cuts and other support measures as part of the past two budgets.

On any day, 5.6 million Australians are at work in small business, earning a wage from one of our 3.2 million small businesses.

Small businesses make up 99 per cent of all Australian businesses and annually contribute $380 billion to our gross domestic product-to our economy.

This means a strong small business sector means more jobs for Australians and more opportunities to build vibrant local communities right across the country.

The government is committed to cutting small business taxes and helping them invest and grow.

The measure this bill enacts today was delivered as part of the 2017-18 budget, delivered to parliament a little over two weeks ago.

On that day-9 May-this government kicked its biggest goal yet for small business: a cut in the company tax rate.

Thanks to laws passed in this parliament on that day, the tax rate for small business is now at its lowest level in many, many decades and small businesses have more money to invest in themselves today.

That change in the law also means more than 90,000 additional businesses can have access to tax concessions as a result of redefining small business to those turning over $10 million per annum.

The 2017 budget continues the government's plan to back small business.

Whether it is the local small business owner in Western Sydney, the mature-aged worker in Noosa or the young jobseeker looking to start their career in Gympie, this budget is full of opportunities.

In the 2015-16 budget the government increased the small business immediate deductibility threshold from $1,000 to $20,000 from 12 May 2015 until 30 June 2017.

This bill extends that measure by 12 months so small businesses with turnover less than $10 million can immediately deduct purchases of eligible assets each costing less than $20,000 first used or installed ready for use by 30 June 2018.

This continues the government's strong record of backing small business to grow and deliver more and better-paying jobs by helping them replace or upgrade their machinery or capital equipment. It has been welcomed right across the nation.

This measure will improve cash flow for small business, providing a boost to small business activity for another year, helping them to reinvest in their business.

Improved cash flow will also give businesses the flexibility to hire more employees and pay staff more.

Over the past few months I have visited small businesses right across the country, listening to the real issues, hearing about the opportunities and meeting with the men and women who employ more than 5.6 million Australians.

I have heard many stories from small business owners about how they have made use of the instant asset write-off to grow their business and increase productivity.

Recently I visited Alana Laliotitis and her husband Peter, the owners of Kouzina Greco-a Greek cafe and restaurant-in Parramatta.

The new equipment she recently purchased helped her business run more efficiently on Mothers' Day and, as Alana told me, helped get through one of her busiest days of trade which is so vital to her small business.

It helped immensely... necessary for us to produce good food, for staff morale and it actually had a chain reaction.

That is what she said. She purchased equipment for her kitchen from local suppliers and engaged the services of a local tradesman to do the installation work. The result: more efficiency, greater productivity, more customers and even, as Alana said herself, a lift in staff morale.

Another practical example is Adrian Moscheni, who runs Straitline Blinds in the Northern Territory. Adrian has used the instant asset write-off since its introduction and says it has been important to help his business grow. He said:

It has been a great incentive for us. It has already helped me purchase vehicles and a forklift for the business. Any time you are going to get a full tax relief up to $20,000 is very helpful.

A Riverina or Central West farmer, or table grapegrower in the Sunraysia can purchase machinery and other equipment to help move their product to port more efficiently, saving time and saving money.

These tools and equipment can be expensive and the rules around depreciating them can be time consuming to understand.

Under the extended immediate deductibility measure, this business can write off each and every item under $20,000 that is purchased until 30 June 2018. And that goes for all small business.

In the process, small businesses support other small businesses and by purchasing new or second hand equipment they are spending money locally, which has a flow-on and multiplier effect. This is impact which is beneficial for our regional towns and for our communities.

Those of us who have run a small business-as I have before entering this place-understand the daily demands and constraints. Small business people are time poor.

Under this measure, the business does not have to keep track of the item records and can use the extra cash-flow to reinvest in the business.

Assets valued at $20,000 or more can continue to be placed together into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter.

Once assets are placed in the pool, there is no requirement to track each item's depreciation over multiple income years.

This reduces paperwork and allows small business to get on with doing what they do best.

The pool itself may also be immediately deducted if its value falls below $20,000 at the end of the financial year, providing an additional cash flow benefit to small businesses.

The law previously included 'lock-out rules' that stop small businesses that elect out of the simplified depreciation regime from re-entering for five years.

These rules were relaxed when the threshold was increased to $20,000 and will continue to be suspended until 30 June 2018 to allow all small business entities to access this measure.

The small number of assets not eligible for accelerated depreciation, such as capital works, will continue to be excluded under this measure, consistent with the current law.

On 1 July 2018, the thresholds for immediate deductibility of individual assets and the value of the pool will revert to $1,000.

The instant asset write-off has proved to be one of the most popular small business incentives and encourages Australia's 3.2 million small businesses to invest in their business and create more jobs.

This government is about creating more jobs. That is why we made the decision to continue to back small business in this year's budget. Extending the instant asset write-off is the highlight in the budget for small business and part of our plan to increase business confidence.

Small businesses, industry groups and business leaders right across the country have been vocal in their calls for an extension to the program. The response from business and stakeholders has been very well received.

Since budget night, the support from small business welcoming the extension of this program and the Government's ongoing commitment to small business has been truly overwhelming.

Peter Strong, CEO of the Council of Small Business of Australia said, 'the Federal Government has demonstrated a genuine commitment to small business ... The Australian Government is clearly walking the talk when it comes to supporting Australia's ... small businesses.'

Last year the CEO of the Australian Chamber of Commerce and Industry, James Pearson, and I travelled to each state and territory as part of a nationwide roadshow when I first became the small business minister.

We heard firsthand from small businesses while visiting the Australian, State and Territory chamber network for the instant asset write-off to be extended as well as the call for more reductions to regulation and red tape.

On budget night two weeks ago James pulled me aside and said the 'extension of the instant asset write-off is terrific.' He said, 'This budget will encourage restaurants to buy more kitchen equipment, landscape gardeners to buy more lawn mowers and tech companies to buy more hardware through the extension and expansion of the instant asset write-off. This is good for small business and good for jobs.'

Therehas been such a positive response that I could go on for hours yet, but I will share one more.

Denita Wawn, the CEO of the Master Builders Association, who looks after the interests of 32,000 members in the building and construction industry-such an important sector-responded to the budget saying: 'The budget's small business measures will particularly benefit the building and construction industry which is 98 per cent made up of small businesses. The building industry is a big winner from the extension of the accelerated depreciation measures by one year and to businesses turning over up to $10 million.'

That is what she said. She was delighted.

This government stands up for more small businesses being able to take advantage of the instant asset write-off, to be able to invest in their capital equipment and in their businesses, and to be able to employ more Australians.

This government is backing small business. We are extending the instant asset write-off to hardworking small businesses to ensure they can continue to get ahead, to progress, to employ more Australians.

Small business deserves the confidence this bill proposes and I encourage all members to get on board and back small business.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.