House of Representatives

Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011

Second Reading Speech

This Bill contains long-term reforms that will bring benefits to small business and lift the superannuation savings of millions of low income Australians and make our superannuation system fairer.

Schedule 1 removes the entrepreneurs' tax offset in order to deliver more effective assistance for small businesses. This is consistent with recommendation 6 of Australia's Future Tax System (better known as the Henry Review).

The entrepreneurs' tax offset, which according to AFTS 'provides problematic incentives related to business structure' makes way for better targeted small business assistance.

Through Schedules 2 and 3 the Government is delivering on its commitment to improve cash flow and reduce compliance costs for Australia's 2.7 million small businesses.

Under Schedule 2, from the 2012-13 income year, small businesses will benefit from being able to immediately write-off depreciating assets that cost less than $6,500. This increase from a threshold of $1,000 will allow small businesses to claim a deduction for more expensive assets - those costing less than $6,500 instead of less than $1,000 - providing a cash flow benefit. Small business will benefit from this initiative when they purchase assets such as a computer, photocopier and printer.

The Government will also simplify the depreciation regime for depreciating assets costing $6,500 or more. Instead of having to allocate assets to one of two depreciation pools, each with a different depreciation rate (5 per cent and 30 per cent), small business will now be able to allocate assets to a single depreciation pool with a single rate of 30 per cent (and 15 per cent in the first year) In addition to the benefits that come with simplifying the pooling arrangements, small businesses will also benefit from being able to depreciate some assets more quickly, at an increased rate of 30 per cent instead of 5 per cent - again, providing a cash flow benefit.

In addition to these measures, which were announced as part of the Government's response to the AFTS Review and the Clean Energy Future package, the Government has continued to deliver for small businesses through the 2011-12 Budget.

Schedule 3 will do this by providing an accelerated initial deduction for motor vehicles purchased by small businesses from the 2012-13 income year. This means that small businesses that purchase a motor vehicle costing $6,500 or more from the 2012-13 income year will be able to immediately write-off up to $5,000 and will be able to depreciate the remainder of the value at 15 per cent in the first year and 30 per cent in following years.

As motor vehicles are primary assets for many small business operators, this increased initial deduction will improve cash flow for a large number of small businesses.

It will mean that a tradesman on a 30 per cent marginal tax rate buying a new ute worth $33,960 will receive a tax benefit of $1,275 in the year they purchase the vehicle. This means more money in the pocket of small business.

These changes improve cash flow for businesses and makes investing in and growing their business more achievable.

Businesses with an annual turnover of less than $2 million will benefit from this small business package. That is 96 per cent of Australia's 2.7 million small businesses.

The Government is committed to assisting small business and has already reduced quarterly Pay As You Go (PAYG) income tax instalments for the 2011-12 income year for taxpayers using the GDP adjustment method, providing a $700 million cash flow benefit to small business.

The Government is providing extensive assistance to small business through the small business support line, website, the small business advisory service program and enterprise connect. These services are all about helping small businesses with their day to day running.

In addition to these measures, the Government will reduce the company tax rate for small business companies from 30 to 29 per cent from 2012-13. This will assist up to 720,000 incorporated small businesses, allowing them to reinvest more of the profits to grow their businesses.

This Government values small business, it has a plan to assist small business and it is delivering on this plan.

These changes are about making a real difference to the 2.7 million small businesses in Australia.


Australians should not have to work hard and retire poor.

How to enjoy a fulfilling and prosperous retirement is one of the great conversations in Australian life.

I've talked about our significant reform to lift superannuation from 9 per cent to 12 per cent, but we need to do more for low income Australians.

It's of great concern to me, and I know of great concern to the Prime Minister and Treasurer, that whilst women live longer than men, their super balances are in fact on average about 40 per cent lower.

This is a serious challenge to Australian women's financial independence. It is important that we address structural imbalances such as equal pay and today the Government is also addressing a structural imbalance in the superannuation system. Currently, 3.6 million low-income Australians, including around 2.1 million women get no (or minimal) tax benefit from contributing to superannuation, due to the fact that the15 per cent superannuation contribution tax is above or equivalent to their income tax rate.

Let's reflect for a moment on these numbers - 3.6 million Australians. That is around 3 out every 10 workers who do not get a tax benefit from contributing to superannuation; 2.1 million of them are women, that is 3 in every 8 women in the workforce.

Put another way the 3.6 million Australians includes:

Around 1.1 million workers in NSW
Around 910,000 workers in Victoria
Around 800,000 workers in Queensland
Around 260,000 workers in South Australia
Around 360,000 workers in WA
Around 90,000 workers in Tasmania
Around 30,000 workers in the NT
Around 50,000 workers in the ACT

The Gillard Government is acting on the recommendation of the Henry Review which said that superannuation tax concessions should be distributed more equitably.

From 1 July next year, we will make the system fairer by ensuring no tax is paid on the superannuation contributions for Australians earning up to $37,000 and that the money is instead directed into their superannuation. This tax reduction is limited to $500 per person which covers the tax due on 9 per cent SG at $37,000. 60 percent of the beneficiaries of this policy are women.

The superannuation savings of 2.1 million women earning less than $37,000 will be boosted by $550 million in 2012-13 alone.

Importantly, the Government has also simplified the application process for low income earners individuals who are not required to submit an income tax return. They will not need to fill out any extra paperwork. Instead the ATO will do the calculations for them using information available to the Commissioner of Taxation such as payment summaries. This streamlined process reduces the paperwork burden on low-income

Australians, while ensuring the integrity of the system.

This will be one of the most significant wealth creation reforms targeted at low income earners in modern Australian history.

Put simply, the Government is lowering the tax burden on low income Australians and directing this forgone tax revenue into their superannuation accounts to help them build for the future.

The revenue from the Minerals Resources Rent Tax will go towards filling the resultant gap in tax revenue. It is the right way to share the benefits of the mining boom and ensure our country is well prepared for the gift of longer life.

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