House of Representatives

Tax Laws Amendment (Small Business Measures No. 1) Bill 2015

Second Reading Speech

Mr Billson (Minister for Small Business)

I move:

That this bill be now read a second time.

This is a historic, unprecedented and game-changing moment for the small businesses of Australia. This bill amends the tax law to lower the company tax rate by 1.5 percentage points to 28.5 per cent for incorporated small business. This is the lowest small business company tax rate in almost half a century.

Many would agree that small businesses make an important contribution to the Australian economy.

Around 96 per cent of all Australia's businesses are small businesses. Small businesses produce over $330 billion of Australia's economic output and there is no doubt small businesses are at the forefront of Australia's jobs and growth. They employ over 4.5 million people, which accounts for almost 43per cent of non-financial private sector jobs in our country. But this would have been more, if it were not for six years of the previous government, where 519,000 jobs were lost under Labor in the small business community.

While small businesses have a significant role in the Australian economy, they face a unique set of operational challenges, and as a consequence typically have higher failure rates than larger companies. These unique characteristics make small businesses more vulnerable to shocks and changes in economic conditions than larger businesses.

We know from the Intergenerational report that there will be a significant challenge to maintain Australia's current rate of income growth. Future growth in living standards must be driven by higher levels of Australian productivity.

It will require productivity growth to increase to around three per cent a year. This is well in excess of what Australia achieved in the past 50 years, and more than doubles that of the past decade. Put simply, growth in productivity will require more or better quality goods and services to be generated from the resources available.

Australians are well known for their enterprising spirit and their willingness to have a go. The hardworking women and men of Australian small businesses are the engine room of our economy. In 2013-14, Australians started over 280,000 small businesses.

Small businesses are often the entities that test and pioneer innovative ideas and business practices, which are critical to future economic growth, job prospects and improved living standards.

This makes it particularly important to get the policy settings right to support small business growth and innovation.

As elected members of this parliament, we need to understand-and this side of parliament does-and recognise where the impediments and headwinds are in every square of our economic landscape and do our very best to address them, so that those enterprising people with an idea, an aspiration, a sparkle in their eye and a fire in their belly can turn their ambition into economic activity that benefits themselves, their community and our nation.

For a long period, we have been blessed by nature with resources that give us a competitive advantage, and we see that we have benefited from that. However, as we look at the over the economic horizon, we cannot bank on that to sustain our living standards and our quality of life.

The Australian economy is in the midst of a major economic transformation, moving from growth led by investment in resources projects to broader based drivers of activity in non-resource sectors.

We need entrepreneurial spirit, innovation, drive and risk-taking to find new markets, develop new products, establish new businesses and delight new customers here and abroad. To achieve that, we need the ambition of enterprising women and men.

This government sees energising Australian enterprises as its priority. The government's $5.5 billion jobs and small business package in the 2015-16 budget will create the right conditions for Australian small businesses to thrive and grow. It will help employers to create new jobs and assist Australia's unemployed to access these jobs.

The budget delivers the biggest small business package in Australia's history. It is about putting in place improved incentives for entrepreneurial behaviour.

Since the 2015-16 budget announcement, I have had so much positive feedback on the jobs and small business package. That is not just from small businesses, who have delighted at our interest and commitment to their success, but also from the commentators who are quick to offer a view.

CommSec said:

The measures in the federal Budget to support small business would have been a key driver of the lift in confidence.

COSBOA's chief executive, Peter Strong, has said:

... this is a fundamental and positive change that sends the right message to people looking to start a business.

Australian Newsagents' Federation has said:

This will definitely create further impetus and incentive for our members to invest in their businesses.

This bill reduces the corporate tax rate from 30 per cent to 28.5 per cent for small businesses with annual turnover under $2 million. This change is one of the key centrepiece initiatives of the small business package, because on this side of the House we are the best friends that small business has ever had.

Small business companies will pay less tax for income years that commence on or after 1 July 2015. This change delivers on our election commitment to small business.

Providing incorporated small businesses with a reduced rate of company tax will enable them to retain more earnings and improve their cash flow-a critical issue for small businesses' survival and success. It is estimated that up to 780,000 small business companies could potentially benefit from this measure.

New company registrations in the last financial year were the highest on record. This measure will help all new and existing small companies grow, thrive, prosper and compete.

Helping more small businesses become more profitable will give them greater capacity to invest and innovate by adopting new and improved ways of doing business, improving our nation's productivity and resulting in more jobs and higher wages for Australian workers. That means better living standards for us all. That is why energising enterprise is everybody's business.

We understand that not all small businesses are incorporated, so we will bring forward legislation to provide tax relief for unincorporated small businesses. In addition, later today I will introduce legislation to deliver assistance for all small businesses, including accelerated depreciation arrangements.

This bill will also ensure that the maximum amount of franking credits a small incorporated business can attach to its dividends in a year will not be reduced along with the tax rate. This additional benefit will allow small companies to distribute surplus franking credits accumulated in previous years, reducing the tax their owners pay when they receive dividends.

This will benefit owners of small business and effectively reduce the shareholders' overall tax paid regardless of their marginal tax rate.

Full details of the measure, please have a look at the explanatory memorandum, where those details are contained.

As I said, this government is a genuine friend of small business, and in 2015-16 our budget is where we demonstrate our bona fides for that claim. This bill is the first of several that will improve and implement the small business environment through measures announced in the budget. This measure is appropriate and it is affordable, and I call on all in this parliament to give it their early and certain support.

I commend the bill to the House.

Debate adjourned.

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