1 August 2012

'Taxation Policy – Does it Work for Small Business?' - 2012 UNIGAS Enterprise Forum, Sanctuary Cove

Good afternoon.

I'd like to thank UNIGAS and Tim Donoghue, UNIGAS General Manager, and John Evans, Head of Elgas, for the invitation to speak with you today on how the Gillard Government's taxation policy is working for small business.

The Gillard Government is committed to assisting Australia's 2.7 million small businesses by improving their cash flow and reducing compliance costs so they can grow their business. That's why the Government is assisting small businesses, such as independent petrol retailers, share in the benefits of the mining boom thanks to some major new tax relief measures which began on 1 July this year.

I know that UNIGAS has a very strong connection to small business, supplying LPG Autogas to over a thousand service stations. UNIGAS customers are largely independently-owned service stations, which compete with oil companies and the two supermarket alliances.

I understand that UNIGAS supports these local service stations to ensure there's an ongoing national role for independent retailers, and that LPG remains competitive and convenient for Australian motorists.

Given UNIGAS' support for the small business sector, I'd like to make some brief points on the nature of competition within the domestic fuel market.

Competition in the domestic fuel market

As you know, the structure of the domestic fuel market continues to evolve.

The large, integrated refiner-marketers are moving away from lower margin downstream activities to concentrate on upstream activities.

At the same time, specialist retailers, including the major supermarket chains, have significantly expanded their involvement in fuel retailing.

The Government recognises that the evolution in the structure of the industry presents several challenges to independent retailers — retailers who play an important role in encouraging competition in Australia's fuel market.

This is a good thing and I can assure you this Government is committed to promoting competition and transparency in the fuel market.

As part of this commitment, one of the first things we did on coming into government was to ask the ACCC to monitor prices, costs and profits relating to the supply of unleaded petroleum products – a function that's overseen by an ACCC Commissioner, consistent with the high level of importance we place on this.

We also have robust competition laws, which protect consumer interests by setting clear rules for businesses in the market, and prevent activities designed to undermine or eliminate competition.

If there is sufficient evidence of anti-competitive practices in any industry, including the misuse of market power, the ACCC is equipped to take enforcement action under Australia's competition laws.

I understand that "shopper docket" discounts offered by the major supermarket chains are a source of ongoing concern, particularly for industry participants.

Of course, shopper dockets benefit consumers through lower petrol prices.

However, we also need to be aware of the potential for these types of promotions to be used in ways that may be anti-competitive.

The ACCC is currently examining several developments in the retail fuel sector, including the expansion and development of shopper docket arrangements and their effect on competition and prices.

This is a complex issue, and I understand that the ACCC expects the investigation to take some time. I would encourage you to continue to engage with the ACCC if you have any concerns on this matter.

Tax policy and small business

Recent reforms

I'd now like to move on the key theme of my talk today – how the Gillard Government is using tax policy to help small business, inlcuding many of UNIGAS' customers.

The Government's vision for the tax system is one that attracts investment, increases productivity, lifts economic growth, and prepares Australia for the opportunities of the Asian Century.

This was set out in the Tax Reform Road Map, released in the 2012 Federal Budget.

Our vision will translate into more jobs and higher living standards for everyday Australians.

For its part, the Government is reforming business tax arrangements.

This is designed to boost investment and promote sensible risk-taking, and is an important part of this vision.

Because this Government understands how vital the small business sector is to the Australian economy.

This is why we have enacted a number of measures worth up to $3.7billion, through to the 2015-16 financial year, that will improve cash flow and cut red tape for up to 2.7 million Australian small businesses.

For example, from 1 July this year, small businesses will be able to:

  • instantly write off assets costing less than $6,500;
  • depreciate other assets costing $6,500 or more in a single pool; and
  • immediately deduct up to $5,000 for new or used motor vehicles purchased after 1 July this year.

We are well aware that maintaining a strong cash flow is vital for small businesses, and the less time small business people spend on their tax return, the more time they have to grow their businesses.

These measures will benefit small businesses, whether they are run by sole traders, partnerships, trusts or through companies.

In particular, these measures will also simplify the tax system for small business. This will boost the productivity of small business owners, allowing them to spend less time on tax matters and paperwork, and more time on their business and, ultimately, with their families.

Loss carry-back

Of course, the Gillard Government understands that many small businesses are feeling the effects of structural change and the "patchwork economy". This is why we convened last year's Tax Forum and asked the Business Tax Working Group to look at ways to better use our tax policy settings to help businesses deal with cash flow problems.

A key recommendation of the Working Group, which the Government has adopted, was the tax loss carry‐back measure announced in this year's Budget.

From 2012‐13, the Government has improved access to company tax losses by introducing a loss carry‐back, and extending this to a two-year carry‐back from 2013‐14.

As you probably know, a tax loss is when deductions exceed assessable or taxable income.

If a small business makes a tax loss – that is, if its deductions exceed its assessable income – under current tax law, that loss is carried forward to be offset against assessable income in future years. That's tax loss carry-forward.

Tax loss carry-back is the reverse. If you paid company tax last year, but made a loss this year, you can claim a refund of the company tax payments you made last year.

Loss carry-back is a broad-based policy that will make it easier for businesses to invest and innovate in order to compete in the patchwork economy. It will also help Australian businesses to adjust to the current high terms of trade and an economy in transition.

Loss carry-back provides more timely and certain utilisation of tax losses, compared with being able to carry forward losses only for possible use against future profits.

This will help businesses by reducing impediments to sensible risk‑taking, giving them more certainty about the treatment of an investment that carries some risk.

Loss carry-back encourages all businesses to adapt and change and make new investments to take advantage of emerging opportunities. In turn, this will encourage productivity, innovation and investment in the Australian economy.

Around 110,000 companies are estimated to benefit from loss carry‑back in the first four years of operation. Of these companies, around 90 per cent are expected to be small businesses.

Looking ahead, the Government sees cutting the company tax rate as the next step in tax reform. That's why we've tasked the Business Tax Working Group to make it their top priority to consider how such a cut could be funded from other changes in the business tax system.

Small business and the carbon price

Turning now to the carbon price, I'd like to make it quite clear that the carbon pricing mechanism is not a tax on small business or households.

In fact, fewer than 500 of Australia's biggest polluters will pay the carbon price.

Some of the big polluters may choose to pass these costs through to small businesses, including through electricity bills.

Most small businesses are expected to pass these costs on to their customers, which is why the Government's plan includes a comprehensive package of household assistance.

The Government is committed to several measures to help small businesses transition to carbon pricing. As I mentioned earlier, these measures include increasing the instant asset write-off threshold to $6,500 for depreciable assets from the 2012-13 income year.

Carbon tax assistance for individuals

I'd like to emphasise that the revenue from the carbon price will pay for new tax cuts for millions of Australians.

These tax cuts will be permanent.

The new tax cuts will benefit all taxpayers with annual taxable incomes under $80,000, including taxpayers operating a small business as a sole trader or through a partnership structure.

In 2012-13, most taxpayers with taxable incomes of up to $80,000 will receive an annual tax cut of at least $300.

Further tax cuts will be delivered in 2015 for all taxpayers with incomes up to $80,000, with most receiving a tax cut of up to $385 in total.

These tax cuts will provide assistance to cover the projected impact of the carbon price out to the end of the decade.

People on higher incomes will pay no more tax as a result of these reforms.

Support for small business sector

I mentioned earlier that the small business sector plays a vital role in the Australian economy.

That's why the Federal Labor Government has introduced a suite of measures to help small businesses. I'd like to briefly outline these.

Non-tax small business assistance

Short-term cash flow problems

Again, we recognise that maintaining a strong cash flow is vital for small businesses.

Firstly, small businesses with short-term cash flow problems can apply to the Australian Taxation Office for the due date of their tax activity statement payments — for example, PAYG and GST instalments — to be extended for up to two months. No interest charge will apply for the period of the extension.

Small Business Commissioner

Secondly, the Government has announced the establishment of the first Small Business Commissioner at the national level. This initiative will give Australia's hard-working small businesses a direct line to the Commonwealth Government.

The new Australian Small Business Commissioner will provide a one‑stop shop for small business services and information.

As well, the elevation of the Minister for Small Business to a Cabinet‑level position ensures that Government decision-making will take full account of the interests of Australia's small businesses.

Business Enterprise Centres

Thirdly, the Government is funding 37 Business Enterprise Centres to enhance small business advisory services under the Small Business Advisory Services Program.

Small Business Support Line

Fourthly, on 3 September 2009, the Government launched the Small Business Support Line.

The Support Line provides initial advice to small business owners and puts them in touch with specialist advisers on matters such as obtaining finance, cash flow management, retail leasing, diagnostic services, promotion and marketing advice, and personal stress or hardship counselling.

In the 2012-13 Budget, the Government extended the Small Business Support Line to 2015-16.

Enterprise Connect

Fifth, Enterprise Connect offers comprehensive advice and support to eligible Australian small and medium-sized enterprises to help them transform and reach their full potential.

Eligible businesses are able to request a comprehensive, confidential and independent Business Review at no charge. Enterprise Connect also delivers a number of targeted support programs to address specific business and regional development needs.

Small Business Superannuation Clearing House

And finally, the Small Business Superannuation Clearing House, which has operated since 1 July 2010, is a free service administered by Medicare Australia.

The clearing house simplifies life for small businesses with less than 20 employees, by enabling them to pay their employees' superannuation to a single location in just one simple electronic transaction.

Conclusion

As you can see, the Gillard Government, from the Prime Minister down, is committed to ensuring that government policy, and in particular tax policy, promotes small business investment and growth.

Moreover, I personally have had a long-standing interest in small business, having chaired Parliamentary Inquiries into small business finance and into franchising law, for example.

There is an old-fashioned idea that the Coalition or LNP is pro-business and Labor is anti-business. But the facts would suggest otherwise and it's worth exploding this myth once and for all.

Over the years, Labor governments have been strong supporters of small business. After all, Labor has always understood that small business is the engine room of growth in the economy and the biggest employer in the country.

That's why this Government has done all it can to listen and respond to the needs of the sector, to help it get on with business of doing business and create jobs, through measures like loss carry-back and the instant asset write-off that I've talked about.

During the 11 years of the Howard Government, the only substantive small business policy was the introduction of the GST, which made every small business an involuntary tax collector.

This stands in stark contrast to our record since 2007, of easing the way of small business, working with the sector, and finding practical ways to help small business survive and thrive.

Once again, I'd like to sincerely thank UNIGAS for inviting me here today to talk about this important topic. I've appreciated the opportunity to engage with you on a range of issues and I trust that the remainder of your enterprise forum is a great success.

Thank you.