ANDY PARK:
If you’ve got a small business, how difficult is it to keep things going? I mean you’ve got costs increasing, you’ve got paying of suppliers, and, of course, the tax office. And yet, consumers seem to be spending less. Some small business operators are getting so desperate, they’re turning to online lenders, signing up to contracts which they don’t understand, which land them in so much more debt they’re forced to sell the family home. And while these loan sharks are able to continue operating, small businesses aren’t protected by some of the laws that you and I are protected by as consumers. Stephen Jones is the Assistant Treasurer and the Minister for Financial Services. Welcome to you, Minister.
STEPHEN JONES:
Andy, good to be back with you.
PARK:
Why don’t small businesses have the same protection as consumers with things like consumer credit and responsible lending laws? What’s going on exactly?
JONES:
The responsible lending obligations which are part of the Consumer Credit Act, put in place in about 2012 after the global financial crisis to ensure that banks weren’t pushing inappropriate lending products onto consumers. They require the bank basically to look at 2 things: whether it’s affordable and whether it’s appropriate. The thinking has always been that businesses are in a different position to ordinary consumers. They’re in business and they have a greater capacity to make assessments about whether credit is necessary, appropriate and what the cost to the business actually is. We had a look at this during the Royal Commission, and Ken Hayne had a look at it in the Royal Commission, because some people were proposing that they be brought inside the Consumer Credit Act. They recommended it against it – the Royal Commission recommended against it. My view is the same as the Royal Commission. If we start raising those bars too high, we lock businesses out of credit and then they’re forced into, mainstream credit that is, they’re forced then into some of these less mainstream operators, if I can put it that way, non‑traditional lenders that have often got very high rates and unfair terms.
PARK:
So, what’s the answer then? I mean, are you saying, you know, if you want to jump off the roof, jump. But let me at least tell you what the terms and conditions might be for making such a jump. Is that kind of the spirit of what you’re saying?
JONES:
Look, the answer is going to be dependent on what the purpose for the loan is. If the loan is to provide some cash flow because you’ve got a debt. Well, honestly, sometimes you might be better off getting some advice on whether you can reach some terms with the creditor that you owe some money to. If the loans for – and that’s particularly the case with the tax office, and I’ve heard some commentary over the last couple of days about the tax office debt collection activities. Always better to reach out, either directly or through your accountant, to get some advice and to try and reach terms with the tax office to pay by instalment or over a period of time. But get some advice, read the terms and conditions, read the detail. Always much more preferable than to entering into loan contracts that people don’t understand.
PARK:
Meanwhile, insolvencies are increasing. March saw about double the number of insolvencies nationally compared to January, and this is still higher than last year, with the rate tipped to get probably even worse. So, how concerned are you that this issue might become more prevalent as people face hitting the wall with their small business ever more?
JONES:
Look, of course I’m concerned, and I know that businesses are doing it tough, particularly if businesses are in the retail space. We’ve seen a fall off in retail spending over the last quarter, and we know that businesses and Australians are doing it tough at the moment. That’s why we’re trying to provide some transition relief in our most recent Budget. But I’m not in a position, I’m not allowed to give financial advice to businesses. That would be a breach of a lot of laws if I did that. Always good to reach out to get some advice. And as I said, if there’s debts to the tax office, reaching out early and getting some terms in place is going to be a lot better.
PARK:
The debts that the ATO is chasing from small businesses is about $34 billion. Why are small businesses in so much tax debt? And can you say hand on heart the ATO is acting ethically when it comes to collecting? You mentioned you’ve heard some anecdotes about their collecting practices, like what?
JONES:
So, in answer to the first question, throughout the pandemic a lot of the debt collection activity was put on hold. So, the tax office suspended its normal chasing of debts, and those debts just accrued and then they accrued and then they accrued. And a significant proportion of that debt is what we call activity statement debt. So, it’s not tax on profits. It’s tax that has been collected by a small business for GST, for example, but not remitted to the tax office. It’s tax that—it might be superannuation not paid on behalf of their employees. And that is overwhelmingly the majority of the debt that is owed in that small business place. And it’s just, the fact is if a business owes debt to the tax office, they probably owe money to other creditors as well. So, it’s really important that they engage with advisors and try and work themselves, work their way through the problem, instead of just adding to the debt and getting further and further and further behind. That’s in nobody’s interest. So, that’s what’s going on. It’s about—a whole heap of that debt accrued through the pandemic. Normal debt collection activities have now resumed by the tax office.
PARK:
05:12. You’re listening to RN Drive. Assistant Treasurer and the Minister for Financial Services, Stephen Jones, is with me. We’re talking about loan sharks and how you can protect yourself from some of these more egregious 300 per cent interest loans. I do want to move on and talk about the Budget. Housing, of course, was a key part. The chair of the National Housing Supply and Affordability Council, Susan Lloyd‑Hurwitz, has said that unless we address some of the key reasons hurting supply, including skills shortages, the government won’t meet its target of 1.2 million new homes in the next 5 years. If the government wants to effectively halve net migration next financial year, won’t this stymie your own goals to strengthen the housing market?
JONES:
Look, we’ve got to get the balancing act right. There’s no doubt about it. One of the big areas where we’re focused on, on bringing that net migration figure down, is through overseas students, which is currently on a demand‑driven program, and it’s definitely grown unsustainably out of control. So, trying to bring that down.
PARK:
The tertiary education sector does feel punished, just to sort of paraphrase them. They say they’re a major contributor to the economy, which also contributes to the research and innovation and skills we need for things like the Future Made in Australia Act.
JONES:
And they are, and they’ll continue to be a significant contributor to the economy. And there is great benefit to Australia and to the students who come here for an education, many of whom stay and go on and make great contributors to our economy, our society, and yes, they’re taxpayers. So that will continue to be the case. But we’ve got the program growing at unsustainable levels at the moment and has to be brought down. In the area of skills, my very strong view is our obligation is to train locals first, and we’re doing that through our fee‑free TAFE program, particularly focused in the construction industry. So, we’re growing and training more tradies here in Australia, and we know we’ve got to do that. We want to ensure that we’re sending a message of hope to all those young kids who don’t want to go on to university, but do want to get a well‑paid job with a good career ahead of them. And the construction industry is one of those areas. Other obstacles outside of skills. Obviously, the planning process taking too long in so many areas, and we’ve got to accelerate the planning process. That requires us having some tough conversations with state and local governments to remove some of those unnecessary obstacles that are holding developments up. We’re doing all of that. Not going to pretend that it’s easy. It’s not. If there was a simple solution to this, believe me, somebody would have done it already. We’ve got to work through all of these things with a coordinated effort and some hard goals in mind.
PARK:
Assistant Treasurer and the Minister for Financial Services, Stephen Jones. Good to talk to you.
JONES:
Always good. Thanks, Andy.