Parliament Updates

15 November 2023

I welcome this bill, the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023, to better support small businesses to improve cash flow and
reduce compliance costs, including the many small businesses in my electorate of Warringah. Small businesses make up a staggering 97.3 per cent of businesses in Australia. They are literally the backbone of our economy and make my electorate of Warringah a vibrant hub of economic activity. In Warringah alone there are more than 8,000 small-business employers. From 2020 to 2021, more than five million Australians were employed by small businesses, and small businesses contributed some 33 per cent of Australia's total GDP. But small businesses are facing yet another crisis following the devastating impacts of COVID over several years. Only in August this year, data showed give per cent of Australian businesses failed in the previous 12 months—the worst rate since the global financial crisis in the late 2000s. Half of the businesses that started in 2019 were permanently closed by June this year, according to ABS data.

A few months ago I met with the Treasurer to discuss with him the perfect storm of challenges being faced by businesses in my constituency. These include: the cost of living and high interest rates; high levels of stress following the COVID-19 pandemic; high levels of borrowing; increased levels of debt; rent rises, with increased interest rates and landlord-deferred rents coming due; and the impact of inflation, meaning consumers are spending less. Raising interest rates is seeking to curb inflation—one of the highest we have seen for decades—but this comes at the expense of our small businesses. From cafes to boutiques, clothing stores to local hardware stores and family run grocery shops, fewer people are coming through the door, and those who are spends less than they have in the past. If ever there were a time to support small business, it is now.

Small businesses face a unique set of operational challenges, particularly managing cash flow and disproportionately high regulatory costs. I welcome this bill and the support it will provide to small businesses with the provision for greater value to be applied to asset write-offs. It provides additional support for writing off assets that support them in energy efficiency. This helps further reduce increasing electricity costs faced by businesses, which are inflationary in themselves. These two initiatives are to be applauded. The $20,000 instant asset write-off was introduced several times by the previous coalition government, including during the COVID-19 pandemic. The impact when it ended was felt by many small businesses. So how does it work? Assets costing $20,000 or more can be placed 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. During my consultations in relation to this bill, both in my electorate and with industry bodies such as the Council of Small Business Organisations Australia, it became clear that businesses need greater certainty.

Robyn Jacobson from the Tax Institute says it best: the 'constant tinkering' of the scheme has made it difficult for businesses to keep on top of current laws and what is on offer to help ease the burden on them. This bill, I would argue, is too limited, providing only for the 2023-24 reporting year, half of which is now almost gone. It provides limited opportunity for businesses to take advantage and make capital decisions. It undermines the utility of the bill in achieving its objectives. We know from the COVID-19 pandemic that, while the uptake of this initiative was initially slow in its first year, with many small to medium enterprises unaware of the increase, the scheme quickly grew in popularity through the pandemic. So it's likely here that, because half the year has already gone, there just won't be the opportunity for the full uptake. It's clear that increasing the amount of the write-off would provide even greater support for the economy and small businesses, allowing businesses to continue to invest when necessary to ensure their resilience. The support offered by this bill will provide life-saving support for businesses struggling to make ends meet and turn a profit right now. The Council of Small Business Organisations Australia noted recently:

Almost 43 per cent of small businesses are not breaking even and the majority of owners are working longer hours than average and paying themselves less than the average wage to protect their business and support their employees. I also welcome the small-business energy incentive in this bill. It will help businesses address the other major issue they face: the rising cost of energy proportional to their cash flow. The June 2023 energy consumer sentiment survey recently released by Energy Consumers Australia reveals that 59 per cent of small-business people are more concerned about paying their electricity bills than they were a year ago. We know for a fact that decoupling from fossil fuels is anti-inflationary. We can get price certainty by moving to renewable energies and assisting small
businesses in doing that. So we need to support small businesses and homes to electrify and benefit from an ever decarbonising grid and become more energy-efficient to reduce their energy consumption.

The small-business energy incentive will support small and medium businesses to electrify, improve their energy efficiency and save on their energy bills. The bonus deduction applies to the cost of eligible assets and improvements up to a maximum amount of $100,000, with the maximum bonus deduction being $20,000. It will help small businesses with buying heat pumps, cooling systems, batteries and more efficient appliances, like fridges, and replacing LEDs. There are a number of energy efficiency measures open to them.

The task of decarbonising of our economy rests heavily on our homes and businesses, and governments should be providing support to accelerate the transition and deliver cost savings to homes and businesses. This is a huge, long-term task, one that is not going to be addressed by this bill, which is limited to simply 12 months, six of which have already gone by. I'm concerned that most businesses will not even know of its existence this side of Christmas. By the time they do, it will probably be too late to really plan to take advantage of it in the final quarter of the financial year. By the time they do, there will be insufficient time to consider, scope and cost potential opportunities to make use of this incentive. Small-business owners are busy running their businesses, which are under immense pressure at the moment. They need more time and awareness to make use of these opportunities provided for in the bill. I would say to the government that, if they are genuine in providing this assistance to small businesses, then the time frame in which these measures are available must be extended. I'll be supporting this bill, but I will also be moving amendments to increase the amount for the instant asset write-off and the energy incentive to extend it for another year, because, if we are going to be genuine about these measures, we have to put them within a time frame where businesses will actually be able to make use of them. If not, it is window dressing and posturing.

It is also really important that the responsible minister should report back to the parliament on its effectiveness in assisting small businesses. Too often in this place, big business has a very loud voice and very quick and easy access to government, but not often enough do we hear and consider the impacts of policies on small business. That is an important aspect that the government should take on board, and it should do better reporting in that respect. The bill is a good start, but I think it can be better, and I urge the government to increase the asset write-off caps and the period in which they are available to small businesses