SUBJECT/S: Budget 2016
JULIE DOYLE: Michelle Rowland, thanks for coming in today. Let’s talk about the small business tax cut the Government announced earlier this week in the Budget. You support that but only for businesses with a turnover up to $2 million. Why is that?
MICHELLE ROWLAND, SHADOW MINISTER FOR SMALL BUSINESS, SHADOW MINISTER FOR CITIZENSHIP AND MULTICULTURALISM: Well, firstly in last year's Budget Reply, Bill Shorten outlined how he considered it possible on a bipartisan basis to lower the small business tax rate to 25 per cent and understood that this would take time. What we see in this Budget is actually the tax rate being lowered, but for companies up to a billion dollars over time, a policy that is in fact not actually even costed as we found out recently. But if you have a look at the statistics, the vast majority of small businesses are actually at $2 million turnover or under, so we support a tax cut for small business. We support small businesses receiving benefits to enable them to grow and employ more people, but we don't want to see this being used as an excuse just to give the big end of town a bigger tax cut.
DOYLE: The first move was from $2 million to $10 million. So that's the tax cut the Government wants to come in first from July. So is your argument that what about small businesses earning $3 or $4 million, why shouldn't they get some tax relief?
ROWLAND: As I said, the vast majority of small businesses, in fact, over 80% are actually at $2 million or under. And it’s actually curious when you’re talking about changing the definition, there are other aspects of this Budget where the definition of small business has not been changed and still has the $2 million threshold. So it's curious that the Government is seeking to increase the threshold for one purpose, but is not consistent in other areas.
DOYLE: You draw the line at $2 million, never to be changed, is that Labor's position?
ROWLAND: We know this is an issue that has been discussed over time and if we are going to have a proper discussion about making sure there is consistency in the definition because, as any small business will tell you, one of their big bugbears is in some jurisdictions or some laws they’re classified differently. Sometimes it's on turnover, sometimes it's on the number of employees. We would like to have a situation where there is more consistency for small business, but for a Government to come in and announce this in a Budget without consultation and without considering any of the other impacts and really just to be doing this as a back door to giving billion-dollar businesses a tax cut and trying to somehow pass them off as small businesses is not acceptable.
DOYLE: Are you saying there then that you would be open to some change in that definition to increase the threshold from $2 million?
ROWLAND: Over time I think governments do need to look at definitions and whether they are appropriate, and certainly, as I said, that has been a discussion that has been happening for some time, but not in that formal sense, but this Budget has chosen to make this announcement, but it's not only for small businesses. Bear in mind, we would want to see -
DOYLE: The initial one is for small business, up to $10 million?
ROWLAND: They’ve changed that definition, that's the first point, but the second point is over time I can see how small businesses would be rather annoyed that all are these other bigger businesses that are not small businesses will be receiving these benefits.
DOYLE: This initial one that we've been talking about, the Government says up to 100,000 extra small businesses will get some tax relief, so are you going to stand in the way of that?
ROWLAND: We want to see genuine small businesses get relief. Now, when you have the vast majority of small businesses being those with a turnover of $2 million or less, then I think you do need to look at where those benefits are going, and again it is a question of fairness. Now, there are other issues tied to small business in this Budget that don't look long-term at the needs of small businesses and one of those is in the instant asset write-off or the accelerated depreciation space. Now, the Government has chosen to increase, take that threshold and it has chosen to have that $20,000 taken forward another year, and we still have next year, so 1 July next year there will be this cliff, an investment cliff where it goes from $20,000 down to $1,000.
DOYLE: How do you stop that, though? Do you extend it and extend it?
ROWLAND: This is a good question. We support the instant asset write-off because we actually introduced it and Chris Bowen had it at $6,500 with a trajectory to increase it to $10,000 in line with the Henry Tax Review. We support it because as Henry recommended it is an issue of cash flow and really does assist small business. When Tony Abbott was elected he took that down to $1,000. Now, the Government in last year's Budget increased it to $20,000, but then it was supposed to drop away to $1,000. Now again, next year, 1 July next year, it goes back to down to $1,000. One of the key things that small business has been telling me is the need for certainty, certainty of investment so they can make these decisions for the long-term term.
DOYLE: But they can't keep that $20,000 in place forever?
ROWLAND: I'm not suggesting that. What I'm pointing to is that this government in one area has chosen to increase the threshold for small business, but in other areas has failed to consider what the impact would be on small business over the long term.
DOYLE: Let's talk more generally about the plan then, after the first year, is to gradually lift the threshold so the reduction in company tax applies to all companies eventually. What is wrong with trying to give business some tax relief?
ROWLAND: We would support tax relief where it's sensible to do so, and we have outlined very clearly our desire on a bipartisan basis to lower that threshold, to lower that tax rate for small business, to 25 per cent. But here is the problem with this Government in this Budget, as has been recently revealed, they've got this enterprise tax plan over 10 years. They haven't even costed it. You can't have a tax plan in a Budget and not have it costed.
DOYLE: Well, they did it over the Forward Estimates over 4 years?
ROWLAND: If you are taking a 10-year plan then you need to cost it at 10 years. The Prime Minister was repeatedly asked could he put a figure on it, and he can't put a figure on it but thinks that Chris Richardson's estimate of in the vicinity of $50 billion is probably right. How can you possibly be running a budget on the basis of having such a big hole in it?