Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016

Thursday, 04 February 2016

Mr HAWKE (Mitchell—Assistant Minister to the Treasurer) (09:01): I move:

That this bill be now read a second time.

This bill amends taxation laws to allow small businesses to change their entity structure without incurring a capital gains tax liability at that time.

Small businesses account for 97 per cent of all Australian businesses. They employ over 4.7 million people and they produce over $340 billion of economic output per year.

To support this vital sector of the economy, the government announced a $5.5 billion Growing Jobs and Small Business package in last year's budget.

This parliament has already passed legislation for the 1.5 per cent small company tax cut; the unincorporated small business tax discount; the immediate deductibility of assets under $20,000; and the immediate deductibility of professional expenses measures.

In addition, from 1 April this year, small businesses that provide their employees with qualifying work related portable electronic devices, will be allowed a fringe benefit tax exemption. This was another measure announced in the Growing Jobs and Small Business package, and passed by this parliament.

This bill contains the final tax measure from the Growing Jobs and Small Business package.

Schedule 1 allows small businesses to change the legal structure of their business and have the capital gains tax liability disregarded and deferred until eventual disposal.

Sometimes a small business will start operating within a legal structure that is not necessarily best suited to the owner's needs. This can occur because they did not receive advice or the advice was inadequate or because the business has developed beyond the original aspirations of its owners.

For small business owners who find that they are running a business through the wrong entity structure, there can be additional administrative burdens and cash flow impediments. To remedy this situation, a small business owner could choose to restructure their business, but this restructure is currently likely to require the owner to pay capital gains tax on the assets of the business even though there is no change in its ownership.

This aspect of the tax law means that small businesses are effectively locked into the structure they choose at the inception of their business at a time when many small business owners do not have the time or money to seek professional advice on the best legal structure for their business.

To alleviate this problem, this measure will allow small businesses to roll over assets from one entity to another, provided the underlying economic ownership of the assets remains unchanged.

This bill has a cost to revenue of $40 million over the forward estimates period and, along with the other tax measures announced in last year's budget, will provide over $5 billion of support to Australia's hard-working small business owners.

The government are proud of their commitment and we have shown to small businesses through this package of measures that we are committed.

Small businesses not only provide income for their families and jobs in their communities, but have great ideas and great visions that can change our country and in some cases can conquer the world. Australia's new free trade agreements present a major opportunity for these businesses to expand into new markets.

This government has a policy focus on small business.

We want small business to be as strong as it can be and for the hard-working people in small business to succeed.

We must continue to foster an entrepreneurial culture and reduce regulatory barriers so that people can take advantage of the opportunities afforded by a growing, diversifying and adapting economy.

This means getting the balance right on tax, to make sure our tax system is not putting obstacles in the way of our ability to innovate, to adapt and to diversify.

We look forward to seeing many more businesses across the country as the benefits of this initiative are felt.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.