Opposition leader Bill Shorten has defended his controversial plan to tax discretionary trusts at a flat 30% and placed energy prices, internet speeds, and skill shortages in his crosshairs.
Speaking this morning at the Council of Small Business’ National Small Business Summit in Melbourne, Shorten said he was hoping to dispel the myths that Labor’s plan for a minimum 30% tax rate for distributions on discretionary trust structures, if it were to gain power, would could widespread damage to small businesses, saying he has “no interest in tearing the system down”.
“I am interested in how we can make the system work better for more people, including small business,” Shorten told the summit.
“I understand that many small businesses use trusts for asset protection and in the past, I have made it clear we shouldn’t just get rid of trusts and we shouldn’t just tax all trusts as companies,” he said.
“I want to assure you the use of trusts for asset protection does not change under any policy we’ve outlined. What we’re proposing is a simple change.”
Shorten said his party’s policy would only target those using trusts to, for example, “pay parents so they can pay your kids’ school fees” where these people are not working in the business, and it is done with the intention of minimising the tax required to be paid.
“You might have a successful investment banker who earns half a million dollars with another $100,000 in passive income. They distribute that $100,000 and they give it to parents to pay school fees and adult kids, and miraculously it’s always just below the threshold,” Shorten told the summit.
“This is costing the budget tens of millions of dollars over a year. That income loophole, we think it’s now time to bring an end to.”
He continued to stress the policy would not bring an end to asset protection for businesses or the tax paid by family members working in a business. He also listed a number of trust structures the policy would not affect, including charitable trusts, deceased estates, disability trusts, farm trusts, fixed trusts, and fixed unit trusts.
The Labor Party’s plan has previously been labelled as “populism” by Council of Small Business Australia chairman Peter Strong, saying the associated research SMEs would need to do would “take the focus right off the business”.
Small Business Minister Michael McCormack has also labelled Shorten’s plans as a “short-sighted tax grab”, reports Fairfax.
Shorten said the Labor Party’s choice to focus on trusts is a “hard decision which needs to be made” in order to improve national debt and crack down on “fortunate high net worth individuals” using discretionary trusts “purely as a vehicle to minimise their tax”.
“If we have to make hard choices about increasing the costs of country kids to go to university, or look at discretionary trusts being used in this way … in a priorities game, this is where we’ve chosen to look,” he said.
“Our policy does not target small business and our policy does not have an effect on 98% of taxpayers — including the vast majority of Australian businesses, big and small.”
Energy prices “out of control” for SMEs
In his speech, the Labor Party leader touched on another pain point for Australian small business, saying energy prices will “continue to go up” until investors and retailers can have confidence in the government’s energy policy, which he believes must include a clean energy target.
Shorten says many small businesses have already embraced rooftop solar, with the number set to grow as installation becomes more affordable, but the “biggest impediment” to reliable, cheaper, and cleaner energy is politics.
“Policy uncertainty is driving prices up, and all sides of politics can take some of that responsibility. There is a vaccum of policy certainty which discourages investors and energy companies and job creators from investing,” he said.
Shorten said Labor is willing to put aside its “first option” of the Emissions Intensity Scheme if the government was willing to come to a clean energy target — provided the target is “fair dinkum”.
“The sooner we can get on with policy certainty the sooner we can unlock investment,” he said.
NBN an “ongoing buffering circle”
The government’s much-criticised rollout of the National Broadband Network (NBN) was also in Shorten’s sights, with the Opposition Leader continuing to push for widespread fibre to the curb access for businesses and families.
“For families, it’s a frustration and disappointment but for small business, it is a difference between profit and loss, the difference between sales and not having sales,” he said.
Shorten claimed the issues go beyond slow speeds, drawing into question the reliability of the network. He said businesses suffer from the “capital expenditure just to remain connected” when paying to upgrade from a copper NBN service to a fibre connection and labelled the costs “exorbitant”.
“In 2013, if a small business wanted to make the switch from copper to fibre for better access, it would be about $2,500. I don’t think that is the average experience now of business,” he says.
“Individual businesses and households have been paying an average of $15,800 today, some with figures ten times that. For small businesses on thin margins, this kind of cost is incredibly frustrating.”
However, Shorten conceded the Labor Party would not “rip out all the copper” if elected. Instead the opposition wants to pressure the government to focus on a better technology mix of “more fibre and less copper”.
“At a minimum, we should be scaling up the rollout of fibre to the curb, which at least allows for faster speeds and cheaper updates,” Shorten said.
Shorten finalised his speech by outlining the Labor Party’s overall goal for small businesses in Australia, saying his focus is on letting local small businesses pursue their own opportunities.
“We do it by cooperation. I don’t want us to be a nation of the working poor, I don’t want us to be a nation where red tape strangles every startup and new idea,” he said.
You can help us (and help yourself)
Small and medium businesses and startups have never needed credible, independent journalism and information more than now.
That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.
Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.