Small business minister Kelly O’Dwyer has given a clear indication that the federal government recognises it has more work to do to “better unleash the power of small businesses and free enterprise” in the Australian economy.
Speaking on the “importance of free enterprise, fairness and planning for the future” at the National Press Club yesterday, O’Dwyer said the potential for more jobs to be created in the small business sector is “enormous”.
“As minister for small business, and as someone who worked in my parents’ small business, it will hardly surprise you that I have a particular focus on ensuring that small enterprises can flourish,” O’Dwyer said.
“But it is equally true that we need to ensure that medium and large enterprises can as well.”
“That said, any discussion about free enterprise, jobs and growth in this country must start with small business – after all, small businesses represent 97% of all businesses in Australia.”
While former small business minister Bruce Billson addressed the National Press Club in the wake of the federal government’s small business-focused budget in 2015, O’Dwyer’s address comes at the beginning of an election year and in the midst of government-initiated reviews of Australia’s taxation and industrial relations frameworks.
Here are four takeaways from O’Dwyer’s speech to the National Press Club.
1. Small business is free enterprise “at its purest”
According to O’Dwyer, small businesses contributed around $340 billion to Australia’s economy in 2014, an increase of $8 billion on the year before.
In 2014, small businesses employed around 4.7 million people, up 146,000 on the year before.
The minister said this economic contribution occurs because small business owners are steering their own futures.
“There businesses are employing people because it is in their interests to do so – not because the government has decided that they should,” she said.
“These businesses are employing people because they have identified a market opportunity – not because the government has.”
2. Small businesses can create more and better quality jobs
O’Dwyer asked the attendees to imagine the employment potential if the government “made it that little bit easier for new businesses to form and that little bit more attractive to start a new enterprise”.
“Imagine if we made it that little bit easier and attractive for each business to employ someone,” she said.
“Seventy-four per cent of employing small businesses employ one to four employees. If each of those businesses employed an additional employee that would create over half a million new jobs.”
“There are over 2 million small businesses in Australia. If that increased by 5% per year for the next five years, that would create over half a million new jobs. “That would be on top of the already 300,000 new jobs created in 2015 alone.”
But O’Dwyer said the potential is not just in how many new jobs are created, it is also in the quality of the jobs that can be created by small businesses.
“Small business can provide the freedom and flexibility that so many women in particular say they want after starting a family,” she said.
“And thanks to technology, it is even easier to have a home based business. It is unsurprising then, that the number of women business owns has increased 5.6 percent in the 12 months to November compared to 4.9 percent over the same period for male owners.
“Small business and free enterprise can unlock genuine social mobility – including the capacity to build financial security for both employers and employees.”
3. Tax reform is essential to small business growth
“Without question, one of the most important policy areas to encourage free enterprise is taxation,” said O’Dwyer.
“Tax policy affects decisions on whether to go into business. It affects decisions on whether to grow businesses and generate jobs. It affects decisions on whether to invest. In a global world it affects decision on where to do these things.
“In doing so, tax affects growth.”
O’Dwyer said the government has implemented nearly all of the tax measures contained in last year’s budget’s small business package.
More reform is under way as part of the government’s innovation statement and small businesses are also affected by other areas of the tax system, such as bracket creep.
“Remember what bracket creep is – more and more wage earners getting dragged into higher tax brackets, getting hit with higher marginal tax rates as their nominal wages rise, even though their real wage remains unchanged,” she said.
“It hits those unincorporated small businesses directly, and the owners of incorporated small businesses when they seek a distribution from their businesses.
“We have to get serious about tackling increased income tax from bracket creep, because it’s a tax on effort. It’s a tax on the potential rewards that encourage risk-taking. It’s a tax on the very things we need to drive our economy forward, to grow and to create jobs.”
4. And this includes cracking down on tax avoidance by big business
“Nothing makes fair-minded Australian’s angrier than having to pay more tax as a result of someone else not paying the tax they are supposed to pay,” O’Dwyer said.
“It makes small business people angry. It makes mums and dads angry. And it makes me angry. It isn’t right.”
O’Dwyer said the government is acting to close loopholes for multinational tax avoidance, strengthen the enforcement powers of the Australian Tax Office and has doubled penalties on large companies that are ripping off the Australian taxpayer.
“We will also consider changes to the law to encourage, protect and reward whistle-blowers whose information reveals artificial tax structures and misconduct,” she said.
“Big business will have to get their house in order, or suffer the consequences.”