Patrick Gorman MP Talks on ABC Radio Darwin

ADAM STEER, HOST: Patrick Gorman is the Assistant Minister for the Prime Minister in town today over proposed changes to unemployment benefit requirements, which we'll get to in a moment. But let's start with the capital gains tax. Assistant Minister, welcome to the Top End.

PATRICK GORMAN, ASSISTANT MINISTER TO THE PRIME MINISTER: Thanks, Adam, and thanks to your listeners for welcoming me here.

STEER: Can you explain what your government was trying to do and now is changing?

GORMAN: One of the things we did put in the Budget was what we call the instant asset write off. And that's where - putting in permanently, where small businesses can write off assets, they buy productive assets in their business so that they can then benefit their cash flow in a much faster way. And that was for small businesses, up to that $10 million threshold. So, what the Treasurer, the Prime Minister and the Government have announced today is that that $10 million threshold will now be aligned for those capital gains tax concessions. Because there's always been some quite generous capital gains tax concessions for small businesses. And your listeners who've built, and potentially sold small businesses, would know about those. But what we're doing today is we've said we're going to align them. So, both the instant asset write off at the $10 million mark of turnover each year and the capital gains tax concessions for those active business assets.

STEER: Explain that, though. A 50 per cent capital gains tax concession. What does that mean?

GORMAN: So, what happens is that when people make a capital gain, that is that they make a profit on what they put into a business -

STEER: So, this is the value of the business, is it?

GORMAN: Yeah. Well, if they sell an active asset within a business, you would make a notional profit. You are able to discount the value of that profit in terms of what you then have to pay on tax. And those discounts mean that we recognise the value that people have put in. I know you've got about 20,000 small businesses here in the Northern Territory, and it's people who are putting in so much of themselves. You know, they're not just doing a 38 hour week, they're putting so much of themselves in. Often it is a family affair. And so some of those generous concessions are there to recognise all of that investment that people make. And this - again, we're going to end up with a system where the definition of a small business on these two things, the instant asset write off and the capital gains tax concessions for those active assets, is the same. And again, that just simplifies things for small business. And it's a significant lift because the current threshold is $2 million and it hasn't changed in a long time. We're going to lift it up to $10 million before they find themselves in those more complex tax regimes.

STEER: So, the $2 million, that discount level of 50 per cent for the capital gains tax, that's been set for some time. So, that wasn't one of the changes that you made a month ago or two months ago.

GORMAN: You have heard the Treasurer, the Small Business Minister, my Western Australian colleague Anne Aly and others talk about, there's a range of capital gains tax concessions that already exist for small businesses. And they've existed for a long time. What we're doing and what we've announced today is extending one of those concessions, which was currently only for small businesses with a turnover of up to $2 million, and recognise that actually, you know, if you've got a turnover of three or four million dollars, you are still very much a small business. And so we're going to keep you in that small business concession zone all the way up to an annual turnover of $10 million. And that's -

STEER: But the capital gains tax, what percentage is that?

GORMAN: What we've said in terms of capital gains tax is, capital gains tax when it comes into an individual's income, is that their marginal tax rate. When it comes to what we're looking to do in other parts of the economy, and again, I want to be really clear, this is talking about other parts of the economy beyond those small business concessions, is have effectively a principal of a 30 per cent tax on capital gains. We recognise that that's -

STEER: So a 30 per cent on capital gains. But that would be 15 per cent if you're getting that 50 per cent discount, is it?

GORMAN: No. And I think I recognise why you asked that question and I recognise that what we're trying to do here is talk about a lot of different tax regimes that apply to a lot of different people. Most people, most working people, you know -

STEER: I mean, if this was such a good idea to do it, why didn't you just do it in the first place in the Budget? Why - what's happened from now, from the Budget being delivered to now that you've changed and increased that small business threshold from 2 to $10 million, why the change now?

GORMAN: We said at the Budget that we're a government that listens, and we said in the Budget that we were going to go and consult with those who would be impacted by these, looking at how do we build a fairer tax system. And equally, I want to remind all of your listeners that the other part of this big change is a significant improvement in the tax regime for working people. 120,000 working people here in the Northern Territory who pay income tax are going to benefit from the Working Australians Tax Offset (that's $250 a year), benefit from the $1,000 instant tax deduction that they can put on their income tax returns, which is the most common type of engagement that people have with the tax system beyond just paying the GST every day as we go about things at the shops.

STEER: Quarter past four. Adam Steer with you. Patrick Gorman, Assistant Minister to the Prime Minister in town today. Your guest on ABC Darwin, 1300 057 222. That's the number to call today. So, the Treasurer has said that the changes now increasing that threshold from $2 million to $10 million means that 98 per cent of all active businesses in Australia will now get that 50 per cent tax concession. How much is that costing the Budget?

GORMAN: Well, the total package of the small business supports that we've got in the Budget is a value of $3.8 billion. That's $3.8 billion of support for small business with a tax regime that supports them when they're investing in productive assets. The cost of the announcements that were made today - I don't want to bore your listeners with every measure of the Budget. I'd encourage them to go to budget.gov.au if they want to read all of the measures that are there. But those tax loss carrybacks will also seriously help with small businesses with their cash flow.

STEER: The Opposition Leader said this.

[AUDIO PLAYS]

ANGUS TAYLOR: This Budget is in chaos. It is in tatters because the Government simply got it wrong from the start. No point going on with these carve outs. Scrap it. Scrap the bill. Start the Budget again.