The minister for small business, Bruce Billson, is planning to overhaul laws covering family businesses around Australia. Billson told Business Spectator that a small business and family enterprise ombudsman will examine the recommendations of this year’s parliamentary inquiry into family business with a view to implementing them.
One issue raised by the inquiry is that our laws and tax system have not kept up to date with family businesses. The inquiry recommended the Board of Taxation look at Division 7A of the Income Tax Assessment Act, which has been in place since 1936. Division 7A still treats loans and debts to shareholders of private companies as taxable dividends and penalises family companies by imposing more costs and potentially limiting growth, restricting a family business from financing other family ventures.
The inquiry also recommended scrapping the requirement under Section 113 of the Corporations Act requiring companies in excess of 50 non-employee shareholders, whether they like it or not, to become unlisted public companies and cop all the unnecessary administrative costs. It has recommended the department of treasury sort something out with the family business sector.
The inquiry also canvassed abolishing the 80-year life span for trusts in Victoria, Tasmania, Queensland and Western Australia. And it recommended opening the door for private equity investment in family businesses – this would be one of the most far-reaching changes.
“I have read that report from cover to cover and I think the recommendations are measured and appropriate,” Billson said.
“They are good, sound recommendations that have been mapped out in that report and we are trying to establish the best steps we can take to support family business success in the future.”
“One of the first tasks will be to systematically examine the recommendations of the parliamentary joint committee on family business.”
If these changes are implemented, the landscape for family business will be transformed.
To give these changes more oomph, Billson is transferring the small business portfolio into the department of treasury, the engine room of the economy.
Asked about the time frame for these changes, Billson said the government had to first establish the ombudsman’s office and make sure it would be there as a permanent feature on the Australian business landscape by enshrining it in legislation.
“Because there is not that clear purposeful and authoritative role, we thought it best to have some legislative backing just to buttress that important work.”
Of course, setting up an office with legislation takes time. There needs to be extensive consultation, the law has to be drafted and then it has to get through parliament including the Senate, where minor parties will hold the balance of power.
Billson has made it clear, however, that he wants the recommendations examined and implemented sooner rather than later.
With that in mind, he is canvassing the idea of his department acting sooner to implement the recommendations, ahead of the ombudsman being set up. It’s an option he has not closed off completely.
“It might take longer to create the machinery of the small business and family enterprise ombudsman and that’s why we have been talking about how we might progress that in advance. But certainly part of our three year agenda, we’re just trying to work out how best to advance that work,” he says.
“Because I’m a no surprises, no excuses kind of guy we’ll need to consult on the shape of that and get the organisational arrangements in place to support that. That might take a little while, whereas we might be able to commence the work on the parliamentary inquiry in advance of that.
“I would be reluctant to see that parliamentary process of the small business and family enterprise ombudsman’s role delay a thorough examination of the committee’s recommendations.
“I’m waiting for some more advice on that, to be frank with you, about what the timing and sequencing of that work looks like. We haven’t shut that off. We are seeking some advice as to how we can best operationalise that policy commitment in the timeliest way. So there is a bit more work to be done.
“I don’t want it to appear as though getting the ombudsman’s role in place is a condition for examining the joint committee’s recommendations.”
He says the government is also committed to reviewing the Fair Work Act. This might well see big changes in its second term.
“We have said a productivity commission review will be part of the work in our first term to identify how well the current system supports employment opportunities, economic prosperity and living standards. Also, whether the policy settings in the current law represent good, wise thinking in terms of the workplace relations regime more generally,” he says.
“If that work identifies specific areas of change that involve amending the current law, we’ll take those proposals to the next election so there’s a clear mandate to act on those clear propositions.”
He says the previous review undertaken by the Labor government only looked at whether the Act was achieving its objectives. Documents obtained under freedom of information by the opposition last year show the original terms of reference for Labor's review were changed. One of the issues to be initially investigated by the Fair Work Act review panel was whether the legislation had "reduced the compliance burden on business." That didn’t happen.
“We have committed to a broader review but we have said that will be in the context of modest problem solving changes in this term of government,” he says.
He says his door is always open to SMEs and family business. They can contact him any time, he says.
“I’m always happy to have a chat or they can communicate to me via email,” he says.
“Our over-arching goal is to put the business back into small business and to have the concerns of small businesses and family enterprises front and centre in the business of government and in the way it formulates policy, implements programs and makes decisions.”