21 May 2015
Transcript - #2015058, 2015

Interview with Steve Price and Heidi Armstrong, 2GB Radio Sydney

SUBJECTS: Budget 2015 - small business package (crowd source equity funding, $20,000 asset depreciation); superannuation

STEVE PRICE:

We had a call last night on the program about Bruce Billson the Small Business Minister. I think he is doing a fantastic job. I had him at a breakfast for 500 in Canberra last week for the Institute of Public Accountants.

Had a call last night from someone who is a big fan -have a listen.

STEVE PRICE:

Hello Lindsay.

CALLER:

I was at the Sydney Institute tonight listening to the Minister for Small Business Bruce Billson. He was tremendous. He was extremely articulate and his knowledge right across the board was so good.

STEVE PRICE:

What was he talking about Lindsay? The small business changes?

CALLER:

The Budget and then he answered quite a lot of detailed questions and he was on top of all of it.

There you go Minister. How is that for a wrap?

MINISTER BILLSON:

That was lovely. I should confess that Lindsay is a relative. No – I am just joking Steve.

HEIDI ARMSTRONG:

A Minister with a sense of humour. We like that.

MINISTER BILLSON:

Look, it is nice to get some positive feedback for what you are doing because I believe so much in the small business men and women of Australia and all they are doing now but also all that we can support them to do into the future. It is great to get that kind of feedback from Lindsay.

HEIDI ARMSTRONG:

That is fabulous. Minister very interested in what you are going to be revealing as to what the crowd source equity funding platforms here in Australia are going to look like. Can you shed some light on that because Joe Hockey did not give too much away when he gave his Budget announcement?

MINISTER BILLSON:

Yes, Joe probably did not because I am carrying the ball on this one and have been spending quite a number of months working with people active in this field.

HEIDI ARMSTRONG:

He is letting you take the glory is he?

MINISTER BILLSON:

Also to navigate the challenges and to benefit from the wisdom of people like Chris Gilbert, who you will have on shortly.

But essentially what happens, and you described it extremely well Heidi, we have got a whole lot of regulations that are there that limit who and what and how much investment can go into different types of businesses.

Crowd source equity funding – using technology to present new start-ups or small businesses with growth proposals into the digital market place to say - hey we do not want a lot of your money but you might want to invest a few thousand dollars with our business.

At the moment there are all sorts of rules around who can take a financial interest in an ownership stake in the business. You touched on some of those. There are other disclosure requirements, there are class orders that ASIC apply where you cannot have more than 50 non-employees owning a part of a business.

All of that and all of that complexity stops the use of modern technological platforms where you and I might have a great business idea, we might have $60,000 to get it off the ground and we go out to people who might have an interest in our business idea or a shared commitment to what it is we are trying to achieve, invite them to put some money into our business and away we go.

STEVE PRICE:

I will play the old cynic journo.

HEIDI ARMSTRONG:

What a surprise.

STEVE PRICE:

What a surprise. I know you would be surprised Minister. Aren’t those guidelines in place to protect people from losing their money?

MINISTER BILLSON:

Yes and you have nailed exactly what the challenging balancing act is. How do we make this arrangement fit fur purpose and useable for the smaller and start-up businesses that it is intended to help? Mindful that if you want to get money to get a business off the ground - off traditional institutions if you go and money from a bank, you need to mortgage your house and your first born and even then you might not get it. When really you are not looking for debt finance, you are looking equity and people who are committed to what you are trying to achieve might want to take a position in the business.

What we have to do is put in place a regulatory framework – like what New Zealand has done to their credit – that provides important information so that you are making a decision with the relevant information before you, but also out on your risks.

We know that majority of small businesses when they start might face a gloomy future. Some go spectacularly well and that is terrific and that is what entrepreneurship is about.

But if you put money in, some safeguards about the disclosure of what the business is, who else is involved, how much money you are seeking, how you are going to make sure the organisation is run well and you get some information back about it, and also frankly, a disclosure that you might not get your money back.

And getting that balance right Steve is the work that I have been involved with.

HEIDI ARMSTRONG:

Minister, can I just ask, all of this can be a little bit vague. What are the parameters? Do you know for example, are you going to set limits on how much an individual who is not a sophisticated investor might be allowed to invest in in one entity?

MINISTER BILLSON:

Good question Heidi. That is exactly what CAMAC, that is the Corporations and Market Advisory Committee proposed in their recommendations to government. A cap of $2,500 per investor in each issuance.

HEIDI ARMSTRONG:

That is not much.

MINISTER BILLSON:

There you go and you have just shared the feedback that I have got and people have said we do not think that is a very good idea. Also CAMAC proposed some separate new corporate structure to facilitate this one transaction at one stage in a business’ life and a lot of people did not think that was a very good idea either, me included.

So what we are looking to do is make sure we are not overly nanny, if I could put it that way.

HEIDI ARMSTRONG:

Good expression.

MINISTER BILLSON:

You can go down to the racetrack and chuck $2,500 on a piece of moving equine that we know as a racehorse and no one is stopping you doing that. We do not want to go too far but we also do not want people thinking this is some kind of investment nirvana.

Investments have risks; it is likely the money that you put in you might not get back.

HEIDI ARMSTRONG:

But you could always use disclosure statements for that story of thing can you not?

MINISTER BILLSON:

And Heidi that is exactly what we have been working on with people that are active in this field like Chris to say well why don’t we just put a reality check on the platform that says you are investing in a start-up business, start-up businesses can find it very tough. You might not get your money back. If this does not seem to be what you want to do, do not put your money in.

That is the kind of safeguards that we think are needed. Not sure a pure dollar cap will achieve that because for some people they might want to put more in and know exactly what they are doing and you do not want to shut down that opportunity but you also want to make sure that the investors interests are…

HEIDI ARMSTRONG:

So we do not want to go behind New Zealand, because my understanding is in New Zealand they do not put those caps on mum and dad investors as well.

MINISTER BILLSON:

Yes that is exactly right and what they have down in New Zealand, and sorry for the jargon, they have put a lot of burden and responsibility on the intermediary – the platform that is bringing the business ideas to the eyeballs of potential investors and where investors go which are looking for some kind of new business or growth aspect of a business that they may be investing in.

HEIDI ARMSTRONG:

That makes sense. Chris will be able to tell us about that I am sure.

MINISTER BILLSON:

Yes and I am drawing heavily from Chris’ knowledge because we have got people with experience in the marketplace. That field evidence is gold.

Some of what the recommendation was to government I thought was over the top and excessively nannyesque and in other areas I do not think we need to be creating new business structures simply for a crowd sourced equity fund raising effort that then might constrain you in terms of when the business does grow and take off, you then find you are running into new obstacles purely because we have come up with some corporate structure that fits one part of a business’ life but makes the rest of their growth opportunity a nightmare.

STEVE PRICE:

You think you might get bipartisanship on this? I heard Chris Bowen asked a question about it at the Press Club yesterday. Here is what he said.

Chris Bowen: We are happy to support anything sensible in crowd source funding in a bipartisan fashion because the sector needs certainty and so if it can be done in a bipartisan way we are all for it. But in the absence of that, we have put out our own ideas about how to deal with crowd source funding.

Well there you go. He seems like he is going to give you bipartisanship.

MINISTER BILLSON:

I have been working with Ed Husic who is a Labor Member who is quite interested in this space. When Chris Bowen said they have but own their own ideas they were just a list of things you need to take into account. We need to go well beyond that and work out how to operationalise the ideas of not having the system so expensive that it is unattractive for people to use. Not having it so loose that we have bad experiences and then the whole idea gets trash talked or not having it so overly inflated and presented as some new kind of investment nirvana which is not the case either.

This is a new and important complementary avenue particularly for small businesses and start-ups to get equity funding to help with their growth and their establishment. That is what to focus is.

HEIDI ARMSTRONG:

What are your thoughts there about self-manage super funds in terms of…

STEVE PRICE:

What? Allowing them to invest in stuff?

HEIDI ARMSTRONG:

They can already if you are a sophisticated investor but I am interested Minister on your thoughts about mums and dads having self-manages super funds and using that to invest.

STEVE PRICE:

Gee  - I do not like the sound of that.

MINISTER BILLSON:

Yes it is going to be one of those things Heidi where the self-managed super funds are supposed to be building up a retirement nest egg and there is certain quality of investment that is expected to go into that endeavour.

HEIDI ARMSTRONG:

You could have a diversified portfolio.

MINISTER BILLSON:

And that is the thing, if you went about it as part of a range of…

STEVE PRICE:

I think Heidi has got a point Bruce, because I have got a financial advisor who manages my self-managed super fund and I am sure he has got within that fund some greater risk investments than the conservative parts at the other end.

MINISTER BILLSON:

And I think that is the good way of going about it. As long as you know what you are doing, and the issue at which Heidi would be alert to, in month of those investments you have what is called a secondary market, that is, you have an opportunity to get out of them and therefore you can transact them as and when you think that is in your investment interests.

In this area, some of the feedback we have had is do not gum up the process to make it so sophisticated and so buttoned down to cover every possible scenario such as how do you on sell, who can you sell to that it makes it too cumbersome to use.

That may be a consideration in the superannuation space but again that is exactly the kind of input that we are drawing from people active in this space to make sure we get a right size and effective arrangement…

HEIDI ARMSTRONG:

Yes, I think you have raised a really good point there about the fact, how easy is it for you to be able to sell your share in, or your stake in the business going forward and that is probably a very relevant issue for self-managed super funds that had not really put my mind to up until now so thank you for sharing that.

MINISTER BILLSON:

Heidi these are the exciting things that keep me awake at night. That is the glamour of public life. I enjoy it.

STEVE PRICE:

Can I ask you two quick associated questions. I had an example raised, this is on your, this is the most popular aspect of the Budget, the $20,000 investment allowed that you can then write back down on your tax which I think everyone has talked about.

A number of motor vehicle retailers have dropped ute prices down to $19,999. Josh Dowling the motoring expert from News Ltd said to me tonight that that $19 999, you can purchase it under your scheme and it is free of GST and on road costs. Is that as you understand it? So the GST and the on road do not take that over your 20 grand limit?

MINISTER BILLSON:

Yes and the trick is to know whether you are registered for GST or not. Steve and Heidi you would know that some of your listeners might not be aware, if your turnover is under $75,000…

HEIDI ARMSTRONG:

You do not have to be registered.

MINISTER BILLSON:

You do not have to register for GST. That means you do not have to charge GST but you cannot claim it back either, so you effectively operate alongside the GST system.

For those businesses, you have to include the GST to be under the $20,000 cap but if you are a business that is registered for GST, you take the GST off. So that was the point that was being made there and a really good issue for your listeners to keep in mind.

STEVE PRICE:

The other point that Joshua made was that you can and the retail, the motor vehicle retailers are doing this apparently, you can add a range of extras to that ute that are applicable to your business and you can write a second receipt and that becomes a secondary $20,000 amount?

MINISTER BILLSON:

Yes so long as when the tax office says ‘hey, what have you done?’, you can show that each individual transaction is an asset that can contribute to your business in its own right.

So do not buy half the car and say you are buying the vehicle for the business because what you are buying does not actually work and cannot contribute to the business. However, if you bought a backhoe or a, one of those little bobcats that has got 1200 hours on it and you can get it under 20 grand, that’s fine. And then you may want to go and buy some of the post hole digging kits and different buckets and all that. That is okay as well but they need to be functional in their own right.

HEIDI ARMSTRONG:

I think that is a really good answer, I have to say.

MINISTER BILLSON:

Heidi can I cover myself by saying, if in doubt check with your tax advisor…

HEIDI ARMSTRONG:

Oh, there is the disclaimer. There is the disclaimer we talked about.

STEVE PRICE:

We need a disclaimer, just before I let you go, you spent a look of the week standing behind Tony Abbott, nodding.

MINISTER BILLSON:

You think I am there as eye candy, don’t you?

STEVE PRICE:

Yes I do.

MINISTER BILLSON:

Miserably on that purpose.

STEVE PRICE:

Do you think we are going to end up with an enquiry into the iron ore price?

MINISTER BILLSON:

No, I do not think so. I mean one of the things, and you are talking business in this segment and your listeners would appreciate, when iron ore prices are spectacularly high everyone wants a piece of that action, and what you end up getting is a supplier response.

If you and I Steve were sitting on an iron ore deposit and we saw spectacular prices, spend the money to invest in the capital infrastructure needed to extract it and get into that market, so what you end up getting is a supply response, there is more iron ore in the marketplace and we know when there is more of something it drives the price down and that is what we are seeing now.

It is a big challenge our country to adjust and you would have seen in the media today a lot of Chinese investments circling around Brazil and Vale which is a very big iron ore producer that runs ships many times larger than the ones we run, everyone is looking for an opportunity, everyone is looking for more efficiencies in this area.

When the money is attractive, as it has been, that brings investors in who add supply to the marketplace so I mean that is all fairly understandable. We also need to know what that means for our Budget and investment trajectory, and sadly it just reminds us how dopey the Mining Tax was introduced by the previous Labour Government that took the wind out of the sale when we could have been there taking more advantage of that opportunity.

STEVE PRICE:

How did I know you would have a good whack at Labor right at the end?

MINISTER BILLSON:

I thought it was classy though, was it not?

STEVE PRICE:

Very classy.

MINISTER BILLSON:

When we are up to 930 at night, we do not want to be too crass.

STEVE PRICE:

No, well done Minister, thanks very much for your time. Heidi would you like to thank the Minister?

HEIDI ARMSTRONG:

I would love to thank the Minister, it has been a pleasure.

STEVE PRICE:

Thanks, Bruce.

MINISTER BILLSON:

Great to speak to you and best wishes to the enterprising men and women that are your listeners.

STEVE PRICE:

Good on you Bruce.