Free business lunch fight devolves into business battle

Treasurer Jim Chalmers has seized on new figures showing companies are being created at their fastest rate this century to accuse the Coalition of misleading voters over the strength of the nation’s 4 million small businesses.

Chalmers, rejecting claims he had politicised the public service by getting Treasury to estimate the cost of the Coalition’s plan to allow small businesses to claim a tax deduction for business lunches, said 25,000 firms a month were being created despite the broader headwinds facing the economy.

The cost of a Coalition plan to allow small businesses to deduct the cost of lunches has turned into a fight over the strength of the corporate sector.Credit: istock

The Coalition last month released its plan for small businesses to claim up to $20,000 as a tax deduction as a way to support the hospitality sector while noting there had been 27,000 small business insolvencies since Labor took office.

Opposition leader Peter Dutton on Tuesday used an address to his MPs to argue small businesses were suffering under the government.

“There are families who are hurting all over the country. There are 27,000 small businesses now who have failed,” he said.

“There’s been a three-fold increase in the number of manufacturing businesses that have closed over the course of the last two and a half years – and it is not getting better.”

Insolvencies so far this financial year have reached 7485, on track to surpass the 11,053 companies that failed in 2023-24.

Chalmers said 25,000 companies a month were being created, with the government supporting the small-business sector in areas from energy bill relief to competition policy.

“We’re helping small businesses in a range of responsible ways because we believe in the sector and we support the sector. What Peter Dutton is proposing is very different,” he said.

Chalmers cited Reserve Bank governor Michele Bullock, who recently noted that insolvencies were not at historical highs. She told parliament in August that “if you look at the trend of insolvencies over time, we’re not even back to where we were trend-wise pre-pandemic”.

Australian Securities and Investments Commission figures show that between December 2001 and November 2007, there was an average of 10,379 monthly new company registrations while 0.5 per cent of all companies fell into insolvency each year.

This increased to 0.54 per cent during the Rudd-Gillard governments even as company registrations rose to 13,779 a month.

Under the previous government, the insolvency rate fell to 0.32 per cent – partly due to insolvency laws being put on hold during the pandemic. But company registrations rose strongly to an average 20,401 a month.

Since the Albanese government took office, the insolvency rate has fallen to 0.26 per cent. New company registrations have reached a high of 24,902 a month.

Chalmers’ release of the Treasury analysis on the opposition’s meal policy prompted an attack from shadow treasurer Angus Taylor, who said the use of the public service for political ends was an “egregious” use of the bureaucracy, which is required to be apolitical.

Shadow treasurer Angus Taylor has accused Treasurer Jim Chalmers of an egregious use of the public service.Credit: James Brickwood, Alex Ellinghausen

Taylor, who again declined to release the full costings of the policy, said analysis by the independent Parliamentary Budget Office showed it would cost less than $250 million a year.

He will write to Treasury secretary Steven Kennedy, demanding an explanation for the department’s role in the costing.

“We’ll be asking for a full explanation as to how this egregious politicisation came about,” he said.

“The public service is not there to make political attacks on the opposition. That’s not the purpose of a public service, but that is how he’s been used by this treasurer who is out of his depth.”

Chalmers said the opposition was deliberately hiding the cost of a policy that could cost the budget up to $10 billion a year.

“To be frank with you … I would rather not have to do it. I would rather a responsible opposition provided the costings of their policy and told Australians what they were going to cut to pay for it,” he said.

Both sides of politics have used Treasury to examine the policies of their opponents.

Most recently, before the 2019 election, then-treasurer Josh Frydenberg released Treasury costings of Labor’s policies that estimated they would cost taxpayers $387 billion. The analysis was done before the election had been called.

Then-treasurer Joe Hockey included in his 2015 intergenerational report – which plotted the state of the budget over the next 40 years – the spending impact of Labor policies from the pre-2013 election period.

The Parliamentary Budget Office, which is an independent federal agency, was created in 2012 to enable non-government MPs to have policy ideas confidentially and professionally costed. The PBO grew out of problems faced by the Coalition before the 2010 election when it claimed its costings had been “audited” by two independent accountants.

When the Treasury costed the Coalition’s promises, it found an $11 billion hole. The accountants were reprimanded by a tribunal established by the Institute of Chartered Accountants.

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