Fears new trust tax changes will smash small businesses as two-day inquiry set to begin
Advocates have urged for existing small businesses earning less than $10 million a year to be carved out from increases to taxes on trusts.
Small business should be carved out from changes to taxes on trusts, with industry warnings owners could be forced to fork out thousands of dollars to restructure.
An inquiry will be held on Thursday into the federal government’s proposal for a 30 per cent minimum tax on trusts.
Labor flagged in the May budget it was making the change due to the large number of discretionary trusts subverting the tax system, which had placed a greater burden on workers.
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By continuing you agree to our Terms and Privacy Policy.Businesses have argued the use of trusts was a means of protecting assets.
In a submission to the two-day inquiry, the Council of Small Business Organisations Australia called for small businesses with a turnover of less than $10 million annually to be grandfathered from the changes.
Chief executive Skye Cappuccio said the tax changes were punishing business owners for carrying out legal measures.
“The measure treats a legal structure - one that hundreds of thousands of small businesses use for genuine purposes - as a problem,” she said in the submission.
“The measures taxes a legal structure, not the conduct of concern. It will materially increase the tax paid by genuine, family-operated small businesses that use discretionary trusts for asset protection.”
The peak body said businesses would be forced to either accept a higher tax bill, carry out a costly restructure, or elect a beneficiary for a fixed-distribution regime.
“The election may be the least worst of the three options for some small businesses, but as drafted, it is too harsh for many businesses to use.”
Ms Cappucio said small businesses would be severely penalised if their circumstances changed, urging for the grandfathering to be enacted.
The council also recommended restructuring costs for businesses to be made tax deductible.
Representatives from accountant peak bodies as well as the National Farmers Federation, Housing Industry Australia and Master Builders Australia will also appear before the inquiry.
The Labor-led committee will hand down its recommendations on November 13.
