Opposition Leader Angus Taylor accuses Labor of waging war on tradies with new tax on discretionary trusts
Opposition Leader Angus Taylor has accused Labor of waging a war on small business with a plan to impose a new 30 per cent income and capital gains tax on discretionary trusts.
Labor has been accused of waging a war on farmers, tradies and truckies as the Federal Government introduced legislation to impose a new tax on discretionary trusts.
From July 1, 2028, a 30 per cent income tax would be levied on family and testamentary trusts used by the likes of small businesses to protect assets, by being able to vary who receives distributions.
Treasurer Jim Chalmers argued this policy, first flagged in the May Budget, was about applying the kind of taxes on trusts that are usually imposed on salary earners.
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By continuing you agree to our Terms and Privacy Policy.“This is all about better aligning the tax treatment of income from assets and income from work,” he told Parliament on Wednesday.
“It’s also about funding the income tax cuts for workers that we are delivering again and again.
“We know there are legitimate reasons to use trusts, including succession planning and asset protection.
“But the flexibility provided by discretionary trusts allows some people to plan their tax affairs in ways that aren’t available to most workers and families.”
Opposition Leader Angus Taylor said this was an attack on small business, with Labor levying both income and capital gains taxes on trusts.
“Farmers, truckies, tradies, you name it, real estate agents, mortgage brokers – Labor is coming after them and they are waging a war on aspiration,” he told reporters at Parliament House in Canberra.
“A war on small business, and we should be clear about why they’re doing this. They’re doing it because they’ve lost control of spending.”
Under Labor’s proposal, trusts would only be able to avoid the 30 per cent tax if they fixed their distributions, instead of varying them through discretion.
This affects family and discretionary trusts that are often used to divide assets during someone’s lifetime, along with testamentary trusts that are contained in a will.
Non-profit and charitable entities that are usually exempt from income tax would also be spared the 30 per cent tax, prompting the Greens to call for an inquiry into the tax because concerns parents could pay for private school fees from their trusts to avoid paying tax.
“Australia’s tax system is riddled with loopholes that overwhelmingly benefit the wealthiest one per cent. Discretionary trusts are one of the ways wealthy people minimise their tax while workers pay more than their share,” the Greens’ economic justice spokesman Nick McKim said.
Despite opposing the tax, Mr Taylor said the Coalition would be open to backing an inquiry pushed by the Greens.
“Now, I fear the Greens will just want more tax. They generally do. But if they are prepared to be reasonable in an inquiry to look at how the hell we got to this place, how is it that Labor could have made this decision — of course, we’ll support that,” he said.
Wilson Asset Management and CPA Australia, the peak body for Certified Practising Accountants, estimated families and businesses could collectively face costs of $8 billion to $13.3b restructuring their wills.
CPA Australia estimates that restructuring a family business can cost between $9,536 and $23,436.
Estate planning lawyer Rachael Rofe, the principal solicitor with Rofe + Co, said testamentary trusts, created as part of a will, also faced a 30 per cent tax if there were potential trust beneficiaries beyond an individual or a charity.
“The whole trust is tainted and none of the income is exempt from the minimum 30 per cent tax,” she told The Nightly.
“That’s a real problem because what that would mean is that anyone who’s had their will drafted to include a testamentary trust — and it would have been drafted to include very broad classes of potential beneficiaries — will need to go back and redraft their will.”
Labor in June announced a carve-out for discretionary testamentary trusts, used by a trustee to divide assets following a death after an outcry.
The Government has since the Budget also dumped plans to impose a capital gains tax on tech start-ups and remove negative gearing benefits from widows or widowers inheriting an investment property.
