Small businesses will pay thousands in upcoming trust tax change
A federal minister has admitted there will be a cost to pay for business owners in adjusting to rules taxing discretionary trusts.
Small businesses will have to pay thousands of dollars in order to comply with upcoming tax changes, the assistant treasurer has conceded.
Laws were introduced to parliament on Wednesday introducing a 30 per cent minimum tax on trusts, after it was flagged in the May federal budget.
The federal government has argued the large amount of discretionary trusts was subverting the tax system and placed a greater burden on workers.
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Assistant Treasurer Daniel Mulino said the reforms would better align taxes through trusts and labour income.
However, when asked what the cost to businesses would be, he said it would be in the thousands of dollars.
“It really depends on the kinds of arrangements that a small business has, it depends on the kind of restructuring pathway they undertake,” he told ABC’s Insiders program on Sunday.
“It should be towards (the thousands) than the (tens of thousands).”
Mr Mulino estimated there was about 800,000 discretionary trusts, with the amount doubling over the past 25 years.
It’s expected the economy-wide costs of the changes would be about $50 million.
“(It’s) a reasonable kind of ongoing cost for adjustment across the economy for a tax reform of this magnitude,” Mr Mulino said.
“At the heart of this reform is the fact that there are a range of options available to some taxpayers in our community that are not available to most, that aren’t available to people who provide their labour.”
Labor will need the support of either the coalition or the Greens to get the reforms through parliament.
The coalition have come out strongly against the bill and are unlikely to support it even with changes.
While the changes will lead to a 30 per cent tax on trusts, concerns have been raised some people could be forced to pay 60 per cent in tax if they use a trust and other companies for business purposes.
The top marginal tax rate is 47 per cent.
Mr Mulino said there would be a transition period so businesses would have time to adjust to the tax arrangements.
“What we’re setting is a very reasonable minimum tax. The 30 per cent is a level that is really to better align taxation through trust income,” he said.
