Are proposed changes to trusts a ‘kick in the guts’ or ‘leveling the playing field’? | The Business

Discretionary trusts have surged in popularity as a tax reduction strategy with over one million held by Australians.

Over the years, changes have been weighed by both sides of parliament, but today the Treasurer introduced its tax bill into parliament.

The reforms plan to tax trust income at a minimum 30 per cent to level the tax rate on trusts with the tax rates paid by workers, to make it fairer for workers who are subject to tax brackets.

However, the national body of Australia’s residential building industry, the Housing Industry Association is vehemently opposed saying this is a “new tax on tradies.”

HIA managing director, Jocelyn Martin says the majority of their homes are built by small businesses, of which, around three in five use a trust structure to manage their business.

She says even if small businesses aren’t imapcted by the trusts changes, they may incur costs by engaging lawyers and accountants “that could cost anywhere between $10,000 and $25,000 to actually get that advice”.

The HIA managing director says the assumption that trust structures are used only by the wealthy to avoid or minimise taxes are not correct, and small businesses often use the “legitimate structure of a trust to manage their business and cash flow cycles.”

“I think it’s not a matter of fairness. I’m not actually even sure it’s realistic.”

Associate Professor at UNSW’s School of Business Law and Taxation, Dale Boccabella says the government’s proposed tax changes look to be about “fairness” and says the current trusts laws a “bordering on a joke”.

“The ambition of the government is to level the playing field between low income wage earners or just wage earners, earning the same income as perhaps their trust income that they pay around the same amount of tax, which they currently don’t.

“So that is clearly just getting a little bit of tax reasonableness, tax fairness, because the obvious point is if someone’s not paying any tax, well, someone else has got to pick up the tab.”

“Now, I’m not suggesting this is the best reform, but it’s pretty close to being a very good reform,” Mr Boccabella says.
#ABCBusiness
Subscribe: http://ab.co/1svxLVE

Note: In most cases, our captions are auto-generated.

#ABCNEWS #ABCNEWSAustralia