CPA Australia urges other states and territories to follow NSW on trust tax election

Australia's largest accounting body, CPA Australia, says the state and territory duty treatment of the proposed discretionary trust election should be resolved before the new rules commence.

CPA Australia acknowledges the Federal Government's decision to provide existing discretionary trusts with the option to elect into the proposed regime rather than undertake potentially costly restructures. However, it says uncertainty around the state and territory duty consequences of making that election must be addressed before the measure takes effect.

The exposure draft released on 3 September would allow discretionary trusts in existence on 1 July 2028 to elect into a regime under which they make fixed distributions to nominated beneficiaries, avoiding both the proposed minimum tax on distributions and the costs associated with restructuring. Submissions close on 18 September.

CPA Australia Tax Lead Jenny Wong said the election was a practical response to concerns raised during consultation.

"The election is a sensible response to a real problem.

"Restructuring was going to cost many small businesses far more than the tax it was intended to avoid, and the Government has listened to that concern.

"But the election only works if businesses can use it with confidence. At the moment, there is still an important question mark over state and territory duty,” Ms Wong said. 

Treasury's accompanying material states that the election is not expected to result in state and territory stamp duties. However, CPA Australia notes that duty is administered separately by each state and territory and that a common position has not yet been publicly confirmed across jurisdictions.

NSW Treasurer Daniel Mookhey said this week that Revenue NSW is continuing to consider the issue, while Queensland has also sought clarification regarding the basis for the Commonwealth's assurance.

Ms Wong said certainty was essential before businesses were required to make election decisions.

"We take the states at their word that they are not looking for a windfall here.

"But businesses can't plan around good intentions. They need certainty about how each revenue office will treat the election before they make it.

"This is particularly important because the election is not a one-off transaction. Its design involves recurring obligations, so any uncertainty about the duty consequences needs to be resolved upfront,” Ms Wong said.

CPA Australia is calling on Treasury to publish the basis for its expectation that the election will not trigger state and territory duty, and for the Commonwealth, states and territories to work together to provide a clear and consistent position before the regime commences.

Ms Wong said the issue was ultimately one of implementation rather than policy design.

"This is a coordination problem, not a policy disagreement, and there are more than 21 months to fix it."

"Settling it now costs a meeting. Settling it later costs a decade of disputes.”

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