Families asked to make permanent decisions before trust tax rules are finalised

• Families and small businesses shouldn’t have to make irreversible decisions before all the rules are known
• The cumulative compliance burden of multiple reforms is becoming a major issue for small businesses and their advisers
• Targeted, practical amendments can improve the legislation without undermining the Government’s policy objectives

CPA Australia has urged the Senate to make sure the Government’s discretionary trust reforms are complete and workable before families and small businesses have to make decisions they cannot reverse.

CPA Australia has lodged a submission to the Senate Economics Legislation Committee inquiry into the minimum tax on discretionary trusts, ahead of public hearings next week. It says the legislation has improved following consultation, but key parts of the regime remain unfinished.

The Bills give the Minister 12 powers to make legislative instruments, and none has been released, even in draft. Yet the roll-over window for restructuring opens on 1 July 2027. Existing trusts will have a single income year, 2028–29, to make a permanent excluded election trust (EET) election.

“CPA Australia is not opposing trust reform,” said Jenny Wong, Tax Lead at CPA Australia. “But better is not the same as ready. Families are being asked to make permanent decisions before the Government has finished writing the rules.

“No Australian would sign a contract before seeing the full terms and conditions. Tax reform should be no different.

“The question for the Senate is straightforward: should Australians be required to make irreversible decisions before all the rules are known?”

The implementation burden

CPA Australia estimates that the professional advice needed to respond to the trust reforms will cost $2.0 billion to $2.8 billion. That is before any restructuring, implementation or state duty costs. It estimates ongoing compliance costs of $221 million to $595 million a year, compared with Treasury’s estimate of $48 million.

The gap is not mainly about hours, because the two estimates are broadly similar on workload. The difference is that Treasury prices an hour of advice at $91.54, while families will generally pay commercial professional rates.

The same families, businesses and advisers are also preparing for the Government’s capital gains tax reforms, payday super and other regulatory changes. Together, the trust and capital gains tax measures could impose $516 million to $1.137 billion a year in ongoing compliance costs.

“Australia cannot keep talking about productivity while adding hundreds of millions of dollars a year in new compliance costs for families and small businesses,” Ms Wong said.

“We acknowledge the Government’s expectation that, over time, more businesses will choose simpler structures, including companies, rather than discretionary trusts. A simpler tax system can improve productivity. But those gains lie in the future, while the transition costs fall on today’s families and small businesses.”

Still time to get it right

CPA Australia has asked the Committee to prioritise three recommendations:

• release all ministerial determinations and outstanding implementation rules before taxpayers must make irreversible choices
• make the EET election workable, with practical ways to correct honest mistakes and handle ordinary family events
• publish updated compliance cost estimates once the rules are final, and legislate an independent review within three years.

“This isn’t about abandoning reform. It’s about getting the implementation right,” Ms Wong said. “Good policy can become bad policy if implementation is rushed.

“This reform should leave the tax system simpler as well as fairer. If these rules come in, the rules they replace should go.”

Media contact

Camille Hanton
External Affairs Lead
[email protected]
0431 180 475