CPA Australia urges fixes to proposed 30% minimum trust tax regime

CPA Australia has called on the government to resolve uncertainty and compliance issues surrounding its proposed 30% minimum tax on discretionary trusts.

The organisation said affected taxpayers could face as much as A$2.8bn in professional advisory fees to establish whether, and how, the proposed rules apply to them.

While backing the policy’s broader objective, CPA Australia said in its Treasury submission that aspects of the proposal could create unintended effects for family businesses, trustees and beneficiaries.

It added that the exposure draft would allow discretionary trusts operating on 1 July 2028 to make an election that would exempt them from both the minimum tax and a requirement to restructure as a company.

This election would be available only once, during the 2028–29 income year, and could not subsequently be withdrawn.

CPA Australia Tax lead Jenny Wong said the measure reaches “far more taxpayers” than Treasury’s estimates.

Wong said: “Treasury has costed this on around 350,000 small businesses.

“But 850,000 discretionary trusts lodge a return each year, and every one of those trustees has to decide whether to elect – because if you don’t decide, you have decided.

“On our modelling, the cost of professional advice alone is between A$2 to A$2.8bn.

“That is incurred before anyone restructures, and whether or not a single trust elects. It is the cost of working out the answer, not the cost of complying with it.”

CPA Australia said the proposed Election to Exclude Trusts (EET) offers family businesses a potential alternative to incorporating.

However, it said the draft legislation does not establish whether making the election could lead to stamp duty liabilities imposed by states and territories.

Supporting explanatory material says duty is “not expected” to arise. However, CPA Australia noted that this position is not protected in legislation, and no state or territory government has formally confirmed that stamp duty would not apply.

CPA Australia has contacted treasurers in every state and territory, requesting clarification and calling for the issue to be addressed with the Commonwealth.