CPA Australia calls for review of minimum tax on discretionary trusts

CPA Australia has urged the federal government to revisit its proposed minimum tax on discretionary trusts, warning it would unfairly impact small and family businesses.

In its formal submission, the professional body called the measure “disproportionate”.

It stated that the move will inflict “significant and unnecessary costs” on businesses using legitimate, long-standing trusts.

CPA Australia Tax lead Jenny Wong said: “People hear the word ‘trust’ and imagine sophisticated tax planning, but for many small businesses a trust is simply the structure they have used for years to run their business and protect family assets.

“Many families have set up these structures in good faith, based on existing laws, which they have used for decades. Changing the rules on arrangements made in good faith erodes the certainty a self-assessment tax system.”

Wong said the current proposal appears to assume that restructuring is a “straightforward solution”.

However, based on feedback from members, CPA Australia said that this is an issue of “proportionality”, where the tax system must be fair, with a response commensurate with the scale of the problem.

Wong added: “We are asking the government to reconsider the measure, not simply to make it easier to comply with.”

She explained that discretionary trust is a “complex, multi-disciplinary process” and generally requires coordinated work by multiple parties including accountants, lawyers, valuers, financiers and state revenue authorities.

Wong urged the government to weigh the “practical, financial and business impacts” of any restructure, rather than assuming it is a straightforward solution.

CPA Australia estimates that if around half of the potentially affected businesses – approximately 105,000 – were to restructure within the proposed three-year period, the national bill for professional advice alone would be at least A$1bn ($703m)–A$2.5bn, excluding any state stamp duty.

The submission notes that stamp duty charged by states and territories could become the single largest hurdle for businesses seeking to change their structures.

CPA Australia has also expressed concerns that the three-year transition window significantly overestimates the capacity of the tax and advisory profession to complete large numbers of complex restructures while still meeting existing compliance work.

Wong said: “Our recommendations provide alternative approaches that we argue achieve the policy objective without burdening small businesses with unnecessary cost, complexity and uncertainty.”