The Family Business Association (FBA) has called on the Government to publish the modelling behind its proposed minimum tax on discretionary trusts before consultation closes on September 18.
The association has called for discussion on simplifying the tax system for small and family businesses. Its request includes estimates of revenue from the revised measure, the number of businesses affected, those likely to choose fixed distributions, and compliance costs.
FBA CEO Catherine Sayer said family businesses need to be considered in the policy process. They make up around 70 per cent of all Australian businesses and employ 50 per cent of the workforce.
“It is good to see the Government has already listened and responded to some of the concerns raised,” she said. “Family businesses are different, and they are critical to the Australian economy and social fabric. We need to make sure this does not inadvertently cause them grief.”
Many family businesses use discretionary trusts to manage variable income, succession and changes in family involvement.
The association said revisions to the proposed policy had added to the complexity businesses already face. Business owners must now weigh options including fixed distributions, rollovers, paying the minimum tax or restructuring, while incurring adviser costs to determine which path to take.
The association also called on the Government to publish modelling on the number of businesses expected to be affected. It also wants estimates on how many of the 350,000 small business trusts will take each path.
“A fairness measure should show who pays, and distributional analysis is how fairness is proven,” Sayer said.
The association also raised concerns that the draft legislation remains incomplete. Rules covering integrity and administration settings have not yet been published, making it difficult for family businesses to plan.
“Our members are not asking for special treatment. They are asking for a tax system that is simple, workable and fair, and for the Government to show its working before it legislates,” Sayer said.
New trust formations have fallen by between 50 and 70 per cent since the Budget, according to estimates from trust documentation providers. Sayer said the decline shows the impact of prolonged uncertainty on family businesses.
“Families are not restructuring. They are stopping. That is not a policy outcome anyone wanted,” she said.
- Further reading: Trust tax changes reduce impact on SMEs but leave issues unresolved.
