Government offers small businesses a trust tax workaround
Those with discretionary trusts can be exempt from the new minimum 30 per cent tax if they agree to hold their trust distributions constant.
The federal government has proposed a solution to help small businesses avoid stamp duty when restructuring from discretionary trusts to dodge the upcoming minimum tax. The draft legislation allows businesses to restructure without changing their trust structure, remaining exempt from the tax as long as they do not alter distributions.
Treasurer Jim Chalmers introduced the draft laws for feedback on Thursday, with the tax being the final major change from the May federal budget to be enacted. Discretionary trusts have been under scrutiny due to concerns about stamp duty, with COSBOA warning small businesses facing a difficult choice between higher taxes or costly restructures.
The government aims to address these concerns by allowing trustees to make fixed distributions to beneficiaries, exempting them from the trust tax as long as they maintain the arrangement. The trust tax will start in mid-2028, with exemptions for super funds, disability trusts, deceased estates, testamentary trusts, charitable trusts, and farm income.
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