Businesses set to fork out in upcoming trust tax change

Small businesses will face thousands of dollars in compliance costs for upcoming tax changes, according to Assistant Treasurer Daniel Mulino. The proposed 30 per cent minimum tax on trusts aims to address the misuse of discretionary trusts and the burden on workers. Business groups argue that trusts serve legitimate purposes, such as asset protection.

Mulino stated that the exact cost to businesses depends on their specific arrangements and restructuring. Currently, around 800,000 discretionary trusts exist, with the number doubling over the past 25 years. The government expects the changes to incur about $50 million in economy-wide costs. However, opposition from the coalition and Greens makes passage through parliament unlikely.

The reforms will introduce a 30 per cent tax on trusts, potentially pushing some businesses into a 60 per cent tax rate if they use trusts and companies for business purposes. Mulino assured a transition period for businesses to adjust to the new tax arrangements, emphasizing the need for a reasonable minimum tax to align taxation through trust income.