Senate Economics Legislation Committee, , 7:28:09 to 7:31:41
A debate occurs regarding the role of stay-at-home parents in small businesses and how the new trust rules might effectively end income splitting benefits for family-run enterprises.
Topics: Government spending, Social services
Speakers: Hon Katy Gallagher, Senator Tyron Whitten, Senator Lisa Darmanin, Unknown Speaker
I I understand your point about trying to make the tax system fair, and that it sounds perfectly reasonable, but I I'll put to you that when you run a small business and you're putting it all on the line and doing 80 hours a week. Um maybe that's a bit harder than somebody that just turns up and get gets a wage. And when you own a small business, just paying yourself a small a wage, um why would you? Why would you bother? You wouldn't you just go and get a job? Um so that's why that there was a differential for that benefit. But I'll I'll give you a scenario.
Senator, I'm gonna have to rotate the call shortly, so if you can be real quick, please. Yeah, and then I can come back to you if I need.
Um, in many small business parents' parents play different roles. It might be that dad runs an electrical electrician business and mum stays at home with the kids. Um dad couldn't do that if mum wasn't staying at home with the kids, so in a real way, she's contributing to that business. These new rules would make that ineffective. Was any advice provided the government around these sorts of scenarios, or was that any modelling of the economic contributions of stay-at-home parents considered when formulating the policy?
and this is something that had been has been looked at uh over the last 50 years, almost every single review into the tax system in the last 50 years has recommended uh making some reforms to the way trusts operate. Now we have been very cognizant of some of the pressures that you've outlined around you know how they're being used for a relatively small percentage of small businesses in Australia are about 15%. And that's why we're doing the work that's being done now, the legislature's come in, the start dates from the 20 July 2028, but also looking at uh way that there's a range of options available for people using trust structures and and how they can you know how can they can arrange and how we can support the restructuring arrangements essentially to give them the support because the rules are changing. Um but we do, I mean based on all of those reviews, plus our desire to ensure that people working for wages are not you know are treated well that it's uh the the way our tax system approaches wages earned through essentially Labor, you know, turning up and getting earning a wage versus the way it treats assets. Um our decision overall has been to try and make that a bit fairer. And Senator, there are other elements of the package that sought to speak to specific things for small business. So obviously the instant asset write-off has been made permanent. Um there's been changes to the CGT active asset rules, so there have been a range of other changes that have sought to small support small business, but as the minister has outlined, it was a clear intent of the policy that you would more clearly align tax rates on income from discretionary trusts with lay other labour-like income, including salary and wages.