Small Business Impact of Trust Tax
Senate Economics Legislation Committee, , 8:45:14 to 8:51:46
Examination of the higher tax burden and advice costs for small businesses under proposed trust tax changes.
Topics: Government spending, Employment
Senate Economics Legislation Committee, , 8:45:14 to 8:51:46
Examination of the higher tax burden and advice costs for small businesses under proposed trust tax changes.
Topics: Government spending, Employment
Speakers: Senator Jacinta Nampijinpa Price, Laura Berger-Thomson, Katrina Di Marco, Senator Susan McDonald, Senator Lisa Darmanin
We'll we'll return to this. Um I've got some questions on uh fuel tax credits, which you've referred to already in your answers.
Uh we're going to have to rotate the do you want me to I'll go to Senator Namajimba price and then come back to come back to you? Thank you.
Thank you. Um I just want to continue with my questions on um trust tax um changes. Um and I note that a lot of the language used by the government is um used to minimise what they uh uh suggest is going to be the impact on small business by saying it's only going to affect a small number of businesses. Um I would suggest that every small business and uh the 210,000 of them to be impacted is an individual, if not a partnership, if not a family, um, who then also employ uh Australians as well. So I don't accept the minimization of that. But of the 210,000 small businesses that will face a higher tax bill as a result of these changes, how many do you expect will be unable to absorb the higher tax burden?
Senator, so I think the government has provided um and as we've outlined already, a range of um mechanisms for small businesses to respond. Um for many small businesses actually perhaps the best thing that they can do, depending on their circumstances, is to pay themselves a wage. And in that situation.
I'm sorry, that's not answering the question. I I suppose um my question is you you've done the modelling, so I would hope that you may understand that how many of them will actually be unable to absorb the higher tax burden.
Senator, I don't the modelling here, and I'll I'll I'll look to Dr. Johnson because I wasn't I wasn't involved in the modelling during the budget, but the modelling here doesn't, it doesn't, that's not how you go about costing these policies. Um these policies sort of focused on or the way you go about costing these is to have a look at how the policy would apply to the existing sort of stock of businesses and then they're projected over the forward estimates. It's not uh I hear what you're saying, which is about sort of the the economic circumstances, but that is not we don't do this at a sort of micro business by business level is the way I would describe it.
I I take it you've consulted with stakeholders. I mean small business owners they often can't pay themselves a wage. They pay themselves a wage and then they have one bad job and they lose all their profit, they can't undo the wage that they have taken. Do you expect um these small businesses would pass on some proportion of higher taxes and restructuring costs to consumers in the form of higher prices? Is was any of this part of the consultation process to understand any of these impacts at all?
Senator, the consultations have been focused on the design, the design of the policy. I think as we talked about a little bit earlier, what we have sought to do, and again, Ms. Berger Thomson can add to this, is to provide a range of avenues and different flexible arrangements to support small business through this transition, in addition to which there's been a range of policies overlaid, like the instant asset write-off that are seeking to provide additional support to small business.
Do you have an understanding then of who might um seek that level of advice? Who will be imp impacted?
Senator, we've outlined some of that in the impact analysis. Ms. Berger Thomson, I think we've talked through some of this already, but Ms. Berger Thomson can go into that a little bit further.
Yes, so as I was explaining earlier, we have um estimates of uh um high advice requirements, and they're the businesses and the kind of um other types of trusts who we expect to be um more affected by the implementation of the policy, and then the low advice requirement um trusts who we don't do not expect to be significantly affected by by the policy and the can you tell me
how many you think would seek the higher advice and you had the right number there, numbers of the two the topics. The assumptions for both of those can are you able to provide that?
Yep. So um in terms of trusts for for businesses, and I don't know whether I've got other colleagues who are a bit more familiar with these numbers, but I'm happy to start. In terms of the number of uh business trusts who are um kind of actively in business, there's 350,000 of those. That 350,000, we have 220,000, which are in the low advice category.
But you won't know until that takes place, fundamentally. That's just an assumption. So industry groups have estimated that discretionary trust restructure and costs for small and family businesses will be in the region of about 50,000 to their business. What's the Treasury's estimate?
So I was outlining this this earlier. We have a some different estimates depending on whether you're in that those kind of high advice and in business, or whether you're in low advice or in business. So get my get my numbers up again. But the average trust in business, we estimate the cost to be around, and this is for those with high advice requirements, 11,000. And that's an average. So that you know there could be some trusts who have significantly higher advice costs and some trust.
That can start contrast to industry groups' estimates, isn't it? 50,000 to 11,000.
I think there's a range of different estimates from industry groups, Senator. I don't think 50,000 is sort of a I think Senator Bragg might have mentioned 50,000 before in regards to some property.
That's come direct from industry groups.
Entities maybe, but I don't I don't think industry globally I haven't seen I think there's a range of different estimates.
In my consultations with industry groups, that's that's roughly the what they're looking at, $50,000 in effect. So of the around 4.5 billion raised yearly from the trust tax, how much is raised from small businesses in your costings?