Senate Economics Legislation Committee, , 7:23:54 to 7:28:09
The committee discusses the impact of discretionary trust changes on small businesses, including the estimated 350,000 entities affected and the associated transitional restructuring costs.
Topics: Government spending, Efficiency dividend
Speakers: Laura Berger-Thomson, Katrina Di Marco, Senator Tyron Whitten
Um I've got some other questions um on trust tax changes in small business. Um there's going to be a massive restructure cost of people restructuring their trusts. Um I think Treasury estimates 350,000 small businesses use discretionary trusts and 210,000 of them will either either pay more tax or be required to restructure. Well, these changes effectively to end income splitting in small business.
Senator, it was it was certainly one of the objectives of the reform. To change um I might take a step back. Discretionary trusts have for some time enabled flexible timing and in allocation of income and capital gains and losses. Um I think the government's been fairly transparent about how that would impact the operation of trusts and how that works with income splitting. You are right that it would affect around 350,000 small businesses that operate through discretionary trusts, but we also want to be pretty clear that is around 15% of small businesses. So we're not diminishing that that number is that number is present, and that is going to require restructuring, and we sought to be incredibly transparent in the impact analysis about those costs. Umetheless, that was an active aspect of the policy design. We have certainly heard the feedback through consultation from stakeholders. That's why the policy included rollover relief. It's why it also included the election regime. But I might see if Ms. Berger Thomson wants to add anything to that.
Laura Bertha Thompson, First Assistant Secretary, individuals and indirect tax and superannuation division. Yes, so there um you know, a lot of the um stats that that you've outlined have the government has been very transparent about. Um we also um in the uh explanatory memorandum of the bill that was introduced, we have um our impact analysis. Um it goes through uh you know all of the um compliance cost estimates that we have um have worked through as you know as as required. Um so we've been very transparent about about those. What the impact analysis says is that you know there's a there's a range of um well maybe I'll go to the the purpose of of the measure which is outlined on um page 176 of the explanatory memorandum. So um we we talk uh in that document it talks about supporting a fairer and more sustainable tax system by improving equity between income earned through discretionary trust and income earned through wages or direct business activities by reducing the extent to which tax advantages can be obtained through these structures, improving the sustainability of the tax system by reducing revenue lost from tax arrangements involving discretionary trusts and promoting the efficient use of resources by reducing incentives to spend time and resources on complex trust arrangements for tax purposes. I think you know um Mr. Marcos has gone through the some of the um transitional arrangement arrangements that the government has put in place to facilitate um the transition to the new to the new regime. What the impact analysis talks about is that there are some upfront costs and very transparently goes through those, but um there are you know there are those are largely transitional and there are um you know the benefits of the regime you know as outlined in the impact assessment um indicate that you know they they are a kind of you know particularly given the purpose of the measure and and what it's aimed to do that that you know those costs if you look at a holistic assessment of what what the measure is trying to do that um you know that the measure is still worthwhile doing even despite those costs.