Senate Economics Legislation Committee [Part 2], , 1:16:40 to 1:23:31
The committee discusses the impact of proposed trust legislation on small businesses and the ATO's commitment to providing guidance to prevent administrative errors.
Topics: Law reform, Integrity
Speakers: Jeremy Hirschhorn, Senator Andrew Bragg, Senator Lisa Darmanin, Unknown Speaker
So, one of the reasons I'm asking about this is because we're about to have a lot more people and a lot more um you know, people in day-today more typical businesses in the trust world if this legislation passes parliament. Um so have you given any thought to advising the parliament or the government that there should be discretion for the ATO uh for the commission to deal with mistakes that will be made? I mean as the commissioner just said the ATO itself uh bungled in some form the consultation on the credit card issue. Um a lot of small businesses are going to make bungles. So, have you given any thought to this massive new population of people and organizations that are going to be using trusts that might not be able to afford what sort of discretion do you think would be helpful for the ATO to help the typical Australian that might make a mistake on one of their trust elections?
Um so Senator uh I might go back to the and I don't want to give policy uh you know it's not my job to talk about policy. Um I would say that uh obviously we support in terms of thinking about policy changes. We support our colleagues at the revenue group and give them the best evidence we can in relation to the operation of the tax system. Uh including where it may be operating in a way which is perceived as unfair by taxpayers. Um I would also say in relation to the family trust election uh the taxpayers with that problem generally h are not the average small business running their operations through a trust and a company. These issues arise where you have mult generally where you have multiple trusts and multiple companies in a complex uh in a complex private group. Often it happens where people have multiple trusts and make uh in a sense designate different family members as the key individual in different trusts. >> Yeah. >> And but but think of it as one family group when in fact for tax purposes it's really two family groups. >> Um in terms of the new measures which do well in terms of the elections proposed under the new legislation. >> Yep. Of course, we will provide um the absolute best guidance we can uh to taxpayers both on how to make the elections and to a degree how not to forget that they've made the election and the consequences of making the election.
>> can I ask one more? the there are half a million building companies in Australia. the housing industry association say that three in five builders use a trust. So let's say you've got a couple hundred thousand new trusts coming in just in that sector. Um you know they are going to have to make what what's I understand you don't want to give legislative advice but I mean I think there are already a lot of Australians that are facing this this situation of never being able to resolve these long-term issues uh because there isn't a time limit um or you might not have as much discretion as you might need to resolve honest mistakes. So what kind of engagement do you think you will have on this new proposal um either through the Senate committee or directly to to the government um about trying to give the many more taxpayers that are now going to be facing these complex and quite convoluted trust structures um some some comfort that they're not going to face potentially bankrupting tax bills down the down the line because someone made an administrative error a decade ago or two decades ago which is cascaded now into a huge bill um and maybe in the circumstances where they were were relying on an accountant. >> Um now everyone makes mistakes as we just heard from the commissioner. So I mean I I'm interested in what you you can do to help protect some of these
>> Yes, Senator. So um in terms of just maybe as I understand the measures um so they apply to discretionary trusts there are about 800,000 discretionary trusts in Australia.
>> Yeah.
>> At the moment many trusts uh used for commercial purposes are fixed trusts already and so are not really caught up by these. They have their existing uh um I suppose arrangements. So they can't be used for streaming. That's why they're not in because uh a fixed trust is you you can't uh in a sense uh choose who gets the the benefit of the trust. It goes directly to people. you know the what when the legislation is passed and fully implemented um we will be uh giving the best again the best guidance that we can as to um how these rules apply how to uh make sure you are monitoring them so that you're still compliant. Uh we're still exploring exactly how we will do that. Uh under the family trust election regime, this was considered and originally the requirement was put on taxpayers to send the or advise the tax office of their family trust election. Uh and that was one way it was thought that uh the ATO would always be in a position to remind people that they had done an election. Um for various reasons that was which are lost a little bit in time. Uh that requirement was subsequently repealed and so the commissioner was not in a position to be able to advise people whether or not they had done a family trust election. Uh so I I think there is an element of how I think advisers uh to to families running a family discretionary trust and the tax office um will have to work together to uh in a sense in ensure against forgetfulness.
>> Well, you're going to have a lot more people to deal with very soon.
>> Thank you, Senator Bragg. Um, I'm going to rotate now to Senator PCO and I'll just let everyone know I've got five new senators on the list to ask questions for one block each and we're running behind time. So, I'd appreciate everyone to be as efficient as possible in their questions and answers. Senator Pox.