![\"Trust](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/10\/topearnerstrustincome.png\"\/)
Credit: Australia Institute<\/p>\nKey PointsSmall business groups warn 350,000 family firms face higher taxes or costly restructures.Coalition vows to repeal changes as compliance costs top $1 billion.<\/p>\n
A multi-billion-dollar gap and a reignited political divide has opened up between small businesses and the government over a new policy taxing trillion-dollar trust schemes. <\/p>\n
The government plans to close a tax advantage many workers can’t access by imposing a minimum 30 per cent tax on the net income of 840,000 trusts that allow wealthy investors and family businesses to spread income across their family or obscure asset ownership in bankruptcy and family-court proceedings. Australian trusts have combined assets of $2.9 trillion with annual income of $600 billion.<\/p>\n
The changes are projected to raise $4.47 billion in 2029\/30 after they begin on 1 July 2028. Treasury data shows trusts are overwhelmingly used by Australia’s top 10 per cent of income earners who receive about two-thirds of distributions, while the bottom 10 per cent receive one per cent.<\/p>\n
Treasurer Jim Chalmers said the reforms affect fewer than 10 per cent of small businesses.<\/p>\n
“Small businesses and others using discretionary trusts can access rollover relief from 1 July 2027 if they want to restructure, or can make an election for tax purposes to be exempt from the minimum tax, for as long as they continue to make distributions to pre-nominated beneficiaries in line with an upfront nomination,” Chalmers said on Wednesday.<\/p>\n
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Senior economist at the left-wing thinktank the Australia Institute, David Richardson, told SBS News the changes plug a tax-dodging loophole used by wealthy people to spread income across their family or obscure asset ownership in bankruptcy and family-court proceedings. <\/p>\n
“The ambiguity of who owns what in the trust means they become a vehicle for putting assets away, where it’s very hard for bankruptcy proceedings to access them,” Richardson said. “It’s hard for the Family Court to know what’s going on. So, generally, family trusts, even when they’re taxed at 30 per cent, will still be useful for somebody on very high incomes, where the marginal tax rate is 47 cents.”<\/p>\n
That small businesses, and others are unhappy with the change, “shows you that they’re presently doing well out of a trust structure”, he said. <\/p>\n
“They wouldn’t be complaining unless they were genuinely avoiding what they would have to pay as either an individual sole trader or as the principal of some sort of corporate structure.”<\/p>\n
Australian Council of Social Service (ACOSS) CEO Dr Cassandra Goldie said the reforms restore some “basic economic fairness”.<\/p>\n
“It is not fair that someone earning $200,000 or more, who would usually pay 47 per cent tax on extra income, can bring that rate down to 30 per cent or less by passing income through a discretionary trust to their adult children or a private company, while an average worker pays tax at a rate of 30 per cent of the next dollar earned,” Goldie said.<\/p>\n
Why are small businesses unhappy?<\/p>\n
The Council of Small Business Organisations Australia (COSBOA) CEO Skye Cappuccio said after months of consultation “fundamental problems” remain, forcing 350,000 family and small businesses structured this way to choose between “a substantial tax increase”, or restructuring costs in the thousands of dollars for professional fees, duties and administration.<\/p>\n
Credit: Australia Institute<\/p>\n
“These are not genuine choices. They are bad options that will make operating a small family business harder and more expensive,” Cappuccio said.<\/p>\n
“These are small family businesses that have legitimately used trusts for decades to protect assets, manage succession and plan for the future,” Cappuccio said.<\/p>\n
“This policy targets a business structure rather than the conduct the government is concerned about. There are more targeted ways to address tax integrity without imposing unnecessary costs on genuine small businesses.<\/p>\n
“Queensland and Western Australian enterprises will be hit hardest by the changes because stamp duty may apply if a business there restructures its assets.”<\/p>\n
What’s the political divide and controversy?<\/p>\n
The Coalition failed to stall the laws on Wednesday, but opposition leader Angus Taylor said the Coalition will go to the election with a “policy of axing the tax”. <\/p>\n
Opposition treasury spokesman Tim Wilson said, “small and family businesses face a bill of up to $13.3 billion for the cost of valuations, advisers and stamp duty because our taxaholic treasurer broke his election promise and can\u2019t kick his spending addiction”.<\/p>\n
“The treasurer has rewritten this tax again and again since budget night because he doesn\u2019t understand his own policy or the damage it does. Every backdown is an admission it should never have been proposed in the first place,” Wilson said.<\/p>\n
Trusts excluded from the changes include deceased estates, disability, superannuation, charities, farms and fixed trusts.<\/p>\n
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The Housing Industry Association warned this is a new tax on tradies, and builders that diverts their attention from building the homes Australia desperately needs.”<\/p>\n
Greens leader David Shoebridge said on Wednesday there are too many concessions being made and will refer the bill to a Senate inquiry and that claims about restructuring costs should be supported by detailed modelling.<\/p>\n
“We want to make sure that we don’t, in passing this legislation, create that additional loophole,” Shoebridge said. “This is about ensuring that there’s a fair level playing field across business, but also across society, and that’s our focus.<\/p>\n
“If the Coalition is going to put a figure out like that ($13 billion), they need to back it up with numbers (and modelling).”<\/p>\n
Will this really cost businesses $13 billion?<\/p>\n
Treasury estimates the cost to businesses will be $141.5 million annually plus $940 million during an implementation phase. <\/p>\n
But the Coalition and Wilson say the cost will be up to $13.3 billion based on a Wilson Asset Management estimate.<\/p>\n
Wilson ran a successful campaign against changes to franking credits by coordinating with Wilson Asset Management in 2019.<\/p>\n
But CPA Australia Tax Lead Jenny Wong told SBS News the Coalition\u2019s figure includes stamp duty, and Treasury\u2019s doesn\u2019t. But there is no source or method listed as to how they arrived at their number. <\/p>\n
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“Our estimate is $2 billion to $2.8 billion, for advice alone (and) covers the cost of working out what to do across roughly 850,000 trusts, before anyone restructures or elects (beneficiaries),” Wong said. “The bill leaves 12 rules to be made later by the minister, up from 10, and ATO guidance won\u2019t come until after the law passes.”<\/p>\n
The government has given families a way to avoid restructuring, and “that deserves credit”, she said.<\/p>\n
“But for those who still have to restructure, nothing in this bill makes it cheaper. Stamp duty can be most of the bill, and the Commonwealth can\u2019t waive it,\u201d Wong said.<\/p>\n
“We support dealing with inappropriate income splitting (done) simply, fairly and in proportion,” Wong said. “On that test, there is still work to do.”<\/p>\n
Treasury’s analysis estimates that restructuring a family business can cost between $9,536 and $23,436 and that restructuring could cost family businesses more than the tax itself. <\/p>\n
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