Settle stamp duty treatment before trust tax rules start

The election would not require a restructure, and the government said it is not expected to trigger state and territory stamp duty.

However, CPA Australia said it is calling on Treasury to publish the basis for its expectation that the election will not trigger state and territory duty. It has also urged the Commonwealth, states, and territories to collaborate and offer a uniform position before the new regime commences.

The accounting body’s tax lead, Jenny Wong, noted that each state and territory administers stamp duty separately, and jurisdictions have not confirmed a common position on the issue.

“The election only works if businesses can use it with confidence. At the moment, there is still an important question mark over state and territory duty,” Wong said.

The Australian Financial Review reported that NSW Treasurer Daniel Mookhey said the state revenue office is assessing whether trusts will be exempt from stamp duty but underscored that the government is not seeking to earn a windfall gain from businesses.

Wong welcomed this reassurance and said it will “take the states at their word that they are not looking for a windfall here”.

“But businesses can’t plan around good intentions,” she said.

“They need certainty about how each revenue office will treat the election before they make it. This is particularly important because the election is not a one-off transaction. Its design involves recurring obligations, so any uncertainty about the duty consequences needs to be resolved upfront.”

Nevertheless, Wong said the election option was a practical response to a “real problem” raised during consultation.

“Restructuring was going to cost many small businesses far more than the tax it was intended to avoid, and the government has listened to that concern,” she said.

She pointed out that the main issue was one of implementation rather than policy design.

“This is a coordination problem, not a policy disagreement. There are more than 21 months to fix it,” Wong said.

“Settling it now costs a meeting. Settling it later costs a decade of disputes.”

Make Accounting Great Again founder Joe Kaleb said that while the federal government has said the election would not result in state and territory stamp duties, he is unsure if it can make that statement.

“They’re not the ones that administer state taxes. We would need the state governments to come out and confirm that,” he told Accountants Daily.

“There’s normally stamp duty on property transfers. That’s the big one to watch. If it’s a property holding trust, they’re not going to want to restructure out if that’s going to result in stamp duty, because that could be quite substantial where you’ve got properties that could be worth millions of dollars.

“The stamp duty on that would be very large if you were to restructure out of that trust.”

In a column on Accountants Daily, View Legal director Matthew Burgess said the new rules were “clearly finalised well before the misleadingly and deceptively named consultation process finished”.

He argued that the draft legislation adds more complexity to an already “outrageously” complicated system and would almost certainly be rushed through into legislation without further material changes, except when required to protect revenue.

Burgess called the excluded election trust (EET) regime “fundamentally flawed”, and said restructuring would still trigger stamp duty in many states and said the draft legislation does not state whether the objective to avoid stamp duty costs would trigger state-based anti-avoidance rules.

Submissions for the draft legislation on the minimum tax on discretionary trusts close this Friday (18 September).