‘A lot more work and headaches’: small practitioner blasts trust tax reforms

“This is going to be an issue for many small practitioners. Can they pass the cost on to their clients? There’s a lot of work we do for free as a result of government legislative changes.

“This is where the practitioner may need to issue a separate engagement letter just for this because we can’t do all this for nothing. We have to be able to charge accordingly for our time. It’s going to need a substantial amount of time, especially with larger clients mapping out scenarios. If clients have to restructure, we have to sit down with them and steer them in the right direction.”

On top of the restructuring costs, business clients with a new company would also need new GST registrations, a new ABN, and a new tax file number.

“Not every small business is going to be able to afford all those costs,” Kaleb said.

He criticised the government for the short consultation period and for refusing to listen to the profession and practitioners’ concerns around the flaws and issues in the proposed legislation.

“They’ve already made up their mind about this legislation,” he said.

Moreover, Kaleb flagged that accountants and tax practitioners need adequate training, experience, and knowledge to advise clients while keeping pace with all the proposed legislation.

“As if we already didn’t have enough going on with BAS and tax lodgements and all the other work we do. This is going to be a major impost on the profession. This is one of the most significant budget changes we have seen in decades. I can’t remember seeing this amount of complicated change any time in over 30 years of practice,” Kaleb said.

“Every one of us has trusts in our practice. We can’t just ignore all this and pretend it’s not happening.”

The government introduced a 30 per cent minimum tax on discretionary trusts from 1 July 2028 and said expanded rollover relief would be available for small businesses and others to support restructuring out of discretionary trusts.

It then released draft legislation to implement the core components of the minimum tax, proposing a new option that would exempt a trust from the minimum tax if it elects to make fixed distributions to pre-nominated beneficiaries as an alternative to rollover relief.

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

Under this electable regime proposed by the government, nominated beneficiaries could only be added or changed later, when a nominated beneficiary passes away, or there is a family breakdown.

Kaleb said the fixed distribution proposal lacks flexibility to change in the future except in case of death or a marriage breakdown. pointed to concerns around making fixed distributions to a beneficiary who may face bankruptcy, or develop alcohol and/or gambling addictions, or any mental health issues.

“As we know, a liquidator can recover assets and it has implications on a liquidation if a beneficiary who’s facing bankruptcy receives income. If we make a fixed distribution to someone that faces bankruptcy in the future, that could be a major issue,” Kaleb said.

“Similarly, if a beneficiary has an alcohol or gambling addiction or mental health issues, we wouldn’t distribute income to them if it wasn’t a fixed distribution. But that’s a fixed distribution now and you can’t change the beneficiary later. You don’t know what people’s situation is going to be in one, two, or five years.”

Furthermore, making fixed distributions may be an option for clients who are not necessarily running profitable businesses or who have a limited number of beneficiaries but it is unlikely to be a feasible option for high-net-worth clients or expanding families, Kaleb said.

For now, Kaleb advised against taking action as the legislation is currently still a proposal.

“I haven’t been having a lot of discussions about this with clients because we have to wait until the legislation is introduced. As we can see, the government is making changes as they go along.”