Tax reform measures risk adding to red tape burden: CPA Australia

“The Commonwealth rollover deals with the federal tax consequences, but not stamp duty or the need to reapply for business licences.”

The government’s draft legislation to implement the core components of its 30 per cent minimum tax on discretionary trusts added a new option that allows a trust to be exempt from the minimum tax if it elects to make fixed distributions to prenominated beneficiaries as an alternative to rollover relief.

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

Legislation to replace the 50 per cent CGT discount with cost base indexation and implement a 30 per cent minimum tax on capital gains passed both houses in June 2026.

The government then released the second tranche of the CGT measures, which included the apportionment formula that estimates the asset’s value on 1 July 2027, based on its growth rate over the asset’s holding period. The government said an asset’s value at 1 July 2027 will be determined by taxpayers as part of their tax return in the year the asset is realised.

Taxpayers could either use this method or seek a valuation of the asset as at 1 July 2027 (which will include using quoted prices for assets such as shares).

“On CGT, the proposed apportionment rules will require calculations that are well beyond what most small-business owners and investors can do themselves,” Wong said.

At the same time, CPA Australia has called on the government to release the Board of Taxation’s Red Tape Reduction Review and set a measurable target to cut tax compliance costs by 10 per cent or around $6 billion a year by 2030.

The board said that through industry consultation it would aim to gain a better understanding of how compliance and regulation hinder business taxpayers, and how this could be reduced through amendments to tax laws and administration. It clarified, however, that tax policy reforms were outside the scope of their review.

CPA Australia’s analysis estimated that taxpayers spend around $13 complying with the tax system for every dollar governments spend administering it. It said the burden falls disproportionately on smaller businesses, with its estimates showing that SMEs incur around $31 billion in annual compliance costs, equivalent to 1.1 per cent of GDP.  

However, the new rules around discretionary trusts and CGT, additional record-keeping requirements, apportionment methodologies, valuations, and transitional arrangements could increase compliance costs and the risk of inadvertent errors, Wong said.

If reforms significantly increase compliance costs, reporting obligations, or uncertainty, that would be difficult to reconcile with a broader goal of reducing red tape, she remarked.

“Good tax policy should aim to achieve its objectives in the simplest and most administratively efficient way possible. Australia already spends around $60 billion a year on tax compliance. You can’t cut red tape with one hand while adding it with the other,” she said.

‘Red tape lens’ needed on tax measures

Wong urged the government to apply a “red tape lens” to all new tax measures and ensure that compliance impacts are considered alongside revenue and policy outcomes.

“Start by publishing the Board of Taxation’s report, which has been with the Treasurer since 30 June. Then apply its discipline to the measures now on the table,” Wong said.

“Every new tax measure should come with a published estimate of its compliance cost, so Parliament can weigh that against the revenue. For the trust changes, the Commonwealth needs to work with the states so duty doesn’t make restructuring prohibitive, and taxpayers need certainty on that before the start date.”

Wong also said the CGT apportionment calculation methods should be simplified and pushed for all tranches of legislation to be released as soon as possible, “so taxpayers have a holistic view of the rules and know what they’re up for”. 

“Getting the design right now is far cheaper than fixing it after it starts. Businesses need certainty, simplicity and time to adjust. The cost of implementing reform should not outweigh the intended benefits,” Wong said.

“Tax reform should not be judged solely by its policy intent. It should also be judged by what it costs taxpayers to comply. If new rules for discretionary trusts and CGT increase complexity, record-keeping and administrative burden, they risk adding to the red tape burden already facing small businesses.

“The challenge for the government is to achieve its policy objectives while keeping compliance as simple and efficient as possible.”

Delivering quick wins in the budget

CPA Australia urged the government to deliver what it called “low-cost quick wins” in the next federal budget.

These reforms include simplifying fringe benefits tax, using single touch payroll data to reduce duplicated reporting, indexing outdated compliance-saving thresholds, cutting duplicated business tax reporting, and improving digital interactions with the ATO.

“Cutting tax red tape should not be controversial,” Wong said.

“There are practical reforms available now that would save businesses time without increasing taxes or reducing government services. If Australia wants higher productivity, stronger businesses and more investment, reducing tax compliance costs must become a national priority.”