Businesses face ‘death by a thousand cuts’ amid tax reforms

The federal government’s proposal announced in this year’s budget is forecast to raise around $4.5 billion annually by 2028–29, its first year of operation.

However, Sayer said the FBA has sought the modelling from the government since the measure was proposed in the May budget, but to no avail.

“Since May we have asked the government to show us the modelling,” she said.

“Two rounds of Treasury consultation have come and gone without it, and the Senate is now being asked to vote on a $4.5 billion tax on figures nobody outside Treasury has seen.”

Speaking to Accountants Daily, Sayer said she wants to know how the government calculated the $4.5 billion figure and what it comprises.

“It’s not very clear if the government will in fact raise $4.5 billion because they’re giving people reasons to change their structures,” she said.

“Therefore, I want to know if there’s going to be some leakage out of that $4.5 billion. I think there’s every chance that people will restructure. It’s going to be a significant cost in time and money for small, medium, and large family businesses. The question is, to what end?”

While the government said around 350,000 active small businesses (or 15 per cent) operated through a discretionary trust in 2022–23, and of these, 140,000 are not expected to pay additional tax or need to restructure in any given year, Sayer questioned how the government arrived at its figures.

“We’ve seen wildly varying numbers of businesses that are going to be impacted,” Sayer said.

“It’s not just businesses but many multi-generational family businesses have lots of different trusts as well. It’s not as though it’s one trust per business. The complexity of everything that’s been built over generations where businesses have been advised to structure themselves that way have all been turned upside down.”

Treasurer Jim Chalmers recently introduced the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 to implement the core components of the minimum tax on discretionary trusts, including a new definition of fixed trusts.

Chalmers said that while there are legitimate reasons to use a trust, “they allow a small number of people to plan their tax affairs in ways that aren’t available to most Australians”.

The 2026–27 budget tax explainer cited tax reviews raising discretionary trust concerns, including Australia’s Future Tax System review in 2009, which said trusts remain a source of tax avoidance and complexity.

Sayer said she is disturbed by the use of the words “tax avoidance” in relation to discretionary trusts, adding that she believes this is a misnomer.

“I think everybody looks at how they can minimise tax to some degree, but not outside the realms of what is being advised and what is legal,” she said.

“Tax avoidance is a different issue, and there are ways to deal with that. I’m disturbed with the phrase tax avoidance because I think that’s an injustice to the sector.”

The Senate recently referred the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 for an inquiry, with submissions closing on 29 October and the inquiry being held in November.

While the Greens argued that the government watered down its position before the legislation was introduced into Parliament, Sayer disagreed, and said the legislation is very complex.

“I don’t come across any family business that doesn’t support the concept of tax reform, but the issue is how it’s done,” Sayer said.

“People do not understand that 70 per cent of Australian family businesses employ 50 per cent of the workforce, so it’s a very significant sector across small, medium, and large businesses, and all individual sectors. The impact is quite significant for the Australian community and the economy. I don’t believe it’s diluted.”

Sayer also said she held significant concerns over the state of Australian family businesses in 10 to 50 years from now and when the current generation of owners hands them over to future generations.

“This is not a tax on this year’s profit. It decides whether the next generation takes the business on or sells it. That question has not been asked, let alone modelled,” she said. 

“We do not want to look back in 10 years’ time and wonder what has happened to all the family businesses in Australia.”

Sayer concluded that such a critical issue that could have long-term impacts on the economy should not be rushed.

“Two weeks is a short time to examine a measure of this size,” she said.

“We’ve been scrambling to put reasonable submissions in because the process so far has been extremely quick.”