‘Please can we have some more?’: Calls for tax reform deadline extension

At the parliamentary hearing, Liberal Senator Kerrynne Liddle asked if the bodies would support a one-year delay in the implementation of the tax reforms given their enormity of scale, and the structural reality, capacity, readiness, timing, and uncertainty.

All of them supported a delay in implementation but indicated that a one-year extension would not be sufficient.

IPA senior tax adviser Tony Greco said it is critical to consider the cumulative effects of all the tax reform changes, particularly changes to CGT, and the additional costs this would impose on small businesses on top of the costs they are already facing.

“I think we need certainty,” Greco told Liddle.

“What we’ve got here with all these legislative determinations yet to be determined, we have so much uncertainty in a complex area of the law. I would challenge whether Treasury can draft something with unintended consequences. There are issues everywhere.”

In its submission to the Senate Economics Legislation Committee Inquiry on the minimum tax on discretionary trusts legislative package, the IPA pointed to several legal issues that could arise from the excluded election trust (EET) election. It said that a regime that locks trustees into fixed beneficiaries and percentages could hinder a trustee’s ability to respond to illness, financial hardship, disability, family breakdown, or other material changes affecting beneficiaries during the income year.

“The proposed design of the EET election therefore risks undermining the proper administration of discretionary trusts,” the submission said.

“Where tax practitioners advise their clients in relation to choosing to make an EET election and advise on making EET-compliant distributions in subsequent years, it could expose them to potential litigation, as trustees have trust law obligations which may be inconsistent with decisions made to ensure ongoing validity of an EET election.

“Family law and intergenerational disputes are already on the rise, and the EET election may give rise to more legal disputes as beneficiaries may challenge the proper exercise of trustee fiduciary obligations required by the trust deed.”

Greco told Liddle at the hearing that state-based laws and stamp duty issues could also complicate matters with the EET election.

“I don’t think one year will [be enough], unless we have certainty on all these other things. I think even one year is a short period of time to deal with the raft of issues we’ve already raised so far,” he said.

1-year extension is better than nothing

CA ANZ Australian leader, tax, superannuation, and financial services, Susan Franks, echoed Greco’s view, stating that while one year “would be lovely”, it may not be enough given the significant pipeline of work that needs to be completed.

“One year would be better than what we’ve got, but we do have real concerns about the timeline,” Franks said.

Franks pointed out that the passage of legislation is only the first stage of the implementation process, following which the ATO has to develop guidance, and accountants have to understand both the legislation and the ATO guidance, apply it to the clients’ circumstances, and make suitable recommendations. Finally, the clients have to decide whether to implement those recommendations.

She also noted that the accounting profession has been subjected to multiple and simultaneous changes, including anti-money laundering laws, Payday super, and the latest tax reforms around CGT, negative gearing, and potential discretionary trust reforms.

“There’s a very large volume of work hitting the same taxpayers that we need to take into account,” she said.

“It’s the holistic cumulative effect of the legislation and the use of resources and the uncertainty that we need to deal with. One year would be lovely but please can we have some more?”

Australia tax policy lead Jenny Wong expressed concern that despite the new CGT and negative gearing tax reform changes coming into effect on 1 July 2027, many of the rules have not yet been released. She said she expects a backlog of work and a “mad rush” during the implementation period.

“A lot of [our] members are saying ‘we’re waiting to see when all the rules will come out at the Commonwealth and also the state level’,” she said.

“There will be a mad rush and capacity issues will arise for our members. I think a delay would be helpful. It’s really important to get certainty around these rules because they’re really complex.”