The real blind spot in Australia’s trust debate

Trusts exist because risk exists

The average salaried commentator faces relatively little financial risk: steady income, paid leave, super contributions, limited liability, and predictable cash flow.

A business owner lives in a completely different world. They: personally guarantee loans, carry payroll obligations, absorb litigation risk, survive volatile cash flow, manage insolvency exposure, reinvest capital constantly, and often go years without stable income.

A discretionary trust is not some exotic loophole created for tax avoidance. It is a legal structure developed to manage uncertainty, liability, succession, and capital allocation. The critics rarely acknowledge this because most have never had to make payroll during an economic downturn.

The debate is dominated by institutions that don’t operate under market discipline

Many organisations leading the anti-trust narrative position themselves as “independent public policy voices.” But independence deserves scrutiny too.

When an organisation depends heavily on government grants, taxpayer-funded research partnerships, public-sector consulting, university funding ecosystems; or policy access tied to political alignment, or the incentive structure matters, because institutions rarely attack the system that finances them. That does not automatically invalidate their work. But it absolutely raises legitimate questions about perspective and bias.

If a private accounting firm became financially dependent on the very regulator it was analysing, the public would immediately question its independence. We saw exactly this logic applied in the PwC and KPMG debates: conflicts matter, incentives matter, and structural dependence matters.

So why should publicly funded policy institutes be exempt from the same scrutiny?

There is a difference between tax minimisation and tax avoidance

This distinction is constantly blurred in public debate. Tax avoidance implies artificial or abusive arrangements designed to circumvent the intent of the law. But most discretionary trusts operate entirely within a framework explicitly created by Parliament and administered by the ATO.

A family business distributing profits through a trust is not hiding money offshore. It is using a lawful domestic structure recognised across decades of Australian commercial practice. Critics often frame this as unfair because not everyone has access to the same flexibility.

But the reality is simpler: people who take greater financial risk tend to require more sophisticated structures.

That is true in every functioning economy.

The real economic question is never asked

The trust debate always asks: “How much tax could government collect if these structures were restricted?”

Rarely does it ask:

• How many businesses would invest less?
• How much entrepreneurial risk would decline?
• How much capital formation would slow?
• How many family businesses would become more vulnerable?
• How much intergenerational wealth creation would weaken?

In Australia, small and medium businesses carry an enormous share of employment, investment, innovation, and local economic resilience. Yet, public debate increasingly treats them as a revenue source first and an economic engine second.

That inversion is dangerous.

Policy experts often underestimate what it takes to build anything

Many trust critics analyse wealth after it exists. Few analyse what it takes to create it.

Building a business means: years of uncertainty, capital at risk, personal stress, delayed gratification, and exposure to failure.

Most businesses fail. Most owners never become wealthy.

Structures like discretionary trusts evolved because business owners needed flexibility, continuity, asset protection, and efficient reinvestment mechanisms.

The idea that trusts exist primarily as a tax dodge reflects a fundamentally incomplete understanding of commerce.

Australia should apply in both directions

Australia has built a large ecosystem of organisations designed to hold government accountable on behalf of vulnerable groups. That has value.

But who consistently advocates for productive businesses, capital creators, employers, investors, and the people carrying economic risk? Who examines whether government policy is making entrepreneurship harder? Who measures the cumulative burden of compliance, taxation, regulation, and financing costs on the productive sector?

An economy cannot redistribute wealth indefinitely unless someone is first creating it.

That perspective is increasingly absent from policy debate.

The bigger problem is cultural

Australia increasingly talks about wealth as though it appears automatically. It does not.

Capital formation is fragile. Entrepreneurship is fragile. Business confidence is fragile.

When policy debate frames legitimate commercial structures as morally suspect, it sends a broader message: success itself requires justification.

That mentality eventually discourages the exact people governments rely on to hire workers, pay taxes, build industries, and invest locally.

Final thought

A discretionary trust is not inherently virtuous, nor is it inherently abusive. It is a tool.

Like any tool, it can be misused. But reducing it to a “tax avoidance mechanism” ignores the economic reality of why these structures became widespread in the first place.

The more important question is this: Do we want a policy environment designed primarily by institutions insulated from commercial risk — or one informed by people who have actually built, financed, employed, and survived in the real economy?

Because those perspectives are not the same.

Naz Randeria is the managing director of Reliance Auditing Services.