‘Absolute madness’: Rushed, unclear, unconsulted discretionary trust tax proposals

Writing wills and creating testamentary trusts for her clients, Martin said that this work has been impacted by the lack of clarity provided to practitioners by the paper.

“We need clarity now and so for me as an estate planning lawyer, that is the biggest issue,” Martin said.

“These are not issues that can be delayed, these are not issues where we can wait for Treasury consultation [for], where we can wait for them to decide how they are going to enforce this legislation.”

“For estate planning — always drafting wills … we do not have the ability to be able to wait for this clarity, because clients that we are seeing today might die tomorrow, clients that we are seeing today might lose capacity tomorrow and not be able to amend their wills.”

She said she fears the government is going to “walk back” on a number of their positions in the paper due to not considering their impacts.

“It is clear that the government is trying to push everybody away from discretionary trusts [and] that they do not favour bucket companies, but they have not considered legitimate circumstances where those are being used in business,” Martin said.

She noted that in the consultation, the government must highlight legitimate circumstances and advocate for exemptions or carve out circumstances which can be restricted from an asset protection perspective.

“My view is that they're trying to push this legislation through as soon as possible, allowing 21 days to respond to what is the greatest tax reform that we have seen in decades is absolute madness.”

Martin warned that if the legislation is rushed and without proper consultation, there will be “an incredible amount of litigation, an increase in delay in relation to how the legislation is interpreted where the Commissioner and the government are in dispute, or any of our courts are in disagreement with how that is to be interpreted”.

Martin said that businesses looking to start a new venture or restructure may need to wait until they there is more legislative clarity potentially later this year.

“We should hold off on any restructuring or potentially setting up new businesses, depending on the structure that the business should be in, because we do not have any clarity at all at the moment.

“Good policy is not drafted in urgent circumstances. Good policy is drafted on reflection and in consultation with the profession.

“I feel as though we're seeing the same approach that the government took with the CGT legislation, which is, ‘let's push it through before we really have a chance to digest the consequences and we'll deal with that later’.”