'They haven’t looked at all the alternatives': IPA calls for rethink of minimum trust tax

Pitcher Partners said that discretionary trusts remain an important structure for family-owned businesses, but changing tax rules, regulatory pressures, and succession planning challenges are reshaping how these businesses manage their structures and plan for long-term growth. 

Many businesses rely on these structures to support reinvestment, working capital management, and long-term growth. 

The Institute has advocated for a more equitable and calibrated strategy that acknowledges the fundamental differences between passive wealth vehicles and bona fide commercial enterprises. 

The submission comes after the Institute of Public Accountants criticised proposed discretionary trust tax changes as a “sledgehammer approach,” arguing they could force businesses to restructure and create costly disruptions beyond addressing tax integrity concerns.

Speaking to Accounting Times following its recent submission to Treasury, IPA senior tax adviser Tony Greco attested that while Treasury has identified legitimate integrity concerns, the proposed response goes much further than necessary and creates significant disruption for businesses. 

“They’ve identified income splitting and the benefits of a corporate beneficiary, commonly referred to as a bucket company, and the ability to defer payments out of a corporate beneficiary … Those are the three things that have been identified in the discussion paper,” Greco exclusively told Accounting Times.

The IPA maintained that surplus imputation credits must remain accessible to beneficiaries, ensuring they correspond directly with their genuine economic interest in franked payouts.

The submission said that since trustees manage equity on behalf of members, individuals should remain entitled to franking credit benefits that align precisely with their respective portion of the overall payout.

Greco told Accounting Times that the restructuring requirement was inconsistent with broader government objectives around productivity and reducing unnecessary business burdens.

“You’ve got some concerns in one area, and then you’re basically throwing in the restructure option, which is very disruptive, very costly, very time-consuming and not in accordance with the government’s productivity agenda,” Greco noted. 

Greco said that Treasury should consider alternative mechanisms rather than relying on broad restructuring requirements, noting that other options could achieve the policy objective without imposing high costs on businesses. 

“They haven’t looked at all the alternatives, and there are many,” Greco said. 

“There is a withholding regime … The treatment for corporate beneficiaries, I think, is a little bit over the top because it ends up at a level of taxation well above the highest marginal tax rate.” 

Greco stressed that while the accountants support efforts to address legitimate tax integrity concerns, the proposed approach needs to be more proportionate and targeted. 

“We’re not opposed to tightening or addressing the integrity measures, but let’s do it in a way that’s proportionate,” he said.