‘Adds complexity to an already broken system’: CA ANZ doubles down on tax proposal

The statement from CA ANZ comes after recent submissions from several accounting bodies to Treasury, including Grant Thornton, CPA Australia, and BDO Australia.

A common trend within the submissions was the concern over double taxation, with firms such as RSM highlighting in its submission that the government should only move ahead with its proposal if it corrects design issues such as unrelieved double taxation, as well as SW Accountants & Advisors, which urged the government to eliminate a punitive 60 per cent double tax on corporate beneficiaries. 

Speaking to Accountants Daily, CA ANZ Australian tax leader Susan Franks said: “The trust system is already complex and outdated; applying a flat 30 per cent rate on top of it, without wider reform, adds complexity to an already broken system.”

“We want a design that is simple to administer and does not tax the same income twice, which forces businesses to incur substantial restructure costs for no other reason than to avoid double taxation.”

Franks noted that the policy objective could be achieved without penalising businesses that use trusts for genuine reasons. 

“The question is not whether inappropriate income splitting should be addressed; the real question is whether the proposed design achieves that objective in a fair, practical and economically sensible way,” Franks said. 

Much like several other corporations and bodies, CA ANZ has also called for further consultation and the release of draft legislation before the measure proceeds, highlighting the complexity of trust taxation and the possible detrimental effects on private businesses and the wider economy.  

"CA ANZ has been engaging with policy advisers to the Treasurer and Assistant Treasurer, Treasury, and the ATO on this measure since the Budget, and through Treasury's consultation,” Franks said. 

"There are existing rules that already trip up honest taxpayers and need to be fixed.” 

“The family trust election rules are a clear example: a simple, unintended error can trigger a substantial tax bill out of proportion to the mistake. Real reform should make the system easier to comply with, not harder."

Treasury has closed consultation regarding the Minimum tax on discretionary trusts consultation paper, after having been open to feedback from July 8-31.