iscover Government needs legal counsel on its ‘tax on the poor’, lawyer says
TaxOne tax lawyer is questioning whether the government knows what a trust really is, highlighting the unnecessary legislative fatigue and administrative burden advisers are facing.
Following the release of his submission on the government’s 30 per cent minimum tax on trusts, one tax lawyer has emphasised to Accountants Daily that the government is not aiming at its intended target.
With the government’s minimum tax designed to address income splitting by rich trustees, the lawyer said that it is in fact putting retired couples, mum-and-dad businesses, and caretakers in the firing line, who will be faced with the 30 per cent tax even though they may earn less than $45,000.
Speaking with the brand, Norton & Quay Tax Lawyers principal Arda Ahmed (pictured), stressed that a discretionary trust is a fiduciary obligation, and not a contract, calling on the government to engage King's Counsel for legal advice on the proposal.
“I don't think the government understands what a fiduciary obligation really is. It's not as simple as a contractual obligation,” Ahmed said.
“This government has lost the plot, and they are taxing the poor and calling it a rich man’s tax.”
“Egregious.”
Ahmed said that the Howard government had already introduced integrity measures to address income splitting in 1979 under section 100A, which he said raises questions as to why further integrity is required.
Further, he noted that the proposal looks at only one taxpayer in a discretionary trust instead of the entire family in the trust.
“That's actually not fair, because you are discounting the other family members who are staying at home, working, taking care of a child or another family member who needs to be taken care of, or even running a startup, which is not generating an income,” he said.
“I want to call this tax out for what it is: a tax on a poor, startup, lower-middle-class family – that is who this tax affects.”
“It doesn't affect anyone who is in a rich family group if they have earnings of over $45,000. This 30 per cent tax would most likely not impact most of the people receiving distributions, because they'd be on higher incomes [anyway].”
Arda added that while the quantitative impacts of the discretionary trust minimum tax may be lower than the modelled figures, it adds significant administrative burden for taxpayers and their tax agents.
“I've been talking to a lot of advisers, and they're fatigued by the amount of papers, legislation, and drafts [put out by the government]. Everything is coming at 100 miles an hour, and none of it makes sense,” he said.
“It's creating a lot of anxiety for taxpayers, [raising questions such as] ‘What's the right way of structuring?’, ‘How do we actually deal with this?’
“When you've already made significant changes to the CGT regime, lugging this on is making it extremely difficult for anyone to understand.”
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