NTAA concerned by extensive use of ministerial determinations in trust tax changes

"This means core aspects of the measures would be set, and could be later altered, outside primary legislation and with reduced parliamentary scrutiny," the association warned.

The NTAA said the matters deferred to ministerial determination were not just technical or administrative details but "go to the scope, operation and incidence of the measures".

Proposed subsection 101AB(2), for example, allows the Minister to determine that trust estates of a specified kind are not minimum tax trusts.

Another proposed subsection, 272-65(4) of Schedule 2F, allows the Minister to determine matters relating to material discretionary elements affecting the entitlements or rights of beneficiaries in working out whether a trust is a fixed trust.

The Minister also has the power to determine matters relating to material discretionary elements affecting the entitlements or rights of members in working out whether a company is an ‘eligible company’ for the purposes of an excluded election trust (EET) election.

The explanatory materials state that delegation is appropriate because the nature and practical complexity of trusts mean there is no one-size-fits-all criterion.

"NTAA accepts that delegated legislation has a legitimate role in addressing technical detail. However, where delegated powers determine entitlement to the roll-over or eligibility to make the election, they go to the substance of the law and belong in primary legislation," the association said.

"Two features of delegated legislation compound this concern. Legislative instruments take effect before meaningful parliamentary scrutiny, and they may be varied after enactment, allowing the operation of the law to be materially altered outside the primary legislative process."

The government previously came under criticism with the Tax Agent Services (Code of Professional Conduct) Determination 2024, when a ministerial determination was released by Assistant Treasurer Stephen Jones, which initially provided registered tax and BAS agents with only weeks to prepare for a raft of new obligations.

The NTAA said that matters central to the scope and operation of the measures, particularly entitlement to the roll-over and eligibility to make the election, should be included in primary legislation.

It also said that any remaining legislative instruments should be released in draft for public consultation prior to registration, with this commitment reflected in the EM.

The NTAA said elements of the election regime also still remained unclear.

"NTAA understands that the election regime is intended to be a transitional measure, allowing trusts and their beneficiaries in existence on 1 July 2028 to remain outside the minimum tax for as long as their circumstances suit the nomination, rather than as a permanent alternative for the life of the trust," it said.

"The EMs do not say so. Trustees and advisers need to understand this, so that an election is made with a clear view of how long it is likely to remain in force and of the events that will revoke it."

The association also raised concerns about the fact that the changes are likely to bear most heavily on beneficiaries with modest incomes, as the minimum tax offset is non-refundable to the extent a beneficiary's own tax liability falls short of 30 per cent of the distribution.

"A beneficiary needs taxable income of $229,320 to use the minimum tax offset in full," it said.