CPA Australia has called for the relief allowing current discretionary trusts to be rolled over into an alternative structure to address any stamp duty issues that might arise from this action.
The federal government has granted individuals and businesses the ability to roll over assets held within a discretionary trust to a structure such as a fixed trust or company without triggering capital gains tax so as not to be disadvantaged by the new minimum 30 per cent tax to be levied on discretionary trusts from 1 July 2028 introduced in this year’s budget.
Under the provision, taxpayers have to make this adjustment to their asset holding arrangements in the three years between 1 July 2027 and 30 June 2030.
A consultation paper on the new tax was released last week clarifying Canberra’s approach to the issue.
CPA Australia welcomed the consultation paper, but highlighted a glaring issue the government has failed to address in any of the narrative about the trust tax relief.
“This consultation paper runs to 17 pages and includes 17 discussion questions, but does not mention state stamp duty once. Until that changes, the commonwealth’s rollover relief only solves part of the bill small business is being asked to pay,” CPA Australia tax lead Jenny Wong noted.
“Right now, the same restructure can cost one business nothing and another business tens of thousands of dollars, purely because of the state they are in. That is not tax reform – it’s a postcode lottery.”
As such, the accounting body is recommending the government engage with state and territory governments through the Council on Federal Financial Relations or National Cabinet before the legislation is finalised.
“Small businesses restructuring in good faith should not be given relief with one hand by Canberra and handed a stamp duty bill with the other by their state government,” Wong said.
Further, she pointed out the timeframe for this taxation regime is confusing given its implementation is due on 1 July 2028, the relief measure commences on 1 July 2027 and the design of the impost has not yet been completed.
“Businesses are being asked to plan for decisions that could cost tens of thousands of dollars either way, but the rules do not exist yet,” she explained.
“CPA Australia wants this reform to be workable [and] getting the detail right now is what will allow business owners to plan, rather than guess.”
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin