After confirming over the weekend that Labor would target trusts, shadow treasurer Chris Bowen has stated that Labor would still allow people to use trust structures if it wins the next federal election. However, it will crack down on the use of trusts as vehicles to reduce tax liabilities, although there are concerns that its measures could mainly affect users of trusts such as farmers and small businesses. Treasurer Scott Morrison has countered, saying there are many legitimate reasons for using a trust. From The AFR:
“As Bill (Shorten) has said, there are legitimate uses for trusts particularly around asset protection and succession planning. Nobody is going to abolish trusts,” said shadow treasurer Chris Bowen.
Shadow finance minister Jim Chalmers all but confirmed the taxation of trusts would be among the equity and budget repair policy promises Mr Shorten will unveil on Sunday at the NSW Labor conference.
He said the use of trusts had grown in an extraordinary fashion in recent years.
“What people are saying is that we should consider and look at the tax arrangements for trusts so that tax arrangements are as fair as possible and so the tax concessions aren’t going to people who need them the least,” he told Sky News.
“That’s not saying that trusts should be abolished. It’s saying that there might be ways for governments to consider and oppositions to consider to make the tax arrangements more fair”…
Treasurer Scott Morrison said the Coalition would not support taxing trusts more aggressively.
“It’s a pretty simple reason why you do it, because you have good news and you have bad news, you have a good year and you pay an amount in tax, and the next year, it’s a bad year, the weather has been unkind to you, and you are borrowing money to pay last year’s tax bill. You’ve also got…who owns the property at the end of the day and you want to keep it in the family,’ he said.
“These are all legitimate reasons why we have a trust scheme in this country and Bill Shorten is coming after that. We don’t agree with him.”
As noted on Monday, new research from The Australia Institute (TAI) shows that the use of trusts has exploded:
And that the equivalent of 21.6% of Australia’s national income was run through a trust, which is overwhelmingly skewed to high income earners:
TAI also argued that the revenue foregone by the Budget from the use of trusts might be $3.5 billion a year.
Thus, there appears to be a case to target trusts used purely for tax minimisation purposes.
