Federal Opposition Leader Bill Shorten announced last week that, if elected to Government, Labor would introduce new taxation laws that would impose a tax rate of 30% on Family Trusts to prevent wealthy people using Trusts to reduce tax.

The lack of detail provided by Labor prompted calls from a raft of national industry bodies for more information given that Family Trusts are used by many small businesses including farmers, retailers, tradies, small grocers, newsagents, retirees and fuel retailers.

“Unfortunately, Labor’s public response to these questions suggests that the justification for these changes is a little flaky”, said ACAPMA CEO Mark McKenzie.

Analysis of many of the comments made by Labor spokespeople on this issue over the past week suggests that Federal Labour has a poor understanding of the extent to which Trusts are used by small business.

“Small fuel retailers are extensive users of family trusts for very valid reasons and so we are concerned to ensure that if these changes are implemented, that the design of these laws does not create more problems than they solve”, said Mark.

“No one can reasonably argue against policies that seek to ensure that all individuals and businesses pay their fair share of tax”, continued Mark.

“You really have to question, however, whether taxing family trusts is the number one priority for the federal government given past evidence of large scale tax avoidance by global corporates”, said Mark.

Further, much of the informed commentary from taxation academics and finance specialists suggests that the primary targets of the new laws – that is, the very wealthy – will just be able to take advantage of alternative legal arrangements to minimise their tax.

Questions are also being asked about the exact extent of the problem and whether there are smarter ways of solving this problem – strategies that do not reduce the utility of Family Trusts for small business.

“While a small number may be used by the very wealthy end of town for tax minimisation (say 5%), this proposal will impact 100% of trusts. Hitting 100% of family trusts, solely to correct the actions of 5%, is hardly fair”, said Council of Small Business of Australian (COSBOA) CEO Peter Strong.

“If the Australian Labor Party wants to correct the behaviour of the 5% or so who are abusing Trust structures then they should look at the Tax system as a whole – and COSBOA would support them on this”, continued Peter.

“While this issue is one that relates to a broader question of Federal Taxation, ACAPMA is aware that any changes to the taxation of Family Trusts will have an impact on many of our members”, said Mark.

Accordingly, ACAPMA has joined a national coalition of industry bodies that has been established to secure further details on the proposed changes.

This coalition is being led by COSBOA. Its’ prime objective is to communicate the need for any such policy to reduce the risk of unintended adverse financial impacts on small businesses.

ACAPMA is therefore interested in hearing any concerns that members have with the proposal. This feedback can be provided by contacting Mark McKenzie on 1300 160 270 or emailing markm@acapma.com.au.

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