Family businesses restructuring their assets to avoid the Labor government’s new minimum tax on trusts could be eyeing accounting bills in the tens of thousands of dollars, according to a Senate inquiry.
During the May budget, Labor introduced a new 30 percent minimum tax on income that goes into a discretionary trust, often called a family trust. The mechanism allows small to large business owners a way to split income streams in order to lower their tax burden.
In its submission (pdf), CPA Australia estimated that restructuring a Victorian family business—that owned a $750,000 premise—from a trust to a company structure would cost $9,536 to $23,436 in fees, registrations, refinancing and the owner’s time.
Stamp duty would also be incurred as any change of property ownership triggers the tax, and could add about $40,070 in fees, about 63 to 81 percent of the total cost.
CPA Australia also pointed to one member’s experience, who owned a hotel and had to pay $22,000 to restructure and move the holding from a trust to a company. The process took about seven weeks and more than 60 hours of the owner’s time.
A related entity that holds the hotel’s land faces more than $600,000 in Victorian stamp duty with the state government not firm on whether it will offer relief from the federal Labor scheme.
Meanwhile, Treasury’s analysis quotes the Council of Small Business Organisations Australia as saying restructures typically cost between $15,000 and $50,000, while stamp duty on a $1 million transfer could cost between $36,590 and $55,000, depending on the state.
Government Firm on Proposal
So far, the federal government is standing firm on the proposal.
From July 1, 2028, the trustee will pay the tax, and family members can claim a credit for it against their own tax bill.
The government says this will stop people paying less tax than wage earners by spreading income to family members. The government expects to raise $4.3 billion by 2029/30.
Costs Not Fully Realised: CPA
CPA Australia’s tax policy lead Jenny Wong told the committee its estimate of $2 billion to $2.8 billion for advice across about 849,000 trusts did not include restructuring costs such as stamp duty.
Members had told the peak body that they expect to charge about $2,000 to $10,000 per client.
Wong said Treasury priced an hour of advice at $91.54, while CPA Australia used market rates of about $250 to $350. Liberal Senator Jane Hume replied, “I can’t get a plumber for $91 an hour.”
Wong added that businesses moving into a new company might have to reapply for licences covering liquor, plumbing, electrical and building work, and move insurance contracts and leases.
Tax Experts Break it Down
Alexis Kokkinos, a tax partner at Pitcher Partners who chairs CPA Australia’s Tax Centre of Excellence, said most restructuring costs could not be claimed as tax deductions.
When a business leaves a trust, the trust is wound up, so any expenses it might claim “becomes a non-deductible item in itself,” he said.
Susan Franks, from Chartered Accountants Australia and New Zealand, said even costs that can be claimed as deductions only lower the tax bill, not the cost itself.
For a business paying tax at 30 percent, every $100 spent on restructuring would save just $30 in tax, leaving the business $70 out of pocket, she explained.
Institute of Public Accountants senior tax adviser Tony Greco said a potential consequence is businesses will be left with less cash to spend on “productive investment” as they handle restructuring.
He said his body was “not here to defend artificial income splitting,” but called the changes “a sledgehammer approach.”
Asked by Liberal Senator Kerrynne Liddle whether the bodies would support a one-year delay, Chartered Accountants’ Franks said, “Yes, one year would be lovely, but please, can we have some more?”
English (US) · 
Turkish (TR) · 