Australia proposes 30% minimum tax on discretionary trusts

The Australian federal government has introduced legislation to implement a 30 per cent minimum tax on certain discretionary trusts. The proposal, introduced by Treasurer Jim Chalmers, has faced criticism from the coalition and business groups due to concerns regarding its complexity and potential unintended consequences.

In response to fears that the new federal tax could trigger additional state-level costs, New South Wales Treasurer Daniel Mookhey has pledged that a re-elected Labor government would shield businesses using the Excluded Election Trust arrangement from relevant state stamp duties. Mookhey stated the move aims to provide businesses with as much certainty as possible.

Tax experts have raised concerns that the legislation, which was moved through a short consultation period, may leave specific financial scenarios unaddressed. Potential issues include how trusts will calculate and report liabilities, the need for trustees to review trust deeds, and whether certain entities will face quarterly tax instalments. While primary production income is excluded from the increase, the administrative burden on other businesses remains a significant concern.