Trusts tax reform set to go ahead under Labor
After first being announced in 2017, Labor’s proposed tax for discretionary trust distributions is shaping up to be a key election issue.
About two years ago, opposition leader Bill Shorten announced that Labor would reform the taxation of discretionary trusts to prevent income from being allocated to household members in lower tax brackets.
As part of its reforms, Mr Shorten outlined that :-
Labor would introduce a minimum 30 per cent tax rate on
all trust distributions to adult beneficiaries if elected in 2019.
Following the release of a report on trusts and the tax system by RMIT University this week, shadow treasurer Chris Bowen said that Labor’s proposed trust tax would eliminate “tax loopholes” costing the budget “billions of dollars through tax, avoiding income tax shuffles including income splitting via beneficiaries”.
ATO Commissioned Report
The report, which was commissioned by the ATO, stated that over the past six years the Tax Avoidance Taskforce had raised more than $1.2 billion in liabilities and collected more than $467 million in relation to trusts.
Participants in the report suggested that reform in relation to trusts could include a withholding tax regime similar to that in place for salary and wage earners, or taxing the trust or trustee as an entity and maintaining the current flow through features of trusts.
Mr Bowen stated that Labor’s reforms to the taxation of trusts was “merely an extension of John Howard’s work as treasurer, in seeking to apply a minimum standard tax rate of 30 per cent to discretionary trust distributions to beneficiaries over 18 years of age”.
copyright accountantsdaily & Garry Wolnarek