Crackdown on Family Trusts by Federal Opposition
Recently, Mr Shorten announced the intended crackdown on Family Trusts should the opposition come into power at the next federal election. The plan is to simply tax all distributions from Family Trusts at 30 per cent which totally ignores the major reason many small businesses set up a trust. Trusts are an instrument which enables the protection of assets from potential claims against the assets. Also, something the Opposition has not thought about or has elected not to bring into play is the capital gains benefits gained through a trust that are not available to a company structure.
There is no denying there can be a potential tax benefit but any crackdown has to take into account the whole package not just a part of the package.
Purely, from an income tax or company tax perspective a company at a reduced tax rate of 27.5% may become appealing as opposed to 30% for family trusts leaving aside asset protection and capital gains.
However, I hold that for the majority of my clients, who have a family trust, will be disadvantaged as their level of income is not excessive and the purpose of asset protection plays a significant role in having the trust and are therefore being punished for having the most effective structure for their business.
I am truly amazed that the Federal Government has effectively remained silent on this issue. Given the current status of the political polls showing that the Federal Opposition will be our next Government this is not something small business should take lightly if the polls remain as they currently stand heading into the election period.
I would like to strongly state that Balanix is not politically aligned to any party but will support good policy by any party and likewise condemn what is believed to be bad policy by any party.
We will always act solely in the best interest of our clients and speak on their behalf where we think they are being hard done by!