The ALP wants to tax divideneds from family and dicretionary trusts (which are the same thing) at 30% to stop multi millionaires and billionaires from rorting the system. This measure won't stop rorts from the extremely wealthy - go get the tax sinners we say. But it does show a lack of understanding of how these trusts work and is the end an attack on families. As we develop our response below are some quotes from July 2017 when the policy was first announced. There are more recent quotes at the top.
Quote from 18 April 2019
“My direct family is a 1/8th owner of a very old family business. My siblings and I are part of a discretionary trust that my father set up many years ago to manage this ownership. The income to this trust comes as a dividend from the FB. This dividend is thus income that has been taxed through the company process at company tax rates. This dividend then gets distributed to my family. This income will now be taxed at a further 30% as well as losing franking credits resulting in an effective 50% tax increase. The dividends of late have been minimal given the nature of the industries we operate in. So a meagre dividend will be taxed to a point where the family will question whether it is worthwhile being part of the business. Better selling and realising the value in our assets.”
The quotes below are from July 2017
“The vast majority of family trusts are operated by Tradies, farmers, shopkeepers, professionals and retirees”.
“Given that about half of all small businesses fail in the first five years, Family Trusts are typically used to protect the assets of business owners in the event business failure”.
“Family Trusts are also extensively used in the Agricultural community to protect multi-generational assets”.
“With suicide rates amongst 50 years+ small business owners (and Agricultural communities) at an all-time high, changes that remove the opportunity for asset protection of small business owners are morally reprehensible”.
“Family Trusts are also used by the elderly for administration of self-managed super funds”.
“So, how does Labour propose to address the minority issues with Family Trusts while guaranteeing that the majority who are using them appropriately are not adversely impacted?”
“This proposal will negatively impact builders, electricians, carpenters, shop keepers, farmers professionals and retirees – not the rich who, quite frankly, will just find another way to avoid paying tax”.
“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”.
“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”.
“Alternatively, Labor could ask the Australian Tax Office to conduct a review of suspect trusts with respect to income splitting practices and then use the findings to determine whether we really have a problem or not”.
“Attacking small business through changes to the family trusts is grossly unfair, particularly given that large corporations and unruly Unions (e.g. CFMEU) pay zero tax."
“This is clearly just a case of the Labour Party going after hardworking small business owners (including Tradies, farmers and shopkeepers) because they are a ‘soft target’ - and don’t have the money or the time to defend themselves, while big business and big unions continue to minimise their taxes without consequence”.
“We have a problem in our society if we, as Australian’s, believe that that people who work hard to build wealth by taking risks should not be able to reap the benefits of that hard work”.
“Increasing the wealth of wage earners by reducing the wealth of those who employ Australians is not Fair – and nor is it Australian”.
“The Australian Labour Party needs to go back to the drawing board on this one”