Will the Federal Budget 2014 axe Family Trusts?
Thursday, 8 May 2014
“The tax treatment of family trusts regularly attracts criticism that it is a ‘tax rort’” said
Associate Professor Dale Boccabella from UNSW’s Australian School of Business. "The Federal Budget 2014 is the right time to take action over their use as a tax minimisation mechanism.”
“Those criticising the tax treatment of family trusts have a very strong foundation for their criticism,” he said. “The guiding principle should be that similarly placed activities or transactions should be taxed in a similar manner. It is very hard to see how this is occurring in the case of the family trust.”
Family trusts should more correctly be called discretionary trusts. Dale Boccabella is currently working on estimates of the amount of lost tax revenue to the government by continuing with the current tax treatment of discretionary trusts.
“The Federal Budget 2014 is the perfect time to address the issue. The government has signalled its intention to hand down a tough budget, including extra taxation to address the deficit. Perhaps however there are much easier and less controversial measures it could take.”
“Indeed when it comes to tax, various government inquiries have endorsed the current tax treatment of discretionary trusts,” he said. The Hon Bill Shorten MP told a Tax Institute conference last year: “We don’t believe trusts are any form of tax avoidance. We see trusts as a legitimate feature of how Australians conduct their financial affairs.”
Dale Boccabella responded “the tax advisors listening must have had a quiet chuckle; they need to be quiet because a loud chuckle may prompt the Treasurer to actually check the basis for that ridiculous statement.”
“If the budget really is in such a dire state that it needs a Deficit Levy – which at best is highly debatable, and might be described in Yes Minister terms as a ‘brave’ move, or even ‘courageous’ – why don’t we look elsewhere. Instead of extra taxation, now is the time to firmly grasp the nettle and grit our teeth, with a thorough review of Family Trusts. Many wealthy families many not thank us for it, but the governments revenue certainly will.”
For Dale Boccabella‘s further analysis of Discretionary Trusts, see his Opinion piece on the Australian School of Business blog:
Is the income tax treatment of family trusts really objectionable?
Australia: The land of the Discretionary Trust
For further comment call
Dale Boccabella on 02 9874 2539 or 02 9385 3365, or Email
Julian Lorkin: 02 9385 9887