The Federal Government’s proposed trust minimum tax reforms would represent one of the most significant changes to the taxation of privately owned businesses in recent decades, with implications for hundreds of thousands of family businesses, investors and business owners across Australia.
Pitcher Partners has prepared a report that recommends a range of measures to improve the proposed trust minimum tax regime and provide a practical pathway for businesses to corporatise that may be adversely affected by the reforms.
Key recommendations include:
Supporting business restructures
- Providing targeted stamp duty relief for restructures undertaken to comply with the new trust taxation framework.
- Allowing immediate tax deductions for costs incurred when restructuring trust groups into corporate structures.
- Ensuring any reform is accompanied by practical transitional arrangements that minimise disruption, compliance costs and unintended consequences for Australia’s SME sector.
Improving the proposed trust minimum tax regime
- Replacing punitive outcomes for distributions to corporate beneficiaries with more targeted integrity measures that address specific policy concerns.
- Legislating the treatment of unpaid present entitlements (UPEs) as loans to better address integrity concerns relating to corporate beneficiaries.
- Preserving the ability for family groups to utilise tax losses during a transitional period and ensuring existing tax losses do not become an impediment to restructuring.
Introducing an elective corporate tax regime for trusts
- Introducing an irrevocable election that would allow trusts to be taxed as companies without requiring costly legal restructures or asset transfers.
- Applying a corporate tax framework to electing trusts, including access to franking credits, corporate tax rates and tax consolidation.
- Permitting trusts that elect into the regime to participate in tax consolidation and access transitional relief for existing tax losses.
Supporting a fair transition
- Providing transitional rules to preserve existing capital positions and mitigate the impact of the proposed removal of the CGT discount on gains accrued before 1 July 2027.
- Preserving existing economic outcomes for businesses that have structured their affairs under longstanding trust taxation rules while supporting a transition to any new regime.
Review our policy paper below:
