Jim Chalmers Think Tank has met and produced a wide variety of ideas including a tax on spare bedrooms….. Whilst a tax on spare bedrooms in a family home may be some way off, it puts into perspective what the government is thinking and once again put trusts under the microscope. With the Treasurer signalling possible measures aimed at property investors, retirees and trusts — framed as a matter of “intergenerational equity” — we are reminded of a long-running tension in the system: balancing revenue needs with maintaining confidence in Australia’s tax framework.
Pitching trusts as being integral to intergenerational equity appears at least misguided and ill-informed, however, it is most likely a political manoeuvre to fit the desired agenda. If the Treasurer wants to tax trusts to raise revenue, then he should simply come out and say so rather than trying to dress it up with one of the current buzz phrases. One of the many benefits of trusts are that assets can be held for the benefit of many generations of a family therefore preserving the value and applying the income to benefit multiple generations of a family.
If, what the Treasurer wants to do, is to raise revenue by way of reference to intergenerational lines so that the money can be redistributed across the community, then perhaps a better and more transparent way to do it would be to introduce an inheritance tax or change the CGT laws to tax an individual on death.
Trusts are not loopholes
Trusts are integral to the way many Australians manage wealth and business operations. They protect assets, facilitate intergenerational planning and provide flexibility in investment and reinvestment decisions. To label them simply as “tax avoidance vehicles” risks overlooking their broader role in the economy.
Tinkering reform
History shows that small adjustments can set a precedent for larger interventions. Introducing minimum distribution taxes or limiting the flexibility of trusts, creates uncertainty and undermines trust in the system itself. How can taxpayers and therefore families plan to invest when the government keep changing the rules? A simple example is the superannuation system into which people were encouraged to contribute (as it reduces the burden on the State pension), however, changes have been made firstly to cap how much of the superannuation savings could be in pension phase and derive tax free income and now, the government is proposing a tax on unrealised gains within the superannuation system. The taxation of unrealised gains sets a dangerous precedent – when does this move out of the superannuation regime and into the wider income tax framework?
Reform must be balanced
If the government’s aim is fairness, reforms must also support productivity, growth and stability. Raising revenue at the expense of small businesses, professionals and farming families risks stifling the very activity that drives economic resilience.
Taxpayers and businesses want stability and a clear line on which they can base investment decisions.
Our position
At ESV, we support a measured, consultative approach to tax reform – one that balances intergenerational equity with the need for stability and predictability. Tinkering with trusts may seem an easy revenue win, but it risks creating more problems than it solves.
Please don’t hesitate to reach out to your ESV Engagement Partner if you have additional questions. As always, we will continue to update you if more ‘noise’ around this topic is made.
