The proposed 30 per cent minimum tax on discretionary trusts has drawn sharp criticism from accounting and industry bodies, who warn that the policy risks creating an unfair and unworkable environment for small businesses. A primary concern is the lack of coordination between federal and state governments regarding stamp duty. While the federal government offers rollover relief for businesses moving to a company structure, this does not address the significant state-based stamp duties that can be triggered by such a move. Without a unified approach, many family-run businesses could face thousands of dollars in unexpected costs simply because of where they operate.
Critics argue that discretionary trusts are not inherently sophisticated tax avoidance schemes, but rather the default starting point for many Australian family businesses. These structures provide essential flexibility and asset protection during the early, high-risk years of operation. By imposing a blanket tax, the government risks penalizing small enterprises that lack the resources to navigate complex restructuring processes. The short consultation period has further fueled concerns that the government is prioritizing a predetermined revenue outcome over the practical needs of the small business sector.
There is also a broader fear that these tax changes, when combined with other recent reforms to capital gains tax and negative gearing, will drive investors toward higher-risk, lower-quality assets. Property professionals warn that this shift in investor behavior could lead to ill-advised investment decisions, as buyers chase immediate cash flow rather than long-term capital growth. This trend threatens to undermine the stability of the property market and does little to address the fundamental supply-side constraints that are the true drivers of the housing crisis.
Ultimately, the lack of a holistic strategy is the core issue. By introducing piecemeal tax hikes without addressing the underlying structural complexities of the tax law or the barriers to new housing supply, the government risks causing more harm than good. Industry experts suggest that effective reform requires meaningful engagement with those who actually administer and operate these structures, rather than rushing through legislation that could stifle the very businesses needed to deliver new homes and economic growth.