That is the warning Peppin Planners managing director Rob Brown has issued after the party’s plan was discussed in detail at a taxation workshop he attended last week.
Originally floated by the ALP in 2017, Opposition leader Bill Shorten says a Labor government would introduce a standard minimum 30 per cent tax rate from July 1, 2019 for discretionary trust distributions to mature beneficiaries over age 18.
Mr Brown said given the significant impact this could have on any business using a trust set-up — and particularly farming businesses — he is perplexed this Labor plan has not received much press coverage in the national media.
‘‘A lot of farmers run their businesses as a family discretionary trust, and this Labor plan is proposing to tax those family trusts that make a profit by 30 per cent,’’ Mr Brown said.
‘‘Traditionally, if these trusts make a profit and it is distributed, it is subject to the personal tax rate.
‘‘Instead, Labor want to take 30 per cent straight away, and they will provide no property offsets.
‘‘That means anyone who has been paying between zero and 19 per cent on discretionary distributions will be subject to a flat tax of 30 per cent.’’
Mr Brown said Labor’s plan would have ‘‘huge implications’’ for those who use trust set-ups, which he said is one of the most used tax structures.
He said tax guides indicate there are 321,000 trusts that will be affected if Labor is able to get its proposal up.
‘‘To small businesses, this is really significant.
‘‘This proposal is more rigid and does not offer as much protection.
‘‘The advantage of a trust over a partnership is that it also offers asset protection.
‘‘All this proposal says to me is that Labor thinks grabbing more income from people with a trust is more important that asset protection.
‘‘They are targeting people who legitimately chose a structure for that reason, and despite there already being a lot of restrictions of trusts.
‘‘It would be incredibly unfair to have your assets stuck in a structure that it may not be so easy to get out of.’’
Mr Brown said Labor’s plan also includes new rules of negatively gearing assets which could impact on farmers, but he said details surrounding this are still very vague.
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