COSBOA calls on Parliament to reject proposed legislation that would force family businesses to choose between higher taxes, costly restructuring or giving up vital flexibility.
The Council of Small Business Organisations Australia (COSBOA) has warned that the Government's discretionary trust tax legislation, introduced into the House of Representatives today, will leave small family businesses facing three damaging options.
COSBOA CEO Skye Cappuccio said that despite months of consultation and some concessions, the Government has failed to address the fundamental problems with the proposed tax changes.
"The Government is effectively telling small family businesses they have three choices, but every one of them comes at a significant cost," Ms Cappuccio said.
"The first is to restructure their business, potentially facing tens of thousands of dollars in professional fees, transfer duties and administrative costs.
"The second is to accept the minimum 30 per cent tax rate, which will mean a substantial tax increase for many smaller family businesses.
"The third is to lock in fixed distributions under the Government's alternative election arrangement, sacrificing the flexibility family businesses rely on. If they later need to change that arrangement, they can face a punitive 47 per cent tax rate on the trust's income for that year.
"These are not genuine choices. They are three bad options that will make operating a small family business harder and more expensive."
Around 350,000 active Australian small businesses operate through discretionary trusts, with COSBOA concerned that a significant number could face additional tax, restructuring costs or changes to their existing arrangements.
COSBOA's submission to Treasury highlighted that restructuring costs alone could range from $15,000 to $50,000, excluding potential state and territory transfer duties.
"These are small family businesses that have legitimately used trusts for decades to protect assets, manage succession and plan for the future," Ms Cappuccio said.
"Family businesses evolve. Children join the business, generations change and circumstances shift. They should not be penalised for making ordinary decisions about how their family business operates.
"We acknowledge the Government has listened to some of the concerns raised during consultation, but the changes do not fix the fundamental problem.
"This policy targets a business structure rather than the conduct the Government is concerned about. There are more targeted ways to address tax integrity without imposing unnecessary costs on genuine small businesses.
"At a time when small businesses are already struggling with rising costs, regulatory pressures and uncertainty, this is another unnecessary burden.
"COSBOA calls on Parliament to reject this legislation. It is bad tax policy that will unnecessarily hurt small family businesses.
"With the legislation now before Parliament, there is still an opportunity to prevent these damaging changes from becoming law."
