Family trusts often cause more harm than good
There is very little, if anything, to commend discretionary trusts. The benefits they bring, and it's hard to see many, are dwarfed by their destructive and damaging features.
There is very little, if anything, to commend discretionary trusts. The benefits they bring, and it's hard to see many, are dwarfed by their destructive and damaging features.
Trusts are generally used to allocate money to members of a group, usually a family. Under a discretionary trust, the only way a beneficiary will get income or capital from the trust is if the trustee chooses to give them something. Family companies are often included as beneficiaries to minimise tax.
The Labor Party's present focus on trusts is warranted because, overwhelmingly, trusts are used to minimise tax, avoid paying creditors and to avoid the fair division of property after a relationship breakdown.
Due to a lack of data, it's hard to estimate the amount of lost tax revenue from the current regime. However, on conservative assumptions, I estimate we are easily losing $2 billion per year in income tax through discretionary trusts.
If a discretionary trust elects to be a ‘family trust' under the tax law, it can also access a number of other concessional tax rules. These tax concessions aren't available to any other entities or taxpayers.
There are a few other ways discretionary trusts are used. They are also used to frustrate creditors, people who are owed money by the beneficiaries of trusts.
So can we just get rid of trusts? Legally, it could be done. But outright abolition is not practically achievable, at least in the short-term
There is very little, if anything, to commend discretionary trusts. The benefits they bring, and it's hard to see many, are dwarfed by their destructive and damaging features.
Trusts are generally used to allocate money to members of a group, usually a family. Under a discretionary trust, the only way a beneficiary will get income or capital from the trust is if the trustee chooses to give them something. Family companies are often included as beneficiaries to minimise tax.
The Labor Party's present focus on trusts is warranted because, overwhelmingly, trusts are used to minimise tax, avoid paying creditors and to avoid the fair division of property after a relationship breakdown.
Due to a lack of data, it's hard to estimate the amount of lost tax revenue from the current regime. However, on conservative assumptions, I estimate we are easily losing $2 billion per year in income tax through discretionary trusts.
If a discretionary trust elects to be a ‘family trust' under the tax law, it can also access a number of other concessional tax rules. These tax concessions aren't available to any other entities or taxpayers.
There are a few other ways discretionary trusts are used. They are also used to frustrate creditors, people who are owed money by the beneficiaries of trusts.