Taxation issues around family trusts are back in the spotlight this week, with Opposition Leader Bill Shorten and Labor treasury spokesman Chris Bowen publicly commenting on plans.
Need they be reminded that the Howard government backed away from its attempt to change rules around trusts in the early 2000s, or that the Henry Review into taxation reform did not consider changes to trusts?
In both cases, it’s safe to assume that the central lesson was that trying to change regulations around trusts isn't worth the political pain.
That’s because trusts are a legal and appropriate tool for managing business risk.
The Tax Institute estimates that 85 per cent of the 823,000 trusts currently registered belong to small employers who use them to legitimately manage their incomes. Farmers alone account for nearly 30,000 trusts. We rely on trusts because we operate in an industry with highly volatile returns and need to manage the tax burden good and poor years.
Trusts act as a safety net to provide financial security in leaner years. But they also act as a valuable tool to secure the next generation of farmers.
I have a trust, which I use to help with succession planning, like many other farmers. Trusts allow assets to be used across generations, and this is why they need to be preserved.
It would be easy for Mr Shorten and Mr Bowen to now claim that they haven’t released an official taxation policy.
But the fact that they are publicly discussing such a radical proposal is troubling.
The farm sector hasn’t been consulted on the proposal, and we have concerns over how much consideration was given to the small employers, like farmers, who could be caught in the crossfire if Labor intends to strike “big business”.
We cannot afford another tax debacle. Remember the mining tax fiasco during the last Labor federal government?
Nor can we have the endless ratcheting up of revenue raising measures.
Let’s be clear: every extra tax dollar raised from agriculture takes direct revenue out of rural communities. No ifs, not buts.
Farmers require a tax and regulatory mechanism that facilitates their growth and future prosperity.
Any proposal to increase taxation to the family trust system is not the answer.
