Back to the trusts debate – again

The debate about whether or not family trusts should be taxed as companies is making headlines again.

Hot on the heels of the speech that Shadow Treasurer Joe Hockey delivered at the Institute’s National Tax Conference back in early April, in which he revived the debate on the taxation of trusts, it appears as though the political heat has been turned up within the Opposition. Many of you will remember this policy proposal was first raised by the Coalition in the early 2000s by then-Treasurer, Peter Costello. More recently, the Shadow Treasurer gave life to the idea again during his speech to the Institute a few weeks back. On both occasions, the policy proposal has lasted the political equivalent of about five minutes. There’s simply too much to lose by seriously considering such a dramatic shift in tax policy, especially in the primary production and small business sectors, where family trusts are commonly found.

But despite that, we should still look closely at how trusts are currently used and whether there is an alternative type of flow-through structure that provides similar legal protections and estate planning opportunities as trusts do. Overseas, the concept of limited liability companies (LLC) is more commonly found than trusts. One of the main benefits of a LLC is that it allows a high degree of flexibility because profits are taxed in the hands of members – rather than at the corporate level. One of the other benefits is that the relevant tax laws would be less complex than those currently in place for family trusts.

While I don’t believe that we need to rush off and put in place LLC structures in Australia immediately, longer-term, we should seriously consider whether alternative structures such as LLCs might have a place in our future tax system. This seems like the perfect topic for dialogue at the upcoming October Tax Forum.

What do you think?

Talking tax: professional privilege, trusts and ATO collaboration

You have probably heard about our exciting couple of days at the National Tax Conference in Melbourne last week. High profile presenters and tax experts generated quite a bit of dynamic debate and discussion!

Highlights from the two days included:

• A speech by Assistant Treasurer Bill Shorten, where he announced that the federal government is to release a discussion paper on professional privilege for accountants. This is an issue that we at the Institute have been advocating for some time, and it was great to see Minister Shorten acknowledging the role that professional accountants play in the community
• Shadow Treasuer Joe Hockey’s lunchtime address, where he generated a lot of controversy amongst delegates and in the media by bringing up the  taxation of trusts.  He also discussed how he would simplify the tax system
• Commissioner of Taxation Michael D’Ascenzo’s presentation, where he launched the ATO publication, Good Governance and Promoter Penalty Laws Guide, co-developed and designed with the ATO’s peak consultation forum, the National Tax Liaison Group, of which the Institute is an active member. The Commissioner talked about the importance of collaboration and how much he appreciated the Institute’s role in working with the ATO.

It was a great forum to hear from influential speakers about the big issues in the tax world, particularly in the lead-up to the federal government’s tax forum. More information about the sessions, including video recordings, will be available on the Institute website.

I’d love to hear your feedback or thoughts on some of the issues that came up!