Labor pushes ahead with trust tax

Labor pushes ahead with trust tax

 

Not just small business, think anyone aspirational!

 

Given liberal hasn't really performed as expected, I think labor will get in next time. Which is going to suck, as all their financial / economic policies are very short minded.

 

The ALP idea sounds practical in principle. However its riddled with complexity.

Their policy reads that an adult beneficiary would be subject to a minimum tax rate on trust income at 30%.

I am particularly confused how the 30% tax could work. Its not unusual for a trust to distribute say $1K but the tax elements may include a (discounted) capital gain of $20K and a tax loss of $19K. So a net $1k income. Tax is 30% x $1K = $150. or is it $3,000 being the 30% tax on the discounted capital gain. Or 6,000 being tax on the non-discounted gain ? Is he suggesting a complete clawback for all CGT discounts ?

I think there is a lot more these guys need to consider and explain. Their track record on understanding complex tax issues isnt great.

And if in the chase for tax reform for trust what consideration is being given to those who do want to re-order their tax affairs ? Or will CGT be triggered AND also be subjected to a minimum 30% tax rate.

 

Former PM lashes out at independents, calling them 'serial collectors of taxpayer money'

They know the realities ..

 

And Labor being so generous with all the complexity likely to be created by them will limit tax advice to a maximum of $3K for those in desperate need of advice as a result!

 

This would represent a huge squeeze on small business. Many, many family businesses do not generate enough income to pay a tax rate of 30%, and are often structured through a Trust arrangement.

Combine this policy, with changes to franking credits, CGT, and not offering any relief from bracket creep to anyone earning >$80k, and I think the economy is really going to suffer.

Having said that....what's the bet that all these policies will look very different & watered down once they are actually legislated.

 

It’s states trust income?
What about dividend income?

Set up multiple companies. Each 100% owned by each spouse.
Distribute trust income to the respective companies. Take the 30% franking, and voila. Claim the tax back through personal tax returns?

Too easy?

I thought so...

Blacky

 

Agree - in the US you can file jointly and income split. Capital gains and dividends taxed separately at a flat rate.

Capital gains are accrued over multiple tax years yet taxed as income in a single year. So. CGT discount smooths the impact, and replaces the old indexation of cost base.

 

Why would dividend income not be classified as trust income ?

 

My understanding is Labor' policy targets discretionary trusts, not all trusts.
It's about the people flip/flopping for tax purposes.

 

Unlikely, governments usually target a certain tax%/GDP, over the longer term this will just change who contributes.

 

What's unlikely? These are all Labor policies, and all involve a bigger tax take.

The Coalition spoke of a cap in terms of tax/GDP. I'm not sure if Labor have done the same.

Labor tax policy as it currently stands, will result in a significant boost to Government revenues, compared with Liberal policy.

 

Couldn't agree more.
Allowing tax split between spouses would solve a lot of issues.
Levels it out for everyone.

 

Yes it will that's ÏF Mr Shortens and Labor gain control ,but looking back on history and the circle of competence within Labor the revenues will rise ,with Labor history it will end like before --******* into a high speed fan and investors standing in front of the fan..

 

Except for those working at Centrelink. Many of them wouldn't have a job if they didn't have to process family benefits.

 

Trust income includes all types of income including rent, business income, capital gains, foreign income, dividends, interest and even trust income (from another trust). If a discretionary trust has income to distribute it could be affected. They could even introduce the tax on the amount of income before losses are applied ?? That would be nasty but could address some avoidance issues I can see occurring.

 

Right so this is interesting, pre July 2018 acquired asset is sold by trust - no CGT discount applied and taxed at 30% ? What the hell.....this is banana republic stuff if granfathering does not apply.

 

What will they do for bare trusts and fixed unit trusts/?