Small business needs certainty on tax treatment of trusts

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Federal Government should finalise reform to taxation of trusts: Crowe Horwath.

Federal Government should finalise reform to taxation of trusts: Crowe Horwath.

The Federal Government should move to finalise reform to laws governing the taxation of trusts, with interim legislation passed by the previous government hampering the small business sector, according to leading Australian accounting firm, Crowe Horwath.

Five weeks ago the government stated that it would review 92 announced but unlegislated tax and superannuation measures. Reform to the taxation of trusts – started by the previous government but which remained incomplete by the time of the September 7 election – was not on this list. This is despite trust tax reform being one of the most important legislative reform issues for small business.

Crowe Horwath National Tax Director, Tristan Webb, said that the government has stated it is committed to helping small business and therefore should put trust tax reform as a top order priority.  Interim legislation handed down by the previous government in response to the High Court decision in the Bamford case of 2010 was “only ever intended to be a stop gap.”

“We are surprised that the government has indicated that it will move on 92 announced but unlegislated measures but has left reform of the taxation of trusts out.

“Our 16,000 trust clients rightfully expect certainty in their business, farm and investment dealings.  The government should act or at least indicate the direction that they want to move so that our clients can forget about tax and get on with business,” he said.

Two years since the legislation came into effect clear deficiencies have emerged with this legislation.  The Australian Tax Office is currently refusing to finalise a key public ruling on the basis that there are several competing views that relate to key aspects of the legislation, each of which may be correct at law.

The taxation of trusts has been a contentious issue for respective governments. The Howard government originally supported taxing trusts as companies but moved away from this proposal. The Rudd-Gillard government favoured maintaining the status quo post Bamford but legislation purporting to do that has come up short.

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