Industry leaders warn proposed changes threaten small business, jobs and housing supply
Five of Australia’s major business and industry organisations have united to urge Senators not to pass the proposed discretionary trust tax changes in their current form, warning of significant consequences for hundreds of thousands of small family businesses and the nation’s housing supply.
In an open letter sent to all Senators, the Australian Chamber of Commerce and Industry (ACCI), Council of Small Business Organisations Australia (COSBOA), Housing Industry Association (HIA), Master Builders Australia (MBA) and Property Council of Australia (PCA) have called for the Senate to recognise the Bill will be another hit on small businesses, many who already have their backs against the wall, and another hit on housing supply, when we are already failing to achieve targets.
The joint intervention follows the Senate Economics Legislation Committee’s inquiry into the proposed changes and reflects shared concern about the impact on legitimate family business structures across the economy.
Around 350,000 small family businesses operate through discretionary trusts, including builders, tradespeople, retailers, hospitality operators and small developers.
The Australian Taxation Office confirmed during the Senate committee hearings that around 99 per cent of discretionary trusts reporting business income in 2023-24 were classified as micro or small businesses.
Many family businesses have relied on these lawful structures for decades to manage commercial risk, support succession planning and provide flexibility when business income fluctuates.
Under the proposed legislation, affected businesses will face three bad choices: accept a higher tax burden, undertake a costly and complex restructure, or elect into a fixed-distribution regime that removes the flexibility many family businesses rely on.
The five organisations warn that with business growth and productivity critical to the economy, the changes will add regulatory burden and divert resources away from investment and expansion.
At a time when Australia sorely needs to increase housing construction, additional costs, complexity and uncertainty risk placing further pressure on the businesses responsible for delivering new homes.
A recent survey found 60 per cent of small and medium residential and commercial developers expect this policy will affect the timing or viability of their projects. Of those, 37 per cent said one or more projects would be cancelled altogether.
The five organisations are clear they support integrity in the tax system and stand ready to work with Government on a more targeted and proportionate approach that addresses genuine tax integrity concerns without unnecessarily penalising legitimate businesses.
The joint letter urges Senators to consider the full consequences of the proposed changes for businesses, workers and communities across Australia, and to engage directly with industry representatives to identify a better way forward before the legislation proceeds.
