Labor is on the search for Australians who are doing ‘too well’ from the tax system, to make sure they pay more tax or they get fewer tax cuts, with the AFR’s John Kehoe telling us those Aussies with trusts are going to cop it next.
It might shock many to learn that 1.7 million Aussies have family trusts and $60 billion worth of income went to those named in these trusts.
“Trusts are often used by families, professionals, private businesses and farmers to protect assets and split investment income between beneficiaries, to lower marginal tax rates,” Kehoe informs us. “About 11 per cent of taxpayers lodging a tax return reported trust income in 2020-21, Treasury said in its annual review of tax concessions released yesterday.”
In one year, 200,000 new trusts were created, and economist Chris Richardson said the Government’s failure to honour the stage 3 tax cuts in their old form, will mean more higher income people will look at trusts and using companies to reduce their overall tax bill.
Under those changes, the 37% tax rate stays for incomes over $135,000 and the 45% tax rate will start at $190,000 rather than $200,000. And these tax cut changes and the crackdown on trusts could be the tip of the iceberg, which could be meant to crash the tax party of non-Labor voters.
Treasury’s report highlighted where the tax collection losses for the Government happen:
While Labor could find it difficult to go after the NDIS tax beneficiaries, landlords and those with big super balances could be in Treasurer Jim Chalmers’ sights.
Over the weekend, some ‘nameless’ Labor MPs were agitating for limits on how many tax deduction rental properties a landlord could own. Meanwhile, at the 2019 election, Kehoe reminds us that Labor “…promised to crack down on income splitting to minimise tax via discretionary trusts”.
Then it wanted a minimum tax rate of 30% on money paid out of family trusts because many trusts pay out money to family members on lower tax rates. A university student on low income could receive income from a trust and pay tax rates of 19% or 32.5%, which means the parents’ income, which might have been taxed at 45%, gets a lower tax hit.
For 2020-21, Treasury has found:
4, 830,000 women had trust income, with average trust income of $35,060.
Between now and the next election, Prime Minister Albanese and Treasurer Jim Chalmers will be targeting potentially non-Labor voters, who are getting a good deal out of the current tax system. And they could easily cop it, with the Government saying that it’s to help those Australians suffering under a high cost of living.