BDO submission on Treasury’s minimum tax on discretionary trusts exposure draft
BDO submission on Treasury’s minimum tax on discretionary trusts exposure draft
BDO has made a submission to Treasury in response to the exposure draft legislation for the proposed minimum tax on discretionary trusts.
While we support consultation on measures designed to address income-splitting, we believe several aspects of the exposure draft require significant refinement to ensure the regime operates fairly, practically and in line with its intended policy objectives. BDO has also called for a longer consultation period given the scale and complexity of the proposed changes.
Key themes in BDO's submission
Preventing unintended double taxation
BDO is concerned that the proposed rules could result in the same economic income being taxed multiple times, particularly where discretionary trusts distribute income to corporate beneficiaries. We recommend removing restrictions that deny corporate beneficiaries a credit for minimum tax already paid by the trust.
Ensuring commercial trusts are not inadvertently captured
The exposure draft introduces a new fixed trust definition that focuses on powers contained in trust deeds rather than how those powers are exercised in practice. BDO is concerned this approach could unintentionally affect commercial trusts and unit trusts that do not present the policy concerns the measure is intended to address.
Making restructuring relief workable
While rollover relief is intended to support taxpayers who restructure out of trust arrangements, practical barriers such as regulatory approvals, financing arrangements and third-party consents may prevent all assets being transferred. BDO recommends a more flexible approach to ensure genuine restructures are not denied relief due to circumstances outside taxpayers' control.
Improving the excluded election trust regime
The excluded election trust regime provides an alternative to restructuring. However, BDO believes the proposed rules are overly restrictive and may limit its practical effectiveness. Greater flexibility is needed to accommodate changing family and commercial circumstances and to avoid unintended loss of election status.
Supporting better tax policy outcomes
BDO encourages Treasury to continue consulting with industry and professional stakeholders as the proposals are developed. Careful design will be critical to ensuring the regime achieves its policy objectives without creating unintended consequences for businesses, investors and family groups.
Download the submission
A full copy of BDO's submission on the minimum tax on discretionary trusts exposure draft legislation is available for download below.
How BDO can help
BDO's tax specialists can help trustees, business owners, family groups and investors understand the implications of the proposed changes and assess available structuring and transition options.
To discuss how the proposed regime may affect you, contact your local BDO adviser or learn more about our tax services.