About 210,000 small businesses face an unresolved cost problem under Labor’s proposed minimum tax on discretionary trusts, with industry groups warning that federal relief means little if state governments don’t also waive stamp duty.

The ABC reports that while Treasurer Jim Chalmers has offered rollover relief from federal income tax and capital gains tax for businesses that restructure out of a discretionary trust, the cost of transferring assets under state stamp duty rules could still make the switch prohibitively expensive for many operators.

Chartered Accountants Australia and New Zealand group executive of policy and international Geraldine Magarey said clarity on stamp duty was “absolutely crucial” before businesses could decide whether to restructure. “They can’t make that decision without knowing,” she said. Magarey said small businesses typically used trusts for asset protection, succession planning, and flexibility in distributing income, and that every operator would need individual advice on their best path forward.

Council of Small Business Organisations Australia chief executive Skye Cappuccio said businesses faced an “impossible choice between a higher tax burden or a costly restructure”, and that the government’s rollover relief did not cover the accounting and legal fees involved. Australian Chamber of Commerce and Industry chief executive Andrew McKellar said state governments stood to collect a “windfall gain” from stamp duty, and called the reform costly and complex for the trades and small business sector broadly.

Chalmers described Labor’s rollover relief as “generous” and said more than 90 per cent of small businesses would not be affected. A consultation paper released last week asks for feedback on how restructuring costs can be minimised, including options to address stamp duty. Consultation closes at the end of July.

The tax, which would raise about $4.47 billion in its first year, is not due to start until mid-2028, subject to parliament passing the legislation. Primary producers are exempt.

For trade business owners running through a discretionary trust, the message from accountants and industry groups is the same: don’t make any structural decisions until the stamp duty question is settled. The mid-2028 start date gives some breathing room, but the clock is ticking on getting answers from the states.

Frequently asked questions

What is Labor’s proposed trust tax?

Labor proposes a minimum tax on distributions from discretionary trusts. It is expected to raise about $4.47 billion in its first year and is due to start in mid-2028, subject to parliament passing the legislation. Primary producers are exempt.

What is rollover relief and does it fix the problem?

Rollover relief means businesses won’t owe federal income tax or capital gains tax when they restructure out of a trust. However, it does not cover state stamp duty on asset transfers, which can be significant, nor does it cover accounting and legal fees.

Which businesses are affected?

Around 210,000 small businesses currently operate through discretionary trusts. Treasurer Jim Chalmers says more than 90 per cent of small businesses will not be affected by the tax at all.

When do businesses need to make a decision?

The tax is not due to start until mid-2028. A government consultation paper on minimising restructuring costs, including stamp duty options, is open until the end of July 2026. Industry groups are urging businesses not to make structural changes until the stamp duty question is resolved.

Sourced from ABC News. Original article.