SMALL businesses and farmers who run their businesses through non-discretionary trusts have been given a reprieve – for now.
SMALL businesses and farmers who run their businesses through non-discretionary trusts have been given a reprieve – for now.
Trusts have proved popular with farmers and small business owners because they provide a structure allowing asset protection and easy business succession.
Of the 453,000 trust returns lodged with the Australian Tax Office in 1997-98, 450,000 of those were from small to medium-sized businesses.
The Federal Government has withdrawn draft legislation pro-posing to tax trusts as companies following heated criticism from small business, farming and accounting bodies.
But it has not ruled out another tilt at legislation to tighten the taxation of trusts.
Council of Small Business Organisations of Australia chief executive Rob Bastian said most small business owners and farmers would be relieved by the deferral of “this frightening exposure draft”.
“The deferral gives us more time to ensure any new approach focuses on the problems created by any misuse of these trust laws and not on the assumption that all trusts are rorts,” Mr Bastian said.
The Federal Government claims forgoing its proposed legislation would only cost $110 million – not the $1 billion some industry figures were claiming.
Mr Bastian said COSBOA had no difficulty with any loss of Government revenue, as that revenue take up was forced on small business.
The law proposed taxing unrealised gains to crack down on people distributing tax-free income through trusts.
An ATO spokesman said some high wealth individuals with rapidly appreciating assets borrowed against those assets and distributed the funds through the trust, effectively making a tax-free gain from the asset without having to sell it.
However, most accounting groups are unsure exactly what revenue leakage the Government was trying to plug with its legislation.
Institute of Chartered Account-ants in Australia spokesman Roger Sullivan said the entity taxation draft had been a “totally idiotic piece of legislation”.
“If the person was borrowing against the asset, they would still have to pay interest on the loan,” Mr Sullivan said.
“About the only way you can see avoidance is if people are not declaring distributions from trusts.
“The ATO matches peoples tax returns with trust distribution information so the Commissioner has an administrative expedient to solve this problem.
“The Government has been very quick to jump on rorts but this proposal was a rort from the Government.
“There are about 15 ways the Government was rorting money from trust owners.”
Trusts have proved popular with farmers and small business owners because they provide a structure allowing asset protection and easy business succession.
Of the 453,000 trust returns lodged with the Australian Tax Office in 1997-98, 450,000 of those were from small to medium-sized businesses.
The Federal Government has withdrawn draft legislation pro-posing to tax trusts as companies following heated criticism from small business, farming and accounting bodies.
But it has not ruled out another tilt at legislation to tighten the taxation of trusts.
Council of Small Business Organisations of Australia chief executive Rob Bastian said most small business owners and farmers would be relieved by the deferral of “this frightening exposure draft”.
“The deferral gives us more time to ensure any new approach focuses on the problems created by any misuse of these trust laws and not on the assumption that all trusts are rorts,” Mr Bastian said.
The Federal Government claims forgoing its proposed legislation would only cost $110 million – not the $1 billion some industry figures were claiming.
Mr Bastian said COSBOA had no difficulty with any loss of Government revenue, as that revenue take up was forced on small business.
The law proposed taxing unrealised gains to crack down on people distributing tax-free income through trusts.
An ATO spokesman said some high wealth individuals with rapidly appreciating assets borrowed against those assets and distributed the funds through the trust, effectively making a tax-free gain from the asset without having to sell it.
However, most accounting groups are unsure exactly what revenue leakage the Government was trying to plug with its legislation.
Institute of Chartered Account-ants in Australia spokesman Roger Sullivan said the entity taxation draft had been a “totally idiotic piece of legislation”.
“If the person was borrowing against the asset, they would still have to pay interest on the loan,” Mr Sullivan said.
“About the only way you can see avoidance is if people are not declaring distributions from trusts.
“The ATO matches peoples tax returns with trust distribution information so the Commissioner has an administrative expedient to solve this problem.
“The Government has been very quick to jump on rorts but this proposal was a rort from the Government.
“There are about 15 ways the Government was rorting money from trust owners.”