Treasurer Jim Chalmers will today introduce legislation imposing a 30 per cent minimum tax on some trusts, a budget proposal that has angered the business lobby and unnerved Labor backbenchers worried about small business hostility.
The Greens, whose votes are needed to pass the bill in the Senate, have a different concern. On Tuesday the party called for a Senate inquiry, saying an early draft was "watered down" and the proposal would not get a "free pass".
The ABC can reveal the Greens' main concern is an exemption for money paid from trusts to charities, non-profits and other tax-exempt entities, including private schools.
"People who are wealthy enough to set up trusts should not get a tax break to pay for private school fees when this option is denied to people who can't afford expensive accountants," Greens economic spokesperson Nick McKim told the ABC. "The treasurer needs to knock this out of the legislation."
In a draft proposal last month, the government indicated it would cap the amount of exempt money each year, but that cap has not yet been set. The proposal does not change the tax treatment of private schools, since this avenue already exists, but the Greens argue carving charitable payments out from the new higher tax rate makes the avenue more attractive.
"There is far too much leniency," Senator McKim said. "Labor is just trying to funnel ever-increasing revenues into the private education system when public schools are being starved of funds."
Mr Chalmers says the proposal is a crackdown on those who use trust funds to reduce their tax bills. The 30 per cent minimum tax applies only to so-called "discretionary" trusts, which tax experts say allow a minority of very wealthy people to achieve dramatic reductions in the tax they pay. The government expects to raise $4.5 billion from the tax in its first year.
Business lobbies and the opposition argue discretionary trusts are used for legitimate purposes, including by small business owners. The government has outlined exemptions for family farms within trusts, charities that operate as trusts, and trusts managing deceased estates.
Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, said the tax sent "the wrong message" and targeted business unfairly. "We urge all members of parliament to listen to the views of those small businesses who will be affected: small and medium-sized home builders, family pharmacies, newsagents, small retailers, restaurants and cafes," he said on Tuesday.
The government estimates 350,000 active small businesses, roughly one in six, used discretionary trusts in 2022-23, the last year of available data. Treasury analysis suggests 140,000 of those would not need to pay the new tax. Others would get government assistance to restructure their affairs, although there remains concern that businesses restructuring as companies would have to pay state and territory stamp duties in the process.