QUESTIONS WITHOUT NOTICE: TAKE NOTE OF ANSWERS
Senator DOWLING (Tasmania) (15:19): To go to the direct point that Senator Scarr was just making, I would encourage you to participate in the Treasury process, because it's very much still open. I understand exactly the point you're making, and I think the point has been made in the consultation paper that feedback is sought on the treatment of distributions to income tax-exempt entities.
That is the exact question that the consultation is seeking to address. It's very important, and I agree that we want to continue to incentivise charitable giving. That's really what this consultation process is about; it's so we make sure that our overall policy objectives are around trust and that there's a better equalisation between trust in other forms of income, without having unintended consequences.
Charitable trusts overall, though, are, obviously, expressly exempt from the minimum tax of 30 per cent. Parliament has also amended the minimum tax on capital gains to preserve incentives for deductible charitable donations. There is also a further question about distributions from discretionary trusts to tax-exempt charities and not-for-profits, and that really is the question being dealt with right now.
The government is very aware of that issue, and that's why we're consulting on it. Treasury has expressly asked for feedback, and that is exactly what the consultation is about. We identify an issue, we listen, and then we get the details right.
In terms of those opposite, on tax, there have been a lot of claims and a lot of fearmongering. Let's just get the facts right: there's no charity tax, and the government is not abolishing trusts. There are legitimate reasons for Australians to use trusts.
They run businesses and plan for succession. We're changing the unfair tax advantage because Treasury analysis shows—and this is what the overall debate is about—that families using discretionary trusts face an average tax rate of around four percentage points lower than families on similar incomes without a trust. That is the equity argument at play.
You have four percentage points lower tax if you have a trust than if you just earn ordinary income. From July 2028—so these are not being rushed; there's plenty of time to fine tune this—discretionary trusts will face a minimum tax rate of 30 per cent of taxable income. More than 90 per cent of small businesses will not be affected by this change, and rollover relief will be available for those that take the choice to restructure.
But the basic proposition is this: Australians earning similar income should make a reasonably similar contribution. A nurse, teacher, electrician or hospitality worker in Tasmania cannot split their salary through a discretionary trust. Their tax comes straight out of their pay packet.
Their work deserves the same respect from the tax system as any other form of income. Fact three: there is no so-called widow tax. Death, divorce and family violence are very serious matters.
They deserve better than a scare campaign. We said these circumstances would be dealt with in the next tranche of legislation. That's exactly what's happened.
Draft legislation released on 4 August ensures that a property acquired from a spouse through inheritance or relationship breakdown retains access to negative gearing where it was owned on budget night. That is clear. That means a widow or widower inheriting their partner's property.
It means someone going through a separation or divorce. And, critically, it means someone who needs to leave a violent or unsafe relationship. For someone escaping family or domestic violence, the tax system should not put another obstacle in the way of rebuilding their life, and those facts need to be put on the table.