QUESTIONS WITHOUT NOTICE: TAKE NOTE OF ANSWERS

Senator TYRRELL (Tasmania) (15:08): The Albanese Labor government's reforms to the taxation of discretionary trusts are about one simple principle: ensuring our tax system is fairer and more sustainable and works for all Australians. At the moment, discretionary trusts allow some Australians to arrange their tax affairs in ways that simply aren't available to most working people and families.

Treasury analysis has shown that families using discretionary trusts, on average, pay lower rates of tax than those who do not. That's difficult to explain when millions of Australians have tax deducted from every pay packet and have no equivalent opportunities to reduce their tax obligations. The tax system should treat people more fairly and consistently, and that is why these reforms will ensure income distributed through discretionary trusts is taxed more in line with the rates paid by working Australians.

Importantly, this reform isn't about attacking trusts or preventing their legitimate use. Trusts play an important role in succession planning, asset protection and a range of genuine business and family arrangements. Individuals and businesses will continue to be able to operate through discretionary trusts.

What we're addressing is the tax advantage that has developed over time. The number of discretionary trusts has more than doubled over the last two decades. Multiple reviews of our tax system over the years have identified problems with discretionary trusts within the tax system.

It's also important to be clear about who is affected. Over 95 per cent of Australians don't receive income through a trust. Most small businesses do not operate through a trust structure.

In fact, the majority of trust income flows to the highest earning 10 per cent of families, and around 90 per cent of private trust wealth is held by the wealthiest 10 per cent of households. Maybe most importantly for Tasmanians, farming income will be exempt. This isn't a reform targeted at ordinary Australians.

In fact, it won't even impact the ordinary working Australian. This is about improving equity within the tax system while protecting legitimate arrangements. These changes won't take effect until 1 July 2028, providing plenty of time for individuals and businesses to assess their circumstances and make decisions that are right for them.

There are also multiple options available for existing trust structures. Businesses that want to keep using discretionary trusts can do so. Trusts can elect to be exempt from the minimum tax without restructuring, providing their distribution arrangements remain consistent from year to year.

Expanded rollover relief from 2027 will allow businesses that choose to restructure into a fixed trust or company to do so without facing Commonwealth tax consequences, such as the capital gains tax. We've also excluded a range of trust types from these reforms, including fixed trusts, charitable trusts, special disability trusts, superannuation, deceased estates and testamentary trusts established for genuine testamentary purposes.

I can understand the concerns about compliance costs. That's exactly why we've designed these reforms to minimise unnecessary disruption. The compliance impacts will be far lower than some claims have suggested, and around half of trusts are not expected to be affected in any given way.

More broadly, these reforms form part of our agenda to simplify Australia's tax system and reduce compliance burdens. Most importantly, they strengthen the integrity and sustainability of Australia's tax system while helping fund tax relief for working Australians.