MATTERS OF URGENCY

Senator DARMANIN (Victoria—Deputy Government Whip in the Senate) (18:45): I don't want to elongate the time between Senator Duniam and a drink, but, as he walks out the door, I, too, would like to wish him all the best for whatever exciting thing comes next outside of this place. The last hour and a half have been a lovely departure from the combat that has been mentioned and that takes place so often in here.

It was a nice little lovefest for us to celebrate some of the good things about being a senator and the contributions that we can make. Senator DARMANIN: Back to the combat! Let's get into it.

In considering the motion that we have before us that Senator McGrath kicked off before the farewell, you would be forgiven for thinking that every corner shop, every family business and every farmer in the country is about to be hit with a new 30 per cent tax. But what this government is actually doing is ambitious and serious reform. Serious reform, particularly around tax, means being prepared to tackle difficult issues.

Reforming the status quo can be difficult, but getting our tax system right is also very important. It's important also to tackle fairness in the system. Simply leaving things as they are and not achieving these objectives is not an option.

Where our tax system provides advantages that aren't available to most working Australians, we have a responsibility to restore the balance, no matter how difficult that might be. That is what this tax reform agenda is about. Reforming discretionary trusts is a very important part of that.

We know that there are legitimate reasons to use trusts, including succession planning and asset protection, but we also know that the flexibility provided by discretionary trusts allows some people to arrange their tax affairs in ways that simply aren't available to most workers and families. The number of discretionary trusts has more than doubled over the past 20 years, to more than 800,000.

At the same time, the vast majority of Australians do not have a trust. More than 95 per cent of individual tax filers do not receive trust income, and more than 90 per cent of small businesses will not be affected by these changes in any given year. The benefits of the current arrangements are heavily concentrated.

The majority of trust income flows to the top-earning 10 per cent of households, and around 90 per cent of total trust wealth is held by the wealthiest 10 per cent of households. Treasury analysis shows that, in 2022-23, families with discretionary trusts faced an average tax rate around four percentage points lower than families with similar incomes who did not use a trust.

That is the issue that this reform seeks to address. The 30 per cent minimum tax will reduce the tax planning advantages available through discretionary trusts and better align their tax treatment with the tax paid by working Australians. Thirty per cent is the same marginal tax rate that applies to workers earning between $45,000 and $135,000.

This is fundamentally about fairness, bringing these tax arrangements more closely into line with tax paid by working Australians. Through these reforms, we've also been deliberate in recognising legitimate circumstances and giving existing trusts practical options. The legislation protects superannuation trustees investing through trusts—I know Senator Bragg has some concerns about that—but it also provides exclusions for genuine testamentary trusts, deceased estates, special disability trusts and the income of minor beneficiaries.

Importantly, we have also expanded the options available to small businesses and others using discretionary trusts to limit or eliminate restructuring costs. Finally, on small business, we back small business. We are delivering more than $3.8 billion in tax relief and rolling out tax cuts for working Australians, including 1.5 million sole traders.

We've seen an average of 900 companies created every day on our watch, and we are the only government to have recorded more than 40,000 businesses registered in a single month—something that has happened twice this year. These reforms are about improving the sustainability and integrity of the tax system while making our economy more productive by ensuring investment decisions are made for economic reasons, not simply tax management reasons.

That is what serious tax reform looks like. We are not interested in defending the status quo for its own sake; we are interested in building a fairer, stronger tax system for the future.