QUESTIONS WITHOUT NOTICE: TAKE NOTE OF ANSWERS

Senator ANANDA-RAJAH (Victoria) (15:28): On the topic of trusts, over the last 20 years, we have seen an explosion in discretionary trusts. We now have over 800,000 of them, and they are heavily used by wealthy households. As the former member for Higgins, I represented one of the wealthiest electorates in this country.

Trusts were widely used by my constituents. It was driven largely by the top marginal tax rate, which, as you know, is 45 per cent. With the Medicare levy, which is two per cent, it is 47 per cent.

People on those incomes are paying a lot of money to the tax man. I'm speaking about the constituents I used to represent. That top 10 per cent shoulder a high tax burden.

They account for nearly half of the tax take—around 46 to 50 per cent. So they pay a lot of tax, which pays for all the services and the infrastructure and the things Australians need. They also work really hard.

It's not surprising that, over that time, this top marginal tax rate, which Paul Keating himself described as punitive, has driven a whole series of perverse behaviour, including the use of discretionary trusts as tax shelters—entirely legitimate over this period of time, entirely legal and lawful. The problem now is that we're seeing such leakage of tax and such rising demands on our economy from aged care, from disability, from paying interest on debt, from defence and national security and from climate change—let's not forget climate change.

All of these kinds of pressures are intensifying on us, and there is a need for government to raise revenue and to deal with tax leakage, which is something we are boldly trying to do, knowing full well that it's unpopular. But we are a responsible government and we have to deal with these kinds of issues. What is of concern, however, is the impacts on small businesses.

There are 2.7 million small businesses in Australia. They are the backbone of our economy. We think around 210,000 small businesses will be affected by this change.

The government has made some concessions to try and help small businesses restructure without incurring high costs, which COSBOA have said could be in the order of $50,000. We also accept that small businesses use these sorts of trusts for asset protection, for succession planning, for continuity, all of which are entirely important and legitimate, and we are consulting deeply with them right now, particularly with industry, with small business as represented by COSBOA and, of course, farmers.

This change in taxation arrangements for discretionary trusts tax is something that we need to be very careful of in this current economic environment. Small businesses are doing it tough. There is weak demand.

Costs are high and, unfortunately, at the moment, rising. We've done our level best to help small business with the $20,000 instant asset write-off and the loss carry-back, which they also advocated for and which I'm pleased we could deliver. We are listening and consulting.